Case Study: Rules Management Solution Powers Customer Incentive Program
Huge computer distributor sees immediate benefit from rules management
- By Linda Briggs
The popularity of business rules engines reflects the growing complexity of the rules and regulations at the heart of many businesses, along with escalating compliance needs. Many companies need an easier way for the business side to manage complex and fast-changing rules without constantly turning to developers.
Avnet, one of the world’s largest distributors of computers and electronic components, needed to better manage the business rules that were part of its vendor incentive programs—specifically, the complex and overlapping business rules its vendor partners issue for ever-changing individual sales incentive programs.
The company reported $13 billion in revenue last fiscal year. It had a system in place for coding rebate management rules directly into software: business people requested a change, which would then be coded by developers.
A rule change took from one to six weeks, depending on its complexity, explains Jim Joy, director of business applications development for Avnet. The time lag was impacting Avnet’s ability to roll out new supplier programs, pushing out payment times from suppliers, and keeping Avnet from taking advantage of all the supplier rebates and incentive programs offered by suppliers and partners.
“Yes, we had somewhat of a solution already available to our customers,” according to Nicole Enright, director of operational intelligence at Avnet. “It was just very costly and painful for us to maintain.”
Joy agrees that keeping up with the frequent rebate management changes from vendors “was a lengthy and fragile process. … We were looking for a solution that would allow us to make changes faster, so that we could get them out on the Web and reflected in the data our customers see.”
If a vendor changed a business rule or incentive program, as they do several times a quarter, Avnet wanted its partners to be able to see those changes quickly so that they could adjust selling patterns in response. Two of Avnet’s largest suppliers, for example, are HP and IBM, along with several large enterprise storage suppliers.
In addition to needing to roll out new programs quickly as manufacturers announced them, Avnet also wanted to easily introduce new incentive programs to multiple manufacturers.
There are additional complexities to the business rules as well. “It would be one thing if [rules] changed several times in a quarter, and instead of being five percent, it was eight percent, for example,” Enright says. “But the [rules] change which products are eligible, which customers are eligible; [even] which days of a month products are eligible. So [it’s] very complicated. … We needed to be able to manage those complicated rules.”
In the fall of 2005, Avnet chose Fair Isaac’s Blaze Advisor business rules management system to address the issue, and then built an online rebate management application with it. The results have been dramatic: changes that took weeks can usually be done within days.
Avnet looked at several top business rules management systems, using reports from analyst firm Gartner Inc. as a guide. Key features, Joy said, included the ability to interface with tools and technologies already in use at Avnet, including Java and Oracle; ease of use for developers; and simplicity in making business-rule changes and pushing them through to production. Avnet also considered each product’s cost, and the viability of each company considered, along with their roadmaps for future development.
“We didn’t want to select a tool just for this point solution, just to get one product out the door,” Joy says. Rather, Avnet wanted a tool that they could use in multiple business applications. The rebate management system would be the first rollout, but not the last.
One compliance-related feature Avnet looked for: the ability to keep track of rule revisions so they could track rule changes back over time. “When we get audited by a supplier,” Joy says, “it’s very important that we be able to come up with the same answer today as we had nine months ago. It’s really important that we know the logic behind that [rule] at the time … if we have to answer questions and explain why a piece of data is the way it is.” Previously, Avnet used its configuration management software for that task, but “with great difficulty,” Joy says. “It’s just much easier with Blaze.”
The network infrastructure at Avnet includes IBM Regatta servers running the AIX operating system; Oracle 9; and Java on IBM’s WebSphere application server.
The proprietary IDE was important, Joy says. “Some of the tools we looked at [did] nothing more than creating XML documents and storing them at the file system because there was no IDE in front of it.”
It took about a month, Joy says, to get Blaze Advisor up and running in Avnet’s development environment, with another two months of work by developers to complete the new online rebate management application.
Introducing a rules management engine sometimes means a painful process of collecting business rules, some of which may not even be in writing. At Avnet, entering the rules into Blaze Advisor was relatively easy because the rules were already part of the existing system. New rules are directly from the written specifications supplied by manufacturers for each fiscal period.
Return on Investment
The return on investment has been immediate and dramatic. According to Enright, Avnet anticipated a 2.5 percent earnings increase from supplier rebates and incentives; the actual increase in upside earnings was four percent in the first quarter the product was in use—an amount that equals several million dollars. “The investment paid for itself in a two-month time frame,” she says. “We continue to see that same trend.”
The earnings increase comes from several areas. For one thing, Avnet’s sales teams and partners get better, faster information about the incentive programs set by suppliers. That allows them to make better decisions about how to reach sales targets set by the supplier.
There’s another upside as well. With Blaze, Avnet has found that data integrity in their invoicing has increased to the point that, Enright says, “our suppliers now simply accept what we send them. They don’t necessarily have to [compare] it against their numbers.” That, in turn, speeds up the payment process significantly.