Jun 08, 2020

What You Need to Know About Your Supply Chain and Rebates

supply chain

The supply chain is a complex beast – especially as organisations around the world are now looking to global supply chains in order to source materials more cost-effectively. Many challenges emerge with such strategies, including how to align incentives such as rebates to the benefit of the whole supply chain.

Make no mistake about it – alignment is important. The fact of the matter is that all members of a supply chain are interlinked.

If all companies work together to deliver quality products to the end customer, everybody wins. On the other hand, if they don’t work together efficiently, then all companies will lose out to another supply chain.

To use a simple two-stage supply chain example, a manufacturer relies on a retail partner to sell the goods it produces. Of course, the retailer’s salespeople greatly influence customer decisions on the shop floor – and the retailer of course, stocks rival products in the same category.

If the manufacturer doesn’t offer the retailer attractive margins on its products, the retailer will push rival products that do. However, when alignment and collaboration is lacking between the two companies – that is, when the manufacturer has no insight into what efforts the retailer expends to promote the manufacturer’s products – the manufacturer struggles to create incentives that will influence the retailer to do what’s best for both companies. These are known as “hidden actions” – and they permeate across the entire supply chain.


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