Top Trends Driving Retailer Success with Scan-Based Trading in 2005

Increasing focus on the consumer, maturing collaboration among drivers identified by Prescient Applied Intelligence

Increasing focus on the consumer, maturing collaboration among drivers identified by Prescient Applied Intelligence

West Chester, PA  March 17, 2005  Five key trends will drive retail success with scan-based trading (SBT) in 2005, enabling adopters to see significant cost savings and increased sales opportunities, according to an announcement this week from Prescient Applied Intelligence, a provider of supply chain and commerce solutions for retailers and suppliers.

SBT is the process whereby suppliers maintain ownership of inventory within retailers' warehouses or stores until items are scanned at the point of sale. Retailers that have adopted SBT are experiencing increased sales up to 10 percent, reduced inventory by 10 to 30 percent and significantly reduced back-room hours and payroll costs, according to research by Kurt Salmon Associates.

Suppliers who have adopted SBT have seen up to a 5 percent increase in sales, improved inventory visibility and reduced check-in time, the research found.

Since the 1999 GMA Direct Store Delivery (DSD) Committee Pilot, interest in SBT has grown and adoption has become more widespread. In 2004 alone Prescient saw a 237 percent increase in scan sales invoicing. According to a recent report on IT spending in the retail sector, SBT was one of the largest supply chain investment areas for retailers in 2004, with 12.7 percent reporting SBT spending.

As the retail market has become increasingly competitive, SBT presents one way of going head-to-head with mega-retailers, according to Prescient. "It frees up working capital, allowing retailers to invest in activities that ultimately benefit the consumer, such as product differentiation, better merchandizing and an improved store experience," the provider said in announcing key trends in this space.

Prescient said it has identified the following trends that will shape the SBT industry in 2005:

  • Increasing Focus on the Consumer: Retailers are recognizing that SBT is not the end, but rather the means to an end, with the ultimate goal of focusing on consumer take-away. Retailers are determining their strategic objectives up front and structuring programs that suppliers can support. For example, retailers who want to reduce assets and operating costs through SBT will have more resources to invest in a better customer experience.

  • Collaboration Is Coming of Age: The greatest competitive advantage often emerges from true collaboration among trading partners. Retailers and suppliers are agreeing on details like item, price, promotion and shrink at the onset of an SBT relationship. Successful SBT systems are utilizing advanced commerce platforms that align trading partners and increase supply chain efficiencies.

  • The Growing Demand-Driven Environment: As the supply chain market evolves, retailers and suppliers are moving toward a demand-driven supply chain that brings partners closer together to collaborate on supply and demand. SBT is an ideal solution for trading partners to integrate into their existing supply chain systems to promote a consumer-centric environment.

  • Supplier Adoption Is Critical: Retailers are demonstrating to suppliers that SBT results in increased sales, inventory reduction, and fewer deductions and invoice discrepancies. In addition, creativity is key in encouraging supplier adoption. When one retailer asked its suppliers to participate in its SBT program, it agreed to take responsibility for shrink.

  • Expansion beyond Direct Store Delivery: Once primarily used for direct story delivery, forward-thinking retailers are expanding SBT to the warehouse. This is where the largest amount of inventory sits for both the retailer and supplier and, therefore, where the largest opportunity exists for reducing the costs associated with inventory.
Prescient provides solutions for retailers and suppliers intended to translate consumer insight into better execution at the store shelf by capturing scan-sales data, improving forecast accuracy and increasing supply chain efficiencies.

Additional Articles of Interest

The focus in the retail sector has shifted from managing the movement of goods to managing the information about goods. Read more in "Ramping Up the Retail Supply Chain," in the February/March 2005 issue of Supply & Demand Chain Executive.