Competition in the retail world has intensified, and companies looking for a competitive advantage have to find ways to reduce costs, shorten delivery cycles, reduce inventory in the supply chain, and respond faster to demand. That’s why so many suppliers have moved away from multi-stage distribution to a direct story delivery (DSD) model.
DSD is particularly appealing for companies that require tight delivery windows for their products, and for smaller retail outlets (gas stations, convenience stores, drug stores, etc.) that need frequent replenishment. It has also become the favored distribution method in markets where freshness is important or product is produced locally — like beer, soft drinks, baked goods, and snacks.
Direct store delivery can help manufacturers be leaner and more responsive to market demand. Using DSD, suppliers can typically deliver goods within 24 to 48 hours of taking an order – much faster than if a centralized retail distribution center or a third-party distributor is involved.
This type of delivery model helps retailers that want to reduce inventory and operating costs, while offloading the merchandising activities to the delivery company rather than the retailer. For the distributor, that means they have more control over merchandising and presentation on the shelf, which can help drive sales. Retailers, meanwhile, don’t have to dedicate staff to stocking and merchandising high volume goods.
But direct store delivery isn’t a one-size-fits-all approach. Companies interested in shifting to DSD operations have to develop a model that will work for their business. Doing so involves several key steps:
- Create a Demand Profile: Examine sales data to determine what type of retailers you are dealing with, and how much order volume they generate.
- Determine Your Sales Approach: How much sales activity will occur during the delivery stop vs. online? Pre-sales help the distributor manage inventory and manage demand, but can tie up the driver when these sales activities are handled face to face. Evaluate your delivery staff and sales staff to determine the best way to manage the sales process.
- Plan the Route: Use route planning tools to best serve the demand of those customers. Routes have to be built around a variety of factors (distance, speed limits, hours of service considerations, limits on truck size or hazardous material transport, etc.). Make sure the routes are optimized to take as much cost out of the distribution process as possible.
- Track Your Trucks and Inventory: Direct store delivery can help reduce shrink and loss. Use GPS to monitor truck locations (and recover missing vehicles), as well as onboard inventory tracking to monitor shrink or merchandise theft.
- Invest in Proof of Delivery: Don’t rely on paper. A combination of DSD software, barcode scanning and mobile computing can automatically track inventory, generate receipts and invoices, allow digital signature capture, and provide real-time visibility into deliveries. This can also improve the efficiency of the drivers, reduce the cash cycle, and eliminate delivery disputes with retailers.
- Prepare to Analyze Delivery Data: Using real-time inventory and order information, manufacturers can get a better view of real demand across a category, a retailer, or a route. By tracking shrink/stales, suppliers can make better inventory recommendations to customers, and improve the profitability of each customer.
Direct store delivery is a growing part of the retail landscape. For specific types of companies, DSD can reduce costs and improve service and sales for retailers. Planning ahead and developing an effective DSD model that fits your business will help ensure you get the most benefit from your DSD system.