Microsoft Dynamics AX: Pricing Strategies for Franchises

By - February 1, 2017

When performing a Microsoft Dynamics AX implementation for a company with franchises, there can be some challenges for implementing and managing pricing. The biggest challenge is, that in a franchise environment, each franchise will be represented in Dynamics AX as a franchise, and all pricing data is company specific by default in Dynamics AX. Often there will be a corporate store company, with separate legal entities for each franchise company. The corporate store legal entity will often serve as the “master pricing” company and franchises will receive updates based on activity in the corporate store legal entity.

Each franchise will have the ability to sell things at their own prices based on the competitiveness of the market in their area, so data will need the ability to remain company specific. Often times, the franchise will blindly accept all pricing, and only differ 5% of the time because of the effort involved in managing the pricing of a large item catalog. This presents a problem in a company where there is a large item catalog, a complex pricing structure, and many franchise companies. Imagine propagating a pricing change for one of the company’s major vendors across all items, across all companies. This could be turning a pricing change that impacts 2,000 items into a price change that impacts 200,000 pricing records if there are 100 franchises, even though only 5% of the 200,000 records are different from the original 2,000 records. The challenge is to achieve the flexibility of company specific pricing, while minimizing the burden of managing more data than necessary. Minimizing the data being managed will help maintain a high performance environment, as well as improve the end user experience.

Considerations for Trade Agreements

There are two basic types of trade agreements: purchase trade agreements, and sell trade agreements. Purchase trade agreements should be sent to the franchises without the option to review to give franchises the ability to leverage the purchasing power of the corporate store entity. Sell trade agreements may need to be review by the franchise owner before they are accepted by the store.

As a result of the different requirements between purchase and sell price agreements, the purchase price and sell price trade agreements for a retail store will typically be shared by different sets of rules. Purchase prices made in the corporate store entity should automatically be posted to all franchise legal entities. Sell price agreements will need the option to be overridden, so a more complicated process may be required.

If the majority of the franchises will accept all sell pricing changes from the corporate store entity without review, and purchase price changes are mandated by the corporate store entity and the company has a large item catalog with complex pricing and a large number of franchises, then a viable sharing strategy may be to share the Trade Agreement table and the Price Discount Journal tables via Virtual Company Accounts.

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This will reduce the amount of data being generated by a pricing change. To manage the exceptions for a pricing change the franchise owners do not want, the franchises could set their own pricing on a set of company specific price discount journal tables and the 1020 Retail pricing job could prioritize the company specific pricing instead of the shared pricing when sending prices down to the POS.

If there will be a review process for a large number of franchises, or the pricing model is simple on a smaller item catalog, then the sell price changes could be sent to a staging table for review in each company, and if accepted would post to the company specific price discount journal table and eventually the trade agreement table. If the trade agreement table is not shared, and an edit occurs on a posted trade agreement, the records created in the franchise company will need to carry a link to the originally posted trade agreement in the franchise company or a new record will be created instead of an update occurring. In a company with a large item catalog, complex and frequent pricing changes, and many companies – performance and load testing will need to be taken into consideration with this model.

Considerations for Retail Discounts

In a franchise environment, often the franchise owner will need the ability to apply their own discounts, as well as override/review discounts sent from the corporate store entity. Retail periodic discounts are driven by the Price Group to determine if they are active in a given store.

Since discount logic is more complex than trade agreement logic, sharing the discount tables and providing a set of company specific tables for franchise owners to manage the exceptions would potentially get too complicated to manage and prioritize what is applied to the POS, so a staging table may be necessary to review the discount before it is created and applied to franchise company’s retail discount tables. Since most franchises are likely to not review every discount before accepting, these franchises can have the discount by-pass the staging table and be created directly in the retail discount tables. This should be parameter controlled to give the franchise owner flexibility.

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In the event of an update, a reference to the original retail discount will need to be carried to the records created in the franchise company to prevent multiple discount from being created that represent the same legal entity.

Summary

The key take away for managing large amounts of pricing data across many companies is to look for ways to minimize the amount of data to be managed. By sharing as much data as possible, the company will improve performance, reduce DB size, and enhance the end user experience. This can be summarized by:

  1. Share purchase pricing data since it should be the same for all franchises.
  2. Share sell pricing data since 95% of the data will likely be the same.
    • Give franchises the ability to set their own pricing by creating a set of company specific data and modifying the 1020 job to the POS.
  3. Allow discount pricing to be company specific, while giving the franchises the ability to automatically accept pricing, being mindful to prevent the creation of unnecessary data.

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by Curtis McDonald for RSM

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