PRICE PROTECTION PROGRAMS
STREAMLINE STOCK ROTATION, PRICE PROTECTION AND OTHER INVENTORY PROGRAMS
In many categories and markets, OEMs reduce prices due to competitive pressures or end-of-life product lifecycles. Channel partners such as distributors, dealers, and retailers often are holding inventory of these products, but purchased at the previous, higher price. In order to ensure their channel partners don’t incur losses or return unsold inventory, OEMs often extend inventory and price protection programs to mitigate partners’ risk. These include:
Price Protection Program
A price protection program is a vehicle through which an OEM compensates a distributor following the reduction in sales price of a specific product. Upon a price reduction, distributors may still have inventory at the older, higher price. Rather than return all the goods, vendors provide price protection on these products in the form of a discount to reflect the new, lower price.
Rotating stock means arranging the oldest units in inventory so they are sold before the newer units. For example, an electronic store will restock its shelves by putting the oldest units near the front part of the shelves, and the newer units in the back. It is important to rotate stock in all areas: retail display area, warehouse, factory, and other distribution point in order to reduce losses from deterioration and obsolescence.
Rights of Return
This refers to distributors' contractual right to return product within certain limitations. For example, returns may be limited to a certain percentage of inventory that is allowed to be returned.
ENSURE PRICE PROTECTION PROGRAM COMPLIANCE
Price Protection, Stock Rotation and similar channel inventory incentive programs are sometimes exploited with fraudulent claims. The key to preventing abuse is having the ability to calculate inventory levels and value channel inventory accurately, at any time, on demand. This is easier said than done when goods have been shipped at many different prices and multiple price changes may have happened while the partner held the goods in inventory.
Entomo's Inventory Programs module automates and streamlines the entire process of:
- Calculating inventory levels;
- Validating claims; and
- Revaluing the residual inventory, thereby reducing or eliminating fraudulent or incorrect claims payments.