Strategic collaboration with manufacturers could be a huge driver of revenue and profit for construction-industry distributors. So why have so many given up on trying to make it work?
DealTrack Blog — Andrew Butt
Topics: Rebate Management
A few years ago news about Excel miscalculations at JP Morgan rocked spreadsheet users’ worlds. A simple cut and paste error cost JP Morgan $6 billion and resulted in dramatic headlines like “Why Excel is the Most Dangerous Software in the World”, but it wasn’t the first time spreadsheets had caused massive business disruption, nor will it be the last. A similar cut and paste error had previously cost TransAlta $24 million and another Excel mishap – hiding cells instead of deleting them – cost Barclays bank millions during the 2008 meltdown. And when a flawed Department for Transport (DfT) forecast model was blamed for the botched bidding process on the £9bn West Coast Main Line rail franchise contract, similar headlines brought the danger of spreadsheets to mind once again.
Topics: Rebate Accounting
We learn about collaboration from an early age. As children we quickly learn that we need to collaborate with teachers, classmates and team players in order to be successful. "There's no 'i' in 'team' is a common mantra in sports and work teams. And "supply chain collaboration" has been a hot topic for decades.
Despite that, there are very few systems that enable wholesale distribution companies and their suppliers in the building materials sector to truly collaborate on their trade agreements.
Topics: Supplier collaboration
The phrase win-win is probably over-used, but I am going to use it anyway to describe the situation where both parties come out of a negotiation feeling like they have won. Let’s be honest. If you think you won and the other party (your supplier or your customer) feels they lost, then it’s not really a good situation.
Price is important, but (particularly in industries like building materials distributors and grocery retailers where margins are tight) time to market, supply chain reliability, innovation, quality and flexibility are elements that contribute significantly towards a company’s competitive edge.
SIG is a leading European provider of specialist building materials, with close to £3bn of annual revenues and around 9,000 employees across the UK, Ireland and Mainland Europe. As a specialist distributor, SIG plays a critical role in the construction supply chain, bringing value to its customer base across major European markets.
Rebates, SPAs, claim-backs, contract support are all very similar and at the same time quite different to each other. In essence they are all terms for the money that wholesalers claim from suppliers and manufacturers for selling their products. Some of the key differences lie in how the agreements are formed, whether goods are actually ever handled by the wholesaler, and how the claims are made.
Collectively, they are sometimes referred to as “vendor monies”. It is estimated that, annually, these amount to $600bn in North America and perhaps as much as $500bn in Europe.
In a world where margins are tight, wholesale distributors across nearly 50 sectors rely so much on vendor monies that their absence would be a serious dent in their profit margin.
Topics: Rebate Management
Whilst many core business systems have some functionality to help monitor trading agreements that involve vendor rebates, most have neither the flexibility nor the extensive range of functionality that is needed to support the increasingly complex world of rebate management.
For many, that lack of functionality has resulted in missed rebates and poor accrual accounting.
But worse than that, if your business systems don’t support rebate management fully, then the whole purpose behind creating deals involving rebates – a means to influence business growth – is missed.
In this blog, we are going to focus on the system requirements for configuring, storing, monitoring, reviewing and operating rebate deals or special pricing agreements.
For the sake of efficiency and audit tracking, and to avoid unnecessary disputes, all elements of pricing agreements should be stored in one place. A cloud based solution is ideal for multi-centred operations.
Companies tend to look for specialist rebate management software when they reach a point where their core business systems are proven to be inadequate.
This particularly affects builders' merchants, plumbing distributors, electrical distributors, HVAC distributors and others who operate in the building materials industry. These businesses usually have to deal with a large number of complex trading agreements involving rebates, special pricing agreements, retrospective discounts, over-riders and more across many thousands of stock items.