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Reversing the tide: How wholesale distributors are protecting margins with modern channel revenue strategies

Guest Author

By Derek Gittoes, VP of SCM Product Strategy, Oracle and Alison Schofield, Product Strategy Director, Oracle

Wholesale distribution can be a tough business to be in these days. Lately, the $7 trillion industry has been hit by a series of severe disruptions, not least of which is the mega-crisis that dominated the headlines for most of the year: COVID-19.

More than anything, the health crisis served as an amplifier and accelerator of a cluster of trends that have been shaking up the wholesale distribution industry for some time and whose cumulative effect has been to reduce returns on operating capital by more than 10% since 2011, according to a 2020 Deloitte Consulting financial analysis of 38 publicly traded Wholesale Distribution companies.

Among other pressures, profits and growth are being squeezed by the entry of direct-to-customer businesses like Amazon and Instacart, bypassing traditional wholesale distributors and redefining the last-mile of the supply chain. Food service companies, to take another example, are now selling directly to consumers and grocery stores.

Meanwhile, innovators have been busy harnessing digital technologies – including IoT, machine learning, artificial intelligence and blockchain – that engage customers in ways that traditional wholesalers never before imagined. 

But wholesale distributors aren’t standing still. More and more, they are mobilizing to protect their revenue streams and customer relationships with digital initiatives of their own. Enterprise cloud solutions are playing a big role in this transformation of traditional channel distributors. Oracle Cloud SCM applications, for example, are helping distributors maximize revenue and minimize leakage, optimize warehouse operations, increase flexibility in planning and fulfillment, and cut logistics spend.

Plugging channel revenue leaks

Let’s take a closer look at revenue leakage – a major pain point and margin killer for more than a few channel distributors. The problem can arise when distributors fail to properly manage their ship and debit programs and thus fail to capture valuable discounts from suppliers.

Lack of automation is partly to blame. Using manually prepared spreadsheets to manage trade programs is an inherently error-prone and inefficient process. Workers can easily tag orders incorrectly, miss cost adjustments, and miscalculate reconciliations – all of which can leave millions of dollars on the table each year and lead to disputes with suppliers that can take a toll on future business.

Oracle Channel Revenue Management, part of Oracle Order Management in Oracle Cloud SCM, helps organizations efficiently manage their trade programs by automating processing and settlement in the cloud. The solution completely digitizes ship and debit programs, creating a single unified platform for managing pricing agreements with suppliers, customers, and partners. The channel revenue management platform gives companies the ability to:

  • Simplify the creation of new trade programs and centralize the management of programs across suppliers, customers and products
  • Integrate trade programs with enterprise ordering and quoting systems, enabling end-to-end program automation and improving accuracy
  • Integrate programs with financial systems to improve accuracy of rebate calculations and payments
  • Monitor the profitability of trade programs in real time and make fast adjustments
  • Automate rebate claim processing and settlements    
  • Optimize channel partner relationships by reducing claim disputes and processing time

A fully integrated Channel Revenue Management solution streamlines the process of managing supplier rebate programs so wholesale distributors can secure better profit margins and spend less time on program management. Distributors deploying Oracle’s cloud channel revenue management are also noticing a greater level of trust among supply chain partners as they’ve gained more confidence in the trade program and experience fewer rebate disputes. Perhaps equally valuable: Time-saving automation is lifting the burden of manual trade program administration and giving managers more capacity to tackle higher-value tasks.  

Today, wholesale distributors are facing no shortage of challenges. Between the pandemic’s upheavals and a growing number of disruptors nipping at their heels, distributors are working overtime to protect margins and forge a path to continued growth. Oracle and Deloitte can help wholesale distributors confront these challenges with modern cloud solutions that transform every part of the business.

To learn more about how wholesale distributors can thrive during these turbulent times, tune into Oracle and Deloitte’s recent webcast, Optimize Channel Rebate Programs with Cloud SCM Order Management

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