Many industry watchers believe that Scan Based Trading (SBT) hasn't lived up to expectations yet. The level of adoption of SBT, in particular by the largest CPG companies, has lagged. Why is that?
Having worked in the SBT space since 2005, we believe that slow adoption of SBT is owed to 4 key reasons, all of which a program managed by iControl helps to alleviate.
Lack of transparency historically
We believe the retailer sets the tone of the relationship between suppliers and retailers. For the most part, retailers have not conditioned suppliers to expect a transparent relationship when it comes to goals, objectives, KPI, and outcomes. The relationship between most merchandising teams and suppliers is too often competitive instead of collaborative. iControl is an advocate for greater transparency, and our software suite provides ample opportunities for the parties to collaborate instead of compete.
Retailer not offering or presenting clear “return value” in exchange for participation
Retailers have not historically shined a bright enough light on the ways SBT can directly benefit suppliers – from major labor savings on check-in/check out, to diminishing pre-selling activities, to the benefits of automated ordering, to the reduction in invoice reconciliation, to the ability to promote more thoughtfully, to potential to pick up space. The fact is that the ROI on SBT for suppliers is tremendous. iControl has the tools and track record to help retailers show their suppliers the direct benefits of SBT to their bottom lines.
Deep reservations about retailer’s commitment to data integrity
This one is an often unspoken truth: Between cost cutting that results in smaller pricebook departments and loss of institutional knowledge, suppliers simply don’t trust retailers to do a great job ensuring a pricebook and item file that is in pristine condition. While both parties are equally responsible for the pricebook and item file, in a non-SBT environment, the costs and benefits of pricebook imperfections is shared by the parties. However, in an SBT setting, the supplier bears the brunt of the pain. Reassuring suppliers that data integrity is a matter of unrivaled importance is essential to gaining buy-in from suppliers. There is no better way to show that commitment than to hire iControl to be the diligent guardian of data integrity – not just on the front end of a program, but every single day. There’s a reason companies hire auditors! Even when the relationship between parties is cordial, it is unreasonable for one side of a trading transaction to demand that the other simply trust it. For a successful SBT program to develop, the idiom “trust but verify” is not only the right way forward, it’s the only way forward.
Anxieties about shrink sharing and settlement process
Shrink sharing is easy in theory, but extremely hard in practice. Capturing the data down to the item level is essential to sharing shrink on SBT, but most retailers capture shrink at the category level. Even those that are capable of settling shrink at the item level have a difficult time settling at the correct cost, since most items have varying costs and promotions during a given period, all of which are factors that impact the financial end of a shrink-sharing arrangement. iControl provides its clients with the most comprehensive shrink-settlement tool ever created, enabling partners to settle shrink by item, by store, by division, by range of dates, and get all the pieces exactly right: the correct cost, the correct promotional considerations, the relevant inventory counts.
Not a reason… but often cited
Interestingly, one commonly cited reason why SBT has been slow to develop is the cost of buying back inventory. However, it is mostly a red herring. With payment terms being what they are today few suppliers actually benefit from payment before their items sell, and operating costs for suppliers nowadays are so high that SBT benefits can outweigh buyback costs rapidly and easily.