ERP Pricing and Hierarchy

Owned by Ben Silva
Feb 05, 2021
5 min read

This document details the ERP pricing methods for Sales Orders, Invoices and Credit/Debit Memos. The document will first cover the different pricing methods available then explain the hierarchy used when pricing.

Pre-Requisites

  1. Companies

  2. Divisions

  3. Customers

  4. Customer Locations

  5. Super Customers

  6. Price Groups

  7. Items

ERP Pricing

There are 3 base pricing methods.

  1. Fixed Price: the value in Amount Differential of a template is the price.

  2. Market Price: the base market value is derived from a Formula, Region, Source, and Type, then Amount and or Percent Differentials are applied as defined on a template.

  3. Basis Price: the base formula value is first calculated from ingredient basis prices of a formula then Amount and or Percent Differentials are applied as defined on a template.

There are multiple variations of these pricing methods.

  1. Market Spread: looks at the base market value across predefined ranges to get range specific values as either a fixed price to supplant the base market or differentials to add to the base market.

  2. Contact Price – Special: supplants the pricing on the template, it can either be an actual price or price and Percent values that replace the differential values of the template in the calculation.

  3. Contract Price – Special Range: like Special the price configurations from the template are replaced but the replacement values are set based on quantity ordered.

  4. Contract Price – Feature: does not change the base calculation of the template, instead feature adds to the template calculated price but prints as a separate line on the sales order and invoice. Furthermore, Features are associated with a Miscellaneous Charge code.

Pricing is configured in multiple layers based on the pricing method.

  1. Fixed price is configured for a customer item combination on a pricing template. This can then be supplanted by an actual price configured on a contract.

  2. Market Price is based on a Region, Source and Type (Midwest, Under Barry, Large) then a Formula is used to determine what market date(s) are used to calculate the base market. Most clients use Prior Thursday starting Sunday for the current week. However other common Formulas average the prior Tuesday and Thursday or average the last four Thursdays.

  3. Basis Price formula prices are pre-calculated each week from ingredient basis pricing. The template simply points to the Basis code and the item is the Formula in Work Orders.

Template pricing allows for a wide range of configurations that must be evaluated to determine the correct pricing for a given Customer, Customer Location, Item and Pricing Date. Template pricing can optionally be configured for a Company, Division, Active From/To dates and even specific to a day of the week. Although the previous configurations are all optional a template must be for one of three customer-based configurations, Price Group, Customer and Customer Location.

Contract pricing requires Effective date, Expiration date and at least one Type, Item or Extended configuration. Contract pricing is designed to set pricing for a short period of time that supplants Template pricing.

One final note on templates. You can have a template for a customer with items and no pricing method configured. This template serves as a list of valid items for the customer. The actual pricing could be configured on a Super Customer or Price Group.



Hierarchy

Hierarchy is a combination of template pricing and contract pricing. Although Contract Special pricing supersedes template pricing it can rely on the template to calculate the price. Contract Feature pricing only adds to the template price.

Each Sales Order is for a Customer, Customer Location, Price Date, and a series of Items. The Price Date is either the Order Date, Ship Date, Delivery Date, or Invoice Date based on a Customer configuration. The Price Date is used to filter the Template Header, Template Detail, and Contract Prices.

When it comes to Companies and Divisions, all other configurations being equal Division supersedes Company templates.

Template Pricing

Assuming all we have is template pricing and we have isolated the templates based on Company, Division and Dates then the hierarchy is as follows.

  1. Customer Location

  2. Customer

  3. Super Customer

  4. Pricing Group

For example:

  • Wal-Mart Store 102 has 3 items but only one item has a pricing method configured.

    • Item1 Method None

    • Item2 Method Fixed Differential Amount $.95

    • Item3 Method None

  • Wal-Mart Super Customer has the same 3 items as Store 102 all with pricing methods.

    • Item1 Method Fixed Differential Amount $1.05

    • Item2 Method Fixed Differential Amount $1.25

    • Item3 Method Fixed Differential Amount $1.15

  • Wal-Mart Store 102 item pricing

    • Item1 $1.05 (from Super Customer Template)

    • Item2 $ .95 (from Store Template)

    • Item3 $1.15 (from Super Customer Template)

In the example above the pricing uses two different templates to determine the item price for the store. Note the template for Store 102 could have been at the Customer or the Customer Location level.



Contract Price Special

If we were to create a Contract Special price for Item2 Fixed at $.90 for the Super Customer, because it is a contract it will supersede the template pricing for the Customer.

  • Wal-Mart Store 102 item pricing

    • Item1 $1.05 (from Super Customer Template)

    • Item2 $ .90 (from Super Customer Contract Price Special)

    • Item3 $1.15 (from Super Customer Template)

Because we can create contracts for Items, Inventory Types and Extended Information the pricing routine must check each configuration to determine of pricing is available for a specific item. The hierarchy is Item, Inventory Type and Extended Information.

It is important to note that only one Contract Price Special can be enforce for any given item of a sales order.



Contract Price Feature

Feature pricing is in addition to any calculated price. In fact, Features create a separate pricing record in the Order Invoice Line Price table for this reason.

If we were to create a Contract Feature price for Item2 of $ -.05 for all customers, the feature will be applied on top of the Customer Template and Super Customer Special Contract. Note: we do this by creating a Feature Contract for the item but do not specify a Price Group, Super Customer, Customer, or Ship Location.

  • Wal-Mart Store 102 item pricing

    • Item1 $1.05 (from Super Customer Template)

    • Item2 $ .85

      • $ .90 (from Super Customer Contract Price Special)

      • $-.05 (from All Customers Contract Price Feature)

    • Item3 $1.15 (from Super Customer Template)

One final note on Contract Price Feature, the software does allow for multiple features for the same item. Each feature must be configured on separate Feature Contract configurations.