Consignment Stock /Scan Based Trading – Why, Who, and How

Consignment Stock /Scan Based Trading – Why, Who, and How

The omnichannel explosion has created enormous pressure on retailers to reduce inventory and cut carrying costs, while still offering high in-stock levels and product variety. Increasing numbers of retailers are consequently turning to consignment stock, also known as scan based trading, to stay competitive.

But what is it? And, how does it work for retailers and suppliers?

The traditional inventory stocking method for retailers is purchasing inventory from suppliers. Retailers then recoup their initial outlay by selling the goods to consumers.

Figure 1.

Unlike traditional retail, inventory managed by scan-based trading is owned by the supplier until the point at which it is sold to the consumer.

Figure 2.

Point-of-sale data (e.g., dates, days of the week, time ranges) is collected by the retailer and transmitted to the appropriate supplier.

Figure 3.

Using the point-of-sale data, the supplier generates an invoice and sends it to the retailer. If a collaborative replenishment or vendor managed inventory model is deployed, suppliers can also utilise this sales data to replenish stock, ensuring optimal stock levels and market exposure. We will be covering this topic in more detail in a future blog post.