Direct Store Delivery (DSD) – Understanding DSD in Sales and Logistics
Referring to a Why and how companies perform the DSD business process: The International Symposium on Direct Store Delivery (DSD) on this interesting topic: Direct store delivery (DSD) is a key method of selling and distributing products for a large variety of industries, like food, beverage, home personal care products, and like wholesale and distribution, oil & gas, service industries to name industries beyond consumer products.
In most cases, DSD is a more expensive way to distribute finished goods from a logistics perspective. However, the fast moving consumer goods industry (FMCG) seems to reconsider its value to their business. As a recent survey revealed, a growing number of companies in this industry runs DSD. Particularly, this method helps these companies ensuring desired levels of product availability at the point of sale, guarantees proper product presentation on the retail shelve, helps collecting prime market research information, and secures a more effective introduction of new products – to name just a few advantages. Based on this, companies believe that DSD delivers benefits that justify – and more than compensate – its’ higher process costs as indicated by the following exhibit. Ultimately, these increased benefits result in an economically higher value-add.
Exhibit DSD Companies’ Assumption: DSD delivers Benefits that justify and more than compensate the higher Process Costs.
Source: Global DSD Analysis 2007
As of 2006, 24 of the world’s top 30 FMCG companies did run DSD. Furthermore, as a recent study stresses 96 % of the FMCG manufacturers as well as 88 % of the retailers identify major benefits and competitive advantages resulting from the DSD business process.
However, DSD works different for various industries. Manufacturers and retailers disagree on where this value originates. While from a retailing perspective the logistical benefits prevail, manufacturers predominantly focus on sales and marketing. And furthermore, for multiple reasons DSD turns out to be difficult to put into practice. Implementing DSD as the only or as a parallel distribution strategy requires specific IT capabilities, which are, so far, according to our research, not yet fully available from shelf. The lack of these supporting IT-solutions and -functionalities is among the top 2 issues of concern both within the retailers and manufacturers. Based on the study, 54 % of the manufacturers see the major deficits in the area of tour preparation and physical distribution. 68 % of the retailers cite inadequate electronic communication capabilities with their suppliers.
Despite showing major relevance in the industries, DSD has not received much academic attention so far. The motivation of our work is therefore to reduce this gap between practical relevance and academic discussion as well as to analyze the current IT support available today.
Hence, we addressed and discussed key questions related to DSD businesses, such as :
- What is DSD? How does it differ from other modes of distribution?
- Who actually runs DSD?
- Which products are DSD products?
- How do companies run DSD?
- Are there differences according to countries, companies, or goods?
- Which characteristic roles do companies use in the daily DSD operation?
- Which trends will shape the conduct of DSD in the future?
- How does IT support the DSD process? Which functionalities are available from shelf as of today?
Resulting in a report, it is fundamentally based on the results of the “Global DSD Analysis 2007” (GDA) conducted by the University of Regensburg. The analysis embraced 203 manufacturing and 49 retailing companies, included 24 of the top 30 FMCG manufacturers and 11 of the top 15 retailers.
The study involved companies representing more than 15 million DSD deliveries to points of sale.
For your convenience, please find the DSD Report to understand why and how manufacturers and retailers run DSD on http://www.direct-store-delivery.com.
In case of any questions or remarks, please don’t hesitate to contact me.
Thank you very much for your attention.
Prof. Dr. Andreas Otto
tel: +49 – 941 – 943 2685
fax: +49 – 941 – 943 3187
University of Regensburg