Stepping up the pace in the grocery supply chain

A study by the GMA shows there is a way to smooth out the glitches in getting groceries onto store shelves and save money along the way.

By -- Modern Materials Handling, 9/1/2000

Traditionally, retailers and their suppliers have a hard time communicating with one another. Valuable time and money is often spent arguing over details of orders and deliveries, getting in the way of supply chain improvement initiatives.

It doesn't have to be that way says the industry trade association Grocery Manufacturers of America (GMA). With a program called Scan-Based Trading (SBT), the GMA says product, price, and promotion information can all be synchronized as a first step to a more efficient grocery supply chain. And the preliminary results of a pilot study are encouraging, says the trade association.

Leading that study was the viaLink Co., a leading provider of business-to-business e-commerce services for the consumer packaged goods and grocery industry. During the test period, the company worked with 12 suppliers and two grocers.

The study commenced in May 1999 with the object of validating the benefits and requirements for item and price synchronization and SBT processes through a third party intermediary (viaLink ).

The top-line results of the study show that there is a greater visibility of product movement information throughout the supply chain with SBT and it proves effective for both the suppliers and retailers.

In addition, study participants found that there were far fewer discrepancies between suppliers and grocers. In fact, invoice deductions were reduced by almost 70% while remaining invoice discrepancies are resolved in half the time prior to synchronization.

With SBT, the buying and selling relationship between the trading partners changes through synchronizing supply and demand at the point of sale.

"If working right, Scan-Based Trading moves the supply chain a lot closer to the ideal just-in-time situation," says Steve Conover, vice president, strategic projects at viaLink.

The supplier owns the inventory up to the point of consumer purchase, so the retailer doesn't have to pay for inventory until it is sold.

"This means, however, that suppliers have to establish trust and rules with retailers," says Scott Redick, the Reynolds Communications Group.

Furthermore, the program gives suppliers more delivery time flexibility. Before, a supplier had to show up at a fixed window of time for back door check ins. With SBT, they can go to the shelf directly any time during the day and spend extra time making the shelf look better, which increases sales.

With time saved on service, suppliers can add one or two more deliveries a day.

In addition, SBT allows a steady flow of product from the beginning to the end. A major benefit of viaLink is the supplier can see what consumers are buying on a near real-time basis.

This helps to make decisions on what products to keep moving in the supply chain. As a result, inventory no longer needs to sit on the shelf as a buffer of uncertainty.