Supply chains are the arteries of the global economy. They move more than $76T in products and materials around the world each year, which is why countless companies care about maximizing their efficiency – small improvements can produce outsized results. And what’s needed to maximize efficiency, produce results, and maintain resilient supply chains is quite simple, but also quite complex: healthy relationships.  

It’s common to believe that just because core members of the supply chain -- manufacturers, distributors, and retailers -- must work together, they will do it well, and that will drive outcomes like efficiency, resiliency, and financial results.  

The reality is that these relationships are often strained. Disputes arise frequently, causing friction in supply chain relationships. And like most disputes, they often result from poor communication. Failing to operate from a single source of truth, not coordinating well internally, much less externally, and one trading partner not providing updates to another leads to misalignment, frustration, and an erosion of trust.  

But there is a way to resolve this friction, and a way to help trading partners work closely together, as seamless extensions of one another. And that solution is rebates.  

Rebates have become the currency of success between trading partners. Rebates create powerful mutual incentives for suppliers and customers in a process that builds trust, enables pricing flexibility and differentiation, and helps partners optimize financial outcomes.

And rebates, like all incentives, are best when they’re tailored. However, many companies – specifically, 62% of manufacturers according to a recent survey Enable conducted – rely on a one-size-fits-all approach to rebate management, meaning that their rebate programs aren’t being leveraged as strategic drivers of behavior and growth.  

Trading partners need to deploy rebates strategically to maximize the value of their relationships. This strategy must include robust data collection and analysis, customization that reflects each partner’s unique needs, an emphasis on automation (and increasingly AI), and the cultivation of collaborative ecosystems.  

These are the core components of effective rebate management, and these are core to trading partners working closely together as seamless extensions of one another. And working closely together will only become more important this year. Trading partners must be capable of leveraging rebates strategically to build stronger relationships.  

Let’s take a closer look at how they can do this.

Operating From the Same Set of Data Has Never Been More Crucial

Trading partners can only determine which rebate strategy is best for them and their partners by understanding the impact of their current rebate programs. Suppliers and customers should ask themselves if a rebate program is helping them achieve their goals and desired outcomes, or if it’s simply something they feel they must have in place.  

Part of understanding the impact of current rebate programs means working from the same set of data. Suppliers and customers cannot operate in silos. When data is shared between suppliers and customers, these trading partners can make more informed decisions and achieve goals more readily. They’re also able to reduce conflicts and delays. Additionally, when trading partners communicate with each other and align on goals and progression – they achieve clear visibility into program outcomes.  

There’s a reason that increasing visibility is a top priority for companies in the supply chain – informed decision-making is impossible without sufficient data. This applies to rebates as well. According to Enable’s 2024 State of Volume Rebates Report, nearly two-thirds of manufacturers (up from 42 percent the year prior) say better analytics would make their rebate programs more effective, offering them greater visibility into program performance.

To enable the types of successful rebate programs that will lead to tighter working relationships among trading partners, both customers and suppliers need access to accurate information about everything from buying patterns and behaviors to granular financial details about margins, purchase volumes, stocking information, and more. This is why trading partners must embrace data, along with the digital platforms required to share and analyze it. Quite simply, the financial outcomes vastly outweigh the investment.  

Customization Drives Margin Growth for Both Partners

There are many types of rebates, from volume rebates to product mixes, special pricing agreements, and beyond, and all types are highly customizable. This means suppliers and customers can create unique rebates that work for their specific circumstance.  

For example, if a supplier knows their customer purchased a surplus of a given product one year and will not achieve that same volume of purchase in following years, the supplier should adjust volume rebate tier thresholds. This ensures the customer is incentivized to continue purchasing from the supplier, but with realistic thresholds that allow the supplier to sell more of a product than they would otherwise while enabling the customer to reach an intended rebated amount. A setup like this is good for both sides. With a high tier threshold that’s based on a year that was an outlier, the supplier would likely not sell as much as they’d model to a customer. Tailoring this program encourages the customer to continue the trading relationship, and incentivies them for doing so.  

This customization is what truly allows rebates to shine. They can be deployed based on specific locations, time frames, volume tiers, product mixes, lump sum agreements, and more, ultimately making them powerful drivers of behavior that protect margins for customers and grow margins for suppliers.

And most importantly of all, rebates require an action to be fulfilled on. So rather than negotiating a discount, where the volume needed to make the agreement profitable may never come through, rebates ensure that goals are met before being paid out.  

Automation and AI Will Be Essential for Rebate Management

One of the biggest obstacles to implementing effective rebate strategies is the reliance on cumbersome and error-prone manual processes. It’s common for companies to run their rebate programs from complex spreadsheets, for example. This is why it’s no surprise that 89 percent of business leaders say automation is important for supply chain companies, and why almost half of CSCOs have introduced new automation technologies within the past two years.  

For rebates specifically, automation helps trading partners improve the efficiency and scalability of their programs via rebate management platforms. An effective rebate management platform must be comprehensive, meaning it can manage any type of rebate from annual rebates to promotions to SPAs and beyond, while allowing the tracking, analyzing, and optimizing of the entire rebate management process. A rebate management platform must also be collaborative, letting suppliers and customers to create, negotiate, and execute deals with their trading partners and improving alignment by tracking progress in one trusted location. Finally, a rebate management platform must be controlled, enabling teams to share only the data they want to share, both internally and externally.  

AI adoption is a key element of the shift toward automation. KPMG reports that half of supply chain companies will invest in applications that support AI and advanced analytics in 2024. AI will play a central role in the future of rebate management, as it allows trading partners to collect and analyze larger amounts of data, automate processes more effectively, and free up personnel to focus on more creative and strategic work.  

Trading Partners Must Build Collaborative Ecosystems

Collaboration is indispensable for rebate management. Rebates exist to incentivize long-term growth for trading partners, which means partners need to be fully aligned on strategies, operations, and performance indicators. In fact, we know that companies are happier when they’re working more closely with their trading partners.  

This requires consistent and open communication (especially when it comes to negotiating or modifying the terms of rebates), visibility across the supply chain, and the digital infrastructure necessary to collaborate productively. But Enable’s research has found that a quarter of distributors report nonexistent communication with manufacturers, while one-third only receive communications when actively seeking them out.

Collaboration is particularly important when 70 percent of companies describe their supply chains as “very” or “extremely” complex. Complexity isn’t easily managed in a spreadsheet. This is another reason digitization is necessary – what we’ve done to manage previously, with lots of manual processes, is inefficient, and it leads to costly mistakes that can undermine trading partner relationships. Trading partners can drastically cut down on these risks with one source of truth, and with digital dashboards that facilitate data sharing, enable strategic planning, and help partners develop effective rebate programs.  

The right rebate strategy won’t just benefit trading partners – it will contribute to an entire collaborative ecosystem that encompasses customers and the broader economy. When trading partners focus on better rebate management, the benefits will be felt across the supply chain.

Discover how to overcome the misalignment driving friction between supply chain partners here.