Why wholesalers should invest in a rebate management system
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.
We have seen the following scenarios:
- Businesses who, perhaps as a result of merger and/or acquisition, have a few different ERP systems in operation and cannot therefore model and report on trading agreements that span all parts of the business and, therefore, several different ERP systems.
- Businesses who have a single ERP system that doesn’t have the flexibility to be able to model all trading agreements perfectly.
- Buying groups who need to consolidate information from all members (all using different systems) in order to calculate their members’ rebates and negotiate better agreements.
- Companies who resort to spreadsheets to manage rebate income find problems with modelling deals, consolidating purchasing information and/or determining rebate claims.
These problems are just the tip of the iceberg, however. Whilst missed rebate income is bad enough, of increasing concern is the lost opportunity for driving growth in margin and market share.
What rebate issues do wholesalers face?
Rebates were, after all, invented as a way of driving growth for both the supplier and the distributor, but they are only effective when the end users have access to accurate, up-to-date information.Let’s look at an example: Suppose you (as a branch manager for a distributor) have an opportunity to sell 200 boilers to a housebuilder. You have an agreement in place with the boiler manufacturer for an extra rebate if your company as a whole sells 1200, but you don’t know how many have already been sold under that agreement to date.
- Do you assume you will get the extra rebate and risk some margin?
- Or do you assume you won’t get it and risk losing the deal on price to a competitor?
You could, of course, ask the manufacturer to tell you how many your company has bought already. But is that practical for every pricing discussion you’d like to have with your potential customers?
Having accurate information to hand is key to being able to price competitively and maintain margin
The problem is this: the information needed, i.e.
- sales of a particular SKU across all branches
- rebate threshold reached
- quantity needed to reach the next rebate threshold
- indicative margin information
...is not easily accessible - particularly in companies that operate multiple ERP systems.What's needed is a specialist rebate management system that collates data across all areas of the business at a granular level and produces information in a format that can be used by commercial team members prior and during negotiations. This buyers' guide provides a review the functionality that is needed and a detailed checklist for those who are keen to solve the problem and achieve real growth through better rebate program management.