Many distributors are moving to the cloud to reduce IT costs. A cloud-based rebate management system can also give a significant boost to revenue and margin.
Businesses of all kinds continue to move to the cloud, with cloud spend (SaaS, PaaS and IaaS) now representing 25% of IT spend, surpassing on-premises software spend (22%), according to an October 2019 report from Flexera.
Among them are an increasing number of wholesale distributors. Around 50% of distributors have moved to cloud-based software for CRM and business intelligence, according to the latest Technology Trends in Distribution report from market intelligence firm MDM, while around 30% now run their core ERP applications in the cloud.
What’s more, distributors rated ‘Cloud/SaaS integration’ as their second-most important IT skill for the next three years, indicating that more plan to move to the cloud in the near future.
The true benefits of cloud only come from modernizing the IT estate
But as commentators like McKinsey point out, moving to the cloud doesn’t bring huge benefits without a corresponding focus on streamlining and modernizing the IT estate to take full advantage of the cloud’s capabilities.
In other words, lifting and shifting existing applications and processes to the cloud doesn’t provide much in the way of competitive advantage.
It’s a particularly relevant point for distributors, many of whom are (in our experience) still reliant on legacy finance systems from the 1990s. These applications were developed long ago and are often running on proprietary hardware like IBM’s AS/400 series. The skills to add new custom functionality have been lost, and extracting data from these closed systems and integrating them with others is next to impossible.
Legacy systems prevent distributors maximizing rebate revenue
That means distributors are missing opportunities to increase revenue and margin from one often-overlooked area: supplier rebate agreements.
In theory, rebate agreements are a huge opportunity to generate profitable business and regain market share from ecommerce platforms like Amazon Business. However, limited deal management capabilities in legacy systems mean distributors struggle to author, track, manage and accrue hundreds of individual trading agreements.
Instead, rebate ends up being calculated manually in spreadsheets, and rekeyed into the finance system. That inevitably leads to errors and omissions that mean distributors fail to claim the full amount of rebate they’re entitled to. Indeed, 2018 research by Benfield Consulting found that 57% of U.S. distributors consistently leave rebate revenue on the table.
A planned cloud migration provides an ideal opportunity to review current processes and systems for rebate management, and explore the potential revenue and margin benefits of moving to a modern, cloud-based rebate management system.
SaaS applications like our own DealTrack are easy to use, can calculate and accrue rebate from many different types of agreement, and integrate with finance systems to ensure the full and correct amount of rebate is claimed.
Rebate management moves to the cloud at Rexel Canada Electrical
Rexel Canada Electrical is one distributor that has recently moved from spreadsheets and a legacy AS/400-based rebate management system to using DealTrack in the cloud. The combination of the legacy system and Excel created scope for error, leading to supplier disputes and missed opportunities to claim the full amount of rebate due.
Now, Canada’s leading electrical products distributor has full visibility of its complex rebate agreements in DealTrack, and can automate the process of calculating, accruing and claiming for rebate due.
Meanwhile, DealTrack’s supplier portal enables Rexel to work more closely with its key suppliers—including the ability for the two parties to author and update agreements directly in the system, so no data or detail is lost.
With DealTrack, Rexel Canada spends less time on manual rebate management, and more time building valuable supplier relationships that benefit its business, its customers and its suppliers alike.
Discover how DealTrack can transform rebate management
Distributors ranked ‘revenue growth’ and ‘increasing profitability’ as their top two business priorities for 2019, according to MDM’s An overhaul of legacy rebate management processes can go a long way towards meeting both of those goals—and a cloud migration is an ideal context in which to do it.
If you’re a distributor currently planning a cloud migration as part of a digital transformation initiative, and you’d like to see how DealTrack can help you increase sales and margin by maximizing the value of your supplier trading agreements, please do visit our product page or get in touch.