Scan-based trading

History

• Improved retailer relationships: The greatest competitive advantage for a supplier is increased collaboration and visibility in its retail-trading partner's organization. With partners agreeing on details like item, price, promotion and shrink at the onset of an SBT relationship, suppliers are able to better service accounts and reduce billing and invoice issues. Sara Lee reported a 60% reduction in invoice error correction costs by the implementation of SBT at an average cost of $70.00 per disputed invoice; the savings are substantial. The improved relationships also allow suppliers to use SBT as a competitive weapon to gain exclusivity at retailers. SBT suppliers are becoming increasingly aggressive in approaching retailers and offering to use SBT on all of their products in exchange for exclusivity in the retailer's stores.
• Increased sales: SBT suppliers have estimated that their increase in sales by switching to a scan-based trading model is from 1% to 5%. Despite what this industry paid for study shows sales are not increased by SBT. As long as sufficient product is in the store prior sales remain the same in newspapers. Actually given theft of the product due to non scanning sales will decrease when inventory is adjusted to reflect real sales not just used product.
• Improved visibility of product sales: As a part of SBT programs, suppliers receive sales by item by store by date. This information provides the supplier with an up-to-date view on the sales of product which is invaluable in sales forecasting and inventory management. However this is only if the employees actually scan the items. Unscrupulous employees have been known to take steal consigner items for their own use, give them away, or even charge and keep; doing so can be thought to hurt their employer vendor's bottom line less that stealing vendor owned product. In addition, management could sell without scanning thereby realizing the revenue but with no cost therefore the entire sale goes directly to profit on the bottom line, but doing so is embezzlement and can result in serious legal action and broken vendor relationships which dwarf the petty increase in revenue at the time of theft.
• Reduced cost of inventory: In the supply chain for supplier-merchandized product, retailers will experience a reduction in cost of inventory. With SBT, product deliveries are based on store inventory of individual items. There is a dramatic reduction in product held in the supply chain.
• Reduction in non-sellable product: Suppliers use SBT to lower the costs associated with non-sellable products. SBT provides greater visibility into scan-sales data, allowing suppliers to better understand the demand chain so that they can anticipate and reduce obsolescence and improve overall profitability.
• Reduced time to market: SBT allows suppliers to put new products into retail outlets at no risk to the retailer, since the supplier continues to own the inventory until it is scanned at the point of sale. This allows the supplier to determine new item performance and adjust selection before wide-scale rollout. The result is increased selection of timely products which results in a better shopping experience for the consumer and increased sales for both the retailer and supplier because the "expert" on product, the supplier, who is in charge of inventory selection. On average, the time to roll out new CPG product is four weeks. Introducing new product with the “advanced” item synchronization business processes and the elimination of the item approval process inherent in scan-based trading reduces the time by at least one half.
• Reduced cost for sales staff to service retailers: By using the coordinated “bi-directional item information synchronization approach" inherent in SBT, suppliers have reported a 7% to 13% reduction in sales force time spent communicating basic item information to customers, following up, resolving queries.

• Increased sales: Typically, the increase was driven by the supplier having more time in the store to merchandise its product, fill holes, and maintain plan-o-gram integrity. In addition, several retailers mentioned suppliers were able to make an additional stop at each store during the week to merchandise products and prevent out-of-stocks. Salmon and Associates reported that "a grocery retailer's sales increased in every product category it tested — from bread to ice to magazines. Sales increases ranged from 1% to 5%, based on product category". Schnuck Markets reported a 4% increase in sales for its SBT pilot.
• Reduced invoice/order processing costs: Retailers have reported that the cost to process SBT suppliers is much less than "normal" suppliers as items, price, promotions, and allowance disputes are greatly reduced by pre-set agreements and the use of EDI to synchronize item information between suppliers and retailers. Schnuck Markets reported a nearly 70% reduction in invoice deductions with time spent resolving item and price discrepancies cut in half. At an average cost of $70.00 per disputed invoice, the savings are substantial.
• Lowered cost of inventory: As SBT changes inventory ownership to the supplier, the retailer experiences a reduction in retailer-owned inventory.
• Improved financial metrics: Once inventory levels were reduced, all financial metrics that incorporate inventory levels showed improvement: working capital can be reduced as much as 15%, RONA increased as much 4%, and the quick ratio increased as much as 7%.
• Reduced stock outages: SBT forces the supplier to manage and merchandize its products to ensure that the right product is on the shelf at the right time or the supplier will see a loss of revenue. This provides a powerful incentive to reduce stock outages. As an example, during its SBT pilot, Rite-Aid, realized a 32% decrease in out-of-stocks.

  Test

Application to direct-store-delivered items

Sales synchronization

Item synchronization

• POS item descriptions
• Long form item descriptions
• Unit Cost Price
• Retail Cost
• Supplier Classification codes
• Logistics information