CHICAGO -- As several retailers prepare to embark on scan-based trading initiatives later this month, retailers and manufacturers already involved in scan-based trading say they have only scratched the surface in leveraging the benefits.
"We see huge potential in scan-based trading," Duncan C. McNaughton, director of grocery procurement for H.E. Butt Grocery Co., San Antonio, told an audience at the Food Marketing Institute's 1999 Supermarket Industry Convention and Educational Exposition here this month.
"It has a tremendous impact at what happens at the back door, as well as down the entire supply chain," he said. H-E-B has already reduced inventory by $25 million with the implementation of scan-based trading, according to Douglas C. Adams, vice president of Prime Consulting Group, Bannockburn, Ill., another panelist in the session titled "Breakthrough in Replenishment Practices."
"The benefits can only multiply as scan-based trading becomes more prevalent," McNaughton said. While retailers and manufacturers can realize huge supply-chain efficiencies with SBT, industry observers say the challenge of synchronizing retailer and manufacturer data has been a stumbling block to wider acceptance of SBT, in which the manufacturer maintains ownership of the inventory until it is scanned at the point-of-sale.
Two retailers -- one an independent with less than 20 stores -- are expected to begin work later this month on scan-based trading programs in which they will exchange data with manufacturers through an independent third party, it was announced at the show. This move is expected to reduce the problems associated with exchanging data.
"We see this as an opportunity to get retailers at all levels involved and move these programs forward," said Prime Consulting's Adams. Prime Consulting is involved as a consultant on the project. While Adams declined to name the retailers involved, Andronico's Market, an Albany, N.Y.-based independent, has confirmed participation in the program (SN, May 3, 1999).
The participants in this phase of the SBT initiative, which will include two retailers and approximately a dozen manufacturers, will be announced shortly, Adams said. ViaLink Co., Edmond, Okla., will provide the common communications network.
Adams noted that the other dozen or so retailers currently participating in SBT programs in which they directly exchange data with manufacturers are already seeing dramatic results.
"They have gotten shrink down to a half to 1%," Adams said. "But the big surprise has been a 3% increase in overall sales." This sales increase can be attributed to a number of factors, including the ability to free staff from having to check in stock as it arrives at the store and fewer out-of-stock situations.
H-E-B inventory-reduction results are not unattainable by other chains, Adams said. "For every 100 stores in a large chain that does scan-based trading with half of their direct store delivery, we estimated a $7 million increase in profit and a $15 million reduction in inventory per year," he said.
SBT also streamlines the delivery process, Adams noted. "Take the number of manufacturers, times the number of retailers, times the number of deliveries per store and the number of stores which you are no longer checking in, and that becomes a huge savings," he said. For these programs to be successful, there has to be a mechanism in place to exchange data on a daily basis, Adams said. "It has to be accurate, complete and done daily," he noted.
H-E-B's McNaughton also noted that it is important to involve staff beyond the area of category management for SBT to be successful. "Category managers are not always in the best position to see the implications across the entire supply chain," he noted.