125554454 Automotivestocks | Dreamstime
125554454 Automotivestocks | Dreamstime

Why Transparency is a Key Growth Driver for Suppliers

Dec. 5, 2023
Transparency isn’t just vital for establishing and sustaining relationships between supply chain partners, it also allows suppliers to attract new partners, retain the ones they already have and make their supply chains as efficient and productive as possible.

The process of building robust long-term relationships is a core focus for suppliers and customers. This process entails improving communication and collaboration to bring trading partners into alignment on operations, rebate management and business goals. Suppliers need to ensure that their partners have a clear idea of what’s expected of them, as well as an unobstructed view of how different links of the supply chain are performing.

Transparency is integral to the maintenance of healthy supplier-customer relationships, as it increases trust, helps partners identify efficiencies and vulnerabilities and improves data collection and analysis. Suppliers and customers need compelling incentives to continue doing business together, such as new business opportunities, strategic clarity and data-driven decision-making—all of which are facilitated by transparency. Suppliers that prioritize transparency aren’t just interested in transactional relationships with customers—they want to build sustainable strategic partnerships.

The goal of any supplier-customer relationship is mutual growth. Beyond the perception of fairness (a value in itself), transparency fuels growth by helping partners establish and meet performance goals, identify opportunities for revenue creation and cost reduction and create lucrative rebate programs. These are the reasons transparency will continue to be essential for suppliers and customers as they leverage their relationships to grow their businesses.

Data Collection and Analysis Are Vital

Supply chain relationships can’t function without data. Trading partners need access to real-time information on shipments, sales volume, market conditions and other variables that will help them track performance and trends. This is why over two-thirds of supply chain leaders have implemented digital dashboards for end-to-end visibility—a move which made certain supply chains far less likely to be impacted by the global disruptions in 2022.

At a time when 73% of supply chain IT budgets are allocated to increasing growth and improving performance, it’s critical for suppliers and customers to rigorously track these metrics. Trading partners need to know how they’re performing and what’s expected of them—information that will enable growth by helping company leaders determine what’s working and what isn’t. The development of an effective rebate strategy is also dependent upon data, as partners need to negotiate terms and conditions, establish sales targets and create marketing strategies on the basis of accurate and comprehensive information.

Suppliers and customers have to be capable of coordinating orders and deliveries, carefully analyzing performance across the supply chain and negotiating mutually beneficial rebate frameworks that limit risk and maximize margins. These goals can only be achieved with reliable and thorough data collection and management.

Transparency is Crucial for Rebate Management

Rebates are powerful and flexible tools for strengthening relationships between trading partners. Suppliers and customers use rebates to keep pace with shifting market conditions, test different sales mixes and strategies, mitigate risk and reduce waste. Unlike discounts and other simple financial incentives, rebates can be customized on the basis of specific business goals, timetables, and a wide range of other variables. This allows partners to account for their unique circumstances and incentivize productive behaviors across the supply chain.

As rebates become increasingly sophisticated and complex, transparency is all the more important. When suppliers provide ample information about which products are eligible for rebates and how these rebates will function, customers are able to make informed decisions about their sales and marketing strategies. Informed customers tend to prioritize products that offer higher-tiered incentives, which drives sales performance and growth. This motivates customers to promote the supplier’s products more energetically and provide feedback on the effectiveness of rebate programs.

Transparency creates a virtuous cycle in which rebates are more aligned with customers’ needs, which leads to more sales growth and incentivizes even greater customer engagement and collaboration. It’s no surprise that three-quarters of distributors report that an awareness of rebate amounts would influence their support for a manufacturer. Meanwhile, almost half of manufacturers say more awareness of their rebate programs among their partners would increase the effectiveness of those programs. It’s clear that trading partners can’t fully harness the power of rebates without transparency.

Transparency Builds and Sustains Trust

Beyond the direct operational and financial benefits of transparency, open communication and collaboration also build trust between suppliers and customers. When customers are treated fairly and kept up to date, they will be more loyal to suppliers—a prerequisite for healthy long-term partnerships. Transparency also gives suppliers a competitive advantage, as it demonstrates that prospective partners will be treated with respect and increases the likelihood that customers will pursue relationships with them.

Despite the importance of transparency in maintaining healthy relationships between supply chain partners, there are several signs that suppliers are underemphasizing it. A recent Enable survey found that 55% of manufacturers don’t provide dashboard analytics, which means they’re making data access and evaluation unnecessarily difficult. While half of manufacturers will provide reports when asked, just 9% make this information readily available at all times. One-third of distributors say they only receive progress reports when they ask—and the information isn’t always adequate.

This lack of transparency applies to rebate management as well—36% of manufacturers say their biggest administrative concern is that they don’t know the “regular status of their rebates or their rebates didn’t match their calculations.” It’s likely that this lack of transparency is contributing to overall rebate performance issues—42% of manufacturers say their volume rebate strategy is “somewhat effective” at achieving their primary goals, while a mere 2% say their strategy is “very effective.”

These are stark reminders that transparency isn’t just vital for establishing and sustaining healthier relationships between supply chain partners—it’s also indispensable for overall performance. It’s time for suppliers to recognize that transparency will help them attract new partners, retain the ones they already have and make their supply chains as efficient and productive as possible.

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