📽️ Check out a video demonstration for this use case, here.
Use Case Situation Description
In this use case, pricing practitioners have the ability to configure formula-based agreements to improve contract business contribution margin, eliminate manual errors and increase customer trust, and reduce margin compression due to out-of-date pricing.
Prescriptive Design Requirements
As a [Pricing Manager/Sales Rep], I want to have the ability to configure formula-based agreements, so I can:
Improve contract business contribution margin.
Eliminate manual errors and increase customer trust.
Reduce margin compression due to out-of-date pricing
The overall design requirements are summarized in these articles:
User Stories
These are the user stories associated with this use case.
Data Requirements
The following tables can be either manually loaded in Pfx via Pfx Excel Client or can be automatically integrated using CSV files in a Pfx dedicated SFTP folder:
Index table that includes the index source, monthly and weekly values, rate, UoM, Conversion factor
Currency conversion table that includes the from and to currencies, monthly and weekly values, FX rates
Raw Material table: a mapping table between the Product and its constituent raw material along with each raw material contribution/weight to the product.
Adder 1, Adder 2, Adder 3: parameter tables that stores adders that can be added to formula at the product level.
Out-of-Scope
This represents the out-of-scope business functions and features for this use case. They can be configured, but by default they are not included in the Chemical Industry Catalog.
Ability to assign a Fixed Price to a product within the Complex Formula guided template.
Ability to calculate prices based on Disaster or Severity contract conditions.
Ability to simulate prices based on index forecasted values.
Ability to apply rounding rules within each step of the price calculations.
The Measures and Decision-making KPI’s
Reporting and Dashboards
Notifications and alerts
API method integration
Customer-Facing templates with calculated prices
Solution Design
The design and the implementation of the Complex Formula Builder is going to utilize the suite of Pricefx out-of-the-box features and capabilities across multiple Pricefx modules, Agreements & Promotions, Price Setting, and Integration Manager modules. The flowchart below illustrates the end-to-end process and mapping of the process components to Pricefx modules and specific capabilities.
The end-to-end Formula Contract agreement setup and price calculation process:
The design and the implementation of the Complex Formula builder is going utilize the suite of features and out-of-the-box capabilities of Pricefx that Agreements & Promotions Module. This module will be the frontline interface that will be leveraged by either the Sales Representative or in some cases will be utilized by the Pricing Manager in collaboration with the Sales Rep for the purpose of:
Streamlining the negotiation process with the end customer
Capturing the agreed-on contract parameters
Approving and producing a customer facing PDF document for the purpose of communicating the approved agreement with the end customer.
The Agreements & Promotion object within the Agreements & Promotions Module consists of 5 sub-objects, the chart below depict the prescribed process with Pricefx Agreements & Promotions module:
Header
The user interface that will allow the user (Sales Rep, Pricing Manager) to select agreement scope a) Customer(s), b) Product(s), c) Agreement Start and End Dates, d) Agreement Currency. And provide the user with access to descriptive analytics that KPI’s based on the agreement scope. Â
The user interface that will allow the user (Sales Rep, Pricing Manager) to configure and build the component of the customer formula by product or group of produces. The below features illustrate the prescriptive solution within the Items tab:
Active: (Yes/No): On/Off Switch to engage or disengage the formula calculation
Product(s): Allows the user to select products from the agreement product scope.
Product Rules: Allows the user to configure the Base Adder, Base Lower and Base Upper Bounds, and the number of precision decimals for the price. The image below illustrates how those parameters will be configured within Pfx.
Formula Configuration: Formula configuration is managed by its own guided workflow that is embedded within the Items tab and after the selection of the product(s). it allows the user to map an index to a product(s), and set up the periodicity, the # of periods, the lag, and the offset parameters. (Illustrated in Table-1 above).
The configuration of the formula can be applied at the raw materials level (one level below the Product Code).
Solution Design Process
This section teaches business users how to apply our solution to this use case or similar ones through a step-by-step process. Follow along to learn and practice.
The use case focuses on automating contract pricing calculations to provide insights and track changes in product cost or market price against fixed margin base. Our solution aims to eliminate human errors and reduce time-consuming manual processes. In the business scenario, as a Pricing Analyst/Manager, you're required to review current contract pricing results, make adjustments, and recalculate the contract. This involves reviewing calculations and conditions tables, the workflow for the approval process, and the customer insights dashboard. Using complex formulas for specific pricing results is central to this process thus showing the need for accuracy and efficiency in contract management.
The first step for this Use Case is to review current contracts’ status and performance to identify those contracts that are close to expiration and need to be renewed. For this step we will use the Chemical Contracts Renewal Dashboard as our Analytics capability.
Login to Pricefx
Type your username, partition, and password. Click the Login button.
Once you are logged into the Pricefx, click on the corner-dots icon to open the main menu.
Click on the Dashboards option in the main menu. You will see then a blank dropdown for selecting the Dashboards. If you click on the Dashboard dropdown, you will see a variety of the prebuilt dashboards that are included by default into Pricefx Chemical Industry Package. The learning partition includes demo data. In the normal scenario to use these dashboards you will need to have Product Master, Customer Master and Transaction data loaded into the Pricefx.
Select the Chemicals Contract Renewal Dashboard option from the list.
The window on the left allows you to filter Contract Renewal information. The fields are automatically filled, but you can make changes using the browser and calendar icons. After making changes, click the Apply Settings icon at the bottom.
In the Contracts Performance table, you will notice the column Days to Expire values (display may vary). Here you can identify the contracts that are closer to renewal and may need some price changes for better profitability. You can compare the Contracts’ Performance previous results with the Approved Contracts table results.
Under the Contract Performance table, you can click on the contract number to open the Contracts window in a different browser page automatically.
These steps are useful to identify contracts opportunities for pricing improvements. You can use the Dashboard contract links to open the contract directly or follow the next steps to search/look for a specific contract under Agreements & Promotions.
The second step is to review the current contract prices to identify opportunities and make changes for a better profitability. For this step we will use the Agreements and Promotions capability.
Using the main menu, locate the Agreements and Promotions path, like this:
→ Agreements and Promotions → Agreements and Promotions.Under the main Contracts window, use the Name search field column to locate the contract number you are looking for. In this example we are using C-272
Select the contract by using the checkbox. Notice at the bottom some additional action icons are displayed, click on the Duplicate icon to recreate a new contract to work on the price changes. Â
You will get a confirmation message at the top of the window. Now you can locate and click on the new duplicated contract.
You must change the name of the contract to easily identify it. Click on the pencil icon.
After you clicked on the pencil icon to rename your contract, provide a name for your contract and click on the OK blue icon.
Under the Header tab, notice the validity period is the same as the original contract. Using the Calendar icons you can change the validity of this new contract. Extend the contract validity for the current year.
You can change the Input Parameters of your contract by adding customers and products at a Header level.
You can add products at a Header & Item level.
On the right side of the window the Calculations results at a Header level. These results come from the original contract. The blue Show hyperlinks allow to review additional historical information in graphical charts.
You can select the condition by clicking on the checkbox to display more details per item level which you can see under the Items tab where the contract conditions are listed.
The blue Show and Open hyperlinks display/enter additional information related to the selected condition. When an item is selected, additional action icons appear at the bottom to maintain the records.
Good to know: in Input Parameters tab in the right hand side dialog window, you can use the expand button to make changes directly. After you have made all the necessary changes, click Apply.
When making your changes, you can use different Base values as you have noticed int he previous step. When the conditions have the Include Scales box checked, you can open the listing by checking the Expand icon.
To add values, click then on the Base Adder column.
To select another product and enter additional scales, click on Duplicate Records icon at the end of the row. Here you will have to enter Targets and Base Adder values. To save the changes, click Apply and close the dialog box.
This can be helpful in understanding how the condition calculation works, should you need to adjust it.
To review the formula, click the Open box under the Formula Configuration.
This is what you will see:
You can now use the dropdown to add another Formula Element into the calculation. If, for instance, you choose Index value, this will appear automatically and changes will be added to the formula.
You can change the Calculation Period to take advantage of price changes as frequently as you may need them. The dropdown menu will display an array of options from monthly to quarterly to rolling 3 months etc.
You can continue and use the Index option to elect appropriate indexes. Note that the system will display a warning message when Contribution percentage values are required.
To resolve this error, enter your selected value in the Raw Material Contribution % field and in Index Contribution %. Save changes by clicking Confirm Changes at the bottom.
To add extra currencies, use the Calculation Output Types section. Click the Expand icon and using the Currency dropdown, select an option from the listing.
You can use the dropdown also to select Unit of Measure from the list. Click on Apply blue icon at the bottom of the dialog box to save changes.
To manage surcharges, scroll down and open the Surcharge dropdown list. Here you can select the item you want and enter a value in the Surcharge Amount field.
Good to know: Alternatively, you can include input parameters by using the Open boxes for each category.
To review previous calculations, click on the Calculations tab → Show. This will display more details to make sure you have all the information before recalculating your changes.
To recalculate changes, after you have completed all the adjustments for the existing condition, you can click on the Recalculate box to apply.
The system will display a warning notification that products must be selected at Header level as well.
To do this, click on the Header tab and under Input Parameters, click on the viewing icon for Products.
Now you can filter the main Product Master list using your dedicated industry. In our example we use Chemicals. Click the checkboxes to select the products you have previously selected for the Items conditions, then click the Select Items blue box at the bottom.
Now the system will display the selected products at Header level.
Click on Recalculate once more to successfully process the calculation. A confirmation message will displayed by the system to notify you that the calculation has been successfully processed.
After completing the previous steps, your current status for the contract will be Draft.
The system displays workflows available to complete the approval process. As soon as you click on the Submit icon, the approval process starts.
You can now submit the contract for approval. To do so, click the Submit button at the top-right corner of the window. Follow the notifications and submission steps as recommended by the system to complete the approval.
Good to know: With the Paper Plane release, you can now approve and watch different contracts right from inside your dashboards by using the hyperlinks available. Learn more, here.
Now you can move on to identifying and reviewing the required company parameters. This is the next stage in this use case and it is important for the contract pricing calculations. The company parameters we consider for this are market indexes, raw materials or cost plus factors.
Identify and Review Required Company Parameters
You can use the Company Parameters to make changes for new calculations. To locate this button, navigate to the top-right corner of the dialog window and click on the Company Parameters icon.
On the left side of the window, you'll see Categories folders for organizing parameters. Use the Add Folder icon at the bottom to create new folders. Find the folder you want and click on it to view the defined parameters on the right side of the window. These parameters are essential for contract pricing calculations. To create new parameters, click on the Add Parameter icon at the top-right corner of the window.
Choose any available parameters by clicking on the checkbox. On the right side of the window, you'll see the defined values, which are calculated based on a combination of dimensions related to Chemicals products. You can modify or create new records/values using the Add Record or Mass Edit icons at the top-right corner of the window. Then, review the parameters to validate the values available for the contract pricing calculations.
Identify Required Data Sources and Datamarts
The last phase in this use case is to review the fields within the Data Source and Datamart tables that store the Process Industry (Chemicals) data and results for Customer Insights Dashboards.
To do this, click on the main menu and go the following path: Analytics → Data Manager → Data Sources.
Once the system displays the Data Source tables you will see the rows contained under each table under the #Rows column. You can now click on the table called Customer Insights Aggregated Data Chemicals. You will notice that most of the fields int his table are related to the Customer Insights Dashboard information. some of these fields are defined as key fields. This allows them to connect to other Data Sources (tables) during the creation of Datamarts.
To edit your Data Source tables, you can use the action icons located at the top-right corner of the dialogue window.
If you want to visualise the content of the fields, click on the Data tab. this will allow the system to display the content of the table along with status and results of previous calculations such as invoice prices, gross margins and so on. To return to the main listing, click on the blue arrow in front of the title field.
For information maintenance you can use the function icons in the top-right corner of the widow.
Now you can review other Data Sources related to this industry.
To review Datamarts, you can follow this path: Analytics → Data Manager → Datamarts.
At this point, the process is similar to Data Sources. The system displays a list of existing Datamarts, and the # Rows column shows the number of records.
If you click on the Standard Sales Data Chem datamart, you can see the combination of fields that collect information from different Data Sources. The main source is displayed in the left area (TXStandardData_Chem(DS)). You can see under the Owner column different sources of information as well as under the Field Picker section on the left area of the window.
To collect and connect information from different source tables, the Datamart must have a key to a Data Source that has a mirror key allowing you to connect the two.
To review the information displayed and the status of the Datamart click on the Data tab. This is the information used/displayed in the Dashboards.
If you want to see/display all the available fields, you can use the Settings icon at the top-right corner of the window and chose the Select Fields to Display option. Use the checkboxes to make your selections or use the main checkbox by the Column name to select all. Click on the Apply blue icon.
Now you can see all the pricing calculated values available to be displayed and evaluated in the Dashboards.
