There’s a vastly underestimated source of potential income languishing in spreadsheets across the supply chain. Historically, this source has been a pain to manage, a headache to calculate, and quite frankly an afterthought. It’s time to bring the full power of effective rebate management into the light. Read this article to unpack why the $10 trillion supply chain industry is ignoring B2B rebates as a business tool, and what they can do instead.
Why are rebates seen as an afterthought?
As consumers, we are all too aware of how supply chain delays and product shortages are increasing prices. As someone involved in the production and distribution of goods in the supply chain manufacturers, resellers and distributors are all too conscious of ever-diminishing profit margins.
But how much money really flows through the supply chain and logistics industry? The venture capital firm, Bessmer Venture Partners (BVP), says that the industry is a nearly $10 trillion market representing more than 10% of global GDP today. And it’s growing at ~$500 billion each year.
Within this vast industry opportunities to maximize profit do exist. One such opportunity is to leverage the power of rebates. Rebates aren’t just an income generator, they can be the instrument that literally changes whether a company makes a profit or a loss. Most CFOs are aware of their value but, all too often, rebates are seen as an afterthought by the business: Something that needs to happen during a product launch, when sales are struggling, or when inventory builds up.
Why? Because, in the past, many elements of the supply chain – including rebate management – have remained offline. Until now.
It’s time to re-evaluate rebates as a strategic business tool to grow the business. However, to make that happen, rebates need to be manageable, visible, trusted, and productive rather than being seen as an add-on, a nice-to-have, or a giveaway to sweeten a souring or distrustful sales relationship.
To change the way people think about rebates and witness their full potential, we need to change the way they are seen and, more importantly, understand the benefits of gaining true visibility of how (and if) they’re performing.
How to view and use your rebates more strategically
There’s a big difference between strategy and tactics. Unfortunately, the two can often be confused. Richard Rumelt explains it beautifully in his book Good Strategy Bad Strategy: The Difference and Why It Matters.
“The gap between good strategy and the jumble of things people label ‘strategy’ has grown over the years. But this plenitude has not brought clarity. Rather, the concept has been stretched to a gauzy thinness as pundits attach it to everything from utopian visions, to rules for matching your tie with your shirt.” – Richard Rumelt, Good Strategy, Bad Strategy
It’s easy to label every decision as a strategic one in times of crisis. But urgency does not equal importance. In recent years our ability to plan, make predictions, and develop strategy based on past experience has floundered. Writing in FM magazine, Dr. Martin Farrar reminds us that “Tactics are based upon the assumption of a linear cause-and-effect relationship in a stable environment. Increasing complexity requires a more creative, strategic way of problem-solving.” As we all know, strategy is proactive, not predictive.
But the pandemic exposed several weaknesses in traditional thinking: The inability to prepare for the unknowable, reliance on old ways of doing things, and the vulnerabilities inherent in a largely paper-based system. He says, “The pandemic has demonstrated we need a more creative, strategic way of problem-solving and the ability to experiment with a range of scenarios for our businesses’ futures” (source: Financial Management magazine).
How to turn rebate managers into rebate strategists
Back in 2015, a survey conducted by Epicor Software and Redshift Research 46% of CFOs are making important business decisions by relying on instinct alone. In some ways, seven years ago feels like a lifetime. In other ways, it was yesterday. The question is: Have organizations moved on since then or are they still relying on gut instinct in the absence of information they can trust?
As you’ll read later in this article, supply chain leaders are embracing technology to improve decision-making. Since business leaders are looking to CFOs, and finance in general, to help deliver insights, automate decision support, and drive advanced capabilities with emerging technology, as Deloitte says in the Wall Street Journal, it’s time to give it to them.
Financial leaders need a way of turning annoying, detail-laden rebate reports in formula-heavy spreadsheets into actionable insights. It’s time to turn rebate managers into rebate strategists. When this happens, rebates become painful, seamless, and a driver of business growth. True partnerships between trading partners become possible. And predicting future performance becomes a matter of analyzing reports to predict whether tiers will be met, rather than guesswork.
Dr. Martin Farrar says, “In the pandemic, high-performing organizations with strategic thinking finance functions are more adaptable and able to rethink their business models to meet new challenges.” This doesn’t just go for finance functions, however. It applies to anyone dealing with rebates: The sales function, account managers, finance teams, procurement departments, and beyond.
To remain competitive, your business strategy needs to be driven by clear, comprehensive, and timely information. Genius ERP tells us that “To take advantage of opportunities and gain a competitive advantage, you need an ERP system that can deliver the right data, to the right people, when they need it.” They’re right, but they’re not seeing the bigger picture. An ERP is part of the solution – but it’s not the whole solution. Unless an ERP helps you plan, create, control, and predict rebate management it becomes just another expensive but incomplete business tool, relying on manual intervention and degenerating true strategy into a series of burdensome tactics.
A more efficient, resilient sustainable world thanks to supply chain software
BVP predicts that the world will be more efficient, resilient, and sustainable because of the operational efficiencies gained with the rise of modern supply chain software companies. Our customers agree.
Jerome Dziechiasz, Senior Category Manager at Carparts explains that, in the past, deals and rebates were tracked on a simple Excel spreadsheet. To meet their ambitious growth and become a billion-dollar company they needed a system to handle hundreds of complex deals and accurately track earned rebates. Eventually, he says, “Excel just was no longer cutting it.” Today he knows exactly what they’ve earned, to the penny, thanks to his customer rebate management software.
“[Before Enable] we weren’t accurately tracking the rebates and so it was kind of a guess. Now, we know exactly what we’ve earned to the penny.”
Jon Samuel, Commercial Manager at MKM Building Supplies knew there had to be a better way to see the screen margin (before rebate) and through margin (after rebate). Previously they had to wait until the 10th of the following month before they could do their reporting and see the through margin. As he explains, “By then there’s not much you can do about the previous month because it’s done.” But once they had Enable in place, everything changed. More accurate, more timely reporting put the power directly into their branch managers’ hands, improving their decision-making and, hence, their ability to serve their broader business strategy: Being able to build a bigger picture with the information in their systems.
“The guys having visibility of through margin allows them to make decisions on a day-to-day basis from a credit risk point of view. They can change their business in a month if they have too much of commodity items, for example, or not enough of others. It’s absolutely critical and key to our longer-term strategy.”
Are you ready to stop treating rebates as an afterthought?
If the words of strategic advisors and the evidence of our customers haven’t convinced you that it’s time to stop thinking of rebates as an afterthought, it might be time to see rebate management in action for yourself.
We’re ready to unlock strategic business benefits from your rebates. Are you?