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. In this model, it is the manufacturer that manages the inventory levels, merchandising, and promotions. Stores have used DSD in years past. It accounted for growth in retail profits for the grocery sector. You can now trust the speed, accuracy, and efficiency of DSD now than ever before due to advances in technology. Everyone in the supply chain is benefitted with DSD including manufacturers, retailers, and customers.
With DSD, the cost of inventory, delivery, merchandising, and stocking labor is handled by the manufacturer. This helps to reduce the capital investments and operating expenses of the retailer. With this, the retailer gets higher profit margins.
The visibility of manufacturers into consumer behavior, sales volume, patterns, etc., is also increased. 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. Sometimes in a day or two the products are replenished.
Also, if there is a representative in the store every few days, manufacturers have the opportunity to predict and take advantage of trends. For example, if there is an event or festival going on, then certain products might be on demand.
Manufacturers and retailers can both put up money to promote new products. With DSD, there is an assurance that throughout the promotion period, the new product will not go out of stock.
DSD can help retailers take away their employees time from being used in ordering stocking, cycle counts, and merchandising but instead focus their efforts on customer services and other activities that drive sales.