Replenishment is Key to Effective Scan-Based Trading
Driven by retailers who love low-risk investments, scan-based trading (SBT) is quickly becoming a normal occurrence among supply chains. While not every supplier is a fan of the practice, SBT is growing across several retailers and channels and suppliers need to get on board, or risk falling behind. Moreover, if they want to succeed with this model, there is one thing they can’t go without: a responsive SBT retail replenishment solution.
What is Scan-Based Trading?
SBT has been around since the year 2000, when the Grocery Manufacturers of America first piloted a program for food and beverage manufacturers and saw massive success. The program introduced a new model for product sales. While in traditional supply chains, retailers purchase products from suppliers before stocking the shelves, during SBT, the supplier maintains ownership of the product until the final sale to the consumer. Only when the consumer scans the product at the checkout counter does the retailer pay the supplier.
The benefits of SBT might seem one-sided at first. After all, the retailer is essentially receiving products for “free” and doesn’t have to pay for anything that doesn’t sell—making it easy to stock a wide diversity of items for customers, without taking the risk of an upfront investment. But, a closer look reveals benefits for the suppliers as well. For example, suppliers of a new product can get the item on shelves in stores that otherwise wouldn’t take the risk. As sales occur, they’re able to respond immediately with store-by-store replenishment orders that maintain the retail shelf presence while driving out-of-stocks down and increasing sales.
How Suppliers Do SBT Today
While the concept of SBT hasn’t changed much since it was introduced two decades ago, the technology that enables it has evolved significantly. Whereas suppliers used to track sales and inventory with cumbersome and error-ridden excel worksheets and written notes, systems like TrueCommerce Datalliance are now equipped to give suppliers more control and visibility than ever before. At the core of today’s most successful SBT strategies are three elements:
Reporting allows the supplier to gain valuable insights into product movement across a broad range of locations. Programs such as TrueCommerce Datalliance create sales reports, which show the number of products sold at the store level. This kind of granular visibility means the supplier knows exactly which locations are moving their product the best, respond appropriately to refill shelves and can make strategic stocking decisions based on sales performance.
Integration connects disparate systems, so that data can be gathered and relayed to enable workflow automation. For example, when sales in a store occur, the data is automatically sent from the store’s POS to TrueCommerce Datalliance, creating store orders that transfer to your ERP, which then produces an appropriate invoice. The whole process takes mere minutes and ensures data accuracy across systems—a far cry from the labor-intensive and typo-prone rekeying still present in many supply chains.
Replenishment ensures the right individual store orders are generated to meet the shelf space targets as agreed between the retailer and supplier rather than relying on reactive retailer purchase orders. Robust forecasting and replenishment features identify demand swings immediately and continuously synchronize consumer demand and shelf availability to maximize sales across slow, medium and fast selling items
The Need for Replenishment in SBT
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 be focusing on product movement for every item. The supplier, on the other hand, is risking the full measure of those products in the hopes that they sell. Therefore, it’s just good business sense to have the more invested party control replenishment.
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 to stay ahead of stock-outs; it’s also the linchpin that maximizes your sales.
Traditional replenishment works when retailers respond to low inventory or stock-outs by reordering products. This highly reactive process doesn’t prepare for spikes in demand, and often begins too late to account for lead times. The resultant delays lead to empty shelves, which can result in buyer disappointment and even the loss of customers, who may simply choose another product that’s in stock.
The collaborative replenishment model enabled by SBT gives suppliers the opportunity to address stocking needs proactively. Sales and inventory data from the retailer make it easy to see which stores are selling product faster, so you can adjust replenishment schedules. At the same time, forecasting helps predict how products will sell in the future, so you can get ahead of lead times. Plus, you can make sure not to over-order with replenishment logic that respects shelf planogram constraints from TrueCommerce Datalliance.
Product Investment Protection
As the supplier in SBT, you are fully invested in the movement of product off retail shelves, because consumer purchasing is the only way you’ll get paid by the retailer. Risk management therefore becomes a top priority, since a lack of sales not only means a loss of profit, but also the loss of the money it took to make and distribute the merchandise.
Again, replenishment offers an opportunity. With proactive replenishment, you’re able to identify and take advantage of areas where your products sell well. But, just as importantly, you’re also able to see where your products are sitting idle. By making decisions to reduce your investment where product is moving slowly, and increase your investment where demand is high, you can effectively leverage the advantages of SBT while minimizing risk.
Reaping the Benefits of SBT
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 Datalliance, you’ll be able to do it all with the push of a button.