PRICING ANALYTICS - SAP HANA USE CASE

Problem

Some of the most important pricing challenges that businesses encounter in today’s market place that require a solid pricing analytics solution on a real time basis.

• Knowing the true profitability of a customer, product or market segment
• Significant variance in plan versus actual customer pricing
• Visibility of the various pricing and cost components that derive a price
• Control discounts and promotions management
• Reacting to new or evolving market opportunities
• Sifting through the abundance of available data to optimize pricing
• Capturing market intelligence and competitive data to price with greater confidence
• Limited analytical capabilities around what-if scenario analysis

High Value Business Case Applicability

• Manage millions of transaction data elements for robust analysis
• Improve business pricing decision response times 
• Build a Price Waterfall to track key performance indicators across various pricing relevant attributes
• Enable business to drill down to SKU level in order to perform margin analysis
• Build pro-active pricing analysis capabilities
• Enable integration to multiple data sources including competitive and third party data elements
• Replace years of excel based analysis with robust real-time pricing analytics tool

Solution

Develop Pricing Analytics within HANA and perform end-to-end profit and margin analysis outlining the scenarios that will deliver tremendous value to the end users. The goal of the overall use case is to show the challenges and how we can address them by implementing profitability and margin analysis using real time data integration into HANA from multiple sources of information like SAP SD, FI, CO, MM, BW and third party data like competitive information.

Key Inputs

• Invoice transactions are the basic requirement to perform profitability analysis
• On-Invoice and Off-invoice adjustments(Discounts, surcharges etc.,)
• Cost-to-Serve(Transaction, Customer, often allocated)
• Costs(Fixed, Variable)
• Master data (Customer, Product, Sales and other additional transaction attributes)

Process

• Process data at invoice transaction line item level
• Apply cost-to-serve elements like rebates, returns, payment terms etc., back to original invoices
• Apply fixed and variable costs to original invoices
• Calculate the final pocket margin to enable profit and margin analysis
• Perform quantitative scenario analysis like customer profitability analysis, price band analysis etc.
• Identify key drivers behind margin leakages performing data comparison across multiple customer segments

Benefits

• Manage pricing analytics real time with high speed performance
• Track pricing key performance metrics across multiple business dimensions
• Identify pricing improvement opportunities / margin leakages
• Drive the price setting processes with real time data analytics and what-if scenarios
• Business user gets greater visibility to do multiple analysis to find margin improvements
• Generate daily reports and alerts based on pre-defined thresholds
• Generate executive, marketing and sales management dashboards
• Real time data integration with SAP ERP applications
• Provide high ROI

Source: Pricing Analytics - SAP HANA Use Case