Replenishment Is Key to Effective Scan-Based Trading

person scanning a jelly jar

February 27, 2020

This content was updated on December 18th, 2023

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 was first tested and proven viable in 2000. 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. Retailers purchase products from suppliers in traditional supply chains before stocking the shelves. During SBT, the supplier maintains ownership of the product until the final sale to the consumer. The supplier receives payment from the retailer only upon the consumer scanning the product during checkout.

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 Suppliers Do Scan-Based Trading Today

Technology keeps businesses moving forward and finding ways to be more efficient. Suppliers used to track sales and inventory with inflated Excel worksheets and written notes. Systems like TrueCommerce Datalliance now give suppliers more control and visibility. At the core of today’s most successful SBT strategies are three elements:

  • Reporting: Suppliers gain valuable insights into product movement across various locations. Programs such as TrueCommerce Datalliance create sales reports showing 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, responds appropriately to refill shelves, and can make strategic stocking decisions based on sales performance.
  • Integration: Disparate systems connect for data collection. The collected data enables workflow automation. When sales occur, the data is automatically sent from the store’s POS to TrueCommerce Datalliance, creating store orders that transfer to your ERP and producing an appropriate invoice. The process takes mere minutes and ensures data accuracy across systems.
  • Replenishment: Accurate order generation and fulfillment keep shelves full. These include proactive targets agreed upon 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 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.

TrueCommerce provides numerous solutions related to replenishment needs:

  • 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.

Inventory Proactivity

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 choose another product in stock.

The collaborative replenishment model enabled by SBT allows suppliers to address stocking needs proactively. Sales and inventory data from the retailer make it easy to see which stores are selling products 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 ensure 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 products 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 can identify and take advantage of areas where your products sell well. But you can also see where your products are sitting idle. By making decisions to reduce your investment where the product is moving slowly and increase your investment where the demand is high, you can effectively leverage the advantages of SBT while minimizing risk.

Reaping the 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.

Scan-based trading is one of many advanced solutions that TrueCommerce offers to optimize your supply chain operations. By choosing TrueCommerce, you’re getting more than services — you’re starting a partnership aimed at fostering growth and efficiency within your business operations.

Reach Out to TrueCommerce for Your Scan-Based Trading Needs

With advanced scan-based trading support from TrueCommerce, you can take control of your inventory for better inventory turns, increased sales, and fewer returns. Harness the power of TrueCommerce’s advanced replenishment solutions to drive significant improvements in your supply chain performance. With a legacy of growth and efficiency, TrueCommerce is your partner in navigating today’s complex supply chain challenges. Reach out to explore a tailored solution for your business.

Stay ahead of the competition

Get expert supply chain insights delivered directly to your inbox weekly.