Describe pricing and discounts in relation to trade agreements
The price of a product depends on multiple criteria. You may need to define different conditions to calculate a discount for the same product. Trade agreements define sales price or discount agreements that are set up for a single customer or for a group for customers. Similarly, trade agreements can be defined for a single vendor or a group of vendors to set up the purchase price and vendor discount. The discount can be applicable for a specific product or for multiple products.
Trade agreements can apply to:
A specific customer, vendor, or product
Groups of customers, vendors, or items
All customers, all vendors, or all items
To use trade agreements, you must activate the combinations of price agreements. Supply Chain Management has control structures to activate these pricing and discount structures.
To activate prices and discounts for customers, navigate to Sales and marketing > Setup > Prices and discounts > Activate price/discount.
To activate prices and discounts for vendors, navigate to Procurement and sourcing > Setup > Prices and discounts > Activate price/discount.
You should activate trade agreements so that each organization can activate relevant structures and deactivate structures that are irrelevant to the company's business processes. This feature provides more control for sales and purchase order processing.
You can use trade agreements on:
Purchase orders
Purchase requisitions
Sales orders
Sales quotes
When you open the Activate price and discount page from the sales and marketing module, each tab displays check boxes for the possible combinations. These options consist of:
Customer
Customer Group
All Customers
Items
Item Group
All Items
You can select these check boxes for access to the various combinations of trade agreements. However, not all combinations are available for selection.
Price - can only be activated for specific items
Line discount - can be activated for items, item line discount groups, or all items
Multiline discount - can be activated for item multiline discount groups or all items
Total discount - can only be activated for all items
Trade agreement journals
You can use trade agreement journals to create and maintain trade agreements.
You can create new agreements manually or by copying and modifying existing agreements. This capability is helpful if a new company is starting without any agreements specified.
You can use existing agreements to manage changes that occur, for example, in price or delivery days. You can copy or change prices and keep existing agreements to use as historical information, so you have a record of the transactions with prior prices.
You can create trade agreements and change them in a journal to post and update at a future time. This situation might apply, for example, if the journals must be approved before they're posted.
Trade agreement pricing
Supply Chain Management provides the following types of trade agreements:
Sales price agreements - used for certain items, customers, groups of customers, or all customers
Purchase price agreements - used for certain items, vendors, groups of vendors, or all vendors
When you set up a trade agreement that relates to price, you need to specify prices for purchases of specific amounts of the item(s) in, for example, defined time periods. The system uses these trade agreements to specify individual item delivery times for each customer.
For example, if multiple customers are allowed the same pricing, the Price/discounts group supports entering one instance of their agreed prices under a specific group. Then, you can attach this group to each customer or customer group to allow for automatic pricing across the group for every order to each of those customers.
Trade agreement parameters describe the trade agreement discount options.
The Discount field determines how the system calculates discounts for lines of a specific sales or purchase order, when both Line and Multiline discount agreements apply to the sales order line. The Discount field is the only parameter setting that directly applies to customer and vendor trade agreements.
Line discounts
Line discount agreements are a discount percentage or a discount amount. Line discounts can be applied if the quantity on the sales or purchase order line meets the minimum quantity and maximum quantity required by the agreement.
Multiline discounts
You can apply the multiline discount when one or more sales order lines that are added together meet the discount requirement. The items must be in the same multiline discount group. You can use this type of discount when a company wants to give a discount to a customer that orders more than 10 items in the item discount group.
Total discounts
The system applies Total discounts on the entire value of a sales or purchase order. You can use this type of discount, for example, when a company wants to give a discount for single sales orders that include a minimum of USD 3,000.00 worth of items.
Total discounts are only applied to items that have the Total discounts checkbox selected on the Released products page in the Purchase or Sell FastTabs.
Consider the following options when you're setting up discount fields:
Line - Only a line discount is applied to the line.
Multiline - Only a multiline discount is applied to the line.
MAX (Line, Multiline) - The system considers both the calculated line discount and the multiline discount and applies only the better of the discounts.
MIN (Line, Multiline) - The system considers both the calculated line discount and the multiline discount and applies only the lesser of the discounts.
Line + Multiline - The discount applied to the order line is the sum of both the line discount and multiline discount. The two discounts are added, and then the discount is calculated.
Line Multiline - The discount applied to the order line is the value of the Line discount added to the value of the Multiline discount that is calculated based on the price minus the Line discount. Notice that the multiline discount is calculated after the line discount is deducted from the list price.
In the following video, I create trade agreements with specific rates and discounts for the customers and products. I create a sales order and use the rates and discounts in that sales order.
You can also define the rates and discounts for the procurement process, which would be specific to the vendors and products.