How do you get . . . “All That! and a bag of chips?” with DSD?

Let’s look at Direct Store Delivery (DSD) – traditionally, merchants have used DSD vendors to provide for high volume or specialty products that the merchant cannot themselves produce or obtain for internal distribution to stores. The vendor is contracted, and the relationship may range from no-service (drop ship or delivery only) to full service (delivery, inventory management, order writing, in-store merchandising). We all know examples of the major players in this arena; Coca-Cola, Pepsi, 7UP, Mondelez, Frito-Lay, KEHe, Mission, AG, Hallmark, and many more.

The DSD vendor manages many aspects of this relationship, or is contracted to, including ordering (regular & promo), delivery, merchandising, back stock, date or code rotation, credit processing, etc. This model allows the merchant to take a back seat and, in most instances, scrutinize DSD performance in a lesser fashion that in-house departments that merchants may feel they have ore control over. This leaves merchants looking to the vendor versus internally for solutions to drive DSD sales and profit performance. In this model the DSD vendor is driving the business, typically from a perspective of enhancing their own sales first, and the merchant second. DSD vendors have positioned themselves well, having products in high demand, with brands known to drive top line sales, and are considered integral to a merchant’s sales & customer traffic objectives. But, DSD Vendors ted to be very linear in their approach to driving sales and think primarily in terms of promotions to drive sales.

Historically, this model of DSD vendor management has worked, DSD items can drive great topline sales, but as the landscape has become more competitive, it has also become extremely promotional. So, while your top line sales may be achieved, your margin may be suffering significantly without allocation funding behind the scenes? But, you want to be COMPETITIVE? RIGHT?

  • AVOIDING THE DIET DRINK SYNDROME – The promotional aspect of DSD will always exist, but, don’t fall prey to topline sales thinking that yields no calories (profit). Promotional activity may drive sales, but it doesn’t always drive profits (calories) in the same way – measure both, find balance, while promo sales may look, taste, and feel good . . . they are like a diet drink, they may have no nutritional value (profit margin) for your business to grow on AND when you consume too much (have excessive promo sales), like a diet drink that top line can begin to trick your mind that everything is AOK when, in fact, it’s not.
  • DO YOU MANAGE YOUR DSD VENDORS, OR DO THEY MANAGE YOU? – DSD Vendors are a necessary part of the retail & grocery landscape, however, there’s only one service provider I was ever told you should “Leave the Driving to Us” with, and that was Greyhound! You should drive your DSD business and that means gaining visibility to DSD vendor performance.

By this point, you’re asking the screen – HOW EXACTLY  DO WE DO THAT?

Like any operational piece of the business, ask yourself some basic questions;

  1. What information related to DSD is available within your organization?
  2. What DSD vendor processes and business levers can you or should you control?
  3. What does good look like with respect to DSD sales & profit, DSD inventory, credits, etc. – do you really know? what empirical data would demonstrate or prove that?

This is the age of big data, where finding a competitive edge can exist in how far the decimal is extended, and how those findings are leveraged against an individual store or your entire fleet. Think about what data you do have; SALES, PURCHASE INVOICES, CREDIT INVOICES, PURCHASE UNITS, CREDIT UNITS. From this data one can identify DSD vendor sales, purchase (order), credit performance and establish benchmarking for what good looks like. This allows a view from afar to better identify underperforming stores through DSD Transaction Monitoring that can be reviewed in any way you wish to see the data to conduct performance analysis & improvement. Add to that, store level performance for on-site vendor execution, and any number of KPIs could be tracked to monitor vendor performance and leverage that data against the transaction monitoring previously discussed to generate a comprehensive view of DSD Vendor Performance. Store level DSD kpi might include; Out-of-Stocks (OOS), Promo Out-of-Stocks (POOS), Out-of-Date (OOD), late delivery, time in store, inventory levels, or other kpi determined to be critical to driving DSD sales & profits.

Now you have a means to identify DSD concerns, validate those concerns against store level on-site performance reporting (let’s call that – Vendor Violation Tracking), and can proactively identify & address; one off store or vendor issues, large scale vendor issues, route driver performance, OOS/Promo OOS/OOD issues, store training, inventory growth (shrink), or AP/LP integrity issues where previously merchants were dependent upon a DSD Vendor or a store to escalate issues. Bottom line is . . . If you want to drive DSD improvements, you have significantly more ability to do so than just setting another DSD Promo Ad!

If you would like more information on DSD Transaction Monitoring, DSD Vendor Violation Tracking, DSD Vendor Performance Scorecarding, or are interested in a DEMO of the DSD Vendor Tools available from the Stores Consulting Group, please contact us.