Why supply chain partners are not resetting rebates past due

Rebates are critical to improving financial outcomes across the supply chain, such as increased profits, increased sales, and better service to end customers. That’s why trading partners must think creatively about how to make the most of rebates to achieve their business goals.

Also read: Why many new industries are embracing kickbacks

Employing more sophisticated and flexible rebate strategies will open up many avenues for growth. While these advanced strategies are inevitably more complex than traditional incentives such as discounts, there are powerful digital tools that can handle this complexity and facilitate collaboration among trading partners. With these tools, partners can take a more innovative and strategic approach to rebates, a shift that has the potential to strengthen the relationship and significantly improve business outcomes for both parties.

In other words, it’s time to reset your rebates. The traditional one-size-fits-all approach to rebate management prevents manufacturers, distributors and other partners from maximizing the value of their relationships and driving the right behaviors to increase profits and sales. By developing a customized, integrated, results-driven rebate strategy, trading partners will discover that there are many more opportunities for profitable collaboration than they imagined.

Technology drives a new era of rebate innovation

Rebate management remains stuck in the past. Managers have long relied on spreadsheets, pivot tables and other cumbersome manual systems to develop and track rebates, preventing them from fully leveraging their relationships with trading partners.

AAH, a major distributor of healthcare products in the UK, had been using spreadsheets until it was discovered that spreadsheets were hindering efficiency and preventing the company from executing rebate strategies. As AAH’s former director of business development, Michael McSorley, explains: “Spreadsheets were not adequate to handle our complex rebate calculations.” AAH recognized that rebates were critical to profitability, so the company prioritized those that made sense for both its business and its clients’ businesses. new rebate program.

Companies like AAH are adopting modern rebate management solutions that include agreement approval workflows, AI analytics, and claims capabilities for full, on-time processing of rebates. It’s part of a larger trend toward supply chain digitization, which “is proven to reduce supply chain risks and optimize supply chain costs,” according to a recent Gartner report. A McKinsey survey of supply chain leaders found that 79% have implemented digital dashboards to enable end-to-end visibility—a core aspect of rebate management. The ability to incentivize desired behavior among partners is the most important factor in rebate reset, which is why visibility and collaboration are at the core of rebate management innovation.

New technology will be of little benefit if trading partners do not first make the necessary strategic adjustments to their rebate programs. Now that trading partners have digital tools at their disposal, they need to develop more comprehensive, customized and creative rebate strategies, and they must focus on how to execute these strategies as effectively as possible.

Customized rebate strategies are the engine of profitable growth

Implementing rebate management technology is just the beginning – once this technology is in place, trading partners will be able to customize rebate strategies to meet not only their own unique needs and business goals, but also those of their partners. When the goals are the same, they can work together to create a kickback plan that works for both parties. Unlike basic incentives such as discounts, rebates can be negotiated, implemented, and tailored in countless ways. They can be volume-based, seasonal, geographical, retrospective or non-retrospective, focused on meeting certain sales thresholds, designed to secure a specific product mix, and built around logistics or inventory.

ECMD is a company focused on manufacturing, importing and distributing construction materials. Steven Carlson, vice president of professional dealer sales at ECMD, recently explained how custom rebates helped the company negotiate a $10 million deal that prioritized high-margin product categories. Carlson observed that these rebates allow ECMD to “allocate specific rebates based on product or category profitability,” which “illustrate how we strategically leverage our strengths to win key accounts and deliver Competitive products to consolidate our position in the market.”

This high degree of customization enables trading partners to establish a mutually beneficial set of behavioral incentives to ensure profitable growth and business objectives. Carlson noted that ECMD’s “targeted sales strategies are supported by our ability to automate the rebate process, ensuring the efficiency and accuracy of our pricing and incentives.” Customized rebate strategies enable trading partners to more effectively manage their Every aspect of the relationship—from negotiation to dispute resolution to performance tracking. This helps them focus on what matters: developing strategies that protect profits and ensure sustainable growth.

It’s time for the rebate reset

Many manufacturers, distributors and other supply chain partners fail to take full advantage of the power of rebates, which is why they are overdue for new approaches to help them build stronger relationships and drive growth. Rebates are different from other incentives because they not only provide a simple financial incentive, but are also a valuable strategic tool. The level of customization provided by rebates enables partners to get closer to long-term goals and market opportunities.

It’s clear that many supply chain partners need to fundamentally rethink their approach to rebates. According to the 2024 Enable Report, nearly one-third of manufacturers believe their discount strategies are ineffective, while 18% do not know whether they are effective. Nearly two-thirds believe better analytics would make their rebate programs more effective—reflecting the trend toward digitalization across the supply chain industry. Once trading partners move away from outdated manual tools like Excel and restrictive ERPs (used by two-thirds of manufacturers), they can work with trading partners to develop robust rebate strategies that meet their mutual strategic goals.

Different rebates encourage different behaviors from trading partners. Some promote sales growth, while others stimulate purchases or promote new product lines. For example, ECMD negotiated a rebate program focused on high-margin products that allowed the company to leverage its strengths and build healthier relationships with key trading partners. There are countless rebate success stories like this, and they all have one thing in common: Company leaders recognized the need to reset rebates and turn rebates into a strategic engine for mutual success.