1. Implementing Channel Revenue Management
  2. Pricing Execution

Pricing Execution

Eligibility service determines which programs are applied to the order line, based on the eligible channel programs, and Pricing calculates the value of the accruals.

Accruals are deferred discounts which impact revenue and margin. Including accruals in the calculation of the margin provides visibility into the true profitability of the sale. When an order line is eligible for a supplier accrual, this accrual is displayed as a charge component and is included in the price breakdown on the order line. Pricing supports the calculations for amount based accruals, percentage based accruals that are a percentage of price or a cost, and New Cost based accruals.

Manage Price Elements for Channel Revenue Management

To manage the channel accrual price element:

  1. In the Setup and Maintenance work area, go to:

    • Offering: Order Management

    • Functional Area: Pricing

    • Task: Manage Price Elements

  2. Use the Manage Price Elements page to create and manage your channel price elements. These must be of element type Cost or Price.

Manage Pricing Bases for Channel Revenue Management

Select the task Manage Pricing Bases to manage your pricing basis, or create a new one. The basis usage Accrual basis is predefined for Channel Revenue Management.

You can create pricing basis for Channel Revenue Management with price element types Price and Cost. Once this is set to active, it can be referenced in the channel program types. The pricing basis can be deleted as long as it's inactive and not referenced in a pricing setup.

Note: Cost elements aren't supported for other types of bases.

Pricing Bases for New Cost and Percent Discount Types

To create a pricing basis for new cost or percent discount type:

  1. Click the Create icon in the Manage Pricing Bases page.

  2. Enter the name of the pricing basis in the Name field.

  3. From the Price Element drop-down list, select a price element based on the element type Cost or Price.

  4. From the Usage drop-down list select Accrual basis.

  5. Select the Active check box.

  6. Click Save. This creates the pricing basis which is now available for selection in channel program types.

Note: Basis isn't used for the Amount discount type.

Calculate Supplier Ship and Debit Accruals

Amount

You can directly specify the accrual amount in the program product rule. Pricing calculates accruals after net price, and returns charge components of element type Accrual. Accruals with the adjustment type Accrual Amount are calculated and returned.

New Cost

You can specify the new cost value in the program product rule. The accrual amount is calculated based on the basis for new cost, specified in the program type. New Cost accruals are calculated based on a cost or price.

The accrual amount is calculated as the difference between the charge component referenced in the basis and the new cost specified in the product rule. Accruals are calculated after net price, and returns charge components of element type Accrual. Accruals with the adjustment type Accrual Difference are calculated and returned.

Calculation

Assuming the new program cost is captured on the program line (pricing term),

New Program Cost = Pricing Term.AdjustmentAmount (Value captured on the program)

Accrual Basis Calculation: This value is calculated by taking the charge component referenced in the Accrual Basis on the Pricing Term.

Accrual Difference Calculation = Value of Accrual Basis - New Program Cost

For example: Average Cost = 100 USD, New Program Cost = 80 USD, Quantity = 1

Unit Price (USD)

Charge Component

500

Net Price

-100

Average Cost

20

Accrual

420

Margin
Note: Algorithm extensions may be needed to derive these costs if they're not defined in Pricing.

Percent

You can specify the discount in percentage in the product rule. The accrual amount is calculated based on the basis for percent, specified in the program type. Pricing calculates accruals after net price, and returns charge components of element type Accrual. Accruals with the adjustment type Accrual Percent are calculated and returned.

Returns

Referenced Returns: The polarity of the accrual charge components is reversed for the unit prices, and the extended amounts are calculated based on unit price multiplied by returned quantity. Charges can be marked as refundable in the Manage Pricing Charge Definitions page. As part of the standard returns processing, Pricing checks whether the charge is refundable, and if non-refundable, the base list price, list price, and net price are set to zero. Accruals are also calculated.

Un-referenced Returns: Pricing will price the un-referenced order line as an outbound line, apply automatic eligible programs, and then reverse the polarity of the charges. Authorized users can decline programs and add manual incentives.

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