AAH is a leading distributor of pharmaceutical and healthcare products in the UK. With an extensive product range of approximately 30,000 items, they efficiently deliver around 200 million products per week to a customer base of 20,000 across the UK. This operation is managed through 14 distribution centers strategically located throughout the country. For the past two decades, AAH has been providing twice-daily deliveries to their customers, establishing a reliable track record.
In the UK, AAH operates under three trading brands: AAH, Enterprise, and Trident. Customers engage with these brands across various product categories, each with their own distinct rebate levels. Effectively managing approximately 40 different rebate types across 20,000 customers and 30,000 SKUs presents a multitude of possibilities for customization and optimization to meet customer needs.
AAH manages a considerable number of rebate agreements and an extensive array of product-rebate combinations on a monthly basis. The operational complexity they face is substantial, evident in the management of around 18,000 unique rebates and nearly 1 million product permutations each month. This inherent complexity underscores the intricacies of their business operations.
Michael McSorley, Head of Business Development has been with AAH for six and a half years, during this time, he has fulfilled diverse roles within sales and commercial departments. Currently, his focus lies on ensuring maximum value for both customers and shareholders. This involves forming partnerships with industry stakeholders and aligning the company's offerings with market trends to provide unique solutions.
Rebates Impact P&L
McSorley explains, “We have quite a diverse array of rebates within our business, encompassing both incoming rebates from suppliers and outgoing rebates to our customers. On a monthly basis, we distribute approximately two to 3 million pounds to customers while receiving around 25 to 30 million pounds in return. This has had a substantial impact on our profit and loss, underscoring the significance of rebates in our financial operations. Any error in this process could jeopardize our ability to meet financial obligations.”
Rebates Drive Collaboration for AAH
McSorley tells us, “Rebates within the pharmaceutical industry ensure we deliver and drive long-term collaborative partnerships for the future. They are instrumental in driving long-term growth for not only our customers, but for our own business. This collaborative approach makes sure that we reward those customers who wish to partner with us for the long term.”
Mutually Beneficial Outcomes
AAH aims to streamline their complex agreements to foster mutually beneficial outcomes for both their customers and themselves. Their primary objective has consistently been to facilitate smoother business transactions. For customers, simplicity entails receiving timely delivery of accurate products at agreed-upon prices, coupled with prompt rebate payments when applicable.
McSorley says, “Our aim is to proactively assist customers in understanding the actions they can take to optimize their rebate outcomes. We want to avoid situations where customers miss out on rebates due to small discrepancies. Transparency is key for us; we want customers to feel confident and informed throughout the process. Our website serves as a primary tool for guiding customers through rebate tiers and ensuring a positive experience.”
Shifting to a More Strategic Approach
AAH underwent a significant transition, shifting from being part of a larger European entity to operating as an independent UK business. This transition marked a shift in their perspective on rebates, now viewing them as strategic investments rather than mere financial transactions. They have embarked on various initiatives to maximize the impact of rebates, forming successful partnerships and redefining the role of rebate administrators into strategic business partners.
Their collaboration with sales and procurement teams exemplifies their approach, focusing on educating and aligning stakeholders to leverage rebates effectively in driving desired behaviors. This shift signifies a deeper understanding of the value of rebates beyond monetary transactions, positioning AAH for strategic growth and influence in the market.
McSorley comments, “This transition has provided us with an opportunity to reassess our approach. We've come to recognize that rebates shouldn't be viewed merely as a cost of doing business; rather, they represent a strategic lever that can be optimized. Our focus has been on maximizing the amount of rebate we offer, aiming to double or even triple it.”
McSorley says, “When determining our rebate strategy, we shifted our approach to prioritize customer input. Instead of creating rebate schemes based solely on our preferences, we engaged with our customers to understand their needs and preferences regarding rebate structures. We're committed to becoming a genuinely customer-led organization. This means actively seeking feedback from our customers, even when it's not what we always hope to hear.”
Previously, managing rebates at AAH was a daunting task due to the fragmentation of their systems. With seven or eight disparate platforms that didn't communicate with each other, they essentially had seven or eight separate pots of money that customers received without clear understanding. Often, these rebates were set up by individuals who subsequently left the company, leaving them hesitant to alter them.
Spreadsheets Not Fit for Purpose
AAH had reached a point where using spreadsheets for rebate management was no longer feasible. The costs associated with their usage were becoming inefficient, and the processing speed was inadequate. AAH encountered issues such as version control and inflexibility, rendering spreadsheets unsuitable for their needs.
According to McSorley, "Spreadsheets were inadequate for handling the complexity of our rebate calculations. Our aim was to foster innovation, broaden our understanding of what could be achieved and avoid being confined to traditional rebate methods.”
Eliminating Ineffective rebates
When AAH embarked on a journey to dismantle their legacy systems and optimize rebate performance. This involved not only improving the effectiveness of existing rebates but also recognizing and eliminating those that were ineffective.
McSorley, tell us, “Through this process, we've not only increased profitability significantly but also managed to remove 2 million pounds worth of ineffective rebates. Despite the streamlining of rebates, we've managed to grow our volume by 12% in the last two years. This growth is attributed to reallocating resources from ineffective rebates to customers who genuinely appreciate and benefit from them. This transformation reflects our commitment to enhancing the value we provide to our customers while driving efficiency within our operations.”
He continues, “This strategic decision has not only enhanced our financial performance but has also contributed significantly to our bottom line. Given our annual profit of around 70 million pounds, this represents a substantial growth percentage, highlighting the importance and impact of effective rebate management on our overall business success.”
Complex Contracts and Calculations
AAH recognized the importance of ensuring that their internal colleagues and customers fully grasped the underlying logic of their rebate contracts and calculations. Their objective was to establish a single version of truth that could be accessed and utilized by everyone, enabling them to transparently communicate progress to customers regarding their performance in relation to long-term rebates.
McSorley says, “We had reached a point where we were unable to effectively manage the sheer number of rebates we had. We wanted our colleagues to focus on where there were opportunities to grow the business, rather than spending lots of time carrying out the complex calculations in the first place.”
Settling Rebates Swiftly
At AAH, all rebates are resolved through credit notes issued on the customer's account. As a result, it is crucial for the company to perform these calculations swiftly and efficiently, ensuring that the credit notes are accurately applied to the customer's business during the monthly statement.
McSorley says, “Our customers are a really important part of the NHS infrastructure and therefore having a quick and easy process to settle rebates is really important for them as well.”
Onboarding of Enable
During the onboarding process, AAH received extensive support from the Enable team. This support was provided through a range of activities, including on-site meetings at AAH's office, visits to Enable's offices, and a significant amount of remote collaboration. The Enable team established a strong and dedicated partnership with AAH, effectively becoming an extension of their own business. This support has been ongoing for the past year.
Leading the team were Matt, Zoe, and Lukasz, who took great care of AAH throughout the process. Bi-daily check-ins were conducted using Enable's project management software, ensuring regular communication and tracking of progress at an executive level.
McSorley, reflecting on the onboarding experience, commented, "We had five legacy systems responsible for complex calculations, and with the assistance of the Enable team, they guided us in understanding the inner workings of each system. They also helped us initiate a data cleanup process for the underlying data within each system."
Sales Team Reaping the Benefits
With Enable, the sales team finally has the tools they need to offer the right rebates to the right customers. They can rely on calculations and projections more than ever before, allowing them to create more rebate programs that drive the behaviors the company wants to see from their customers.
McSorley tells us, “Enable has provided our sales teams with a high level of confidence. They now have the ability to offer customers best-in-class rebates, knowing that the calculations will be accurate, and payments will be made promptly and in full. The flexibility that the platform provides around being able to offer different types of rebates simply wouldn't be possible in a spreadsheet environment.”
He continues, “This newfound assurance allows our sales teams to interact with customers in a more impactful manner. They can provide customers with detailed updates on their progress regarding rebates, enabling them to focus on business growth instead of being burdened with the task of calculating rebates independently.”
McSorley tells us, “With Enable and the expertise of our team, we've been able to streamline our operations without sacrificing the human touch. Instead of replacing people, Enable has complemented their work, allowing us to focus on value-added tasks rather than repetitive calculations and checks. This has not only increased our efficiency but also enhanced the accuracy and reliability of our rebate management process.”
Efficient and Accurate Calculations
Reflecting on when AAH first implemented Enable, McSorley says, “It's amazing how quickly implementing Enable revealed a significant calculation error that had gone unnoticed for a decade. While it might have been a nerve-wracking moment initially, it ultimately led to a substantial improvement in efficiency. Prior to using Enable, our processes were disjointed and labor-intensive, involving multiple rounds of calculations and checks, often resulting in disputes over accuracy. In the past, the value of our rebates was heavily reliant on individual calculations, which was far from ideal.”
Improved Forecasting and Reporting
AAH has experienced significant benefits in both forecasting and reporting aspects of their business as a result of their partnership with Enable. Improved forecasting capabilities have enabled AAH to make data-driven decisions with greater accuracy. They can now more precisely estimate the amount of rebate they will need to pay out at the end of the year, allowing for better financial planning.
In terms of communication with customers, AAH has been able to provide clearer and more transparent updates on their performance. This enhanced communication has fostered stronger relationships with customers, as they are now able to understand how they are progressing in a more comprehensive manner.
McSorley says, “Within our business, our data landscape was really fragmented with regards to rebates. Bringing everything into one place became very important for us. We can now precisely track and attribute rebate payments to specific products and customers, providing insights into their margins in a way that was not possible before. This improved visibility allows us to make more informed business decisions and optimize our operations more effectively.”
A Wealth of Data and Insights
McSorley comments, “Enable offers a wealth of data and insights that can significantly impact decision-making. The challenge lies in effectively surfacing this data and insight to users, empowering them to make informed decisions based on the information available within the platform. By leveraging the capabilities of Enable to present data in a user-friendly and accessible manner, we can allow our teams to make more informed and impactful decisions that drive the success of our business.”
Significant Cash & Time Savings
The implementation of Enable has resulted in significant savings for AAH, both in terms of time and cash. McSorley tells us, "By leveraging the Enable platform, we have successfully automated the manual calculation of £600,000 in annual rebates that our sales team used to perform. Although it may not directly result in financial savings, it has significantly reduced the time required for these calculations. Additionally, it has ensured consistency and standardized calculations for our valued customers."
Enhancing Customer Offerings
Through their partnership with Enable, AAH has gained the ability to consolidate spending across their three trading brands in the UK. This consolidation enables them to provide their customers with a unified payment at the end of each month, simplifying the process for both AAH and their customers.
McSorley says, "Enable has empowered us to execute customer offers that were previously beyond our reach. This capability has enabled us to incentivize customers to engage with all three of our trading brands and ensure that we appropriately reward those who have chosen to partner with us."
Every morning, AAH reviews the accrued rebate for the month, examining both outgoing and incoming amounts. This allows them to anticipate potential issues such as miscalculations or missed targets by customers. Additionally, they hold a dedicated forum where rebate performance is thoroughly discussed among the board members. Key metrics such as the number of customers hitting or missing targets are closely monitored and analyzed.
McSorley says, "Our focus is not just on avoiding customers missing targets but ensuring that they hit them. Sales teams are held accountable for their contribution to achieving this goal. However, as our business scales, inherent risks persist, particularly concerning customer awareness of rebate agreements. Approximately 50% of our customers are unaware of the terms of their rebate agreements, which presents an ongoing challenge.”
He continues, “While leveraging Enable has significantly reduced risk, complete risk elimination remains elusive. Our journey with Enable has been one of continual learning and improvement, with the overarching goal of minimizing risk while maximizing value creation for both our company and our customers.”
AAH carried out extensive market research to understand who the best provider was to go to within the UK for rebate management, and Enable's name came up time and time again as a partner to go to.
McSorley says, “The Enable team is readily available whenever you need them, offering round-the-clock support for you and your business. Users within our organization have found Enable to be highly intuitive, requiring minimal training to get up to speed. I would recommend Enable to anyone who is seeking a long-term partner in their business.”
Special Pricing Agreements
Special Price Agreements (SPAs) play a vital role in the NHS ecosystem, with 99% being funded by the manufacturers. For AAH, SPAs are crucial in ensuring that they can offer their hospital customers the most competitive pricing precisely when it is needed. The turnover generated by SPAs amounts to approximately £25 million per month. As a distributor, AAH claims this income from manufacturers for the administration of these schemes. These SPAs cover the entirety of UK hospitals, serving a total of approximately 3,000 customers.
McSorley comments on their current SPAs process, "At present, we rely on an outdated Access database to manage our SPA program, which is inadequate and not designed specifically for handling SPA arrangements. Retrieving a significant volume of data for invoicing purposes is time-consuming, and it takes five to ten days to complete the reconciliation process once calculations are done. This inefficiency is a significant waste of time for us and has direct implications on our cash flow, delaying incoming funds by approximately 30 days."
Enable for SPA Management
McSorley says, “Enable's solution for SPAs will significantly accelerate the cash flow into our business. We will have the ability to invoice our manufacturing partners on a more frequent cycle, resulting in improved cash flow not only for us but also for our end customers.”
He continues, “This solution will provide us with greater transparency regarding the allocation of funds, allowing us to work closely with our manufacturer partners and share data more rapidly than ever before. By having a single source of truth, we can closely monitor our daily spending on SPAs and accurately forecast the amount we expect to bring back into the business.”
Advice For Rebate Management Success
McSorley says, "I would strongly advise anyone embarking on the journey of utilizing rebate management software to first gain a comprehensive and accurate understanding of the rebates present within their business. We discovered that various stakeholders held different perspectives on how calculations should be conducted, emphasizing the importance of establishing a clear and documented brief."
He continues, "We also understand the significance of having well-maintained master data. Therefore, it is highly beneficial to invest a small amount of time in ensuring that your master data is in excellent condition before transitioning to the Enable platform. This upfront investment will pay off in the long run and contribute to a smoother transition process."
Future Rebate Strategy
McSorley tells us, "In the coming six to twelve months, we anticipate significant growth in our rebate strategy. Our goal is to offer even more rebates to our customers, providing increased value as a result. We firmly believe that rebates are a precise and targeted approach to drive sustainable and profitable growth for both our customers and our own business.
"To ensure the success of this strategy, we will continue to rely on Enable. Whether it involves consolidating the trading brands of all our businesses or identifying and optimizing deals that may not be yielding desired results, Enable will play a crucial role in our ongoing journey."
Enable's implementation has automated the manual calculation of £600,000 in annual rebates, saving significant time and ensuring standardized calculations.
AAH can now offer unified payments to customers, incentivizing engagement with all three trading brands and appropriately rewarding long-term partnerships.
35x return on investment.