Retailers are constantly looking for innovative methods to enhance supply chain efficiency as competition grows and consumer demand shifts.
Some merchants optimize their supply chain with little changes: a process modification that saves a few hours here and there, or a technology upgrade that reduces costs.
Small changes, on the other hand, are insufficient for some. Direct store delivery may be an option for retailers trying to enhance their bottom lines by eliminating an entire supply chain phase.
Direct store delivery is not always the most convenient or cost-effective alternative. However, when properly implemented, it has the potential to produce huge cost savings and other advantages that can assist a firm in defending its competitive edge in the future.
In this post, we’ll define direct store delivery and discuss its merits and drawbacks.
Direct Store Delivery Definition
Direct store delivery is a supply chain approach in which items are delivered directly to a retail shop or location rather than a centralized warehouse or distribution facility.
Direct Store Delivery Advantages
Direct store delivery can be a low-cost alternative for businesses trying to simplify their supply chains, cut costs, and streamline their operations. Here are some of the advantages of DSD that businesses should examine.
- Better Protection for Perishable and Delicate Commodities
The longer perishable commodities, such as fresh foods, spend in the supply chain, the greater the danger of expiry and the shorter the shelf life of the inventory. Similarly, the longer delicate commodities are in the supply chain, the more likely they are to be destroyed.
By eliminating transportation to and from a retailer’s distribution center, you reduce the number of times fragile products are transported (reducing the chance of damage) and allow perishable items to reach shelves faster. As a result, numerous firms in the supermarket industry use the DSD business model.
- It Might Be Less Expensive
Consumer goods are not carried to or kept in a warehouse with direct retail delivery. This lowers your logistical costs since you won’t have to pay for transportation (including petrol or driver compensation) or rent, operate, or staff a warehouse.
- Improved Retail Store Delivery
Inventory can reach retail stores faster since it moves straight from manufacturers or suppliers to retail outlets.
Consumer products that spend less time in transportation help retailers assure improved product availability and higher inventory turnover, which is especially crucial for CPG brands and convenience shops that have limited shelf space.
- Enhance Customer Experience
Customers are less likely to face stockouts and are more likely to locate the things they desire in pristine condition more immediately with faster and cheaper retail stocking. This promotes consumer happiness and aids in the growth of your customer base.
Difficulties With Direct Store Delivery
Even though the benefits of direct-to-store delivery are numerous, it is not without its own set of problems. There are various drawbacks to direct retail delivery that you should consider before committing to the business.
- Can Be Costly
Despite the fact that direct retail delivery reduces warehouse and labor costs, it can still be costly when transportation costs rise.
Inventory stocking errors are even more expensive since the cost of receiving, returning, and replacing the wrong SKUs is considerable – especially if you consider the potential cost of lost sales while fixing the problem.
- Makes DTC Compliance Much More Difficult
Fulfilling DTC e-commerce orders might be difficult logistically in the absence of one or more distribution facilities.
While it is feasible to utilize retail establishments as micro-fulfillment centers and ship from them, you must constantly manage your inventory levels to avoid selling units that you do not have. Fulfilling and shipping from stores can also be costly due to the additional effort required and the requirement to ship larger distances depending on where your retail outlets are situated.
Direct Store Delivery Vs. Centralized Distribution
The centralized distribution paradigm can be replaced by direct retail delivery. Retailers who employ the centralized distribution model retain all of their goods in a warehouse or fulfillment center. Suppliers or manufacturers will deliver products to the retailer’s warehouse or fulfillment center, where they will be received and held until it is selected and packaged for a DTC order, it is set aside for emergency supplies and it is separated and transferred to a retail outlet that requires replenishment.
Even if the retailer distributes through many storefronts and sales channels, the warehouse or fulfillment center serves as a hub for inventory and administration, order fulfillment, and shipping under the centralized distribution model.
Direct store delivery, on the other hand, is a type of decentralized distribution in which there is no central hub for logistical operations instead each retail shop keeps a portion of a company’s inventory.
However, although direct retail delivery does not require a warehouse or fulfillment center, other types of decentralized distribution must. Some organizations distribute their inventory among many fulfillment centers, each of which may select, pack, and ship direct-to-consumer e-commerce orders as well as send merchandise to retail locations.
Furthermore, direct retail delivery differs from a decentralized supply chain, in which companies divide their product across various fulfillment locations. The items are held at various fulfillment centers until they are ready to be transferred to end-users or retail locations under this strategy.
Trends In Direct Store Delivery
With the increased availability of technological technologies, new trends are influencing the direct retail delivery market. These developments are assisting in the resolution of some of the most significant issues confronting firms who choose this distribution strategy.
Many direct store delivery companies fail to connect the connections between merchants and suppliers. However, this is gradually changing due to the development of technology that allows delivery staff to automatically record and share pickup and delivery actions. Connected mobile devices provide retailers and suppliers with real-time access to route planning, GPS, and inventory data.
Furthermore, mobile printers and EDI connectors make it easier to provide invoices and delivery receipts, ensuring that information is correctly and automatically captured.
Furthermore, the necessity to reduce time spent in the supply chain in order to keep items fresh is propelling some of the direct store delivery trends. Businesses may speed up delivery by improving route planning using automation and historical data, as well as automating order processing.
How to Begin with Direct Store Delivery
If you believe that the direct store delivery strategy is the best fit for your company, you should get started right immediately. Here are a few pointers to help you get off to a good start.
- Begin with a demand profile.
Examine your sales data and identify the goods that are in great demand and have a high inventory turnover. This will assist you in determining which goods would be most suited for direct store delivery, as this model is best suited for products with large replenishment rates.
- Determine the best delivery route.
Suppliers and manufacturers frequently have to deliver to hundreds of stores across multiple locations, so an efficient route planning tool is essential to ensure that your goods are shipped on time and as cost-effectively as possible — just ensure to account for each retail store’s availability windows to reduce wait time.
- Install a loss prevention system.
Accidents do occur, even with direct shop delivery. Make sure you have preventative safety measures in place to reduce loss from accidents, last-mile transportation interruptions, inventory lost in transit, and commodities damaged in transit.
Preventative strategies include appropriately assigning items based on each vehicle’s carrying and loading capabilities, utilizing suitable packaging, and keeping real-time inventory movement visibility.