Introduction to the Direct Store Delivery (DSD) Model

Published: January 14, 2022, Last Updated: May 2, 2024

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Writer: Martha Pierson
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Editor: Anais Osipova
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Reviewer: Michael Needham

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.

What Is Direct Store Delivery?

Employee stocking store shelves.

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.

What Businesses Should Use the Direct Store Delivery Model?

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.

Advantages of Direct Store Delivery

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:

  • Faster delivery of products. Implementing the DSD model can bypass long delivery times and get your products delivered to the end customer faster. When you deliver to distribution centers, you can never be sure how long your goods may stay there until they’re ultimately placed on shelves.
  • Safer delivery of short-lived and fragile products. When you ship a fragile package to a distribution center, you cannot ensure it will be handled with care. Likewise, products with short shelf lives, such as bread or milk, may spoil if stored in a warehouse for an extended period of time. A direct store shipping option can help avoid these problems.
  • Better control of demand. DSD allows manufacturers to track the demand for their products much better. You can analyze your sales with the help of the retail staff to better evaluate the efficacy of merchandising strategies and promotions. By knowing the actual figures, you can better understand how much to produce to meet your customers’ needs.
  • Increased inventory visibility. By keeping in close contact with the retailer, you can get real insights into how much you have in stock. You can track your inventory much easier since you know that they’re either at your facility or directly in the store. Additionally, the retailer can identify damaged or defective products much faster, saving you a lot of time to send replacements or organize returns.
  • No third-party involvement. Without any middlemen or stoppages in the supply chain, you rarely have to share profits with a third-party organization. You will be in charge of the entire delivery route.

The Challenges

Despite the overwhelming advantages, small businesses can face some challenges with the direct store delivery model. The two main drawbacks include:

  • Higher shipping costs. One of the biggest drawbacks of the DSD model is the increased distribution cost. For instance, you may have to purchase or lease trucks, hire drivers, and coordinate with them to deliver your products safely and efficiently to the stores. Unless your products need fast delivery and careful handling, warehouse storage fees may be less than the costs of converting to a DSD model.
  • More responsibilities. The manufacturer plays a more strategic role in this distribution method. As a result, the manufacturer will have more responsibility in ensuring timely deliveries. Moreover, the manufacturer will likely need to assume the liability of damaged or defective goods.

DSD Best Practices

If you plan on implementing the DSD model, here are some tips that could help you get the most out of it.

Use a Supply Chain Management (SCM) System

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.

Employ an Experienced Logistics Specialist

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.

Bottom Line

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.

Martha Pierson

Content CreatorMartha Pierson is a marketing strategist and business development expert based in Glendale, California. As a content creator for the Finturf blog, Martha shares her vast knowledge and experience with readers to help them build and sustain successful businesses. Her articles offer practical tips and actionable advice that entrepreneurs can implement immediately to achieve their goals. Martha also provides insightful analysis of current trends across different industries and offers expert guidance on how businesses can adapt to changing market conditions.

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