How Manufacturers and Distributors Can Build Mutually-Beneficial Partnerships

Distributor-supplier relationships are the backbone to the business of supply chains, and many parties are missing out on growth opportunities. Here's how to optimize your partnerships.

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Every year, manufacturers and distributors miss out on growth and profit opportunities because they aren’t negotiating, managing, and measuring B2B rebates effectively. They frequently approach these deals in a zero-sum way – instead of recognizing that transparency, ongoing performance measurement, and operational improvements are lucrative for both parties, they too often settle into their silos and fail to collaborate productively. 

When B2B partners develop and implement rebates, they should focus on making targeted and measurable growth investments, establishing trust with measures for shared accountability and visibility, and having open discussions about how to operationalize the relationship going forward. This planning and deployment process won’t just strengthen relationships between manufacturers and distributors, it will put structures in place that boost financial performance, improve operational efficiency and mitigate business risk for both parties.

The most productive trading relationships are integrative and agile. Manufacturers and distributors have many moving parts to worry about, and they’re constantly iterating to stay ahead of shifting trends and other changing conditions that will have an impact on the relationship. In a world where margins are tight, B2B companies have to use all the digital resources at their disposal to implement more sophisticated and streamlined collaboration platforms to help them get the most out of their partnerships. 

Prioritize joint deal visibility

One of the surest ways for B2B partners to build stronger relationships, drive efficiency, and ultimately increase the bottom line is to focus on joint visibility. According to a survey conducted by KPMG, supply chain visibility is the biggest investment focus for executives in the sector. However, EY Global reports that just 6 percent of companies are “very confident in their systems and capabilities for end-to-end supply chain visibility.” 

Manufacturers and distributors don’t just need to increase visibility into their own operations – they should also give their partners the resources they need to maximize mutual growth opportunities. When partners are using the same information to make decisions, there won’t be as many redundancies, disagreements, and other logistical headaches. Joint visibility isn’t just vital to increase productivity – it’s also a way to break down barriers to communication between partners and help them maintain healthy and sustainable relationships. Trust and performance are always interdependent. 

Measuring performance and adapting in real-time

The negotiation of a rebate deal is just the beginning – B2B partners have to determine how it will be operationalized, how progress will be measured, and which key performance indicators (KPIs) they want to focus on. This process of establishing KPIs and rigorously tracking progress toward them is especially important at a time when 38 percent of supply chain leaders are concerned that they aren’t well-positioned to handle the challenges of the next two years. 

One reason manufacturers and distributors are struggling is the fact that 60 percent of supply chains were designed to manage costs rather than with resilience and agility in mind. But these priorities aren’t mutually exclusive: when companies are capable of adapting to shocks and changing course as circumstances require, they’ll avoid unnecessary costs, keep pace with customer demand, and maintain operations even in periods of economic uncertainty. To be adaptable, supply chain leaders need real-time performance data to make decisions with the best information available. It’s also essential to ensure that this information is available to both partners, so they can make coherent joint decisions. 

Performance tracking should also be directly tied to forecasting. McKinsey reports that top-performing companies make significant investments in forecasting, which improves their accuracy by between 10 and 15 percent. The process of improving B2B trading relationships with robust KPIs and performance tracking is often incremental and iterative, but partners should always remember that building productive relationships is a long-term process. 

Making the most of digital collaboration tools 

Despite the fact that the supply chain sector stands to benefit more from digital transformation than just about any other industry, the digitization process has been a slow one for far too many companies. A 2021 BDO study found that just 28 percent of manufacturers had a “supply chain-wide digital strategy with specific business objectives and KPI targets over the next 1-3 years.” Meanwhile, 58 percent use ERP software, while Enable found that more than a third of companies still use manual tools like spreadsheets to approve, document, and share deals. 

This lack of digitization has real-world consequences, like the fact that just 2 percent of manufacturers say they have information transparency across the entire business ecosystem while 14 percent admit that their data are siloed. There’s often a lack of trust between manufacturers and distributors, as they regularly shield information from one another and compete rather than working together. By synthesizing information on a digital platform, B2B partners will be able to communicate clearly, integrate their operations, and manage deals more effectively. 

Digital tools facilitate joint visibility, help companies set KPIs and determine whether they’ve been met, and allow them to make B2B partnerships productive and sustainable. Manufacturers and distributors face surging competition and supply chain complexity, but they’ve also never had more powerful resources to ensure Andy JamesAndy Jamestransparency, accountability, and productivity. 

Andy James is Director of Product Management at Enable, a SaaS provider that features a collaboration platform for maximizing the performance of B2B deals while improving financial transparency and driving operational efficiency. He's been with the company for 14 years.

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