In today’s competitive markets everyone is searching for the best price, and companies often need to resort to the demand to lower prices if they are to succeed. Therefore, whether your role is a purchaser or a salesperson, making sure you track agreed upon price discounts is critical to your job tasks.
Microsoft Dynamics AX ERP assists in the tracking of price discounting from both the side of the purchaser and the side of the salesperson through trade agreements and purchase/sales trade agreements. This blog will introduce you to the differences between these agreements and provide a few quick configuration tips.
First, let’s look at what each of these agreements mean.
A trade agreement allows you to set up, track and monitor any price or discount items. Trade agreements allow pricing to be automatically updated based on quantity or by dollar amounts for a single customer, by a group of customers or for all customers. In this manner, selected clients that meet specified buying levels or tiers can receive special pricing. Trade agreements can be scheduled to be in effect for a period of time.
There are four types of discounts supported by trade agreements:
- Line Discounts
- Multi-line Discounts
- Total Discount
For example, all of these scenarios can be handled via trade agreements:
- Month of March Special! Place an order for more than 250 units of Product A in the month of March and receive a 10% discount.
- Tiered Pricing: Purchase between 51 and 100 units of Product A, and receive $10.00 off each unit. Purchase over 100 units, receive a $12.00 discount per unit.
- One week only! All orders totalling over $10,000.00 will receive a 5% discount.
Setting up Trade Agreements
Step 1: Activate Trade Agreements
Trade agreements must be activated prior to use. Activation involves simply selecting the discounts that will be available in your AX environment.
- For Sales Trade Agreements navigate to: Sales and marketing > Setup > Price/Discount > Activate price/discount
- For Purchase Trade Agreements navigate to: Procurement and sourcing > Setup > Price/Discount > Activate price/discount
Step 2: Establish grouping for Customers, Vendors or Items
To provide discounts by a particular segment – whether specific groups of customers, by item type or by vendor (for purchasing) – groups will need to be setup prior to creating the actual trade agreement.
- To create a Customer group navigate to:
Sales and marketing > setup > price/discount > customer price/discount group
- To create a Vendor group, navigate to:
Procurement and sourcing > setup > price/discount > vendor price/discount group
- To create an Item (Product) group, navigate to:
Inventory and warehouse management > setup > price/discount > item discount group
Step 3: Setup the trade agreement journal
In this step, you will first setup the journal that will store your discount pricing rules, then you will setup the actual rules by clicking LINES on the menu bar.
- To create a Trade Agreement journal for Sales navigate to:
Sales and marketing > setup > price/discount > trade agreement journal
- To create a Trade Agreement journal for Purchases navigate to:
Procurement and sourcing > setup > price/discount > trade agreement journal
Once the journal is created and posted, the system will automatically apply the price, discount, line discount multiple line discount and/or total discount that you configured on all sales orders or purchase orders within your set time-frame.
Benefits of Trade Agreements
There are a number of benefits to using trade agreements in Dynamics AX:
- For Price: Automatic pricing is only applied to items that are in the trade agreement journal that is posted.
- Trade agreements are controlled by journals.
- Detailed management of price and discounts.
- Helpful to manage items that have multiple vendors. If an item has multiple vendors then you can setup trade agreements for each vendor for a specific item code. Dynamics AX will select a vendor based on the best price and lead time.
Purchase and Sales Agreements
A sales agreement is a commitment between the organization and the customer to acquire a product in certain quantity over time for special pricing and/or discounts. This type of agreement overrides any pricing and/or discounts that are found in any trade agreements. Sales agreements are commonly known as blanket orders.
Purchase agreement is similar to the Sales agreement, however, the relationship is between the organization and the vendor. Purchase agreements also override any standing trade agreements.
Setting up Sales/Purchase Agreements
Configuration of Sales Agreements can be found at: Sales and Marketing > Common > Sales orders > Sales agreement. Due to the nature of Sales/Purchase agreements, setup is a bit more involved and each agreement is setup per customer or vendor. The grouping is not the same as in Trade agreements.
- For Purchase agreements, navigate to: Procurement and sourcing > Common > Purchase Orders > Purchase agreements.
Benefits of Sales/Purchase Agreements
- Purchase and sales agreement stay on hold until they are effective.
- Purchase and sales agreements allow you to release a new sales order right from the agreement form.
- Within the same form you are able to setup terms and financial dimensions.
- Exclude from rebate – if this check box is selected, this agreement is excluded from any rebates. This is due to earlier customer discounts that are setup.
- Definition of a period for the agreement.
- Sales order: The requested ship date must fall within the same period of the agreement.
- Purchase order: the delivery date must fall within the same period of the agreement.
A final tip! By default, a Sales or Purchase agreement will not use a discounted price of a product from a trade agreement. If you want the Sales or Purchase agreement to use product pricing from the trade agreement, then you can enable the For Sale Prices or For Purchase Prices in “Product dimension groups” setup. See image below.
With the help of Dynamics AX 2012 agreements, tracking pricing from both the respect of the purchaser and the salesperson can be much more controlled and manageable. In addition, the collaboration of managed pricing through both trade agreements and sales or purchase agreements is a very powerful tool that offers increased flexibility in terms of quantity limits and trace-ability by agreement.
Gilbert has been providing Microsoft Dynamics AX services and support for over 10 years. With expertise in Supply Chain Management, Retail, Transportation and Manufacturing, Gilbert delivers smart solutions with efficiency to assist clients in their business challenges.