You are called into the bosses’ office where you are asked a ‘simple’ question, requiring an accurate answer.
“What was our margin on the xxx deal?”
“$28,000”, you are able to confidently answer (phew, that was easy. You thought you were going to be asked something tricky).
“Great, thanks.” replied your boss. “So that includes their rebate? And also the discount they received?”
“Ok, what was our dead net margin?”
“Um. I would need to go and work it out. I think Finance will have that data on some spreadsheets. It might take me a while”.
Whether you are the business leader or the employee in this scenario, neither side of this conversation is ideal. It is possible that the deal you - the sales person - thought was profitable, actually resulted in a loss?
It is no secret that Supply Chains are not what they used to be and, in this day and age, businesses must be agile. They should have access to real time, accurate information that can help them make better and informed decisions for the profitability and scalability of their organisation, creating a level of resilience within their supply chain.
We have learned a fair bit about this in our time. So here are 5 Strategies for Successful Supply Chains.1. Margin visibility leads to profitability.
A 2018 survey found that the biggest challenge for global supply chain executives was visibility, with 21.8% of respondents selecting this answer. This lack of visibility has tangible effects on profitability. Visibility seems simple, doesn’t it? It makes sense. The reality is however, that B2B companies’ sales teams focus on closing deals - but how do they know these deals are profitable? They don’t. It’s guesswork at best.
Imagine if businesses, specifically the person closing the deal, had an accurate view over their true cost and true profit at the point of sale? The ability to access real-time margins for better decision-making when it comes to deals? This means visualising a true net margin that considers the entire supply chain revenue and accounts for all customer incentives such as rebate programs, all supplier rebates and support, along with any discounts and upcharges in between.
 “Biggest Supply Chain Challenges Worldwide 2017-2018,” Statista, 2019.
This accurate and instant margin visibility gives businesses the power to focus on profitable deals. Margin management can transform organisations, providing them with the control to maximise margins and ensure they never price below margin again (unless by design).2. Agile technology must match supply chain forces.
There are unprecedented market forces on supply chains. With increased pressure in ever-changing and competitive environments, pricing is volatile for distributors. We call these surging prices and it’s happening week-to-week and day-to-day.
Prices are constantly changing on both the purchasing and sales sides of supply chains at an unprecedented frequency. So, businesses need to be quick to adapt and adjust pricing in seconds based on supply chain fluctuations – it’s the agile that can survive by having the flexibility to capture all possible revenue opportunities.
A modern, agile, cloud-based ERP is a true strategic advantage over competitors for supply chain companies.
As supply chains are getting even more complex, most ERP’s are challenged to meet these evolving supply chain requirements, leaving businesses no choice (or so they think!) but to use manual workarounds or expensive ERP customisations.
These customisations slow down systems and pricing speed. Transactions get batched, nothing happens in ‘real time’, and inefficiencies creep in. Customisations can take up thousands of hours that could have been invested in growing their business.
Manual solutions ‘outside of the ERP processes’ (think spreadsheets, spreadsheets and more spreadsheets) are poison for supply chains. They create unnecessary layers, resulting in less transparency and of course, an increased risk of error(s).
The reality is, with the pace that things move these days, businesses can no longer afford to spend days or hours updating pricing. The inconvenience and extensive hours spent on customisation can outweigh the benefit of your ERP which with its broad functionality, is simply not geared up for the ‘new world’ in which we operate.
Supply chains have specific needs and require specialised functionality that works for your business. With the right solution, ERPs can have an extended life by integrating a best of breed solution.
Promotions and incentives are a key driver of sales in the supply chain. According to the POI 2020 State of the Industry Report, a whopping 23% of revenue is spent on trade promotions! That same report notes that 72% of responses described the amount of time spent on the entire process of creating a promotional plan from budgeting, to planning, to execution, to settlement, and post-event analytics in their organisation as ‘burdensome’. That doesn’t sound too fun.
So with the ‘burdensome’ work that goes into planning for promotions and incentives, are businesses making that promotional spend matter? How do businesses ensure that promotions and incentives are successful?
Generally speaking, rebate programs are mostly ‘given’ without a requirement to hit a target volume, product mix ratio or order type. Due to system limitations, the majority of companies rebate the same % on their lowest margin product to their most premium. The challenge is having the right technology solution to extract the most trade revenue from these incentives.
As time goes on, more sophisticated promotions are emerging. With trigger products, businesses can assign discounts on other products in the order. With mix and match deals, businesses can grow distribution of new lines. Most systems are not designed to run these complex promotions.
Your business can seize opportunities without increasing overhead costs, and here’s how: automation of supplier/ customer rebates and claims/deductions, pricing, deals, and trade promotions. Top supply chain companies are unlocking growth through promotions and incentives powered by automation.5. Success comes from mastering multiple sales channels
Today, most businesses use multiple platforms to sell their products. From retail stores to sales rep’s orders, Ecommerce, EDI orders, call centre orders and more, omni channel trading is here. And depending on how prepared businesses are, this could be a curse or a crown.
Mastering these sales channels is what defines a successful supply chain company. Businesses that master sales channels will grow their performance in sales, pricing and incentives, leading to increased profitability.
The key to unlocking omni channel growth? Ensuring profitability and eliminating any misaligned pricing? Centralised pricing through a best of breed Pricing Engine. It is the new frontier for successful supply chains and will deliver you instant real time price calculations for any sales channel faster than you can blink. These results can only be achieved through technology and thanks to Flintfox and the Azure load balancer, there is no limit to the number of prices that can be calculated per second.
At Flintfox, we have over 30 years of experience in helping businesses become masters of their supply chain. Providing businesses with accurate and up to date information to make informed decisions at any time. Allowing them a strategic advantage by remaining agile, resilient and profitable. This could be you.
If you would like to eliminate the ‘burdensome’ work in promotional planning, managing pricing errors and excessive admin time, contact us HERE to arrange an assessment of your supply chain and a demo of our high-performance pricing engine from one of our experts.