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the highest prices if there are price brackets. Still other manufacturers take a “hands-off” approach,
allowing wholesalers to price their products as they see fit.
Regardless of which approach is used, sophisticated wholesalers will estimate the margin potential of a
manufacturer’s line before negotiating the redistribution allowance.
The redistribution allowance is provided by the manufacturer to the wholesaler, usually reflected in the
net invoice price. Ideally, the allowance amount is a reflection of both the manufacturer’s cost-avoidance
and the wholesaler’s cost to serve the target set of distributors. Much more detail is shown in the coming
chapters; for now it is sufficient to say that the best allowance programs create clear “win-win” results for
both the manufacturer and the wholesaler.
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