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Scan-Based Trading

The Future of Scan-Based Trading: Improved Alignment

Learn how consignment point of sale software aligns the interests of retailers and suppliers in scan-based trading agreements.

Scan-based trading, or SBT, is a great inventory model born out of the need to drive operational efficiencies in retail trading. The rise of omnichannel business has forced businesses to adopt scan-based trading to improve inventory management and cut carrying costs. This strategy has also been instrumental in helping retailers offer high in-stock levels and great product varieties while keeping costs low. As a result, major retail chains, including Target, Amazon, Kroger, and Costco, have managed to stay competitive by adopting scan-based trading.

The core benefit of scan-based trading is that it significantly lowers the retailer's financial risk as they do not purchase inventory until it is sold to the consumer. The retailer does not pay for products until they are sold, meaning that they bear no risk in allocating shelf space to new and unproven products.

Scan-based trading also greatly empowers the suppliers. It gives them the power to control which products to stock at specific retail locations based on their targeting and marketing strategies. In addition, suppliers can incorporate point-of-sale data from scan-based trading with their marketing strategies, such as product promotions and placement, to better learn customer purchase habits and improve their sales.

Challenges of Scan-Based Trading Inventory Models

SBT may be a viable way for brick and mortar retailers to manage their stock, but it has its share of challenges if done incorrectly.

In the traditional inventory models, the retailer bears responsibility for inventory shrinkage —or the loss of inventory through shoplifting, vendor fraud, employee theft, etc. In scan-based trading, the supplier will bear the losses resulting from shrinkage since the retailer does not buy the inventory until it is scanned and sold to the consumer. 

Although this type of relationship frees retailers from many of their normal risks and costs, they may also feel like they’re giving up visibility and control of their inventory to their supplier.  Giving this trust to their suppliers to make optimal strategy decisions can be difficult, meaning they still need a system to track their SBT processes. 

Another significant challenge to scan-based trading is the accuracy of scan data, which is used as the basis for payment. Therefore, it is critical that the retailer's point-of-sale systems (POS) are synchronized with the supplier's delivery system so that product codes and product details are accurately captured when the products are sold.

Finally, since the supplier bears the risk of products on the retailer's shelf, there is a chance that they may want to supply fewer products at a time to minimize these risks. Before they figure out consumer purchase habits, suppliers of popular foods and beverages, for instance, may want to limit the products they supply to mitigate risks of shrinkage. Unfortunately, this may often lead to sellout problems.

The retailer and supplier can minimize these downsides to scan-based trading by formulating a strategy to meet halfway. A consignment point of sale software can come in handy to align the interests of the supplier and retailer and greatly lower the risks of the former without hurting the interests of the latter.

How Consignment Point Of Sale Software Improves Scan-Based Trading Agreements

Consignment point of sale software achieves this in three main ways:

1. Provides Better Inventory Management Processes

The whole idea of consignment inventory has been revolutionary in the retail market. A consignment point of sale software takes this idea a step further by providing real-time inventory on items sold. The benefit of this strategy is that the retailer does not need to have cash or any ongoing carrying costs tied up on inventory on the store shelves.

The software enables the retailer to take charge of prices and product update details to ensure the customer gets accurate information. They also have the administrator privilege to add new products and update the inventory even before the supplier delivers the actual products.

Both the retailer and supplier will have access to the product dashboard on which they can quickly and conveniently track and manage deliveries and analyze sales in real-time. In addition, the consignment point of sale software makes accurate restocking possible. It also reduces the chances of sellouts by making it easy to accurately monitor a product as it moves down the UPC level.

2. Provides a Clear Real-time Picture of Cash Flow

With a consignment point of sale software, the supplier does not need to wait until the end of the day, week, or month for the retailer to compile their accounts to get a report of how a product performed. The software updates accounts and reconciles vendor accounts in a simple process immediately after a sale is made. It also generates invoices the moment a product is sold and even splits payments for the supplier and retailer at the point of sale.

The retailer can review sales records, approve payment disbursements, and evaluate moment-by-moment cash flow right on the consignment point of sale software dashboard. This feature makes it easier to identify anomalies such as under-deductions and over-payments to correct them immediately.

3. Improve Sales with Enhanced Shrink and Supply Chain Analytics

The biggest challenge forcing suppliers to shy away from scan-based trading is the shrinkage problem. The supplier bears the losses when inventory is lost to shoplifters, thieving employees, damage, or cashier errors. Unfortunately, it has become a new normal for suppliers to accept such losses as the cost of doing business.

A consignment point of sale software mitigates the shrinkage problem by providing accurate real-time data to both the retailer and the supplier. This offers clearer visibility on all potential causes of shrinkage for immediate action. The software takes the guesswork out of calculations and provides the data to improve negotiations.

With real-time access to the point of sale data and in-depth supply chain analytics, suppliers can provide better forecasts and plan their products, and retailers can manage their inventory with greater ease. The software enables both parties to focus on business processes that really matter: sales trends and planning to accommodate future demand.

Step Into The Future With The Right Consignment Point Of Sale Software

Scan-based trading offers many more benefits to both retailers and suppliers than we have learned about here. A consignment point of sale software brings greater transparency and enables real-time management of SBT.

Still, the benefits a business can enjoy and the risks it must bear will largely depend on the quality of software used. The surest way to know how such a tool can help your business is to check it out and discover its features. Visit iControl to learn more about one of the most robust consignment point of sale software in the market and why it is the future of scan-based trading.

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