Optimizing Supplier Discounts: Dynamic Discounting (Part 3)
Our last post (part 2) in this series on four best practices for optimizing supplier discounts – based on our new white paper – discussed how the first two of these best practices gives suppliers incentives to participate in discounting programs.
These second two best practices focus more on your own organization – essential steps to take to earn the highest possible returns from your dynamic discounting initiatives.
Embed dynamic discounting into your corporate culture
Many organizations begin dynamic discounting initiatives, but they fail or deliver sub-optimal results. One reason is a lack of alignment between three critical teams within the organization – each playing an important role in creating successful discounting programs:
- Accounts Payable: The A/P team must make sure all payments are sent on schedule to meet discounting terms so that programs can be flexible enough to earn the highest possible returns.
- Procurement: As suppliers are sourced and evaluated, procurement executives must make sure dynamic discounting terms are written into contracts and purchase orders.
- Treasury: Financial executives need to evaluate and accept the expected ROI from discounting – and provide guidance on times of year when more cash may be available to fund discounting programs.
Because success requires support across organizational teams, strong executive sponsorship is essential. A senior “champion” within the organization must focus on keeping processes aligned, coordinate activities, and track performance.
Monitor productivity through analytics and reporting for continuing improvements
Where possible, automate processes to enhance efficiency. “Timeout” tasks in workflows, plus automated reminders and escalations, can keep systems running smoothly and notify the right people when discount offers are about to expire.
With customized analytical tools, managers can see where discounts are being offered, how many were taken, and where opportunities were missed. Then, system parameters can be adjusted at a global level or fine-tuned for specific suppliers.
Optimizing supplier discounting can help you fully leverage your working capital to generate high returns and enhance relationships with key suppliers. For more information on dynamic discounting and these four best practices, download our white paper or contact us to discuss your needs.