How to Build Strong Supply Chain Relationships Amid Economic Uncertainty
While supply chains were already facing dire circumstances at the end of last year, 2022 has hit manufacturers and distributors with a new list of crises and disruptions. The war in Ukraine has snarled already-stressed supply chains, fuel costs are surging, shipping has become more expensive and less reliable, and the price of raw materials has spiked. Meanwhile, companies are dealing with extremely high labor costs, the ongoing effects of the COVID-19 pandemic, and increasing consumer demands.
These challenges are daunting, but there are many ways for manufacturers and distributors to mitigate risk and maintain their operations amid economic volatility. For example, supply chain partners should focus on alignment across core functions – from delivery schedules to order volumes. This will minimize the risk of disruptions while allowing companies to implement pricing strategies that will be more predictable and less frustrating for consumers. Rebates are crucial for maintaining alignment because they allow partners to negotiate orders on the basis of market realities and make corrections when discrepancies arise.
A multi-dimensional supply chain crisis
We’re in the middle of a massive global supply chain crunch that shows no sign of abating anytime soon. This crisis has made it difficult for companies to secure goods, driven up the cost of those goods (and the materials necessary to produce them), reduced access to working capital, strained relationships across the supply chain, and caused consumer frustration with inventory issues, delayed delivery times, and so on.
According to a May 2022 Accenture report, estimated economic losses attributable to supply chain disruptions have exceeded €112 billion (0.9 percent of GDP) in the eurozone – a total that could increase to €920 billion (7.7 percent of GDP) in 2023. Many of the problems in the supply chain sector are self-perpetuating. For example, soaring inflation drives up the cost of raw materials, which forces companies to increase prices and slow down production. This affects demand for those materials, which pushes their prices even higher. The latest Consumer Price Index report showed a year-over-year increase of 8.6 percent – the fastest rise since 1981.
At the beginning of the year, there was talk of stabilization in global supply chains – a discussion that will now be on hold well into 2023. This means suppliers and distributors will be dealing with continued geopolitical friction with unpredictable price fluctuations, shipping delays, and many other issues for the foreseeable future. They have to figure out how to navigate this shifting economic terrain to minimize their financial risk and maintain customer trust.
This is all the more reason for manufacturers and distributors to improve their relationships with a robust rebate management platform, mutually beneficial pricing strategy, and solutions that provide the best possible experience for end customers.
Supply chain partners need to focus on their relationships
As the situation continues to deteriorate for global supply chains, relationships between suppliers and distributors are suffering. Manufacturers are sending out notices which inform distributors and retailers that their prices and discounts are subject to change without notice. They are also warning that special orders, promotions, and other benefits are no longer available. Meanwhile, some distributors are canceling orders while others are desperately trying to refill depleted inventory to keep up with consumer demand and share what is available equitably.
This uncertainty and inconsistency is putting immense pressure on supply chain partners, which has led to allegations of price gouging, incompetence, and unfairness. These endless recriminations and upheavals in partner relationships hurt everyone – suppliers, distributors, retailers, and ultimately consumers. Trading partners need to stay focused on providing the best customer experience possible. This means they have to be open with each other about business objectives, potential costs and risks, and the status of contracts and rebates.
Transparency and open communication are necessary to craft a mutually beneficial go-to-market strategy which shares costs, protects margins for all parties, and increases customer confidence. This is why companies should adopt a digital platform that will allow them to share data, eliminate silos, and ensure visibility (a top priority among industry executives) at every link of the supply chain. This won’t just build healthier relationships between supply chain partners – it will also help them identify additional sources of revenue at a time when extra revenue is extremely difficult to come by.
How rebates can maintain partner relationships
One of the most critical elements of any healthy relationship between supply chain partners is alignment on goals, delivery schedules, volumes, operations, and a range of other issues. Alignment is especially important in times of economic volatility, as manufacturers and distributors have to be capable of adapting to rapidly changing circumstances without wasting product or alienating consumers with delays and other inconveniences. One of the factors that makes today’s economic environment particularly difficult for the supply chain sector is the fact that consumer demands (for delivery times, pickup options, real-time tracking, etc.) have only become more stringent despite the crises faced by manufacturers and distributors.
As part of strategic pricing, rebates can help companies address consumer demands, mitigate risks, and forge stronger relationships with one another. This is because rebates enable supply chain partners to set price strategies and deliver competitive quotes that are in line with consumer demand, while allowing them to course-correct when projections aren’t aligned with reality. When you’re equipped to model, forecast, and track rebates with your trading partners, you’ll be in a strong position to maintain customer loyalty while reducing the chances of disputes that can undermine your relationships. Instead of inflexible ERP systems (or worse, manual rebate tracking with spreadsheets), a comprehensive rebate management system can get supply chain partners out of their silos and facilitate open communication and collaboration.
Amid all the economic chaos today, it’s vital to work with your supply chain partners – not against them. By focusing on alignment and transparency at every link of the supply chain, companies will build healthier relationships and continue to provide the best possible experiences for their customers.