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📽️ 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business contribution margin, eliminate manual errors and increase customer trust, and reduce margin compression due to out-of-date pricing.

 User Role(s) and Business Objective

Pricing Analyst/Manager (primary) / Sales, Commercial, Finance leaders (secondary

Business Objective:

Contracts pricing is typically negotiated for 1 year but can sometimes extend to multi-year agreements. See Price Setting UC 1 for detail on contract pricing. Contract renewals offer an important opportunity for long-lasting business improvement. The goal of sales and commercial teams is to improve contract margin, volume, and mix. They will do this when armed with market and renewals trends, seasonality, and visibility into underperformance.

 Complication

  • Limited negotiation timeline

  • Seasonality (e.g. high percentage of renewals and year-end… other high/low cycles)

  • Limited visibility into market trends and recent outcomes for similar renewal accounts

  • Limited visibility into underperformance and recommendation for price improvements

 Capability Needed

  • Time series view into when each contract expires; count-rev-vol at risk by month

  • Tracking and alerting for agreement expiration dates and draft review progress

  • Force ranking by category of high/low performing customers and products

 Benefit(s)

  • Reduce possibility of missing a renewal deadline & delay in price/margin increase

  • Increase margin with contextual decision support

  • Increased alignment between pricing and sales teams

 KPIs

  • Up-to-date margin inputs: no profits lost due to old/incorrect pricing inputs

  • Efficiency and error reduction: cost of manual errors, process costs

 Calculations

  • Up-to-date margin inputs = average monthly cost increase * days pricing out of sync

  • Labor savings & error reduction = hrs./mo. contract calculations * analyst rate

 Value Projections

Prescriptive Design Requirements

Primary:

As a Pricing Manager/Sales Rep, I want to use contract renewal as an opportunity for a long-lasting business improvement. I want to improve contract margin, volume, and mix by considering:

  • Market and renewals trends

  • Seasonality

  • Insight into underperformance

Secondary:

As a Finance leader, I want to have oversight over contact renewals. I want to make sure my team is considering all factors to improve margin, volume, and mix of contracts.

The overall design requirements are summarized in these articles:

 Functional and Non-functional Requirements

For this use case, the functional requirements are separated into these categories:

Complications:

  • Limited time for negotiations

  • Seasonality (e.g., year-end contract renewal rush)

  • Limited visibility into market trends and recent outcomes for similar renewal accounts

  • Limited visibility into underperformance and recommendation for price improvements

Capability Needed:

  • Timeline view into when each contract expires; count-rev-vol at risk by month

  • Track and alert system for agreement expiration dates

  • Draft progress review

  • Rank customers and products - high/low performance

Benefit:

  • Reduce risk of missing renewal deadline

  • Reduce risk of delay in price/margin increase

  • Increase margin with contextual support

  • Increased alignment between pricing and sales teams

KPI:

  • Up-to-date margin inputs: no profits lost due to old/incorrect pricing inputs

  • Efficiency and error reduction: cost of manual errors, process costs

Calculation:

  • Up-to-date margin inputs = average monthly cost increase * days pricing out of sync

  • Labor savings & error reduction = hrs./mo. contract calculations * analyst rate

Non-Functional Requirements

For this use case, the non-functional requirements are:

  • As a prerequisite: Contracts need to be set up already within the Pricefx system.

  • Automatically updated metrics in the dashboard.

 Measures, Calculation and Decision-making KPIs

The following are the primary KPIs for this use case:

  • Revenue Trend YTD: metric that tracks a company's revenue performance over a certain period of time, usually the current year

  • Margin Trend YTD: metric that tracks a company's margin performance over a certain period of time, usually the current year

  • Volume Trend YTD: metric that tracks a company's sales volume performance over a certain period of time, usually the current year.

  • Renewal Timeline: metric that tracks the time it takes for a company to renew its contracts with existing customers.

  • Contracts Status: list of approved contracts and contracts waiting for approval.

  • Expiry Date: listing of contract expiration dates.

 Reporting and Dashboards

These requirements for reporting and dashboards are included in the baseline estimate.

  • Single dashboard that contains:

    • Single widget showing summary of total and year-to-date trends for same period from previous year

    • 8 charts via portlets

      • Pie charts (3)

      • Bubble charts (2)

      • Bar charts (2)

      • Column chart (1)

    • 4 tables via portlets

      • Contracts portfolio summary

      • Individual contract performance

      • Approved contracts

      • Contracts awaiting approval

 Scope Validation and Project Readiness

During scope validation process we are ensuring that the project deliverables are completed according to the agreed scope and quality standard by asking the following questions:

Scope Validation and Project Readiness Workshop – Validation Questions & Answers

Q1: Are the dashboards dimensions reflecting your business? Or do you need additional dimensions/attributes to be displayed in the dashboard?

A1:

Q2: Where is your data stored?

A2:

Q3: How many customers is expected?

NOTE: Assumption is less than 20000.

A3:

Q4: How many contracts do you expect to have displayed with applying filters in the dashboard?

NOTE: The average and max number. Assumption is less than 10000.

A4:

Q5: Are you able to provide contract ID field from PFX in the transaction table? If not, enriching the transactions with contracts will become significant additional effort.

A5:

LEARN MORE: For more information on scope validation and project readiness, click here.

User Stories

As a Sales Rep/Pricing Manager/Pricing Administrator, I want to create a dashboard visualizing metrics of my contract portfolio to improve my overall performance.

 Epic: Contract Renewal Dashboard

User Story Name - Dashboard

I want to: To filter the dashboard data by following fields: - Customer group - Product group - time segment

so I can: Have a clear overview of specific information I am interested in analyzing

Acceptance Criteria: inputs: - Customer group - Product group - Start Date - End Date

User Story Name - Contract business summary Total

I want to: See a general summary of total and Year-to-date trend of - volume - revenue - margin

so I can: Evaluate my portfolio health

Acceptance Criteria: Widget: - Revenue Trend YTD (%) - Margin Trend YTD (%) - Volume Trend YTD (%) - Total Revenue - Total Margin - Total Volume

User Story Name - Contract business summary

I want to: I want to see a more detailed summary of my contracts portfolio, aggregated by:

  • Industry

  • Region

  • Product group

Just like in the general summary I want to see YTD trending as well as accumulative totals for the year.

so I can: Evaluate success of all my contracts quickly

Acceptance Criteria: Table of business contracts. Columns:

  • Industry

  • Region

  • Product group

  • Revenue Trend YTD

  • Margin Trend YTD

  • Volume Trend YTD

  • Total Revenue

  • Total Margin

  • Total Volume

User Story Name - Customer Performance

I want to: See my contracts in quartiles by performance: low, medium, high by:

  • volume

  • revenue

  • margin

I want to be able to drill down on quartiles to see specific contracts within quartiles

so I can: H

ave a clear understanding of:

  1. My portfolio overall health

  2. individual contract performance to easily identify underperformers and overperformers

Acceptance Criteria: 3 pie charts “Customer Performance”

  1. Margin

  2. Revenue

  3. Volume

Chart divided into quartiles:

  • low – red

  • medium – blue

  • high – green

Each quartile is clickable and when clicked, it unfolds into a pie chart showing all contracts in the quartile.

When hovering over an individual contract, exact numbers are displayed:

User Story Name - Contract mix by Region

I want to: See an overview of my business portfolio by region

so I can: Maintain proportions of business per region as I have intended them

Acceptance Criteria: Bubble chart

  • X-axis: Revenue (absolute value)

  • Y-axis: Margin (%)

Bubbles represent individual contracts. The size of the bubble is related to its comparative size. The color of the bubble indicates the region to which contact belongs. When hovering over a bubble, exact numbers are displayed.

Under the X-axis are names of the regions. When clicked, makes bubble contract bubble of that region disappear from the chart.

User Story Name - Contract mix by Industry

I want to: See an overview of my business portfolio by region

so I can: Maintain proportions of business per industry as I have intended them

Acceptance Criteria: Bubble chart

  • X-axis: Revenue (absolute value)

  • Y-axis: Margin (%)

Bubbles represent individual contracts. The size of the bubble is related to its comparative size. The color of the bubble indicates industry, to which contact belongs. When hovering over a bubble, exact numbers are displayed.

Under the X-axis are Names of regions. When clicked, makes bubble contract bubble of that industry disappears from the chart.

User Story Name - Renewals Trending

I want to: To see renewals trending over time, considering volume, but also margin and revenue 

so I can: Spot upcoming contract renewals to anticipate and start renegotiations in suitable time

Acceptance Criteria: Will have 2 Bar charts: 

  • Renewal Timeline by Volume

    • X-axis: TTM 

    • Left Y-axis: Volume 

    • Right Y-axis: Contract Count 

Bars alight to left Y-axis: Volume
with dots, connected by line align to right Y-axis: Contracts

  • Renewal Timeline by Margin and Revenue

    • X-axis: TTM 

    • Left Y-axis: Amount 

    • Right Y-axis: Contract Count

NOTE: When user hovers over the bar or a dot, exact amount is displayed. 

2 types of bars: light blue for Revenue, dark for Margin. The Bars alight to left Y-axis: Amount
with dots, connected by line align to right Y-axis: Contracts

User Story Name - Renewals by Quarter

I want to: See renewals per quarter

so I can: Know now best to plan my year, resources, allocation, etc.

Acceptance Criteria: A bar chart where:

  • X-axis: Quarter

  • Y-axis: Renewals

NOTE: When user hovers over a bar, exact amount is displayed. 

User Story Name - Contract performance

I want to: See individual contract performance to understand contract success, but also to see how soon contract expires

so I can: Anticipate and start renegotiations in suitable time.   

I need to see all relevant information immediately, so that I can bring context to the table of negotiations. 

Acceptance Criteria: Table columns of:

  • Contract Id 

  • Customer Name  

  • Customer Id 

  • Region 

  • Industry 

  • Expiration Date 

  • Days to expire (color coded) 

  • Revenue 

  • Volume 

  • Margin $ 

  • Margin %

User Story Name - Approved Contracts

I want to: See summary of approved contracts

so I can: Understand which contracts have been approved

Acceptance Criteria: Table columns of:

  • Contract Id 

  • Contract Name  

  • Customer Name  

  • Customer Id 

  • Expiration Date 

  • Days to expire (color coded)

User Story Name - Contracts to be approved

I want to: Contracts waiting to be approved

so I can: Understand which contracts are not yet approved, so I can act on them

Acceptance Criteria: Table columns of:

  • Contract Id 

  • Contract Name  

  • Customer Name  

  • Customer Id 

  • Expiration Date 

  • Days to expire (color coded) 

Data Requirements

The data requirements for the dashboard depends on following data: 

  • Customer master 

  • Product master 

  • Transactions, enriched with Contract ID 

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.

  • Any metrics reporting other than the ones explicitly mentioned above 

  • Any customization 

  • Additional filters 

  • User entitlement of the dashboard 

  • Data Integration 

Solution Design

The design and the implementation of this use case (Improve contract renewal performance and long-term visibility via analytics and KPIs) is going to utilize a suite of analytical dashboards that will utilize a range of measures (volume, revenue and margin) from sales transactions, contract portfolio aggregates by industry, region and product group, outperformers and underperformers, business mixture by region and customer industry basis, trending contract renewals, individual contract performance and list of approved contracts and those awaiting approval.

The end-to-end solution design is shown below:

 Step 1: Create Dashboard Settings

This dashboard will contain the following inputs that will be used to filter the data; customer group picker, time segment (Start and End Date):

 Step 2: Summary of Total and Year-to-Date Trends

This is a dashboard portlet that is the widget showing the summary of total and Year-to-date trend compared to the same period previous year by:

  • volume 

  • revenue 

  • margin (calculated as (Revenue – Cost) / Cost) 

The input data comes from sales transactions to evaluate portfolio health. 

 Step 3: Detailed Summary of Contracts

This is a dashboard portlet that is a table showing more detailed summary of my contracts portfolio that is aggregated by:

  • Industry 

  • Region 

  • Product group 

So, just like in the general summary it shows the YTD trending as well as accumulative totals for the year, only grouped. 

 Step 4: Pie Charts

These are a dashboard portlets that are pie charts showing outperformers and underperformers by margin, revenue, and volume, again taking the data from the sales transactions. 

It shows a general overview:

NOTE: Each Low, Medium, and High bucket will represent 1/3 of the total number of records.

Each of these has the ability to drill down to customer level:

 Step 5: Bubble Charts

These are a dashboard portlets that are bubble charts showing the mix of business across regions and across customer industry basis, again taking the data from the sales transactions.

 Step 6: Bar Charts

These are a dashboard portlets that are bar charts showing the trending renewals to spot upcoming contract renewals by volume but also by margin & revenue to anticipate and start renegotiations at a suitable time. 

It is taking Volume, Margin and Revenue data from sales transactions grouped per month and also shows the number of contracts (CT) that have an End Date in the given month. 

 Step 7: Column Chart

This is a dashboard portlet that is a column chart showing renewals by quarter: 

NOTE: Similarly, this chart is showing number of contracts having their End Date in the given quarter.

 Step 8: Individual Contract Performance

This is a dashboard portlet that is a table showing individual contract’s performance. It will allow us to understand contract success, but also to see which contracts expire to anticipate and start renegotiations at a suitable time. 

The data is taken from the sales transactions joined with the contract table (CT). 

The Contract Id column is a hyperlink, it allows to navigate to the given contract. That allows us to see the original analytics at the header and line-item level (e.g., raw material history vs material forecasting; profitability; volume history) 

 Step 9: Approved Contracts

These are dashboard portlets that are tables showing the list of approved contracts, 
and contracts waiting to be approved.

NOTE: This data will come from the contracts table (CT) that is joined with the Customer master table.

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