Scan-based trading (SBT) is the process by which suppliers maintain ownership of inventory within retailers' warehouses or stores until items are scanned at the point of sale.
[1] Traditionally scan-based trading programs use electronic data interchange solutions as the key component to synchronize information on store locations (Organizational Structure 816), items (Price/Sales Catalog 832), daily sales (Product Activity Data 852), receivings (Receiving Advice 861), billings (Invoice 810) and payments (Remittance Advice 820) between a retailer and its Scan-Based Trading suppliers.
In the magazine industry, the full implementation of SBT has been estimated to provide operational savings to the retailers and suppliers of $220 million per year.
The greatest competitive advantage for a supplier is increased collaboration and visibility in its retail-trading partner's organization, including reduced cost for sales staff to service retailers.
[3] With partners agreeing on details like item, price, promotion and shrink at the onset of an SBT relationship, suppliers are able to better service accounts and reduce billing and invoice issues.
SBT provides greater visibility into scan-sales data, allowing suppliers to better understand the demand chain so that they can anticipate and reduce obsolescence and improve overall profitability.
There are some benefits for retailers switching to SBT: There may be increased sales, typically driven by the supplier having more time in the store to merchandise its product, fill holes, and maintain plan-o-gram integrity.
Schnuck Markets reported a nearly 70% reduction in invoice deductions with time spent resolving item and price discrepancies cut in half.
Financial metrics may be improved too- once inventory levels were reduced, all financial metrics that incorporate inventory levels (such as working capital required, return on assets (RONA), and quick ratios) showed improvement: working capital can be reduced as much as 15%, RONA increased as much 4%, and the quick ratio increased as much as 7%.
Scan-based trading is primarily applicable to products distributed through direct store delivery, commonly referred to as DSD.
According to an analysis by one vendor,[9][better source needed] "most major retailers in the U.S. – including CVS, Safeway, Kroger Ahold’s divisions, A&P and its subsidiaries, Hess, Barnes & Noble and Rite Aid – conduct their newspaper business using the SBT model."