Scan-based trading

Scan-based trading (SBT) or Scan based trading is the process where suppliers maintain ownership of inventory within retailers' warehouses or stores until items are scanned at the point of sale.

Contents

History

Traditionally scan-based trading programs use Electronic Data Interchange solutions as the key component to synchronize information on store locations (Organizational Structure 816), items (Price/Sales Catalog 832), daily sales (Product Activity Data 852), receiving’s (Receiving Advice 861), billings (Invoice 810) and payments (Remittance Advice 820) between a retailer and its Scan Based Trading suppliers.

While at first it would seem that the benefits of scan-based trading are mainly derived from savings for the retailer, in fact, the scan-based trading supplier is usually the driver of the trading as they receive huge benefits. In the magazine industry alone, the full implementation of SBT has been estimated to provide operational savings to the retailers and suppliers of $220 million per year.[1] The benefits to the supplier to implement SBT include:

For retailers, the implementation of SBT has been seen as a goal as it saves money and improves customer satisfaction. The following is a list of benefits derived by retailers switching to SBT:

Sony Pictures Home Entertainment (SPHE) offers a DVD and Blu-Ray SBT program to select grocery and speciality retailers.[7] [8]

Test

The Grocery Manufacturers Association (GMA) ran a test of the concept in 2000 with Schnuck Markets in St. Louis, Missouri, and Andronico's Market of Berkeley, California and a dozen suppliers. Sales went up 3% to 4% for the retailers and between 2.5% and 5.2% for suppliers. Mispricing of stock items were decreased by 70%.

Application to direct-store-delivered items

Scan Based Trading is primarily applicable to products distributed through direct store delivery, commonly referred to as DSD. The most common application of scan-based trading to DSD products involves garden seeds, DVDs/Blu-ray Discs, newspapers and magazines. Nearly all newspapers and magazines are distributed to retailers by the DSD method of distribution. According to Elizabeth Poff's 2010 article,[9] "most major retailers in the U.S. - including CVS, Safeway, Kroger Ahold’s divisions, A&P and its subsidiaries, Hess, Barnes & Noble and Rite Aid - conduct their newspaper business using the SBT model." According to Poff "Most [retailers] rely on a third-party partner to provide oversight. iControl Systems USA, a Rockville, MD company headed by Tal and Sean Zlotnitsky, two brothers who formerly owned and operated large magazine & newspaper distributorships, is the leading third-party provider."

Sales Synchronization

Scan Based Trading is based on the ability to transmit sales information from the retailer to the supplier. Sales information is used to by both parties for financial settlement of sales and to inform the supplier of sales by location. This information is critical for suppliers to plan production, sales and marketing activities. The process is simply to have the retailer send daily sales to its SBT suppliers of items scanned at POS by store for each item an SBT supplier sells in an EDI Product Activity Data (852) document which is formatted by the retailers EDI software and transmitted to the supplier. The Product Activity data is primarily used by the supplier to support stock replenishment program, to provide input to sales analysis and forecasting systems and to calculate the total dollar volume by store for Invoicing.

Item Synchronization

Implementation of SBT is dependent on synchronization many pieces of information with the synchronization of item information between the supplier and the retailer being the most important. Typically a retailer will use the EDI Price/Sales Catalog (832) document to send and receive item information to/from its SBT suppliers to ensure item synchronization as without item synchronization, Scan Based Trading is not possible. The initial step it to have the retailer to export its item information to its SBT suppliers as an EDI Price/Sales Catalog (832). The outbound 832 provides details on what items the retailer had in its item database. It is critical that the SBT supplier review this item information as proper item synchronization is critical to the SBT business process. The next step is for the supplier to send back a detailed EDI Price/Sales Catalog (832) back to the retailer. The inbound 832 from the SBT suppliers contained information used by the retailer to identify/categorize/price item information to facilitate the SBT process. The information sent generally includes:

To aid in the ongoing synchronization of items, the SBT supplier must send the retailer any item changes (modifications, additions, deletions) as soon as possible to ensure that the retailer's item database is fully synchronized to the supplier’s item database. If there are any “issues” with item synchronization, they will be addressed prior to the implementation of any further EDI documents.

See also

References

  1. ^ 1999 – Mercer Management Consulting Study
  2. ^ a b c Kurt Salmon and Associates, Secrets to Developing a Successful Scan Based Trading Program, Fall 2004.
  3. ^ a b A.T. Kearney, Data Synchronization Proof of Concept: Case Studies from Leading Manufacturers and Retailers.
  4. ^ a b eCollaboration Standards – Benefiting from the EAN.UCC System
  5. ^ Cyclone Commerce - Case Study – Sara Lee Bakery Group
  6. ^ The Benefits of Scan Based Trading by Line 56 – April 4, 2005
  7. ^ "High Def Digest". http://feelthatbeat.com/worldnews/sony-posts-another-quarterly-decline/. 
  8. ^ "Park City Group". http://www.parkcitygroup.com/wp-content/uploads/CS_SBT_Sony.pdf. 
  9. ^ Elizabeth Poff, "Scan-Based-Trading’s Ascendance Changing the World of Magazine & Newspaper Distribution," iControl, May 24, 2010

External links