Scan Based Trading Agreement: What it is and How it Works
Scan Based Trading (SBT) is a retail supply chain model where the supplier or vendor owns the inventory until the product is scanned at the point of sale (POS) in a retail store. In an SBT agreement, the supplier is responsible for restocking the inventory, while the retailer doesn`t pay for the product until it is sold. The payment is based on the actual sales data from the POS system, and the supplier is paid a percentage of the sales revenue.
SBT has been gaining popularity in recent years, as it offers several benefits to both the supplier and the retailer. For the supplier, SBT minimizes the risk of overstocking, as they only produce or ship the required quantity of products. It also enables them to have better control over the inventory and sales data, which helps in improving the forecasting and planning process. For the retailer, SBT eliminates the need for upfront payment and reduces the inventory carrying costs.
How Does SBT Work?
In an SBT agreement, the supplier and the retailer enter into a contract where they agree to sell the products on a scan-based trading basis. The supplier provides the products to the retailer, and the retailer keeps the inventory in their store until it is sold. The supplier is responsible for restocking the inventory, and they are only paid for the products that are scanned and sold at the POS system.
The payment process in SBT is automated, and the supplier receives a percentage of the sales revenue, as agreed upon in the contract. The retailer deducts the cost of the products sold from the sales revenue and remits the payment to the supplier. The supplier can access the sales data in real-time, which helps them keep track of the inventory levels and adjust their production or shipping accordingly.
Benefits of SBT
SBT offers several benefits to both the supplier and the retailer. For the supplier, SBT minimizes the risk of overstocking and reduces the inventory carrying costs. It also enables them to have better control over the inventory and sales data, which helps in improving the forecasting and planning process. For the retailer, SBT eliminates the need for upfront payment and reduces the inventory carrying costs. It also helps in improving the product availability and reduces the risk of stock-outs.
Conclusion
Scan Based Trading is a retail supply chain model that offers several benefits to the supplier and the retailer. It minimizes the risk of overstocking, reduces the inventory carrying costs, and enables better control over the inventory and sales data. It also eliminates the need for upfront payment and improves the product availability for the retailer. SBT is an effective way for suppliers and retailers to collaborate and optimize their supply chain operations.