TAKING THE UNEXPLAINED OUT OF DEDUCTIONS

The publication provides the Canadian grocery industry with practical, specific recommendations to document and communicate changes and promotions. It could also potentially help reduce the time taken to resolve deductions and eliminate unexplained deductions.

The publication includes:

1. detailed best practices for processing deductions and reducing unexplained deductions;
2. revised standard forms;
3. recommendations for the implementation of EDI transaction sets with respect to deductions; and
4. revised deductions guidelines with specific recommendations for documenting financial agreements including pricing, trade spending agreements, deal timing and distributor audits.

The Committee emphasized that these recommendations only provide the framework for improvements. Real change can only be achieved when trading partners embrace these changes as part of their business practices.

In the past, the recommendations have suffered from a lack of industry consensus regarding implementation of best practices.

During 1999, the Deductions Committee focused its efforts on bringing closure to these items.

RECOMMENDATIONS TO IMPROVE CLARITY, IMPLEMENTED BY JUNE 2000

The Canadian grocery industry has implemented a number of guidelines to improve clarity of deductions. All CCGD members have endorsed these guidelines and indicated that they will be implemented no latter than June 2000. Some distributors implemented these guidelines as early as September 30, 1999.

The industry has agreed that no deduction will be processed without a contract number. Contracts can be assigned by either trading partner, but usually will be assigned by the distributor. The key is to ensure that both trading partners use the same contract number.

Contracts will specify at a minimum the following information:

• timing of activity which attracted deduction;
• type of promotional activity which attracted deduction;
• amount of deduction; and
• manufacturer and distributor authorization for deduction.

GROCERY INDUSTRY IMPLEMENTS BEST PRACTICES

The majority of CCGD members have implemented ECR deductions best practices for post audits and price change notification.

In particular, the ECR trading partner recommendation that "all post audit claims must be made within two years of original agreement date" is being adhered to by the majority of distributors. The two-year time frame varies by distributor, with most indicating that the two years begins at the end of the contract period.

Similarly, the majority of distributors have implemented the ECR price change notification, which states that "the lead time on price increases should be standardized at eight weeks." Some distributors have indicated that they require a longer lead time to accommodate advertising and business planning time frames.

The implementation of these best practices remains a proprietary responsibility. As indicated, it is clear that the majority of the Canadian grocery industry is utilizing the defined business practices within their companies.

Individual companies are advised to discuss particular business practices regarding deductions with their trading partners.

CCGD/FCPMC TAKE ON OMBUDSMAN ROLE

CCGD and FCPMC have undertaken the role of ECR Ombudsman. This role will provide a forum for companies seeking clarification on the implementation and interpretation of ECR guidelines and recommendations.

If you require assistance in understanding industry commitments regarding the implementation of deductions best practices by your trading partners, contact your trade association.

ECR STEERING AND DEDUCTIONS COMMITTEES SUNSETTED

A new Top-to-Top Forum, led by the Chairs of CCGD and FCPMC, will guide the ECR initiative in the new millennium. At a recent meeting, the ECR Steering Committee agreed to sunset its activities.

This decision was based on a review of the 1999 objectives and future issues that must be addressed by the industry. The Forum’s new mandate will include addressing common advocacy, spokesperson and supply chain issues.

With the implementation of the deductions best practices, the goals of the ECR Deductions Committee have been achieved. As such, the ECR Steering Committee unanimously approved to sunset the Committee’s activities.

• David Wilkes at 416-922-6228 ext.324; e-mail: dwilkes@ccgd.ca

• Elaine Smith at 416-510-8087; e-mail: elaines@fcpmc.com

For a copy of the French version, please contact FCPMC or CCGD.