WHITE SULPHUR SPRINGS, W. Va. -- The early results are in from the latest round of scan-based trading pilots, and the initiative got an overwhelming vote of confidence from the retailers involved, Schnuck Markets, St. Louis, and Andronico's Market, Albany, Calif. The strongest endorsement: the two chains are expanding SBT even after the conclusion of the industry-sponsored tests.
According to a preliminary report presented at the Grocery Manufacturers of America Executive Conference here last month, SBT resulted in sales growth of almost 4% over control stores, shrink remained at acceptable levels and out-of-stocks were reduced, and retailers and suppliers saved time through the elimination of back-door check-ins. In addition, SBT provided the participants with a common view for inventory, scanner and delivery data, while giving suppliers better information on product movement at the store level.
Schnuck, which continues to use SBT in stores with Earthgrains Co., St. Louis, is expanding to all stores with two additional vendors, said Craig Schnuck, chairman and chief executive officer. "This is a win-win-win situation. Our customers win because of improved in-stock; our suppliers win through reduced operating costs and improved sales; and we win through reduced operating costs, reduced investment and improved sales," he said.
In May -- the pilot ended in March -- Andronico's added the remaining six of its 10 stores to complete its SBT relationship with Dreyer's Grand Ice Cream, Oakland, Calif. "It's a formula that works," said Mike Miller, director of information systems. "It belongs in the supply chain for both sides of the fence, the suppliers and the retailers," he said.
With SBT, direct store-delivery suppliers maintain ownership of their inventory until it actually moves across the point of sale, rather than up to the retailer's back door. H.E. Butt Grocery Co., San Antonio, ran an SBT pilot study for the GMA in 1997, and Wal-Mart Stores, Bentonville, Ark., is currently running its own SBT tests independently of the GMA.
Dallas-based viaLink Co. provided synchronization and SBT services for the 12 suppliers and two retailers participating in the pilots, which were conducted under the auspices of the DSD committee of the GMA, Washington. The Schnuck's and Andronico's pilots began in September 1999 with the objective of validating the benefits and requirements for item and price synchronization and SBT processes through a third-party intermediary provider. Suppliers in the program included Anheuser-Busch, Coors Brewing Co., Dean Foods Co., Dreyer's, Dr. Pepper/Seven Up Co., Earthgrains, Frito-Lay, Kraft Pizza Co., Miller Brewing Co., Nabisco Biscuit Co., Pepsi-Cola Co. and Tony's Pizza Co.
"The GMA study results confirm our belief that synchronization is the cornerstone of CPG- and grocery- industry e-commerce initiatives," said a source close to the tests. "SBT fundamentally changes the buying and selling relationship between trading partners through synchronizing supply and demand at the point of sale. Using SBT, the supplier owns the inventory up to the point of consumer purchase."
"The study results demonstrate the tremendous potential for profit improvement from synchronizing critical trading information between suppliers and retailers," said the source. "Beyond the demonstrated cost savings, synchronized and accurate trading data results in less time spent by retailers and suppliers chasing needless errors, allowing them to devote more time and resources to increasing sales and profits."
At Andronico's, as work progresses on a new category-management program moving the company from paper to electronic processes, Miller hopes to further expand use of SBT. "We intend to roll out the program aggressively to our vendor community," he said. At a vendor breakfast scheduled for next week, the retailer's executives plan to talk about changes in its information-systems and grocery departments, as well as new marketing opportunities involving kiosk and frequent-shopper programs, "and then we are going to talk about scan-based trading," he said.
"We are going to take an executive-level approach to describing the way the program works and its benefits, and then have the category managers work on recruitment from that point on. Our intention is to gain a critical mass of SBT vendors to enjoy the efficiencies and the accuracies of the electronic data flow," Miller said.
Andronico's is also working on recruiting other retailers for SBT, he said. "Our objective is to get additional retailers to engage in the program that will provide a critical mass to suppliers. Ultimately, we want to maximize the efficiency of this electronic synchronization by involving as many of our high-volume vendors as possible," Miller said.
With SBT, Andronico's gets all the benefits of DSD but at a much lower cost, he said. "We don't have the labor, the reconciliation at the category-manager level is streamlined, and the notification of discrepancies is very responsive. So if we had our preference, we would do a greater percentage of vendors on SBT than on DSD, and maybe at some point we'll get there," he said.
For example, with a bread supplier, Andronico's can have as many as 200 invoices a week, including deliveries and credits. With SBT, "we immediately eliminate all of the credit invoices," reducing the total invoices to 100 a week. "As we go into scan-based trading, all of those invoices become electronic and ultimately that flows through and we gain some incredible efficiencies," Miller said.
"There are so many good things about it," added Ed Endicott, DSD program coordinator. "The only thing that we've had to do is eliminate the quantity key [at the checkouts] so we could get a clean read on each product by item. Also, the drivers themselves are instructed to show the receiving clerk on the way out that they are taking out a product," he said.
Item and price synchronization is a necessary first step and foundation for many e-commerce and supply-chain efficiency initiatives, including SBT, and collaborative planning, forecasting and replenishment.
Invoice deductions were reduced by almost 70%, and remaining invoice discrepancies were resolved in half the time needed prior to synchronization.
Synchronization provides both retailers and suppliers with significant profit-improvement opportunities from improved invoice accuracy, back-office efficiencies, sales-force and category-manager/buyer time redirected to sales-growth activities, and improved promotional visibility.