Bagcraft: Foodservice Trade Spend Customer Story
Automated Workflow and Margin Analysis Facilitates More Profitable Pricing
Increased Accuracy of Distributor Rebate Payments Saves $300,000 per Year
BUSINESS SITUATION
- Bagcraft needed an automated solution to manage trade, contract management, deductions and rebates with its distributor and operator customers.
- Bagcraft’s operator-deviated prices summaries were inconsistent and time consuming due to the manual evaluation with Microsoft Excel.
- Bagcraft wanted to pay corporate rebates based on net dollars, but manual processes made it difficult and time consuming.
- Bagcraft needed a more efficient and accurate tool to calculate the basis of corporate rebates.
RESULTS SINCE IMPLEMENTING TPM
Gaining Value from Trade Spend
Historically, the team managed trade rebates (aka: payments to distributors) and operator contract/bid pricing with a wide range of manual processes utilizing tools such as Microsoft Excel and Access. Talk about manual and time-consuming. The Bagcraft team felt like they had to choose between making good decisions and making decisions quickly.
Industry conditions like flat market growth, increased pressure for more aggressive pricing and additional sheltered income — the leadership team agreed that an investment in technology would be required to address foodservice challenges and establish a foundation for future opportunities.
“When we started digging into ‘gross to net’ revenue, I realized there were tremendous opportunities to get more value from our spending and also increase visibility for analysis. Like many manufacturers, we were using Microsoft Excel and our ERP to manage all of these areas, which was inefficient and did not facilitate good decision-making. We also wanted an application that was easy for our people to learn and use. Something that didn’t require extensive training,” explains Frank McManus, Revenue Manager.
The Solution: Blacksmith TPM
The selection process took 3-4 months, starting with a vendor review including team leaders from pricing, accounting, marketing and IT. Revenue management led the charge. They started by looking at ten vendors and narrowed down to three. Those three vendors were invited in for demos and working sessions.
“We selected Blacksmith Applications because they were best able to address the key components we needed: trade management, contract management, deduction management, rebates and recapture,” says McManus.
“Of the final two vendors, Blacksmith was the only one with true foodservice functionality and expertise. The other vendor was more retail-focused. While they offered to build what we needed, it would cost money and add to the implementation timeline,” McManus adds. “Blacksmith met our needs the best, had the most experience solving our biggest issues, and we felt like they knew and came from our business. The other vendor was still in the experimental phase for the biggest drivers of value. Blacksmith was the smart choice.”
Implementation started in February 2009 with workshops to define core business requirements and the configuration layer. Initial user training was held in June and the official “Go Live” in July.
Blacksmith integrates 12 master and transactional data files with Bagcraft’s Lawson PRMS ERP system on a nightly basis.
The Results
Bagcraft’s sales, marketing and finance teams now use Blacksmith to evaluate the profitability of each price agreement and automatically route deals based on approval thresholds. The finance team processes payments and credits with tools to manage and clear deductions. Ultimately, Bagcraft has better insight into profitability, more control over their processes and improved communication with customers.
The approval workflow (which defines margin-based thresholds for each level of the organization), enables a greater degree of accountability for managing the business.
Requests that route to the leadership team provide the visibility necessary for their review. “I get about 5 pricing requests to assess every day and I love it. I have a better pulse on what’s happening in the business now,” says Rob Inlow, VP of Commercial Strategy & Procurement.
Bagcraft is leveraging Blacksmith TPM to auto-pay distributor rebate programs. Based on the distributor purchase history within the application (interfaced nightly from the ERP system), Blacksmith TPM automatically creates check and credit requests based on the conditions of the rebate offer.
This means that if a distributor is to be paid a 2% rebate on all purchases once/month, Blacksmith TPM will automatically calculate the appropriate payment (based on either gross or
net revenue, as defined in the program) at the beginning of the following month and place it in someone’s workflow for approval.
Upon approval, the payment request is interfaced to the ERP and the check or credit is issued along with the supporting detail to the customer.
The resources devoted to executing this process have been dramatically reduced, from 40+ working hours per month in the prior process down to less than a day per month.
The key area driving ROI is the accuracy of corporate and buying group payments. “For many years, our rebate agreements were based upon sales dollars that are net of national account and bid credit dollars. With all of the manual steps in our previous process, we were not very efficient in accurately defining that value. With Blacksmith TPM, we are accurately reflecting the
correct amounts for each customer,” says McManus.
During the first 6 months of the project, the team identified more than $300,000 of annual savings from the project.
McManus continues, “Working with Blacksmith has been unbelievable — their knowledge, ability to process what our needs are and tie those needs to the capabilities in the software. We would like to leverage additional functionality, so we’re putting together the case to expand. We decided to start small and expand rather than taking on everything at once. This has worked well for us. We have already seen significant ROI, and we’re really just getting started. Our advice to others in the industry is to get involved and take action now. Every day that goes by without this application is a day you are losing money you could have saved.”
As a result of implementing Blacksmith TPM, Bagcraft has more visibility and smarter decision making.
Pricing analysts are making better decisions, resulting in prices that are more profitable. The team has dramatically reduced ‘bad’ prices going out the door. Before, it was a dartboard approach as to the ‘right’ price. Now, Bagcraft is on track with our expectations from financial and efficiency perspectives.
