Of the many, many issues bouncing around the industry, theres one that keeps popping up at just about every level of the channel. And thats Pay on Scan (POS).
For those who havent heard about POS, AutoZone has told its suppliers that the mega retailer is moving to a POS format. Using this method, suppliers would be paid only once a product has been scanned for sale at the counter (plus terms, by the way). Its basically a consignment sales system. Its a pretty good deal from AutoZones perspective, since they would never actually own (or have to pay for) any inventory. But the potential ramifications for suppliers are another story. Theres far more to POS than space allows, so if youd like to read the complete details on it, see Pay on Scan Poses Hurdles for Suppliers, which appeared in the March issue.
Just for the record (and for claritys sake), Id like to try to coax everyone in the industry to stop calling it POS. Its just too darned confusing since the acronym can also mean Point of Sale, which is a more common term we all throw around. I suggest we all start calling it Scan Based Trading, or simply SBT, OK? Now I can get off my soap box.
Can POS, er I mean SBT, work? To answer that question, the Motor & Equipment Manufacturers Association (MEMA) investigated other industries to see exactly how SBT has worked - or not. MEMA found that there are several other industries that are using, have used or are experimenting with some sort of SBT system. Most that are using it are doing so on a very limited basis.
The grocery store industry, for example, is using SBT on a limited number of SKUs, mostly on fast movers, as well as some direct store delivery categories, such as pretzels and potato chips.
Of all the industries out there, some say the pharmaceutical industry is the closest kin to our own. How has SBT worked for it? According to a study from the National Pharmaceutical Association, only 7 percent of distributors use consignment with their suppliers - and then only on a small range of product. I also suspect those products are the fastest moving SKUs.
Final conclusions on SBT have not been made and theres still more investigation to be done. The Automotive Aftermarket Industry Association has commissioned a research firm to conduct an in-depth study of the SBT system. The results of that study are just now becoming public, and well let you know the results as soon as we have them.
Even if the industry decides SBT isnt the right direction to go, we are still better off having gone through the exercise of re-examining and re-addressing the way everyone does business. Its a healthy process that leads to a more informed distribution channel. That might just be the greatest payoff SBT provides.