Best practices for a direct store delivery business model

Sept. 2, 2014

Foods that are fresh often have a shorter shelf life than preserved or processed products, which opens the door for potential revenue losses as these items can become out-of-code more quickly. To address this challenge, more manufacturers are considering a direct store delivery (DSD) business model.

As modern consumers continue to demand more fresh food and beverage products, many manufacturers are examining how their company can improve upon their delivery and quality management processes. Foods that are fresh, whether healthier or of better flavored, often have a shorter shelf life than preserved or processed products. This can open the door for potential revenue losses, though, as these items can become out-of-code more quickly. To address this challenge, more manufacturers are considering a direct store delivery (DSD) business model.

The DSD model allows companies to better track product expiration dates and keeps closer control over how products are handled and maintained. While this might seem like an obvious answer, DSD is accompanied by its own complexities, which can cause issues within underlying systems and operations if not managed properly. Food and beverage manufacturers should adopt the following best practices to effectively address the potential quality dilemmas associated with the DSD model.

The first step is to adopt an integrated IT approach. Companies typically need a specialized software solution to employ a DSD business model, but working with disparate technology solutions will create more problems than it will solve. Lack of integration of the DSD solution with core systems such as an enterprise resource planning (ERP) system can create disjointed processes and data, which in turn hinders DSD by creating silos that limit visibility for users involved. In order to fully realize potential benefits, manufacturers should create a connected technology environment that will enable automated information exchange between applications.

Of course, it is also critical to ensure that existing technology has the appropriate functionality needed for managing each DSD nuance. Whether it is scheduling maintenance on route trucks or tracking inventory levels at multiple warehouses; companies need a reliable solution in place to account for and manage all relevant processes without requiring users to access a third-party system.

Essentially, the DSD model will require a flexible solution that offers mobile functionality. In this case, delivery vehicles act as “mobile warehouses” moving products from plant to warehouse, branch to retail store, and everywhere in between. Relying on a mobile technology platform that is integrated with business applications can contribute significantly to the success of the DSD model. This is achieved by providing users in the field with real-time information access. This platform should also be flexible and agile, as the requirements for mobility shift continuously and new types of mobile devices are introduced to the market. Providing drivers, retailers and plant managers with the ability to interact while on-to-go can help to significantly speed processes and improve business decisions.

Outside of technology, manufacturers should focus on optimizing product rotation. This is crucial for perishable goods regardless of whether the DSD model is employed because it minimizes the risk of out-of-date products. The DSD model allows manufacturers to place their product directly onto the shelves of a retail store, which increases the liklihood of maintaining its freshness due to few levels of processing. While this does require more frequent deliveries and time on the part of the manufacturer, the long-term savings often outweigh the initial time investment.

It is likely that the move to fresher foods will change demand levels, so food and beverage companies should also factor in this fluctuation when planning and scheduling. Shorter runs will become more common, and the size of orders will potentially decrease as well. This can lead to increased costs if not properly accounted for, meaning that manufacturers should consider potential shifts at the onset when initially switching to a DSD model.

While DSD is not a new to the food and beverage industry, many manufacturers are considering its benefits. This includes an easier means for product performance tracking when expanding fresh product offerings. Others continue to leverage mass-market distributors, but they still fight the same challenges associated with maintaining quality. The combination of the right technology and the right processes can enable manufacturers to effectively employ a successful DSD business model.

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