New Pay By Scan Program Reduces Risk for Retailers
BFG Supply's pay-by-scan program helps with inventory management and cash flow. The program for growers has proven so popular that the distributor is now rolling it out for retailers.
October 8, 2012
The concept of pay by scan, in which growers ship plants to stores and don’t get paid until they sell, is, to put it mildly, heartily disliked by growers. In this model, growers assume all the risk — trusting that the store will properly take care of and display their perishable product all season. Some operations hire employees themselves to do this to protect their product.
But the unpopular concept has taken a turn for the better in a program offered by BFG Supply Company, one of the largest horticultural suppliers in the U.S. In fact, the program, called Grower Stock-Up, is so well liked among the 24 large growers who participate that not one has ever left it. This summer, BFG tested the concept for the first time with a retailer, Malmborg’s Garden Center and Greenhouse in Rogers, Minn., and is now rolling out the Retail Stock-Up program.
While the Stock-Up program’s chief benefits — making sure inventory is always available when needed and improving cash flow — are of great advantage to growers, they promise to be even more of a boon to independent garden centers.
“We asked ourselves how we could make it easier to do business with us,” says Rob Glockner, president and CEO of BFG. “We asked, ‘How do we make sure our customers have what they need when they need it? How can we make them more efficient? And how can we help them with their cash flow?’”
Glockner points out that traditionally, distributors buy inventory, put it in the warehouse and wait for the customer to call. He and his staff began to question that model and decided to do something different.
“We said, let’s work with these key customers of ours by taking our inventory and putting it on their premises. We own it, and as they use it, we’ll bill them for it. We kind of treat it as an extension of the BFG warehouse,” Glockner says.
How It Works
Currently, the Grower Stock-Up program is primarily for chemicals and fertilizers, although more products are added all the time. BFG’s information technology department designed a web-based computer system that interfaces with a scanner, which is provided to participating growers. Each grower is set up on the system with his own account and login, and he sets minimum and maximum inventory levels of the products he needs.
“We go in and label their shelves with bar code labels, and then as they scan inventory out, it decrements the amount. As soon as it hits a minimum (and it’s all real time), it hits our system and creates a transfer. We transfer more inventory to their location so they can always maintain their stock levels,” Glockner says. “It saves growers a lot of time, because they don’t have to have someone checking the inventory all the time. The whole process is automated. They have what they need when they need it, seven days a week, 24 hours a day. We added features where different people have different logins in the scanner, so you know who took what out.”
An additional benefit is the ability to assign the product to a crop, so a grower can track the quantity of chemicals and fertilizer that are used on that crop, along with the cost and when it was applied. Glockner says then BFG reps can work with growers to adjust their minimum and maximum inventory levels over time to really zero in on what they need so it is always on hand.
A Grower’s View: Efficiency Is The Biggest Benefit
Steve Mulder, co-owner of Grand Flowers in Wayland, Mich., has used the program for nearly four years.
“I love it,” Mulder says. “The main advantage to me is you just don’t run out of chemicals. In the past, I would pre-order everything — you have to make an educated guess and figure out what you might need. But then I’d run out and say, ‘I have three more [greenhouses] to go this week, and I’m out of chemicals and it’s a Friday. This way, I always have them.’”
For Mulder, the efficiency is the biggest benefit. “I never have to send anyone out to get chemicals anymore; they’re just always on hand,” he says. I used to say, ‘I’m going to use this one today,’ and then realize I was out of it. Then you have to apply one that may not be as effective just to get one on. I will always use a chemical, regardless of cost, if it works. If it helps quality, I do it. So I’d say the biggest benefit is that the chemicals are always on hand. The second benefit is that you don’t pay for it until you use it.”
Program Alleviates Risk, Aids Cash Flow
Because BFG owns all the product until it is used, it alleviates the risk of a grower overestimating the quantities needed and being stuck with extra, unused inventory. In addition, the program helps with cash flow, since a large, up-front purchase is not necessary.
“It does help [customers’] cash flow,” Glockner says. “We have 9,000 active customers, so we take our inventory and put it there. They don’t pay for it until they use it. If they’re long on inventory, we’ll pull it out and put it somewhere else so they don’t get stuck with it. But they will have the product when they need it — at night or in the middle of spraying — but they don’t have the risk associated with getting through a season and having a room full of chemicals that’s tying up all their cash. We may put it with another grower who needs it or put it back in our inventory and wait until someone else needs it.”
Glockner says the program makes the most sense if the customer has a certain volume of chemical and fertilizer needs. “If you’re a smaller grower and don’t use much of these products, it doesn’t make sense to set it all up,” he says.
“The program creates a lot of efficiencies throughout the whole supply chain and reduces a lot of redundancy,” Glockner says. “We eliminated all that to help our customers save money and make it easier to do business with us. We have truly become more of a partner.”
Mulder, who grows spring annuals and fall mums on 6 covered acres and 5 outdoors, says he can’t think of any disadvantages and would definitely recommend it to other growers. “You might pay a little bit more for some of the chemicals, but for me, I would never go back to the other way,” he says.
He keeps the scanner gun in his office; right now he and his assistant grower are the only ones that can scan in products. Employees write down what they use for the day in a book in his office and Mulder scans them in at the end of the day.
“Once a month, a BFG rep visits to double check everything because sometimes you forget to scan,” Mulder says. “He’ll reinventory everything just to make sure all the numbers are correct, and if we missed anything, it’s added to our invoice.”
Mulder says every year a few more items are added to the program.
“I can purchase Anderson injector parts, which is nice. Before, I’d have to order and wait a few days, but now I’ve got them in the program,” he says. “Also, I get my EC test kits. I don’t use their masks, but you can also buy spray masks, filters, hoses and water breakers.”
Mulder points out that it’s still possible to take advantage of sales and early-order discounts. “Sometimes there are programs where you get special deals, for example when Syngenta does their big push for early chemical orders. Anything like that I’ll buy ahead of time, so I still get the cheaper price on that,” Mulder says. “So that’s already in my inventory. I still scan it out, but I don’t pay for it. If I run low, they’ll just send new in. You don’t pay for it until it gets into BFG’s inventory.”
Glockner says the Grower Stock-Up program is entering its fourth year and most of the largest growers in the midwest are participating.
“We have 24 growers right now and will probably double that in the next year or two,” he says. “And on the retail side we’ll probably do more than that because it’s even more applicable.”
New Opportunity For Retailers Helps Level The Playing Field
Glockner says he believes the Retail Stock-Up program is a first for independent garden centers. While the grower program focuses primarily on chemicals and fertilizers, the retail program includes any hard goods you would find in a garden center. Instead of the scanner system used in the grower program, the retail program is tied to the garden center’s POS system, so inventory is scanned out as the customer purchases it, making manual scanning unnecessary.
“I don’t think they’ve ever had a program like this before, especially on the hard goods side. Big boxes do it, but it’s our inventory sitting on the shelf until they scan it out. It’s a great opportunity for them, allowing them to keep inventory on the shelf all the way through the season. This way, if you get near the end of the season and you’re wondering if you should hold off on buying more inventory, you don’t have to worry about getting stuck with it,” Glockner says.
“Because we have 12 branches and all the volume we do and all the customers we have, we’re not typically going to get stuck with that inventory. We’ll pull it out as the season winds down and reduce their inventory with their permission, working with them and finding a new home for it. This is where we can truly add value as a distributor.
“What we’re finding is that they’re saying, ‘It’s too good to be true. What’s the catch?’ There is no catch.”
Glockner says the way it works is simple. “You or I could set up an independent garden center. BFG would fill our shelves, and as we scan it out and the customer pays us for it, we turn around and pay BFG. It’s a great cash-flow model. And you don’t have to do inventory every weekend,” he says.
BFG tested the Retail Stock-Up at a new store Malmborg’s was setting up. “We worked together and tweaked the system,” Glockner says. “And now they’re taking it to their other locations because they liked it so much. As a result of seeing how well it worked and making sure we could deliver on it, which we did at Malmborg’s, we’re now comfortable rolling it out to other independent garden centers, and that’s what we’re in the process of doing.”
According to Glockner, four or five garden centers are signed up currently and BFG is in conversation with an additional 15 to 20 retailers.
“This is brand-new business for us,” Glockner says. “We never did lawn and garden. When we bought Wetsel [in 2011], we took that product line and are moving it west. For us, it’s great with the incremental sales. For our customers, it’s great because it adds a lot of value — ease of use, having inventory when they need it, saving labor of counting inventory and it’s a great cash flow model.”
Mobile App Allows Ordering On The Fly
The two Stock-Up programs are part of BFG’s overall strategy called Virtual Purchasing Assistant. The third part of that strategy is a mobile app for the iPhone and Android that provides the ability to place an order on the fly. Customers do not need to be enrolled in either Stock-Up program to participate.
In short, the user scans the barcode of the product they need and an image and description of the product pops up along with customer-specific pricing. The user enters the number of units and the order is shipped from BFG on their next delivery day. It’s also searchable by keyword, phrase or item number.
“Anybody can download the app, and it allows you to reorder any of the 12,000 items we stock right on the floor,” Glockner says. “You can place the order while it’s top-of-mind. Keep adding to the cart all day and then you hit the button at the end to place the order. It also reduces the chance of error because you’re scanning the bar code of the exact product and we send confirmation.” GG
Robin Siktberg is Editor of Greenhouse Grower. She can be reached at firstname.lastname@example.org