A new system that allows food and beverage manufacturers to dramatically streamline the way they deliver products to retailers was successfully put to test by member companies of the Grocery Manufacturers of America (GMA).
Results of GMA’s six-month long “Price Synchronization/Scan-based Trading” pilot program with 12 manufacturers, Schnuck Markets (St. Louis Mo), and Andronico’s (Albany, CA) showed a 4 percent growth in sales for retailers and a near 70 percent reduction in invoice deductions.
The system, which provides retailers and Direct Store Delivery (DSD) suppliers with the ability to synchronize pricing, promotions, sales, inventories, invoices, and other data via the Internet, also nearly eliminated item and price mismatches.
DSD companies deliver their products, which typically have high turnover at the store or are fragile and/or perishable, directly to retailers, rather than through a warehouse system. Scan-based trading allows retailers to pay for DSD supplier’s products after they are scanned through the store’s front register, rather than at the retailers’ back door at time of delivery.
Allowing the supplier with 24-hour delivery windows and the elimination of backdoor receiving also reduces costs and increases supply chain efficiencies. GMA’s DSD Committee developed the idea for scan-based trading as a way to bring even further efficiencies to the DSD system.
“We were very encouraged with the results of the pilot and see this as a major win for both manufacturers and retailers,” said Al Carey, Senior Vice President, PepsiCo, Inc., which was one of the pilot participants. “Scan-based trading has been a promising concept for retailers and DSD suppliers but has been complex. The use of the third party provider, viaLink, allowed us to remove a great deal of the complexity and bring rollout of SBT closer to expansion.”
Synchronization of data between manufacturers and retailers, which was provided by a third party provider, the viaLink Company (NasdaqNM:VLNK), and accessible to companies through the Internet, was critical to the pilot’s success.
“The ability to seamlessly integrate our data with our trading partners’ data and rid our system of time-consuming errors is, without a doubt, the first big step for our industry in doing real business-to-business e-commerce transactions,” said Craig Schnuck, Chairman and CEO, Schnuck Markets. “As retailers, we’re also able to shift our time from entering promotions and cost changes to more category planning and better serving our shoppers.”
Other key findings from the pilot include:
- Sales volume increased: sales in Schnucks’ stores increased 3.9 percent compared to stores not participating in the pilot. Sales increases for suppliers ranged from 2.5 percent to 5.2 percent.
Invoice deductions were reduced by 69 percent across all synchronized suppliers.
- Stores enjoyed lower “out-of-stocks,” as route sales representatives had more time to spend on merchandising activities, given the elimination of the back-door check-in and the potential a 24-hour delivery window.
- Product shrink remained at acceptable levels for both Retailers (.3 percent for Schnucks and .1 percent for Andronico’s).
Suppliers saved 20-25 minutes per delivery and retailers saved 10-15 minutes in delivery time.
- Time spent resolving item and price discrepancies were cut in half, from an average of five days at the pilot’s outset, to two to three days at the pilot’s conclusion.
“Because participants could access the data via the Internet, we were truly able to bridge the gap in technology capabilities between trading partners,” said Joe Hoff, Vice President, National Retail Sales, Anheuser-Busch Companies, Inc. and chairman of GMA’s DSD Committee. “The pilot also proved that smaller, independent retailers, like Andronico’s, can implement scan-based trading without a significant investment in new e-commerce systems.”
Manufacturers participating in the pilot were: Anheuser-Busch, Coors Brewing Company, Dean Foods Company, Dreyer’s, Dr. Pepper/Seven Up Company, The Earthgrains Company, Frito-Lay, Kraft Pizza Company, Miller Brewing Company, Nabisco Biscuit Company, PepsiCo, and Tony’s Pizza Company, along with numerous distributor/bottling partners representing several beer and soft drink suppliers.
Prime Consulting Group, inc. served as consultant to the project, documenting the findings throughout the pilot and authoring the report. The Food Marketing Institute also helped support the study.
For more information on GMA’s scan-based trading pilot, contact Erin Harcourt at 202/337-9400.
GMA is the world’s largest association of food, beverage and consumer product companies. With U.S. sales of more than $460 billion, GMA members employ more than 2.5 million workers in all 50 states. The organization applies legal, scientific and political expertise from its member companies to vital food, nutrition and public policy issues affecting the industry. Led by a board of 44 Chief Executive Officers, GMA speaks for food and consumer product manufacturers at the state, federal and international levels on legislative and regulatory issues. The association also leads efforts to increase productivity, efficiency and growth in the food, beverage and consumer products industry.