Enable Blog — Supplier Rebates

The pandemic has tested supply chains to their limits and highlighted supply chain weaknesses, resulting in massive disruption to their operations. In fact, 94% of Fortune 1000 companies are seeing supply chain disruptions from COVID-19. However, as supply chains start getting back on their feet, many businesses are taking a long, hard look at their supply chains to mitigate the risk of future disruptions and ensure resilience for the future. Here are supply chain lessons that we can all take away from the experience and apply in 2021 and beyond.

Businesses have long taken for granted supplier relationships, until the COVID pandemic forced all parties involved to immediately examine their relationships with suppliers. There are many reasons why it’s important to maintain a great supplier relationship, it not only makes daily operations more enjoyable, but it can also get you a better rebate deal, support greater collaboration and strengthen goodwill.

Strong supplier relationships are also key for businesses wanting to maintain growth and expand into new markets. A strong supplier relationship, is critical to the health of businesses, but how well do you really know your suppliers? Here are 10 ways you can improve your supplier relationships today.

A key stakeholder in any successful business is the vendors it works with and it can take a lot of care and consideration to make sure that the company is maximizing the value it is getting out of the relationship with the vendor. Added value can take the form of general cost savings, efficiencies made possible by new technology or processes and delivery of certain products or services at an agreed rebate.

In the supply chain and the rebate world, you will often hear the terms supplier and vendor used interchangeably when supply chain roles and duties are discussed. Even here at Enable we sometimes call supplier rebates, vendor rebates. They both supply goods and services, but there are certain attributes that make each one a distinct term in the supply chain world, which we will discuss in more detail below.

Supplier rebates should lower your costs, while helping you form lasting, mutually beneficial relationships with the businesses you buy from.

Firstly, if you’re reading this blog you will most likely to be familiar with what an ERP system (enterprise resource planning) is, but as a reminder it is a type of software that manages and integrates a company’s financials, supply chain, operations, reporting, manufacturing, and human resource activities into one system. Examples of ERP systems include NetSuite, Oracle, SAP, SAGE plus many more.

Over the years we have seen many accounting scandals which means there are now more calls from organisations like the Financial Reporting Council (FRC) for “Boards of retailers, suppliers and other businesses to provide investors with sufficient information on their accounting policies, judgements and estimates arising from their complex supplier arrangements”.

In business, procurement and finance are two separate departments, working alongside one another within the organisation. The procurement function is about spending the money well and driving more for less from suppliers, and the finance team is all about keeping the balance sheet in check and driving profitability.

Contracting is at the core of many B2B relationships and the ability to negotiate and execute contractual agreements is crucial to the success of any business, no matter the size or industry. Contracts don't simply allow companies to complete tasks on time and on budget; a successful contract is integral to business relationship building, accurate planning and problem-solving, and the long-term growth of a company. The importance of good contract management can never be overstated and today there is an increasing global competition, ever-more complex contractual agreements for rebates are being created.

Trading agreements involving rebates are prevalent in many industries such as building materials, lumber, HVAC, electrical distributors, buying groups of all types and other wholesale distribution businesses. Rebates are used by suppliers to these industries to influence purchase decisions and drive profitable growth for both the supplier and the wholesaler.

Rebates were “invented” as a way of driving sales growth without simply reducing the contract price. By agreeing retrospective financial incentives based on actual sales, both the supplier and the distributor are working together to drive market share and growth. Rebate agreements are becoming increasingly more creative and many are finding that “standard” business systems don’t facilitate this creativity.

This need for an auditable process and the desire to use very creative deal mechanisms as a vehicle for growth has resulted in a new paradigm of business system — the rebate management system.