How Seamless It Can Be to Switch to Scan-Based Trading

Driven by retailers who prefer low-risk investment, scan-based trading (SBT) is gradually becoming a common practice in the food and beverage industry. Even so, not every supplier has embraced this practice—and while that may be the case, the explosive rate at which SBT is growing across numerous channels and retailers demands that suppliers embrace it or risk lagging behind. In this post, we'll walk you through what scan-based trading is and how easy it is to switch to it.

Let's dive in.

What is Scan-Based Trading (SBT)?

SBT is a  business model, and a form of consignment trading,  that helps retailers and trading partners drive operational efficiency by aligning supply and demand at the point of sale. It ensures that vendors retain ownership of physical inventory until the time that that particular product has been swiped at the checkout and sold. Upon the sale of the item, its ownership is passed on from the vendor to the retailer. 

With SBT, retailers can benefit from releasing cash tied to in-store inventory while eliminating stock-outs, since they are empowering their suppliers to implement their own inventory strategy with all their sales data. And when they eliminate their inventory costs, they're able to raise their profit margins and use their working capital elsewhere for the growth of their business. SBT also plays a crucial role in shrink reduction.

Meanwhile, their suppliers can also reduce time spent on inventory planning and forecasting with consignment inventory management software because the solution will show them real-time transactions and more accurate forecasting, always pointing them to their next move.

Achieving a Seamless Transition to a Scan-Based Trading Agreement

Despite the industry-wide adoption and acceptance of SBT, there are still several pitfalls that you can face when transitioning to the use of scan-based trading. Here is an outline of some of these challenges and how they can be remedied to achieve a smooth transition.

1. Retailers can Lose Visibility of Vital Supply Chain Data

Retailers accustomed to viewing their credit, orders, deliveries, and inventory counts at the store and UPC level might lose that visibility given that suppliers assume control over the inventories using their own technologies. The lack of transparency can affect the collaboration between these two partners. By utilizing a consignment inventory management software, supply chain data can be directly abbreviated from the supplier to be shared within a centralized pothole, allowing the retailer to maintain full visibility.

2. One-Size-Fits-All Scan-Based Trading Solutions are Unable to Maximize the Benefits of Data Sharing

For SBT to reach its true potential, it should be customizable for both suppliers and retailers. Expecting any of these parties to implement a non-customizable cookie-cutter solution will not work since it will limit the communication between them. Implementing an SBT agreement that can automate data exchange within a centralized collaborative enterprise portal can help maximize the benefit of data sharing between retailers and suppliers.

3. Supplier Cash Flow may be Strained

Whereas suppliers gaining complete control over inventory management may lead to a significant increase in their sales, most often than not, suppliers also experience a strain on their cash flow as they take back their inventory at the beginning of a scan-based trading agreement. Retailers can help improve SBT adoption and alleviate this strain by being flexible with the terms of the SBT rollout. Meanwhile, consignment inventory management software can help facilitate SBT rollouts by offering store authorizations on different dates (such as 10 stores this week, 15 next week), helping retailers and suppliers formulate a strategic plan for the future. 

4. Suppliers and Retailers' Priorities Shift when Implementing the SBT Agreement

Traditionally, suppliers are mainly concerned with selling products to their retailers, while retailers are most concerned with what products consumers purchase in their stores. When suppliers agree to enter into a scan-based trading agreement, they begin to receive payments based on what sells on the register. This aligns their interest with that of the retailer, which can bring forth more focus on growing their mutual business more collaboratively. 

Nonetheless, given that suppliers now own inventory, they might be inclined to understock with the hope of selling out. On the other hand, retailers would rather not sell out of a product and have to deal with disappointed customers. Consignment inventory management software creates transparency and accountability between both parties, so that retailers can feel confident knowing that their suppliers are using a strategy that aligns with their objectives.

Secure a smooth transition to SBT agreements with consignment inventory management software

The best solution to seamlessly switching to a scan-based trading agreement is to utilize cloud-based consignment inventory management software. Besides this solution being cost-friendly, easily updatable, and adaptable, it ensures that both retailers and suppliers have access to the same set of data. Contact us to learn more.