SBT Builds Slowly

Scan-based trading certainly has proven benefits. It is a way to streamline the cash flow and get a better handle on the success of promotions. While there are quite a few retailers who are thriving on it — including Wal-Mart, Meijer Stores, Kroger and Winn-Dixie — the retail community has a whole has been slow to adopt SBT.

SBT helps retailers avoid using in-store labor to check in orders and frees up investments in inventory because they don't pay for the goods until they cross the point-of-sale.

On the consumer package goods side, companies like Dreyer's Grand Ice Cream, Perfection Bakeries and Schwan's Consumer Products, makers of Tony's Pizza, have been able to gain benefits of SBT, which include an improved flow of data as well as cash. As on the retail side, there are some leaders but the industry has been slow to embrace SBT.

For CGs, SBT can allow them to dedicate more time to in-store merchandising rather than checking in shipments. In addition, many retailers are willing to negotiate special payment terms for SBT programs, so the CG can actually get paid for the goods sooner than they would with a traditional invoice that gets paid in 30 days or longer.

With all the upsides, why the stalemate? Industry observers notes that one of the impediments to progress is that CGs have been slow to implement SBT because it involves a drastic change in their business model and systems. Small to mid-size firms are more likely to work with their retail partners on SBT because they have more flexibility. Likewise, retailers have not had the resources to dedicate to SBT pilots.

In addition, many concede that the retailers stand to gain more than the CGs, although there are huge benefits for CGs as well.

"The basic story is that SBT continues to progress, but it is still a retailer-centric model," which has discouraged some consumer goods companies from getting on board, says Doug Adams, VP at Prime Consulting, a consulting firm that has closely followed the evolution of SBT. Dave Potts, merchandising systems analyst at Shop N Save, which is about to kick off a pilot SBT program in December, concurs that retailers benefit from SBT, but he says CGs are receptive once they learn that they will also experience some gains.

"We do a lot of direct store delivery, so we found that once we made inquiries to our DSD vendors, they were already doing SBT with other retailers or they were willing to work with us on it," Potts says.

Shop N Save, a division of Supervalu that operates about 35 stores primarily in the St. Louis area, plans to kick off an SBT program in early December with Schwan's, Dreyer's and Sara Lee Baking. Shop N Save will use viaLink (www.vialink.com) for the initial roll out. Other CGs could be added based on the success of the pilot.

"One of incentives for our suppliers is that even taking into account the fact that they don't get paid for products until after we sell it, their cash flow can be improved. Our standard terms for regular invoices can be as long as 30 days, but with SBT the plan it to process payments in 10 day from end of business week. As we start going to electronic funds transfer, the plan is to get vendors their payment within two or three days."

Mark Elzinga, president and owner of Elzinga & Hoeksema (E&H) Greenhouses, a plant company that has an SBT relationship with Meijer through viaLink, admits there was a lot to learn about the new business process, but says both sides of the trading partnership can benefits.

In planning store deliveries, E&H can see which products are moving in which stores, how long the inventory has been in each store and where additional product is needed.