Digitalization-based commerce is often seen as negative for distributors, but Kent Godwin discusses here how distributors can use it to their advantage. Moving to a scan-based business model may not seem like an ideal situation from a distributor`s perspective. However, by managing SBT with strategic efficiency and continuous improvement in mind, the opportunities that come up are endless. The key is to integrate data from both ends of the process and analyze it against important benchmarks for the distributor. By leveraging this information and integrating it into their strategy, retailers can get the most out of digitalization-based commerce – and more money. Scan-based trading (SBT) is often seen as a process exclusively for large, big-box retailers. This business model transfers the relationship with suppliers from purchased inventory to Supplier Managed Inventory (VMI), with cash register analytics data serving as the distributor`s payment channel for goods. The data collected from the transactions is then delivered to the distributor in the form of a receipt. Digitization-based trading (SBT) is the process by which suppliers retain ownership of inventory in retailers` warehouses or stores until items are scanned at the point of sale. Digitization-based trading is based on the ability to transmit sales information from the retailer to the supplier.
Sales information is used by both parties to financially process sales and to inform the supplier of sales by location. This information is crucial for suppliers to plan production, sales and marketing activities. The process is simply for the retailer to send daily sales to its SBT suppliers of items that are scanned at the point of sale per store for each item that an SBT supplier sells in an EDI product activity data document (852) formatted by the retailer`s EDI software and submitted to the supplier. Product activity data is primarily used by the supplier to support the inventory replenishment program, to provide inputs for sales analysis and forecasting systems, and to calculate the total dollar volume per store for billing. The best solution to develop a trading contract based on successful analysis is to use an SBT solution that provides advanced exception reports. „When traders are exposed to risk, they respond by reducing risk,“ Professor Bloom wrote. In addition to increasing the price for the retailer, the most common way to mitigate risk is to reduce the supply to get a sale. By striving to sell, a distributor solves the voting challenge of reversing scan sales in the „less returns less returns equal revenues“ format of its route accounting software. The reason is simple: the turnover almost always corresponds to the delivery, because the returns are zero.
Traditionally, digitization-based commerce programs have used electronic data exchange solutions as a key element to synchronize information on store locations (organizational structure 816), items (price/sales catalog 832), daily sales (product activity data 852), receipts (receive advice 861), settlements (invoice 810) and payments (remittance notice 820) between a retailer and its digitalized retail suppliers. Several studies document positive results and increased sales after the implementation of digitalization-based trade agreements. This is mainly due to the fact that the supplier gets full control over the inventory management, especially the ordering and fulfillment process. However, most suppliers also experience significant pressure on their cash flow as they take back their inventory at the beginning of an analysis-based trading contract. Although they generate sales, they are unable to capture real revenue while buying back their retailer`s inventory. Retailers can help reduce this burden (and improve SBT acceptance) by being flexible with redemption terms. Retailers open to multi-year buybacks will be much more successful with the introduction of SBT than a retailer expecting an immediate buyback of 100% of inventory, often worth millions or tens of millions of dollars. We know the challenges because TrueCommerce Datalliance has been a pioneer and leader in this trend.
If you are a supplier or retailer exploring digitalization-based commerce, please contact us – let`s talk about it! Efficient and accurate inventory management is in the best interest of both trading partners, and choosing the right solution provider can make all the difference for a digitalization-based trading contract. Traditionally, retailers have always been more concerned about what consumers buy in their stores, while suppliers are more concerned about selling suitcases and products to their retailers. When suppliers agree to participate in a commercial agreement based on digitization, they are paid according to what is sold in the registry. This aligns their interests with those of the retailer, who can put more emphasis on the collaborative growth of their joint venture. Overall, analysis-based trading helps make inventory control more accurate and increase sales – so what can prevent successful introduction? Read on to discover the five ways to overcome the pitfalls and take advantage of new analysis-based trade deals. .
