INDUSTRY REPORT. DIRECT STORE DELIVERY FOR FOOD & BEVERAGE DISTRIBUTION Strategies and Technologies DELIVERING RELIABLE DATA COLLECTION SOLUTIONS

Transcription

1 INDUSTRY REPORT DIRECT STORE DELIVERY FOR FOOD & BEVERAGE DISTRIBUTION Strategies and Technologies DELIVERING RELIABLE DATA COLLECTION SOLUTIONS

2 PART I: FOOD & BEVERAGE DISTRIBUTION ENVIRONMENT Many challenges exist for today s food and beverage companies. One of these is that many processes are not yet automated. Direct Store Delivery, the process used to distribute the right goods to the point of sale at the right time falls into this category. This process is frequently performed by a third-party supplier to maintain the best product placement and replenishment at the lowest cost. It is a process that has been slow to become automated, yet rife with opportunities to reduce costs and improve customer service and relationships. Growth and profitability (driven by cost reduction) are the main challenges of food and beverage companies. Both of these challenges are, in large part, determined by managing and meeting customer demand. However, meeting customer demand levels is not as simple as it seems. Food and beverage companies that deliver direct to the point of purchase are a step away from the final demand and find it DSD is both a Strategy and a Technology. difficult to understand customer consumption patterns. However, this is precisely what helps them gauge the level of demand for the products they must have on the shelf. Other difficulties include knowing what product the customers want, and how to optimize spending on trade promotions. Direct Store Delivery (DSD) automation includes capabilities that help food and beverage companies distribute their goods from manufacturing through to distribution and out to the retailer or other points of use such as restaurants. The capabilities of an automated DSD system include planning and managing the inventory (i.e., load) and route of a delivery truck, dispatching and scheduling deliveries for physical distribution, and reconciling the route after the truck returns from its deliveries. All these capabilities are further automated with mobile computers and printers that allow the immediate and accurate entry of data. When information is up-to-the-minute and visible, sales and production planning can be synchronized with consumer demand. PART II: BENEFITS OF DSD FOR FOOD & BEVERAGE DISTRIBUTION The capabilities of an automated DSD system address difficulties and requirements across many areas of food and beverage distribution. While the overall power of a DSD system is in reducing the replenishment cycle, there are other major advantages that stem from the automation of DSD. Page 2

3 1. Appropriate Product Handling. DSD as a distribution strategy allows for food and beverage companies to ensure the proper handling of goods. Some goods, such as baked goods and ice cream are highly perishable while others are not. Planning, dispatching and route optimization help ensure that products are delivered with the level of freshness demanded by consumers. 2. Inventory Reduction. DSD puts inventory management in the hands of the supplier. Food and beverage companies control inventory from production through to the point of sale. This is especially the case for perishable products where there is a high need to synchronize production with demand. The system allows delivery drivers to make inventory decisions for the retailer based on service-level agreements. Demand can be planned more accurately based on order and replenishment information thus lowering the need for surplus inventory that may be needed when reaching a customer location. 3. Reducing Out-of-Stock Conditions. Companies running a DSD system outperform companies without a DSD system. One important way they do this is by reducing or eliminating stock-outs at the point of sale. For companies in the snack food industry, replenishment can be nearly a daily process. A DSD system allows the delivery person to monitor shelf space and promotional items. In this way shelf space can be optimized, refreshed and rearranged as the need arises since the route sales person is in real-time DSD technology provides unhindered communications between suppliers and customers as frequently as required. communication with the planning system. Information on usage levels is available to determine if more frequent visits are necessary to maintain a sufficient inventory of goods on the shelf. 4. Improved Communications. Food and beverage companies need frequent and effective communications with their customers to determine their needs on an ongoing basis. In fact, many retailers, in effect, outsource shelf stocking to their suppliers and must communicate their needs effectively. A DSD system provides unhindered communications between suppliers and retailers as frequently as required. In fact, no other process provides this level of integration between the needs of the customer and the plans of the supplier of food and beverages. 5. Profitable Customers. Several factors affect the ability to increase the profitability of retailers. When shelves are stocked with merchandise and stock-outs are reduced, a higher volume of product can be sold. In addition, DSD can help increase the satisfaction of customers because their shelf stock is managed more effectively and their needs are met based on frequent updates and communications. Finally, there are a number of capabilities of the DSD methodology that work to improve profitability including: Improved Product Presentation Better Product Pricing Access to Market Information Efficient New Product Introduction Effective Promotions Page 3

4 PART III: DSD FUNCTIONALITY DSD is both a strategy and a technology. It helps improve effectiveness of operations from load and route planning, to physical delivery, to load and route optimization (see DSD Functionality diagram). DSD enables communication between customer and supplier at each stage of the process. Inventory and replenishment is managed better. Pricing and promotions can be optimized. In the final count, sales grow with more satisfied and profitable customers. Load and route planning 1. Truck Inventories. In a highly competitive environment, it s imperative for food and beverage companies to make sure product is on the shelf and available at a time of the products optimal freshness. Eliminating out-ofstocks is the most important metric for retailers in the DSD chain. The DSD solution enables food and beverage companies to dynamically manage inventory levels between the shelf, the truck and the warehouse while also tracking empties and returns. Giving real-time visibility to inventory levels as well as allowing for automatic triggers and alerts when inventory thresholds are reached allows food and beverage companies to ensure their ability to fulfill customer demand. 2. Route Optimization. The pressure to remain competitive and eliminate waste is seen most predominately in how DSD companies plan and execute the movement of product from the warehouse to the store shelf. Fuel costs continue to go only in one direction and companies are mindful about the most effective ways of using resources such as trucks and labor. Being able to optimize routes can mean significant savings to the bottom line and allow a competitive advantage to more quickly and effectively servicing customers. 3. Dispatch and Scheduling. Whether routes are static or dynamic, food and beverage companies constantly seek the most effective means of getting their product on the store s shelves. With increasing fuel costs and pressure to maximize the utilization of resources, DSD Page 4

5 technologies provide companies tools that will allow them to analyze routes and the opportunity for improving distribution methods while allowing them to be responsive to new customer demands. Real-time visibility to orders and customer demand compared to route information and truck availability allows food and beverage companies to make decisions on the best means of getting product to market. Physical delivery 1. Load Management. It s critical for companies with a DSD distribution method to be able to get the right product to their customers without shortages or an overstocked route. Doing so successfully requires planning to optimize space on the truck. Optimizing the truck load can result in significant efficiencies, but requires a system that supports presales and conventional routes while having the flexibility to accommodate a company s variable needs. The result is fewer items coming back on check-in and an optimal way of servicing the customer. 2. Delivery Automation. Tracking the delivery process is at the heart of a solid DSD system. To start the day, drivers download the day s route, inventory and pricing information. The driver and other parties validate the proper inventory is correctly loaded onto the truck before the day s deliveries begin. At the customer s location, the driver will then count and unload products ordered and accommodate for any returns. This information is gathered automatically for tracking and messaging to the back office. The driver then has the ability to confirm the delivery with the customers. Sometimes this means capturing a signature, producing an immediate invoice or collecting payment. The right solution helps automate the steps in the transaction while improving transactional accuracy to speed reconciliation of the route. 3. Pricing Management. Pricing scenarios in a DSD environment are typically quite complex. Between a wide variety of items and customers coupled with constantly changing discounts and promotional activities, many organizations have dedicated resources to manage and validate pricing. One of the capabilities of a DSD system is to help food and beverage companies manage and track all pricing and discounting options including customer-specific prices, group pricing, product quantity breaks and more. It s important that companies have a solution with the structure and depth to manage many pricing scenarios. Equally important is the system s ability to easily update the mobile user with real-time pricing and promotional changes to ensure that transactions are accommodating the most upto-date pricing rules and limit the need for post- Page 5

6 transactional adjustments. 4. Merchandising and Promotions. Merchandising continues to be an expanding activity in DSD. Merchandising offers both closer alignment with the customer as well as an expected increase in product exposure and sales. As a result, companies are seeking solutions to automate and effectively track merchandising activities while monitoring their effectiveness. Whether merchandising activities are dedicated or done by sales or delivery resources, it s important to give these personnel up to date information on campaigns, promotions and pricing. This not only allows field personnel to be more efficient and accurate, but allows them to instantaneously maintain information on product and labor consumed and capture photos for necessary compliance situations. Better tracking of trade and promotions activities not only allow food and beverage companies to operate more efficiently but gives them visibility into the effectiveness of their trade investments. Load and route reconciliation A system that supports automatic collection of payments improves cash flow. back-office personnel to focus on transactional variances before posting instead of checking and importing all transactions. 2. Invoicing and Collections. Traditionally, customers of food and beverage companies paid upon invoice or receipt of the delivery. Today as options for payment increase and supporting technology allows for new and accelerated payment methods, food and beverage companies need to be flexible in how they receive payment. A strong benefit to a mobile DSD application is the ability to transact payments in the field. By being able to automatically perform credit authorizations and take credit cards, food and beverage companies can eliminate the delays and resources in collections. A system that supports the automatic collection of payment improves cash flow but also instills transactional integrity and supports accountability for those collecting 1. Route Reconciliation. Upon completion of the day s routes, trucks are checked back into the production or distribution facility where remaining inventory and returns are counted and compared to invoices and payments collected in the field. A system that dynamically tracks these activities during the course of the day dramatically speeds the time of route reconciliation allowing payment in the field. While food and beverage companies are still producing receivables and invoices in the back-office for many customers, Page 6

7 supporting the multitude of payment activities is a critical function in today s DSD environment. 3. Performance Reporting. Many companies make the mistake of designing process improvements and investing in technology without measuring the expected performance against actual performance results. Although systems are a significant component to attaining improvements, people and processes also have a significant impact on the end result. An effective DSD system needs to be able to produce real-time, comparative data with reports that can easily measure performance. From tracking inventory and product movement to a wide variety of sales metrics, food and beverage companies seek to easily and graphically measure results and use tools to drill down on potential areas of improvement. industry. The main way to operate efficiently is to make the best use of resources. DSD technologies can optimize these resources to maximize the number of stops and the number of deliveries accomplished by each driver each day. PART IV: CONCLUSION As a strategy, DSD integrates food and beverage companies with their point of sale retail customers to meet consumer demand. It is an alternative form of distribution pioneered by some of the largest food and beverage companies in the world. As a technology, DSD automates the activities involved in fulfillment of customer orders. It manages truck inventory, optimizes routes and dispatches trucks to deliver food and beverage products to the point of sale. DSD manages the most efficient load, automates delivery and assists with pricing, merchandising and promotions. Finally it helps to reconcile inventory and payments in the returned truck, as well as serving as a reporting mechanism to determine route efficiency and effectiveness. Costs for resources such as trucks and drivers are fixed and common across the Supply Chain Services 5600 Memorial Avenue North Stillwater, MN (866) info@supplychainservices.com Copyright 2012 Supply Chain Services LLC. All rights reserved. Page 7