The Advantages of Scan-Based Trading for Your DSD Supply Chain

Scan-based trading (SBT) offers many advantages for retailers –and the entire DSD supply chain. 

With SBT, your store benefits from reduced inventory costs, elimination or reduction in shrink, enhanced operational efficiencies, decreased merchandising time, and a boost in sales. All of this, as well as better collaboration with participating DSD suppliers, is possible by implementing a scan-based trading program.  

What is scan-based trading?

Scan-based trading, or SBT, is a widely-used payment solution that aligns supply and demand at the retailer’s point of sale (POS) –providing substantial operational savings to retailers and distributors alike.

As a business model, SBT is a form of consignment trading where suppliers/distributors maintain ownership of the physical inventory until items are scanned and sold at the POS. This is the moment when inventory ownership automatically passes from the supplier/distributor to the retailer. Vendors are then paid based on what has sold (via scan data) at the register.

Because the supplier/distributor owns the inventory and delivers to retail locations, they maintain greater control over ordering, product placement and ongoing inventory levels.  

The advantages of scan-based trading for retailers

Scan-based trading offers significant advantages to retailers. These advantages are summed up in three main categories: 

1. Reduce inventory risk

Unlike other delivery methods, retailers do not pay manufacturers, suppliers or distributors until products are scanned and sold to consumers. Instead of paying upfront and hoping your inventory projections meet demand, you pay based on customer interest.

2. Foster a positive buyer-seller relationship

With inventory carrying costs eliminated, and shrink liability negotiated, this business model changes the buyer-seller relationship dramatically. On the surface, that may appear as a negative to a distributor, but the opposite is true. 

Retailers who have less risk specific to inventory and shrink are much more willing to experiment, allowing distributors to roll out new products in retail outlets and expand the number of locations where their product is available for sale.

3. Get clear visibility into performance 

Because scan-based trading also includes visibility into POS data at the store and item level in real-time, suppliers get a clearer view of their own promotional performance. The result is increased responsiveness and smarter product placement and promotions, which leads to a better shopping experience for the consumer, and increased sales for retailers and suppliers. 

An efficient scan-based trading program increases visibility with integrated inventory management –where both the supplier or distributor and the retailer can access and share transactional and inventory data on a single platform. 

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The advantages of scan-based trading for suppliers and distributors

SBT not only benefits retailers, but suppliers and distributors as well.

1. Become a preferred vendor

Suppliers and distributors benefit from scan-based trading by becoming a preferred vendor. Once preferred, the supplier- and distributor-retailer relationship can evolve into a collaborative business partnership, as both parties are working to achieve shared objectives.

Because partners agree on details like item, price, promotion, and shrink at the onset of the scan-based trading relationship, suppliers and distributors are incentivized to service accounts better. Trading partners are no longer focused on billing/invoice issues, and discrepancies in those problems no longer exist.

2. Gain helpful insights

By combining sales and inventory data from retailers with their own internal records, suppliers and distributors have far greater insight into the causes of “revenue leakage”. 

According to Industrial Distribution, this new way of doing business allows distributors to, “take a deeper dive into derived insights and verify the data from the retailer. This ultimately gives them the ability to spot errors, reconcile inventory levels maintained at the retailer, and identify shrinkage issues.”

3. Operate more efficiently

Scan-based trading touches many areas of the supply chain. Since suppliers and distributors don’t have to meticulously check-in at every retail store, deliveries move faster and the cost of transportation is reduced. This leads to greater overall operational efficiency, and cost savings to distributors.

Scan-based trading with iControl

iControl’s Scan-Based Trading System can help you maximize the benefits of SBT.

We designed our systems to foster collaboration between key players in the supply chain through integrated, easy-to-use software that keeps your trading partners’ data secure and safe. And automates invoices and payments while making POS data available for operational insights. 

If you have any questions or would like to learn more about how iControl can help you transact more profitable business, contact us today.