Speed is the name of the game in today’s retail landscape. How quickly products are purchased from store shelves depends on various factors, including consumer preference, special promotions, and brand recognition, just to name a few. The trick to gaining speed and increasing your inventory turns is to ensure you have a successful and cost-efficient replenishment system. Over the last few years, many consumer goods manufacturers have been increasingly using a Direct-to-Store delivery model as an alternative to their traditional wholesaler and distributor networks. A Direct-to-Store delivery model establishes a ‘closed loop’ network from the CPG manufacturer’s warehouse to various retail outlets, making multiple stops before returning to the point of origin.
Below are a few tips of how you can set up a Direct-to-Store Delivery model for your business:
- Create the Demand Profile – Understanding who your retailers are, and what their demand (i.e., order volume) looks like, is critical.
- Routing Deliveries – Once the right mechanisms are in place to capture the daily demand profile, you can map the optimal route for each day’s delivery. The route plan should take into consideration variables such as traffic patterns, speed limits, distance and time calculations, and Hours of Service for drivers.
- Loss Prevention – Because DSD involves multiple stops at retailer locations, building in processes to prevent and monitor product theft is very important. In addition to GPS and security cameras, training drivers on identifying suspicious behavior is paramount.
- Capturing Proof of Delivery – A variety of new technologies can enable electronic proof of delivery, primarily using handheld devices. This has an incredible impact on Order-to-Cash cycle time, reducing it to a matter of hours.
- Continuous Improvement – Using information captured through the demand profile, route designs, and delivery information, you can set a baseline for performance. This way, you can measure the effectiveness of incremental and ongoing improvements to the network, through cost savings and increases in efficiency.
Is a Direct-To-Store Delivery model right for you?
If your products and supply chain have these requirements, you may be a good candidate for this model:
- Control of the deliveries is very important. For example, delivery windows are small or limited to specific times.
- A large portion of your customer base are small retailers like convenience stores that cannot store excess inventory and require frequent replenishment.
- Direct contact with retailers is a critical element to customer satisfaction, and therefore, drivers making the delivery broker the retailer relationship.
- If goods are not on shelves, you lose a sale and, consequently, market share. For example, if one soft drink brand’s products are not on retailer shelves, then the consumer will buy the competitive brand as their second choice.
- Security or product theft is an issue, especially in the case of high-value goods like tobacco, alcohol, and jewelry.
Is your organization following a Direct-to-Store Delivery model and, if so, what benefits are you seeing? Post a comment and share your experience and viewpoint.
Guy Toksoy is Vice President of Ryder Canada’s Supply Chain Solutions business segment. He is responsible for directing the development and operations of logistics solutions for Ryder’s global and domestic customers. Prior to joining Ryder, Guy held progressively senior positions at APL logistics, including Head of Logistics operations with responsibility for the operational and sales activities of all Canadian services. His career also includes progressive senior management positions at Cebra Inc. and GATX Logistics, as well as several entrepreneurial companies. Guy has a Bachelor of Science degree in Mechanical Engineering from Middle East Technical University, a Master of Science degree in Mechanical Engineering from University of Cincinnati and an M.B.A. from Miami University.