Data science

Why Enterprise Resource Planning Systems Fall Short with Rebate Management

Enterprise resource planning (ERP) systems allow companies to integrate many disparate elements of their business on a single centralized platform – from human resources to supply chain logistics to financial data. While this level of centralization can create operational efficiencies, the breadth of functionality offered by ERP systems also make them less effective when it comes to handling more specialized aspects of your business.

For example, when companies need to design, track, and execute rebate agreements, ERP systems come up short. This is because rebates can be highly complex and dynamic – to manage them productively, companies need purpose-built software that will help them maintain transparency internally and with trading partners, identify where rebate programs can be improved, and react to changes in markets and distribution dynamics. ERP systems allow companies to record the rebates they’re owed, but not much else.

Although many companies get by with the rudimentary rebate management tools offered by ERP systems, supported in parallel by spreadsheets and other off-system tracking, the usefulness of these tools breaks down with complex incentive-based rebate programs and an ever-increasing drive for rebates to stimulate the business growth they were implemented for in the first place. Dedicated rebate management systems, on the other hand, are designed around the needs of complex and dynamic rebate programs, helping companies build more sustainable relationships with one another by giving them a wider range of options and the resources they need to communicate and collaborate in real-time.

How to manage complexity

Global supply chains have never been more complex than they are today – they’re more interconnected, they serve larger and increasingly diverse markets, and they often require vast logistical infrastructure to function. A 2020 survey found that 91 percent of businesses say they “can’t stay ahead of their supply chain complexities.” As if this task wasn’t already difficult enough, COVID-19 threw the global economy into chaos overnight, snapping crucial links in supply chains, straining relationships between manufacturers and distributors, and forcing consumers to deal with delays and unpredictable cost fluctuations.

One of the reasons rebates exist is to account for uncertainty – from economic shocks to shifting consumer demands. They retroactively bring volume, pricing and payments into line with projections, incentivizing trading partners to continue investing in one another. The more contingencies rebates can account for, the easier it will be for companies to predict future conditions and adapt when they change. This is why there are hundreds of different types of rebate agreements – they can be based on seasonality, sales targets, marketing commitments, the performance of specific product lines, and a range of other variables.

Many rebate agreements also change annually (or more frequently) to spur growth and react to market changes as they arise. These are all reasons why these agreements can be surprisingly intricate, which makes ERP systems blunt instruments for managing them.

Increasing efficiency and agility

ERP systems are all about efficiency – by bringing a wide range of business processes (from workflow solutions to communication tools) together on a single platform, these systems are designed to consolidate information, facilitate cooperation, and streamline a company’s processes across the board. This sounds particularly attractive to company leaders in the supply chain sector, who are hyper-cognizant of any opportunity to increase efficiency. An EY survey found that 55 percent of companies expect digitization to improve operational supply chain efficiency (the second-most-cited option) over the next three years.

But can ERP systems really increase the efficiency and effectiveness of B2B rebate programs? By failing to account for a wide enough range of variables and providing little in the way of real-time flexibility, these systems aren’t the drivers of business growth that companies need. According to Gartner, 89 percent of supply chain professionals want to invest in agility. This is what specialized rebate management solutions provide by giving companies the chance to get creative with the negotiation and implementation of deals, adjust those deals as circumstances change, and track every stage of the process on a platform that was built specifically for handling rebates.

When companies rely on ERP systems that can’t accommodate their rebate needs, they’re forced to use other forms of documentation and manual logistics management, such as spreadsheets. This can lead to costly errors and wasted time – hardly the efficiency companies are after.

Building stronger relationships between supply chain partners

Rebates help companies forge stronger relationships by allowing them to negotiate deals that satisfy both parties and giving them the freedom to alter the provisions of those deals as circumstances dictate. Dedicated rebate management platforms provide mechanisms to ensure transparency and accountability, more robust contract management, and the ability to manage hundreds of different types of rebates.

According to a recent Enable survey, more than one-third of companies say they still use spreadsheets to document, share, and sign off on deals. This doesn’t just lead to mistakes, backtracking, delays, and a series of other logistical problems – it can also be detrimental to relationships, as it requires partners to dig through scattered documents and search records that haven’t been properly systematized whenever a dispute or any other issue arises. ERP systems are typically transaction-centric, while rebate management systems make the process of creating, approving, and tracking deals an ongoing collaborative process with dedicated workflow and communication tools.

ERP systems have a clear role to play in helping companies become more productive, which is why rebate management solutions can be directly integrated with them. But rebate management is a highly specialized field – it requires digital tools that are specifically designed to manage complexity, improve supply chain flexibility, and build healthy and sustainable relationships between partners.

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AUTHOR BIO:

Andy James is the Director of Product Strategy at Enable, a cloud-based SaaS solution for B2B rebate management. The software is used by procurement and finance professionals in distribution, wholesale and manufacturing across over 50 industries so that they can have an easy, seamless solution to execute and track their full range of trading programs.

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