If products are delivered straight from the manufacturer to the retailer, especially with goods that sell quickly at a high volume, then this logistics model is called direct store delivery or DSD. Since products go from manufacturer to retailers, then there is no longer any need for distributors or warehousing for the retailer. The inventory levels, merchandising, and promotions are all handled by the manufacturer directly. DSD has been around for a while. And for the grocery sector, DSD has made their retail profits grow. 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. The retailer benefits in that it greatly reduces his capital investments and operating expenses. With this, the retailer gets higher profit margins.
This also increases the visibility of the manufacturer into consumer behavior, sales volume, patterns, and more. This then helps the manufacturer better personalize the demands of specific stores and their customers. Their impact on sales is direct and they don’t have to rely on the retailer’s efforts.
In the traditional way of doing things, when products are ordered and replenished, it usually takes time. Ordering products from the warehouse takes time since the store has to wait until the products will be delivered according to schedule and this can take days. 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. But, with DSD, there are representative sent by the manufacturer several times a week to check on the store’s existing inventory. This allows them to know what is on the shelves sitting, what is moving quickly, what is getting low, and what has outages. With these direct line products are taken to the stores more quickly. Sometimes in a day or two the products are replenished.
With a representative checking the store every few days, manufacturers will have an opportunity to take advantage of trends if there are any. So, if there is an event or a festival which would make an increase in demand for certain products, then manufacturers can take action and supply the retail stores with these products.
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.
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.