Direct Store Delivery (DSD) allows manufacturers to bypass retail distribution centers and bring their products straight to the point of sale in store. Most commonly found in the Consumer Goods (CG) industry, many manufacturers find that the speed and availability gains outweigh the investment required to make it happen.
Over the last 18 months, we have seen peaks in demand for particular Consumer Goods products rise exponentially. For manufacturers, keeping up with this demand has become increasingly difficult at the production stage alone, and the added step of retail distribution centers present a further hurdle before products get on-shelf and in front of customers. Having products sitting in retailer distribution centers takes away dynamic planning opportunities from the manufacturer and puts it a lot of blind trust in the retailer.
As retailer and manufacturer interests are not always aligned, optimization of product distribution in real-time can be impacted. Fluctuation of customer needs requiring rapid adaptation of supplier and distributor strategy means that direct to store deliveries offer greater insights into brand performance. This, in turn, puts the reins back in the hands of the manufacturer, ensuring that they have the information they need to efficiently plan production volumes and product assortments.
Being able to send out stock to fulfil known demand is the ideal scenario for a manufacturer – the priorities of retail distribution centers aren’t aligned with this. If stock is sitting in a warehouse waiting to get onto the shelves of one store, it isn’t in front of customers in another. Demand will weaken when there is reduced brand presence in-store as customers find alternative products. As out-of-stock is measured at the shelf level, any organic changes in demand will be difficult to accommodate when all the extra supply is sitting in a warehouse.
As illustrated in articles by Consumer Goods Technology (CGT) magazine, many leading manufacturers have chosen to deploy a DSD strategy. Here are 3 examples from global leaders, Mondelez, Kreuger Dr Pepper and Danone:
Mondelez
Mondelez, the no. 21 consumer goods company (as indicated by this CGT post) announced their intention to cut their SKUs (Stock Keeping Units) down by a quarter in order to continue meeting high levels of demand even after the pandemic. Despite the seemingly drastic change, Glen Walter, Mondelez EVP and president, North America, has revealed that the company has maintained shelf space. He describes their evolving DSD functions as both a ‘huge capability… [and] a big investment’.
Keurig Dr Pepper
As covered in this CGT article, we have also seen Keurig Dr Pepper trimming their speed to market with evolving DSD acquisitions – Canada Dry, A&W, 7UP, Sunkist, Snapple, CORE and Bai brands were snapped up into KDP’s company-owned DSD operations in February 2021.
Danone Waters of America
With the mutually beneficial operational alliance between PepsiCo Beverages Canada and Danone Waters of America (DWA), as described by CGT, Danone will be leveraging the established PepsiCo DSD systems for the Canadian distribution, sales and merchandise of Evian.
Skipping the retailer’s process of moving product from distribution centres is a real advantage for manufacturers. Obviously, the branded product is the manufacturers’s priority, but for the retailer it’s one of many and therefore unlikely to be prioritised in restocks. If the manufacturer can ensure their product arrives in store as replenishment is needed, they are not only putting their goods ahead of competitors waiting to be restocked by the retailer, but also ensuring that their products are in front of and available to the customer at all times.
Consistent product availability and brand visibility are major selling points for a DSD approach; no retailer will value the product as much as the manufacturer and, to an extent, their distributor. An end-to-end product journey can be tracked and quality-controlled by the manufacturer. Moreover, it offers the opportunity to ensure that, in-store, the manufacturer can easily check compliance to agreed merchandising and promotion execution. We’ve covered the importance in our recent Trade Promotion Management blog.
DSD puts more power in the hands of the manufacturer and their chosen distributors – there’s no uncertainty in how or where their products are being delivered. The supply route through to sale becomes much more transparent, which is crucial in remaining competitive in the evolving Consumer Goods marketplace. With so many brands struggling for shelf space, DSD provides, at face value, a more simplified route to market. Product in store = no missed sales opportunities.
What Are the Downsides?
Notably, downsides to DSD are the physical constraints that predicate how much stock can be supplied to a store at once. Without the longer term, larger storage option that retail distributor centres provide, manufacturers can only deliver a limited amount of goods each time. This means that manufacturers need think very strategically about where their DSD priorities are made. If the distributor needs to make deliveries to multiple locations in one day or trip, the available space for the manufacturer’s product is further limited. If the manufacturer self-distributes, delivering large amounts of stock increases labour and vehicle costs.
Time is another key factor in this equation. If on-shelf stock is proactively replenished from the warehouse as required by the retailer, it could be argued that direct delivery can cause a delay in restocking due to the schedule of the delivery. If the delivery is late in the day, a gap in the on-shelf brand availability can occur, potentially resulting in loss of immediate and future sales to competitors with stock available.
As we’ve outlined, there are many benefits to DSD. But manufacturers can quickly become overwhelmed in the complexity of direct to store distribution. Successful companies are very deliberate about where they deploy this model and how they use their resources in an effective and efficient manner.
The Aforza Solution
Successful deployment of a direct to store delivery model requires a modern, end-to-end execution platform that underpins the efficiency and effectiveness of every delivery. This is where Aforza provides a market leading solution for the Consumer Goods (CG) industry with a single platform that allows manufacturers to plan, visit, sell and deliver products to market.
Built to enable the Total Experience from the supply chain through to retail execution, Aforza’s platform helps address the resource challenges outlined above while capitalizing on the benefits of DSD. The ability to connect planning to execution with real-time inventory visibility makes it easier than ever to maintain the necessary stock levels to keep your products where they need to be – in the eye of the consumer.
Aforza’s route planning capability optimizes a driver’s schedule to ensure that the maximum amount of time is spent in-store, not in transit. Additionally, these visits can be made even more effective for the manufacturer by enabling the driver to perform in-store tasks such as merchandising, promotional compliance checks and up-selling orders, all via the Aforza mobile app.
