Scan-based trading (SBT) is rapidly catching on among retailers and suppliers because it reinforces the age-old truism that the consumer drives the supply chain.
SBT represents a potentially radical supply-chain shift for the retail industry, said industry observers. It allows products to remain under the control of the supplier until they are scanned in at the checkout counter.
Underlying this potential overhaul is the growing role of the ASP, which can provide a hosted repository link between retailer and supplier. ASPs can offer daily and sometimes hourly scanned-in purchasing data.
SBT promises to make inventory control more accurate and boost sales, industry observers said.
"It will dramatically increase retailers' cash flow," said Erin Harcourt, director of industry affairs at Grocery Manufacturers of America (GMA).
SBT can also boost retailers' sales by as much as 3.9 per cent and suppliers' sales by as much as 5.2 per cent, according to a recent study done by GMA, which surveyed retailers and suppliers involved in SBT pilot projects.
Because scanned data is a more accurate measurement of demand, it can be a powerful order management and forecasting tool. "It helps us write a better order based on sales history rather than delivery history," said John Shreve, manager of SBT development at Dreyer's Grand Ice Cream.
For instance, food supplier Frito-Lay uses hourly SBT data to learn the buying patterns of shoppers at Schnuck Markets, a chain of 91 supermarkets in Missouri, Indiana, and Illinois, said Bob Drury, senior vice president of logistics, manufacturing, and IT for the chain. The point-of-sales information helped Frito-Lay find "new marketing opportunities," Drury said.
Armed with this new capability, suppliers still have had to adjust to a new point of income for themselves and retailers.
"Our point used to be the back door. Now, we both have the same point of income and a mutual interest in getting that product through the register," said Russ Daniels, logistics project manager at Tony's Pizza, a US national supplier of frozen pizza under various brand names.
The IT points of contact are also minimized through the widespread use of an ASP to sidestep significant on-site investments in IT.
ASP supplier The viaLink Co., for example, provides the connectivity to map systems among trading partners. The vendor also offers applications to track daily movements of products, promotions, invoices, and missing inventory. But the real benefit of an ASP is its role as the keeper of the data, Dreyer's Shreve said.
"In SBT there has to be a price of record," Shreve said. "Otherwise, you would start to see disagreements, with each side claiming they didn't get the message about the price change."
To provide conformity, all scanned data is sent to an ASP such as viaLink, which serves as the central repository.
"We get a file from the retailer ... with that day's sales by store and by product, and that is what triggers the [payment] calculation," said Betsy Hill, director of marketing at viaLink. "That's what generates the scanned trading invoice, the price of record in our database," Hill said.
But the IT benefits of SBT alone do not assure increased profits, said Daniels, of Tony's Pizza.
"There has to be trust between the two trading partners," Daniels said. "Historically, retailers and manufacturers haven't trusted one another. I can talk to the vice president of operations at the retailer about what the data indicates, but that message has to be carried out down through both companies. Trust gets built up on metrics."
Although SBT may not replace standard retail forecasting practices for supply-chain efficiency, all parties agree that it gets businesses closer to customer buying patterns.
The recent GMA study was based on DSD (direct store delivery) suppliers who sell bread, ice cream, and other perishable products, sidestepping a two-tier distribution system.
The DSD suppliers say they also hope to reap benefits from SBT through improved logistics planning, according to the survey. The average time that both retailer and supplier spend to check in a single delivery is between 15 minutes and 20 minutes. Prior to SBT, the retailer had to have a receiver at the loading dock and the supplier had to wait in a long line until the delivery was completed.
Now suppliers can come and go when they want because SBT allows the retailer to shift the responsibility for knowing what was delivered and when to the supplier.
Dreyer's Shreve said that suppliers no longer have to adhere to a delivery schedule created by the retailer because of SBT. Suppliers know when the shelves are empty and can make deliveries on an as-needed basis, he said.
Dreyer's can make better use of its most expensive asset, its fleet of $100,000 refrigerated delivery trucks. "Sometimes we can use the same truck twice in one day," Shreve said.
Scanning the alternatives
Suppliers and retailers that do not want to move to SBT (scan-based trading), have alternatives.
Taking a step in this direction, Associated Food Stores (AFS), a wholesale distributor for the grocery industry, signed an agreement earlier this month with WhereNet, a provider of microchips with wireless capabilities, dubbed tags.
Using WhereNet tags for storing and sending location and product description information, AFS can track, locate, and monitor the contents of every food product in its 1-square-mile distribution center.
Using the tags, AFS will now know exactly when trucks and trailers arrive, where they are located in the center, and what the contents are of each delivery, AFS officials said.
The next step will be to deploy the technology to the store level with tags placed on the pallets rather than in the trucks.
Working with WhereNet, AFS will place antennas on the roof of each customer store. A delivery triggers an automatic transaction between the supplier and store.
"Check-in becomes much quicker," said Tom Turner, senior vice president at WhereNet. "It reduces the non-value-added work done by receiving personnel. Error-proofing is greatly improved."