Is a contract management system the best choice for managing rebate agreements? | Enable blog
Summary
They set out the prices, service levels, terms and supplier relationship, ensuring that your company is regularly supplied with their direct and indirect supplies.A study by the Institute for Supply Management uncovered that between 60-80% of all business-to-business transactions are governed by some form of written agreement, with a typical Fortune 1000 company maintaining 20,000 to 40,000 active contracts at any given time. Plus according to Harvard Business Review companies lose between five to forty percent of value on a deal due to inefficient B2B contract processes. If you’re responsible for procurement in a buying group, wholesale distributor, multi-site or large business (such as building materials, HVAC, plumbing and electrical supplies businesses or buying groups of all types) then it’s likely youll be using a contract management system to deal with your supplier rebates and the B2B contracts that come with them.Rebates were originally designed to aid both the manufacturer and the distributor to grow product sales without resorting to a price war. By maintaining a set price that is reduced by rebate income depending on actual sales, manufacturers can control margins and reward those who promote their products the most.At any point in time, the net margin on a product is dependent on the total volume of sales to date and the detail behind the rebate agreement that is in place. Actually knowing the volume of sales and the rebate level that has been reached — particularly in a multi-site operation — can be difficult.
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