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Conducting the first Global Analysis on Direct Store Delivery (DSD): Approach & Key Findings

Dear community,

I would like to dedicate my first contribution to the Global Analysis on Direct Store Delivery (DSD) we conducted in the last months. In this blog I would like to share the most compelling results with you. In case of any comments or remarks regarding the Global Analysis on DSD or any other topic, please do not hesitate to contact me.

The approach
Direct Store Delivery (DSD) is one of the strategic key growth topics within the Consumer Products Industry as the process delivers a broad range of business benefits to all parties of the value chain.To better understand the daily business of the Direct Store Delivery process, SAP’s Industry Business Unit Consumer Products & Life Sciences together with the University of Regensburg, Germany, conducted the first Global Analysis on DSD involving Consumer Products and Retail companies. For this and not limited to SAP’s installed base, several companies in the area of Fast Moving Consumer Goods (Food, Beverage and Tobacco) as well as Retail (grocery) have been interviewed.

The goal
The goal of this survey was to analyze the employment of the Direct Store Delivery business process on a strategic as well as an operational level and to examine the business process supporting IT systems.

The feedback
Due to broad company feedback and the multi-level survey, the results of the Global Analysis are relevant in various parts of the Direct Store Delivery business (e.g., in terms of region, size or volume). By this, it was able to:
– Receive a better understanding of the DSD business process and the employing companies.
– Channel Performance YTD
– Generate a global status quo and multi-level insights (strategic, operational, IT) of the DSD business process.
– Evaluate drivers & trends of the DSD process utilization in the future.
– Establish globally-evaluated industry best practices on regional and segment levels.

At the end, 252 responses have been gathered and 82 interviews performed worldwide, representing e.g.:
– 24 out of World’s Top 30 Fast Moving Consumer Goods companies.
– 80 % out of the worldwide Top 10 in Food, Beverage, 60 % in Tobacco.
– 11 out of Top 30 Retailers worldwide, 70 % of Europe’s Top Retailers.
– Deliveries to more than 15 Mio. Point of Sales.
– Respondents located in more than 40 countries.

Key findings on strategic level

On the strategic level, three key findings are representative across region- and segment-specific boundaries:

1. DSD generates value in the business – but major strategic differences exist
An overwhelming majority of Consumer Product and Retail respondents see the benefits and competitive advantages coming out of the DSD business process – but, the two industries disagree on the point of origin of the value. Consumer Product manufacturers predominantly focus on the sales & marketing side, while logistical benefits prevail from Retail perspective.

2. DSD increases the efficiency of innovations and new product introductions
In light of ongoing (re-) verticalization of manufacturers in today’s consumer product distribution, the manufacturers understand how DSD brings more efficiency to their product innovation and new product introduction processes. This is achieved by supply chain transparency and process control, as well as adequate downstream information in high quality. Most of the responding Retailers confirm.

3. CP manufacturers and Retailers stress their need for better IT-solutions for DSD
Compared to their business needs, the lack of supporting IT-solutions and -functionalities is among the Top issues within both the Consumer Product and Retail industries. The Consumer Product respondents see the major deficits in the area of route preparation and physical distribution. Retailers cite inadequate electronic communication capabilities with their suppliers.

In addition to the three key findings cited, there are others having their relevancy in certain regions and/or segments (e.g. in terms of out-of-stock, promotion effectiveness, customer loyalty).

Key findings on operational level

On the operational level, the survey was structured around a generic “Direct Store Delivery” value chain.
The Direct Store Delivery value chain

On operational level, four central findings have been identified:

1. Major process shifts are shown in DSD’s order entry process – but Presales and Call Centers will remain key
The DSD order entry process is very heterogeneous on region and segment level. From a consolidated view, the survey shows two fundamental changes for the DSD order entry process in the future. Traditional order entry process types will decrease in utilization while more automated, non-interactive types will catch up comparatively. However, orders via presales and call centers will remain in the top position.

2. Four strategies in the execution of physical distribution in DSD have been identified
The DSD process is performed differently in the various regions and segments. This is also valid for the execution of product delivery to the PoS. Within the Global Analysis, four major strategies could be identified, depending on the Consumer Product manufacturer’s attitude regarding the DSD engagement and process delegation.

3. The information gathering is the most performed activity by DSD companies on a global level
Followed by merchandizing, placement & positioning, and category / assortment related activities, the collection of information is the overall top activity performed in DSD.

4. SAP is the only vendor in the market to deliver an integrated end-to-end DSD solution in the market
Although various vendors provide focused solutions in specialized areas of the DSD process, SAP is the only vendor to offer an integrated end-to-end DSD solution.

In case of any comments or remarks regarding the Global Analysis on DSD or any other topic, please do not hesitate to contact me.

Thank you very much for your attention.

Best regards,
Ramin Shariatmadari

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      2. Four strategies in the execution of physical distribution in DSD have been identified.

      Could you please list and elaborate on the four strategies of physical distribution - operational level.