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Consignment Stock /Scan Based Trading – Why, Who, and How

October 4, 2019

Consignment Stock /Scan Based Trading – Why, Who, and How

The omnichannel explosion has created enormous pressure on retailers to reduce inventory and cut carrying costs, while still offering high in-stock levels and product variety. Increasing numbers of retailers are consequently turning to consignment stock, also known as scan based trading, to stay competitive.

But what is it? And, how does it work for retailers and suppliers?

The traditional inventory stocking method for retailers is purchasing inventory from suppliers. Retailers then recoup their initial outlay by selling the goods to consumers.

Figure 1.

Figure 1

Unlike traditional retail, inventory managed by scan-based trading is owned by the supplier until the point at which it is sold to the consumer.

Figure 2.

Figure 2

Point-of-sale data (e.g., dates, days of the week, time ranges) is collected by the retailer and transmitted to the appropriate supplier.

Figure 3.

Figure 3

Using the point-of-sale data, the supplier generates an invoice and sends it to the retailer. If a collaborative replenishment or vendor managed inventory model is deployed, suppliers can also utilise this sales data to replenish stock, ensuring optimal stock levels and market exposure. We will be covering this topic in more detail in a future blog post.

 

Benefits of Scan-based Trading

  • Retailers reduce financial risk by not purchasing inventory until it is sold to the consumer, enabling them to free up working capital. They also benefit from less risk of wastage and obsolete stock when dedicating shelf space to new, unproven products. 
  • Suppliers have more control of what products (sizes, colors, etc.) are stocked at retail locations. This also presents opportunities for targeted assortments for specific locations, thus enabling an increase in sales benefitting both the retailer and the supplier.
  • By combining point-of-sale data with sales promotions, suppliers can better identify consumer-purchase habits, thus enabling them to better market their products, which can in turn result in an increase in sales.
  • By working in this way with their major customers, the suppliers can strengthen their relationships, increase sales and improve the long term stability of their business.

The key to achieving these benefits is the ability to capture and synchronise the necessary data to all parties. TrueCommerce has many years of experience of managing business critical data flows and we have helped many retailers and suppliers take advantage of the benefits available from consignment stock and scan-based trading.

If you are a retailer who is considering scan-based trading, or a supplier who has been asked by your customers to manage inventory using scan based trading, please contact us to find out more information.