Guest Commentary: Thirsty for DSD Efficiency? Issues and Answers

The beverage business has become much more complex, dynamic and fragmented over the last five years. One of the reasons why is consumer taste buds are changing in both developed and emerging markets. The result is a dizzying plethora of choices to quench every thirst, from hundreds of craft beers to Chinese colas to a seemingly endless stream of flavored energy drinks.

According to a recently published survey, “Global Beverage Survey 2013-2014: Market Trends, Buyer Spend and Procurement Strategies in the Global Beverage Industry, the following are some key market issues and trends:

  • Global beverage manufacturers consider China, India, and Brazil to offer the largest growth potential among emerging markets in 2013-2014.
  • Pressure on margins, volatility and increase in input costs, and regulatory changes are immediate business concerns.
  • The top three expected key changes in business structure are: improving operational efficiency, adding new products and services and expanding in emerging markets.

In the United States, the number one challenge is keeping inventory in-stock. Direct Store Delivery (DSD) business models currently average 98.2% in-stock. If beverage companies can optimize DSD with an integrated planning and execution solution, they will have the opportunity to synchronize the salesperson, the merchandiser, and the delivery truck in the most efficient manner possible.

Complexities and Challenges
According to a Grocery Manufacturers Association study, the activity that takes the most time away from working the shelf is associates waiting to receive product at the store. There are many challenges associated with DSD, including:

  • Balancing DSD territory assets against customer demand fluctuations.
  • Underutilized fleet assets.
  • Improving collaboration of sales, operations, planning, execution and the retailer.
  • Compliance of store visits by sales and merchandisers, as well as delivery routes.
  • Inaccurate fill rates due to unique promotional driven pallet configurations required by the retailer.

And among the complexities…

  • The move from static routes to dynamic routes creates a new set of business process changes.
  • In-stock replenishments depend on harmonious synchronization between Sales and Operations.
  • Getting retailers to share point-of-sale (POS) data.

How to Handle DSD Logistics Challenges
DSD networks bypass the retailer/wholesaler distribution network moving goods directly from the point of production/distribution to the stores. Managing this process efficiently also requires a fully integrated DSD planning and execution platform.

Many beverage companies today use legacy routing and load building systems, in many cases, manual systems. Most of the beverage industry leaders – including Coca-Cola, Heineken, Molson Coors, and Carlsberg – use an ERP system known for its ability to support Consumer Good companies that are distribution-intensive in nature. They addressed the “white spaces” for DSD by embedding a best-of-breed solution that operates natively within their ERP solution, without any interfaces, and uses the ERP’s master data.

The companies referenced above have modernized business strategies and processes that make them global DSD leaders for beverage. Their businesses depend on “delivering beverage,” but behind the scenes, there are numerous logistical and operational challenges that they must address. These companies wanted to leverage their ERP ecosystem to plan truly efficient routes, build customer delivery loads with mixed-pallet configurations, and build fully-utilized delivery trucks. With their embedded DSD solution, they can identify optimal territory networks to improve customer service levels; simultaneously generate optimal next day planned routes and loads; and execute accurate case pick using voice picking to allow for a seamless flow of business data through their ERP.

Quenching the Thirst for DSD Efficiency
DSD businesses are very complex given the nature of delivering direct to the point of sales. Beverage companies make 10-20 deliveries on a given route and require compliance for on-time delivery. Lost sales due to out-of-stock situations can cause a beverage company to loss shelf space given the margins retailers manage to. Improving in-stock levels using an integrated platform is the value attained. Improving labor efficiencies in this business model is crucial because synchronization from sales order intake, to merchandising the shelf, to delivery requires true collaboration and accuracy between internal parties on an integrated platform. For global beverage companies, using technology to fill the “white spaces” has led to a reduction in miles driven, ensured that sales territories are defined to enable optimal delivery frequency, increased efficiencies in trailer utilization, and reduced load planning time and order delivery accuracy. Leaders in the beverage industry have chosen to address the complexities of DSD head-on by investing in technology that  improves operational efficiency and preserves their market leadership in an increasingly competitive global marketplace.

Bobby Miller is Global CPG Strategist at ORTEC. Bobby pioneered the innovative ORTEC solution ‘Perfect Shipment’ which utilizes demand forecasting to generate optimal shipments, enabling organizations to plan and reduce freight cost in advance of execution. He has over 25 years of expertise working in the Consumer Goods Industry and developing supply chain software solutions that help companies globally such as P&G , General Mills, Coca-Cola and Clorox. Prior to ORTEC, Bobby was Sr. Manager of Supply Chain Excellence for Georgia-Pacific, where he pioneered the concept of sales order load optimization. He has also held various positions with Kraft, Coopers Lighting, Information Resources, IRI Logistics and Manugistics. Bobby received a B.S. degree in Information Systems from Chicago State University.  He is currently chairman of the Technology Association of Georgia Logistics Society.

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