FDBuyer: Unleashing DSD Efficiencies

Discussion
Feb 22, 2012

Through a special arrangement, presented here for discussion is a summary of a current article from Frozen & Dairy Buyer magazine.

"Pioneers get the arrows," the saying goes. So despite the agreed-upon potential offered by new concepts, people often are hesitant to be the first with full-blown implementations. (Those arrows can really hurt.)

We’ve seen this with scan-based trading (SBT). The basic ideas have been widely accepted for decades, but there’s that nagging fear of arrows. As a result, SBT has not come close to reaching its full potential.

However, we may now be entering a new era. For some retailers and manufacturers, the time for caution with SBT appears to be over. That’s the view of Tal J. Zlotnitsky, chairman and CEO, iControl Systems USA, Rockville, MD. Mr. Zlotnitsky has seen some DSD category sales more than double from SBT partnerships and resulting data analyses.

Mr. Zlotnitsky spoke on this subject at the recent ProductivityPlus Conference put on by the Food Marketing Institute and the Grocery Manufacturers Association. During the conference, he also met with FDBuyer to describe how retailers are seeing bottom-line benefits from SBT.

Mr. Zlotnitsky believes that the industry’s focus has shifted away from building and integrating massive legacy information systems. Today, "Winning retailers have started to turn their attention toward using information system collaboration with their suppliers to drive smarter merchandising decisions," he said.

The foundation of these successful partnerships is synchronized data, one of the earliest SBT requirements defined in the 1996 report Scan Based Trading: Using Scanner Driven Technologies to Change Direct Store Delivery Practices — A Pilot Study (published by Grocery Manufacturers Association). "We are now in the age of the third-party intermediary," said Mr. Zlotnitsky, "who is trusted by both retailer and manufacturer to be the keeper of the data."

Mr. Zlotnitsky said retailers who have successfully implemented SBT relationships with DSD suppliers, have reduced the amount of time spent by their internal resources on activities such as item and price file maintenance, invoice audits and accounts payable functions. Instead, they allocate more time for activities that drive sales.

"Retailers are looking for people in their organizations who are doing things right and supporting them with analytics to make better business decisions," said Mr. Zlotnitsky. "Companies are moving away from the negatives of scorecarding and toward the broader adoption of positive performance techniques."

Discussion Questions: Do you see retailers and manufacturers increasingly embracing scan-based trading (SBT) partnerships? Do you see 2012 as a breakthrough year for the use of SBT?

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7 Comments on "FDBuyer: Unleashing DSD Efficiencies"

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Ryan Mathews
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5 years 9 months ago

As Dan so ably notes — it’s been almost two decades since people first started kicking around the scan based trading idea, so I don’t know what “increasingly embracing” means in this case. I guess it’s hard for me to think of this as a “breakthrough year” given the history. SBT seems to be waging a war of attrition, not conquest.

Bill Bittner
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Bill Bittner
5 years 9 months ago
I saw a survey a couple years ago where 90% of the retailer respondents said they were doing Scan Based Trading. I knew this impossible, but I think it leads to the big problem faced by advocates of SBT. Many people simply don’t know what it is. The back door receiving dock really remains the “wild west” of inventory management. Spend a day watching the receiving clerk trying to keep up with what is being delivered and it is a miracle anything is accurately recorded. Even if they are on DEX or NEX, the comparison of what is actually being delivered to what is recorded in the receipt transaction and accounting for returns is either tedious or cursory, there seems to be no in-between. SBT has huge operational benefits. Especially in crowded urban areas where there are often curfews on truck deliveries, the ability to drop a delivery at odd hours and then move on to the next store is critical. Frozen and dairy vendors who have to tie up significant capital investment to ensure… Read more »
Gordon Arnold
Guest
5 years 9 months ago
This is a very interesting article that does not come close to exposing the reason for such slow development and growth in this market. The problem “synchronized data partnership” is facing is the misuse of proprietary property. IT security audits have continuously demonstrated that over 90% of company data damage and theft is by company employees and third party IT vendors. The liabilities and costs, both direct and indirect, associated with this as a security issue have forced many small and medium business out of the SBT market as well as others. So when the participation costs are added to the maintenance costs it is too big a part of IT’s budget to be sustained. It is further interesting to note that through the years there are many contractual changes being made to protect against inventory losses due to traffic mistakes, shrink, and damages. While at the same time little is done to address the issues of data security, integrity and misuse. Perhaps it is time for small and medium businesses to consider cooperative, wholly… Read more »
Ben Ball
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5 years 9 months ago

The perception persists among vendors that SBT “is OK for the big guys” (because they have the power brands, item velocity and clout to push back if the retailer’s accounting gets funky) but that “it’s the little guys who will get screwed” (for exactly the inverse reasons). I can’t speak to how accurate that perception is in practice — but until it is disproved, the resistance to SBT among most vendors will remain strong.

Ralph Jacobson
Guest
5 years 9 months ago

SBT has been and will continue to be utilized in a very narrow selections of product categories. I see no reason for 2012 to be a breakthrough year. I believe SBT makes complete sense for most categories, however there still remains too much apprehension in the trade ecosystem to make it work today.

Once awareness of the tactical successes becomes available, SBT should begin to accelerate its adoption industry-wide. I also think that retailers overseas are making progress faster than we are here. Vendor managed inventory is the driver in this case.

Mark Burr
Guest
5 years 9 months ago
Do you see retailers and manufacturers increasingly embracing scan-based trading (SBT) partnerships? No. Do you see 2012 as a breakthrough year for the use of SBT? No, I see nothing in 2012 that would lead to the description of a “breakthrough” year. I agree with Ryan on that account. Data synchronization will be no further ahead in 2012, than in 2011. In fact, there has not been significant “breakthrough” gains in that area since 1996 in the report noted. The back door is the largest sink hole of dollars at retail; greater than any other area. Retailers, in particular supermarkets, insist on counting every single customer item out the front door. However, they remain willing to be robbed blind on both inbound and outbound traffic at the back door. Do they allow Mrs. Consumer to walk up to the cash register and say they have about $50 today? No. they ring up every single item with diligence. At the back door, they do however allow DSD vendors to enter the store, declare that they have… Read more »
Darrel Jackson
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Darrel Jackson
5 years 4 months ago

The bad economy is driving retailers to embrace scan based trading (SBT) more in 2012 than in past years. Retailers welcome the relief from the burden of carrying inventory. It also helps that the vendor manages the product shelf instead of the retailer. Vendors get information at a level they’ve not had before, and a more efficient way of conducting business.

I don’t think vendors have found a way to leverage the efficiencies that SBT provides…yet. And buying back inventory hurts, read the headlines. For now it helps retailers more than vendors. That’s why I see the trend growing.

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