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“We may get five deliveries a week of bread, and that can take a lot of time for our receivers to check in product,” he says, adding that those check-ins also mean employees have to be responsible for forwarding paper invoices to Ahold’s accounting office.
The absence of a check-in requirement also can increase the productivity of direct-delivery vendors, since they no longer have to operate according to a planned check-in schedule or wait at the back door for a receiver. “Now they can just come in through the front door” whenever the store is open, Krygier says. He notes that direct-delivery suppliers often use the delivery flexibility of scan-based trading to get in more store deliveries in a single day and with fewer drivers. “Suppliers will consolidate their truck routes,” he says. “Instead of 100 trucks out on a single day, they may have 70.”
That kind of flexibility may help to bring more suppliers into SBT programs, addressing what is still the biggest challenge facing scan-based trading, Krygier says. “The reality is that it will take some time to get many major players on board with SBT, probably another two to four years,” he says, adding that some large suppliers are still hesitant to buy back large volumes of inventory and take on more responsibility for shrinkage.
Prescient, meanwhile, is looking to expand the use of scan-based trading technology beyond retail stores and into warehouses, and has already started serving companies in the automotive aftermarket industry, says Betsy Hargus, vice president of marketing at Prescient.
Ahold, however, says it will stay focused on expanding scan-based trading among its direct delivery vendors. “If we get to 20% of our DSD business in scan-based trading within two years, we’ll consider that quite successful,” Krygier says. l
Scan-based trading the Chase-Pitkin way
There is more than one way to deploy scan-based trading, though it helps if you have a champion who understands both the financial and technology sides of it.
At Chase-Pitkin Home & Garden, a chain of 15 home improvement stores where more than 60% of products arrive as direct-store deliveries, CIO and controller Chris Dorsey has fashioned an in-house, e-mail-based system that sends files of POS data to direct-to-store suppliers. “We load in the vendor and product codes, then trigger e-mailed files to suppliers based on their frequency requirement, such as weekly or monthly,” he says. “Then they bill us.”
When Chase-Pitkin first considered deploying scan-based trading, Dorsey tried to figure out a way to do it in-house through either its existing EDI or e-mail system. He determined that EDI would be too expensive due to its transfer fees, but then realized that he could leverage Chase-Pitkin’s existing IBM Websphere technology platform integrated with its e-mail system.
“It dawned on us that we could use Websphere to generate e-mail on the fly,” he says. And unlike EDI, which sends communications to a general mail box, e-mail would send scan-based trading data to the particular person at the supplier who needs it, he says.
“We have saved at least a hefty six-figure dollar number by doing this in e-mail instead of a commercial application, plus saving 18-20% a year in an ongoing maintenance fee,” Dorsey says.
Chase-Pitkin, which uses the scan-based trading system with about 5% of its direct delivery suppliers, has realized faster inventory turnarounds and a lower volume of product shrinkage, Dorsey says.
And he’s confident that Chase-Pitkin will draw in more direct delivery suppliers. Many of the existing scan-based trading partners joined because of Chase-Pitkin’s reputation for lowering shrinkage through an in-house system that uses web-based analytics technology from SPSS Inc. to match inventory and sales data, and the use of scan-based trading will only improve that reputation, he says. “We have proved that the faster we turn inventory, the less shrink-and the more sales,” he says.