What are the Advantages of DSD?
This logistics model called direct store delivery or DSD is a delivery system where products, usually those that sell quickly at high volumes, are delivered straight to the retailer from the manufacturing facility. With DSD, products no longer pass through distributors and retailer-owned warehouses. The manufacturer directly manages the inventory levels, merchandising, and even merchandise promotions. DSD is not something new. And for the grocery sector, DSD has made their retail profits grow. Today, with advances in technology, DSD has become faster, more accurate and more efficient than ever before. Everyone in the supply chain is benefitted with DSD including manufacturers, retailers, and customers.
In direct store delivery, the manufacturer handles the cost of inventory, delivery, merchandising, and stocking labor. Capital investment and operating expenses of the retailer are greatly reduced. And this leads to higher profit margins.
This also increases the visibility of the manufacturer into consumer behavior, sales volume, patterns, and more. And this leads to better personalization designed around the demands of specific stores and their customers. Manufacturers impact sales directly and even without relying on the efforts of the retailer.
Traditionally, ordering and replenishment can be slow. When stores order products from the warehouse, it has to wait for the scheduled delivery which could be days away. If products are missing from the shelves because of this delay, then both retailers and manufacturer suffer from lost sales and customers that are not happy. On the other hand, in the DSD model, manufacturer’s representatives are in each store several times a week. With visits several times a week, the representatives will know the products that don’t sell, the products that sell really fast, the products that are getting low, and the products that have outages. Since manufacturers are able to determine the status of products in the store regularly, they are able to make timely delivery of the proudest that are needed in the retail store. The products get replenished quickly, mostly in a day or two.
Manufactuers will have the opportunity to predict and take advantage of trends if there is a representative in the store every few days. Manufacturers can check out certain products that increase on demand if there is an event of festival going on in the place, for example.
When there is a new product to be released, both manufacturer and retailer can put up the money and promote it together. DSD ensures that there is a good stock of the product throughout the promotion period.
With DSD, retailers can focus employee efforts on customer service and other activities that drive sales instead of spending it on ordering stocking, cycle counts, and merchandising.