Prest: In the pharma segment we have been able to address some of the main problems with profit margins. In this market only three wholesalers own about 95% of the distribution. It's not like any other vertical I've seen. Over the years, the wholesalers have given up much of their sell-side margins when supplying the big chains and in some cases apparently end up selling for less than what they purchase the products for. Some wholesalers chose to obtain buy-side margins from the manufactures. One way they were doing this was by "investment buying". What they would do was to place purchase orders in advance of anticipated price rises, then stop ordering after the price increased. The manufacturers really had no way to stop the practice, and were losing valuable price-rise margins.

 How were you able to affect this?

Prest: We used our analytic process to review the EDI documents and analyze the purchases. We get the EDI documents either on a daily or weekly schedule, as in the case of chargebacks, and we get feeds from the ERP system after the data has been through basic validation by the ERP system.  They send the data to our system for checking against the business rules they establish in our system. We recommended not fulfilling the orders when the practice was detected. That was the original core value that was provided.

 That sounds like a straight-forward insight, but obviously the manufacturer had to know about it in order to stop it.

Prest: Manufacturers estimated they were losing about 1% of revenue based on this practice. And that was really a big deal to them. It amounted to about 5% loss of profit. The technique we deployed turned out to be very effective. Since then the wholesalers have shut down their trading operations.