Although rebates are the driving force of many of today’s top supply chains. The question remains - is it worth considering rebate management software modernization? Those who haven't yet considered it, are still reliant on an ad hoc and manual approach. This is not only a burden on time-starved accounting staff, but it can also lead to missed deal earnings, subpar pricing, poor cash flow, strained partner relationships, and financial compliance violations.
Replacing your legacy system with new cloud-based technology is a significant challenge, but one that’s well worth taking on especially for organizations still adapting to a rapidly changing world. Those who consider rebate management software modernization now will reap the benefits the trillion-dollar deal economy represents.
Many attempts to usher rebate management software modernization have stemmed from modern enterprise resource planning (ERP) systems. But while ERP technology can help reduce costs and streamline operations by integrating multiple business processes, it lacks ease of use and the technical capabilities needed to manage ever-evolving rebate programs. In fact, according to a December 2020 Harvard Business Review Analytic Services survey of more than 500 executives, more than a third (34%) of respondent's rate ERP systems “fairly difficult” or “very difficult” to use.
A perfect example of the limitations of ERP is shown by Mark Gilham, Finance Director of Strategic Projects at the Grafton Group, an international manufacturer and distributor of building materials. “We trade with nearly 4,000 suppliers; and across those suppliers, we have about 100,000 products configured in our system, while most ERP systems can handle simple rebate agreements, they struggle to accommodate the diversity of complicated rebate structures that account for a majority of our transactions,” making ERP a poor choice of technology for most manufacturers and distributors.
“If it isn't broke, don’t fix it” is a common phrase used in reference to legacy software and spreadsheets when managing rebates. However, consider how detrimental a a non-efficient system is to your organization.
For example, Scott Weir, vice president of purchasing for Thos. Somerville Co. cites an incident in which they were calculating rebate pay outs from a manufacturer based on the weight and dimension of products sold. However, after automating its rebate management processes, Weir discovered that the manufacturer had been calculating pay outs based on a product’s manufactured weight rather than weight and product dimension—a minor discrepancy, but one that Weir says, if undetected, could have caused Thos. Somerville to miss program targets, potentially resulting in “hundreds of thousands of dollars” of lost revenue.
Although rebate management software modernization requires some financial investment, the example above shows how organizations can no longer afford to poorly manage the rebates process without putting themselves at dire financial risk.
One of the most important reasons for rebate management software modernization is increased visibility of data. Since the data can be stored in one system with real-time access to everything from contract terms to program targets, you can drive partner behavior, incentivizing distributors and retailers alike to purchase larger volumes of product, thereby maximizing return on rebates. Also, by gathering and analyzing the data produced by an automated rebate management system, organizations can more easily detect developing trends and share these findings with a company’s business line leaders.
Bob Gay, Manager of Customer Profitability and Rebates at Advance Auto Parts, cited in a Harvard Business Review paper that cloud-based retail management systems provide clear visibility of its rebate agreements. He says, “Local coffee shops do a great job of showing how many points we’ve accumulated and when our next cup of coffee is free. But when you’re talking about millions and millions of dollars in purchases, and millions of product stock keeping units, customers can become easily overwhelmed with data.” By centralizing this information and making it available to partners in easy-to-digest reports, Gay says the organization can “drive decisions where customers obtain products, how quickly they obtain them, and the assurance they are paid both timely and accurately.”
Given the changing supply chain landscape, the time is more than right to embrace the cloud. Cloud-based rebate management software modernization can help by providing a pathway to greater financial transparency and audit control, data-driven insights, dynamic pricing, and vertical integration among key partners for greater growth. It not only promises to deliver better business outcomes but also foster long-term and more meaningful partnerships for the purpose of mutual gain.
Find out how you can achieve this and more with our findings in the Harvard Business Review Analytic Services paper: The Evolution of Rebate Management.