To survive in the overly saturated retail market, every business seeks new methods to gain a competitive advantage. One of these methods is the direct store delivery model. Many small businesses choose to deliver their products directly to the retailer or consumer to save money and time.
This article will focus on what is DSD in retail, its pros and cons, and which businesses would benefit from implementing this model.
Direct store delivery is a distribution method utilized by manufacturers that involves delivering products directly to the retail store. This model eliminates the step of delivering the products to the retailer’s warehouse. Ultimately, this helps manufacturers save time and money on warehouse organization and maintenance costs.
The basic DSD model starts with an agreement between the manufacturer and the retailer about the types of products and the quantity distributed. The supplier is responsible for delivering the goods to the store smoothly and on time. Once the products are at the store, the retailer takes the wheel in assuring that products are arranged on the store shelves.
In a DSD model, all contracts and price arrangements are negotiated only between the producer and the retailer. By shortening the supply chain, direct store delivery can help both parties offer products to consumers quickly and at a lower cost.
Some companies could specifically benefit from this distribution method. For example, it would be wise to distribute products that are easily perishable directly to the storefront. As a result, bakeries, grocery stores, and other markets can benefit from a DSD model that eliminates a lengthy supply chain. This can save the business money in the long run by decreasing warehousing costs and lost revenue from spoiled goods.
Additionally, businesses that sell low-value products in large volumes can benefit from the DSD method. The profit margin for low-value goods is likely much slimmer. As a result, warehousing costs can significantly affect overall profits and cut into an already small profit margin. Usually, low-value items do not take up much storage space and have quick turnover rates. Convenience stores, gas stations, and drug stores can benefit from a DSD model for low-value products they sell in bulk.
If your products are fragile or require special handling, you can go with this model to avoid damage in transit. Additionally, the shorter the supply chain, the less likely the products will be damaged. As a result, companies dealing with fragile goods can save money on warehousing costs and loss of revenue from damaged goods.
To make sure the DSD model works efficiently, you may need to implement POS financing software with inventory management tools, which can help you achieve the following benefits:
Despite the overwhelming advantages, small businesses can face some challenges with the direct store delivery model. The two main drawbacks include:
If you plan on implementing the DSD model, here are some tips that could help you get the most out of it.
An SCM software can help you oversee the entire supply chain. You can track your products in transit and remove any obstacles on the spot. For example, if your product gets stuck along the way, you can immediately take measures to fix the issue and normalize your supply route.
It’s crucial to have someone who knows a lot about logistics on your team. To keep up with demand shocks or emergencies, you need someone who can make effective decisions quickly and strategically. Your logistics manager should also ensure that you comply with all federal or state regulations on shipments.
As a small business owner, knowing what is direct store delivery can help you achieve success in a competitive market. If your company produces food, beverages, or fragile items, consider adopting this model today. With this distribution method, you can avoid long supply chain processes, increase revenue, and connect with your customers easier. However, keep in mind that it comes with extra tasks and responsibilities and higher costs at times.
