People often ask me about their challenges in SAP Pricing. Me and my favorite HubSpot 'er were chit chatting when the subject of SAP claim pricing came up. Let's do a deep dive into claim pricing?
Handling warranty claims pricing presents many challenges to our customers. Let’s list three challenges:
Given these three very complex challenges, SAP Warranty Management claim pricing capabilities provide numerous ways to handle these issues.
Out of the box, SAP warranty claims allow for three concurrent currencies on each claim:
There are a number of steps in handling vendor recovery by the OEM
Things like aircraft engines are much like calipers on a car. You usually have to exchange an old one for a new one.
This step is difficult for most manufacturers to accomplish because of the documentation gap. The core needs to be tagged as such and immediately claimed as a vendor warranty claim against the part supplier. In SAP, it is possible to solve this difficulty.
You see, the claim has two main claim versions: the customer claim; and secondly, the vendor claim, all under one claim number umbrella. The customer and vendor versions get their own claim-version number. This unique feature makes it possible to trigger the vendor warranty claim and vendor recovery purchase order automatically, rules based. The vendor warranty claim involves many steps on its own, and eventually the vendor is expected to pay for parts, sometimes services, freight, etc. differently. Hence, part and labor pricing on the vendor side is different, and the system needs to accommodate those differences in pricing rules. In SAP we take care of that principally by using a second pricing procedure for the vendor claim version. The vendor pricing procedure prices out the parts and labor items on the vendor version that is used for vendor recovery.
It is not only that SAP handles this complex scenario, it is also that SAP automation takes cost out of the process and reduces disputes.
Getting pricing right leads to many questions such as the following:
By reimbursing dollars immediately, available now on the customer’s AR account, we enable another purchase today! Some customers are waiting for that credit.
From a customer service perspective, with SAP's Warranty and Program's Solution, what we want to accomplish, we'd like to instill the wow-factor. E.g., a customer rep reads an email's PDF statement, saying to himself, “Wow, these guys have their act together, they are fast. Great customer service!”.
So, where do part prices come from?
Let’s jump into the fray. There are many ways to price claim items, however we manage three major buckets: Prices can be either about
Parts are known in SAP, as material masters. A part number on a claim item that is a part is a material number in SAP, e.g., 82-00100-1. A material master. The part number is known to SAP and typically has a list price for new parts. However, parts claimed on a warranty claim, may or may not be reimbursed at new part price. Think of a claim as a reversed product sale.
Let’s assume…
We acknowledge, part pricing rules are different in each industry.
Having an acceptable core is a key requirement to making this process work. What is an acceptable core?
Basically, it must be the part number we expected to come back, or an acceptable “exchangeable” part number. Goes into the -dash number part revisions and specs. And the core condition must be good enough. In this case FFF interchangeability doesn’t work, because even though the FFF grouped parts are interchangeable, from a refurbishment and exchange pool perspective, they are not.
In our happy path example, the core is acceptable and booked into inventory for further processing. The claim is updated accordingly to finalize the claim adjudication with the customer. The next step is difficult for most manufacturers to accomplish because of the documentation gap. The core needs to be tagged as such and immediately claimed as a vendor warranty claim against the part supplier. In SAP, this entire process is fully supported. You see, the claim has two main claim versions: the customer claim; and secondly, the vendor claim version, living all under one claim number umbrella. The customer and vendor versions get their own claim-version number.
Talking about Supplier Recovery for a minute. In our SR - Supplier Recovery Warranty Solution we have additional pre-built pricing capability - to reduce what the project needs to build in coding. With this SR pricing capability, not only is the amount of coding work reduced,- it allows you to come much closer to having a standard approach to solving specific SR pricing requirements. Getting two disconnected business entities to agree on pricing requires a more complex, robust pricing system than the standard one that comes out of the box.
This unique feature makes it possible to trigger the vendor recovery claim automatically, rules-based. The vendor warranty claim involves many steps on its own, and eventually the vendor is expected to pay for parts and labor differently. Hence, part pricing on the vendor side is required to be differently configured, and the system needs to accommodate those different pricing rules. In SAP we take care of this requirement by using a second pricing procedure for the vendor claim version.
To make matters even more complex, the original sales order is a special-order type that may be either free-of-charge to the customer; then the claim will be “free-of-reimbursement”; or we may charge a core deposit, typically a core value %. The purpose of the core deposit is to incentivize the customer to return the core in a timely manner, to recoup their core deposit.
We will cover the pricing aspects for Labor, Sublet, and Taxes in a subsequent blog.
In the meantime, if you’d like to talk to us about your warranty claim pricing issues, please book a meeting with us