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Vendor Profit Toolkit - ‘Product’ Beta

Vendor Profit Toolkit - ‘Product’ Beta

Guide to Use

11.14.2024

Introduction

Welcome to the Reason Automation Vendor Profit Toolkit product profit beta evaluation. This new set of dashboard reports is designed to give Vendors unprecedented insight into product-level profitability, inclusive of deductions from distributor co-op, chargebacks, customer co-op, advertising spend actuals, and if desired, vendor internal COGS.

NOTES

  1. It is imperative that you maintain a 1-to-many relationship between purchase order and invoice in your operational practice with Amazon. In other words, when creating invoices, ensure that any single invoice relates to only one purchase order (multiple invoices per purchase order is fine - in fact, more than likely unavoidable). If you are not currently doing this, start now. The profit dashboard will not work properly for data where invoice to purchase order relationship is many-to-many. More generally, a many-to-many relationship between invoice and purchase order severely limits vendors’ ability to perform accurate profit analysis.

Background

Building a complete picture of vendor profitability at the product level is challenging. As a result, vendors with otherwise sophisticated accounting operations often find it hard to build a complete picture of their financial reality on Amazon. For example:

  1. The universe of Amazon financial reports is complex. Data is provided across up to 15 separate reports, is difficult to decipher, and complex to connect into a single comprehensive profit picture.
  2. Customer Co-Op (sell-out) reporting is disconnected from Distributor (sell-in) reporting. When a unit sells, there is no definitive way to link that unit precisely to an invoice or PO reference from the inbound side.
  3. Minimal Grouping/Classification Various (and numerous) co-op agreements and chargebacks are rarely grouped, making it hard to aggregate agreements by type/subtype to support higher-level analysis
  4. Undocumented data issues Undocumented data issues, such as inconsistent (or non-existent) population of key columns like purchase order and invoice references in certain reports, complicate analysis.

Product Description

The product profit dashboard leverages Reason Automation’s deep understanding of Vendor finance data to incorporate Distributor-side (Sell-in) and Customer-side (Sell-out) deductions into a single profit analysis platform, enabling analysis of either side separately, or together in a modeled per-unit P&L with user-selectable model control.

Report Sections

1. P&L By Month, by ASIN

This P&L report shows aggregated values from sell-in and sell-out data at the product level. Filter by date and ASIN using the slicers on the left.

  • Income is ‘invoiced amount’, less any shortages that are currently noted by Amazon. From that are debited all sell-in (co-op, chargebacks) and sell-out (promotion co-op) deductions, along with your advertising spend actuals for Sponsored Product and Sponsored Display ads (optional), and your internal vendor COGS if you have uploaded values to your Reason Automation database.
  • The user can select a ‘Distributor Coop Offset’ that will shift the distributor co-op sample window backward in time by N months. Ideally, the offset should match typical inventory turn time, so that sell-in costs applied to sell-out units are most likely to match conditions when those units were inbounded. For instance, if inventory turns every 3 months, a DC offset of -3 would be appropriate. With report date set to Q3 2024, the combined P&L would include sell-out data for Q3 2024 and sell-in charges from Q2 2024.

2. Sell-in P&L

This report shows aggregate and unit-level P&Ls for sell-in activity only. In addition to date and ASIN, you can filter this report by vendor code.

  • We think of the distributor co-op P&L as a ‘yield on invoice’ - what was the original invoice amount submitted to Amazon, and what was the recovery on that invoice.
  • All per-unit calculations use original 'invoiced units' (sourced from invoice data).

3. Sell-out P&L

This report shows aggregate and unit-level P&Ls for sell-out activity only. Filter by ASIN or date (month).

  • For sell-out reporting, shipped COGS is used for income.
  • All per-unit calculations use 'shipped units'.

Unit Economics

This report brings together per-unit costs from both sell-in and sell-out data, combining it into a single per-unit P&L.

As above, the user can select a ‘Distributor Coop Offset’ that will shift the distributor co-op sample window backward in time by N months.

  • The combined P&L uses for income shipped COGS, sourced from Retail Analytics Sales
  • All per-unit calculations use either 'invoiced units' or ‘shipped units’, depending on whether the line item is related to distributor co-op or customer co-op/advertising respectively.

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