Driven by retailers who love low-risk investments, scan-based trading (SBT) is quickly becoming a normal occurrence among supply chains. Retailers face the ongoing challenge of balancing carrying costs with unsold inventory while balancing the optimal amount of stock to keep up with omnichannel demand. An innovative way to meet this challenge is with Scan-Based Trading (SBT), a widely embraced model that harmonizes supply and demand by merging them at the retailer’s point of sale.
What is Scan-Based Trading?
Scan-based trading is a business model that revolutionizes the traditional supply chain dynamics between suppliers and retailers, particularly in the realm of consumer-packaged goods (CPG). Under this model, the supplier retains ownership of the product until it is scanned at the point of sale in the retail store.
The retailer is essentially receiving products for “free” and doesn’t have to pay for anything that doesn’t sell. That makes it easy to stock a wide diversity of items for customers, with minimal upfront risk. But, a closer look reveals benefits for the suppliers as well. Suppliers of a new product can get the item on shelves in alternate stores that can carry the risk. As sales occur, they can respond immediately with store-by-store replenishment orders. That maintains retail shelf presence and increases sales.
How Does SBT Work?
SBT eliminates the need for retailers to wait for sales to recover inventory costs and turn a profit. Unlike conventional retail approaches where the retailer is on the hook for inventory management, SBT grants suppliers ownership of inventory management. In exchange, the retailer grants visibility into point-of-sale data such as time ranges, dates, and days of the week to the appropriate supplier.
The supplier generates an invoice using the transmitted purchase details and sends it to the retailer. SBT creates a consignment selling model where suppliers maintain ownership of inventory until the items are scanned and purchased, automating product transfer and accelerating payment distribution.
The Need for Replenishment in Scan-Based Trading
Remember, with SBT, the supplier owns their products until the final consumer sale. Retailers may have hundreds or even thousands of SBT products on their shelves, and since they haven’t purchased any of the merchandise upfront, they are unlikely to focus on product movement for every item. On the other hand, the supplier is risking the full measure of those products in the hopes that they sell. Therefore, having the more invested party control replenishment is just good business sense. While reporting and integration are key in an SBT strategy, replenishment takes the concept to the next level by letting the supplier call the shots on stocking. In doing so, replenishment not only helps you stay ahead of stock-outs but it’s also the linchpin that maximizes your sales.
- Just In Time (JIT) Replenishment: Goods arrive exactly when needed, reducing carrying costs.
- Bulk Shipments: Consolidated orders for economies of scale and reduced transportation costs.
- Continuous Replenishment: Real-time data exchange for steady product availability and reduced bullwhip effect.
- Demand-Driven Replenishment (DDR): Aligning inventory with real-time demand signals for agility in volatile markets.
- Advanced Replenishment Solutions: Item-level forecasting and stratification for nuanced replenishment strategies.
- Cross-Docking: Reduced storage and handling time, especially valuable for perishable goods.
- Consignment Inventory: Pay-for-goods-as-sold model, lowering financial risks for retailers.
- Drop Shipping: Direct, supplier-fulfilled shipping, reducing carrying and operational costs for retailers.
Benefits of Scan-Based Trading
The benefits of SBT for retailers may be obvious, but the advantages for suppliers are perhaps more significant. Driven by supplier-owned replenishment, SBT enables you to make strategic decisions, drive workflows, and put your products in the perfect position to sell. And, when paired with technology like TrueCommerce, you’ll be able to do it all with the push of a button. More benefits include:
- Reduced stockouts and overstocks: Real-time sales data allows for better inventory management, reducing the likelihood of stockouts and overstocks.
- Enhanced supplier-retailer relationships: Shared responsibility and data transparency foster a collaborative relationship between suppliers and retailers.
- Lower holding costs: Suppliers own the inventory until it’s sold, reducing holding costs for retailers.
- Improved inventory turnover: Accurate demand forecasting can lead to faster inventory turnover and healthier cash flow.
- Better on-shelf availability: Real-time replenishment based on actual sales data ensures products are available when and where customers want them.
- Decreased administrative costs: Automated invoicing and streamlined administrative processes lead to reduced operational costs.
- Enhanced demand forecasting: Access to real-time sales data allows for more accurate demand forecasting and better decision-making.
- Reduced markdowns and discounts: Better inventory management results in fewer forced markdowns and discounts.
- Improved data accuracy and insights: Accurate sales and inventory data enable actionable insights for better business decisions.
- Simplified reconciliation and dispute resolution: Clear data sharing can simplify reconciliation and expedite dispute resolution.
