DSD can get better still

October 26, 2011

A new Bishop-GMA study says retailers should share more data and objectives with DSD suppliers to build sales and save significantly on labor costs.

Retailers that make DSD (direct-store delivery) processes better in their stores improve the shopping experience through high in-stock positions of demanded items and fast ‘speed to shelf’ for new products. Chains operating on this higher plane have what is called ‘fully integrated DSD.’ 

This collaborative process between retailers and DSD suppliers syncs ordering, warehouse and delivery, merchandising and advance notices of upcoming promotions with demand sensing at the individual store level. It builds sales and saves a typical large-format store nearly 17,000 labor hours per year, according to earlier Willard Bishop research for the Grocery Manufacturers Association (GMA).

An updated Bishop-GMA study released this month, Optimizing The Value of Integrated DSD (also done with ShelfSnap, ATA Retail Services, Gladson and Kwikee), tells what it takes to attain this consistently across high-velocity categories such as soft drinks, salty snacks, cookies, baked goods, frozen pizza and ice cream. The study involved field study and senior executive interviews at seven food chains (28 stores) and 128 manufacturer sales representatives (MSRs).

Where to improve? The study found that:
•    Challenges in managing planograms are an important reason why shelf conditions don’t always deliver the optimum shopping experience. Only 80% of MSRs were confident an initial shelf set was accurate, and fewer than 60% reported they could access store-specific planograms.
•    The DSD in-stock level averaged 98.2% versus 94% in other studies of DSD and warehouse-delivered products. To attain these higher numbers, stores collaborate more with suppliers on shelf allocation and back-stock, share sales data and merchandising plans, and restock DSD goods in off-hours.
•    Under-facings in this study averaged 13.1%, far lower than the 30.0% in other studies. Data guides, agreements on days of supply and timely adjustments and audits of the planogram were key.
•    There are significant differences in retailer adoption of DSD practices, which creates untapped potential for improving performance.  Detailed data on specific practices can be seen in the full study.  http://www.gmaonline.org/file-manager/Logistics/WP-DSD2011-9rev.pdf

The benefits are clear to stores that share POS data, planograms and merchandising plans with motivated DSD suppliers. The Lempert Report says opening up will improve shelf performance and satisfy shoppers, who are offended by out-of-stocks as a waste of their time and a promise unfulfilled.