Distributors and suppliers are both working towards the same goal, so what’s stopping them from working together?
At a basic level, all trading agreements involve two (or more) parties, looking for mutual growth.
Suppliers want to grow by increasing loyalty and incentivising purchases. Distributors and buying groups want to grow by reducing their costs. And, by working together, both can achieve their goal.
Most companies keenly understand this symbiotic relationship. According to a survey by Tradeshift, approximately 85% of distributors say their business’ success is tied to that of their suppliers.
But too often, the companies involved still work in relative isolation. Distributors and suppliers record trading agreements in different systems, and track progress independently. Discrepancies creep in and disputes arise. And instead of mutual benefits, trading agreements deliver mutual headaches for both distributors and suppliers.
In this post I’ll explore why greater collaboration has to be the future for distributors vs suppliers alike—and the part technology can play in bringing trading partners together.
What is the difference between a supplier and a distributor?
Firstly, lets discuss the differences between these two trading partners who play a significant role in the supply chain. A distributor simply distributes; hence the name and they have a direct relationship with the manufacturer that they represent. The distributor is the manufacturer’s direct point of contact for prospective buyers of certain products. They purchase the product from the supplier and then resell them to wholesalers or retailers. A bonus is that wholesalers will buy large quantities of one product but sometimes the wholesaler will give a discount in rebate for this.
Suppliers on the other hand provide the product or service to consumers, usually via distributors which can be traced back to the manufacturer. The supplier can either only manufacture or acquire a product but cannot take it forward. It is the distributor who has the resources and the skills to distribute the goods directly to the end user.
Regardless of the differences between the supplier and distributor, both these trading partners cannot survive on their own. Suppliers and distributors need to work together to achieve their objectives, meet product demand and to make the products available to their customers. They want to keep the supply chain running smoothly, without any product shortages.
The pitfalls of isolated deal management for suppliers vs distributors
When suppliers and distributors don’t work together, they can find themselves falling into three major pitfalls and, far from driving mutual growth, actually putting their trading relationships at risk.
- A lack of clarity across rebate deals
Working with fragmented information spread across multiple systems, and different ways of recording agreements, suppliers and distributors can end up losing clarity of the details in their trading agreements. Whether it’s an opposing view of how close the distributor is to a rebate threshold, or what products are included as part of the deal, this lack of clarity can lead suppliers and distributors to unnecessary disputes, and even money left on the table by distributors.
- Complicated admin challenges
Without a unified way of handling rebate deals, suppliers and distributors are forced to fall back on their own admin practices. These can range from using spreadsheets to manage rebate data to using inadequate ERP systems to calculate rebates—but they rarely match the method used by their trading partner. It can lead to a large amount of manual effort, and wastes rebate manager time that could be spent on developing relationships and seeking new opportunities.
- Disorganised deal information
Often, proposed deals are negotiated by email, with details being sent back and forth between the parties. This isn’t only an inefficient way of arranging deals, it also leads to huge inefficiencies later on, as companies have to trawl through email chains to find a particular agreement, and check the terms and conditions.
For all these reasons and more, the future of trading agreements has to be one of greater transparency, visibility and, above all, collaboration for distributors vs suppliers.
It’s time for suppliers and distributors to collaborate
When suppliers and distributors collaborate on trading agreements, they both have the same understanding of the deal, they reduce the risk of disputes, and they’re more likely to maintain a strong relationship.
But for most companies, becoming more collaborative will mean developing a number of new systems and practices in their trading deal management, including:
- Record agreements in a standardised way—in one centralised location, to ensure everyone can access up-to-date, accurate information
- Common processes—to ensure rebate calculations match up and reduce the risk of errors
- Shared sales data—so both parties have a clear idea on progress towards rebate thresholds
- Share business activity forecasts—to closer align supplier and distributor goals, and ensure mutual success
- Simplify rebate sign off—with an easy-to-access place to review and accept agreements
Many distributors are adopting platforms like our own rebate management software to transform their management of trade agreements and ensure mutually profitable growth.
And with the introduction of Collaborator, our new multi-trading partner functionality, distributors can share schemes, deals and granular data with their suppliers to boost collaboration in their trading relationship.
Suppliers and distributors must come together
The benefits of distributor vs supplier collaboration are clear—each party has greater visibility, more clarity, and more control over their trade agreements.
And as we see more companies adopting new collaborative practices, such as standardised ways of recording agreements and greater sharing of data, we’ll start to see stronger relationships between suppliers and distributors that lead to mutual growth.