What is DSD Delivery? A Guide for Small Businesses in 2024

As an eCommerce store or a small business, I’m sure you must’ve had the thought of eliminating parties in your supply chain altogether. 

It consumes significant resources and requires intensive communication efforts. 

But is it possible to do that? 

Can a small business consider it? 

One way to do that is through Direct-to-store deliveries. 

Direct-to-store deliveries have their challenges but if implemented correctly, they can save costs for small businesses, especially if you deal with a certain type of goods. 

What is DSD Delivery and How Does it Work?

Direct-to-store delivery is a distribution model in which a manufacturer or a supplier directly delivers the products to an online store or a retail business. It eliminates the middle intermediary often prevalent in traditional distribution centres.

This model is highly suitable for online retailers and retail stores that sell perishable goods and offer just-in-time delivery with a tight delivery window. This approach helps businesses have a hands-on approach to their supply chain and have greater control over the costs and order cycle. 

What is the DSD Delivery Process? 

Order Placement

Retailers and online stores send their orders to suppliers through an order fulfilment tool that facilitates real-time communication. This allows both the retailer and supplier to get updates on inventory and current demand levels and allows suppliers to adjust their distribution strategy accordingly. 

Order Picking 

Once the suppliers receive the product, they proceed with the task of product picking after checking their quality and product packaging.  

Loading Trucks and Delivery 

After the products are packed and ready, they are dispatched for delivery from the suppliers to the retail stores. As direct-to-store deliveries are opted for delivering perishable goods like medicine, food, and beverages, this step involves using specialised delivery vehicles that are optimised for space, temperature control, and efficient route planning. 

Merchandising 

Unlike traditional delivery methods, Direct-to-store delivery also involves suppliers in product placement and display in the retail store. They help with retail planning and organising the products in an appealing way that helps with brand recall. They also actively take part in managing inventory levels along with the retail stores to ensure timely restocks and avoid overstocking. 

Pricing and Invoice

Payment processing is done after the supplier delivers the products and is satisfied with the merchandising. The payments are handled electronically with invoices based on the delivered products. Retailers are then responsible for settling the final amount with the supplier. 

Benefits of Direct-to-Store Delivery

Now that you know what is DSD delivery, you must be wondering why certain retailers would choose to opt for the same from the many other delivery options available. 

1. Easy Logistics for Perishable Items

As mentioned, perishable goods anyway have a short window. If you follow a traditional supply chain, there is a high chance that the products can lose their freshness and even rot. 

The DSD model is apt for items like fruits and vegetables that are time-sensitive and require careful handling. DSD distribution ensures custom packaging and transport for such items leading to efficient handling of goods at grocery stores and during transit.

2. Quick Deliveries to Stores

Here, the goods aren’t transported to the warehouses like done in traditional supply chains. The supplier is directly involved in the delivery process and has to deliver the products at the location where they will be consumed for end-consumption. 

There is also a reduction in the overall time for marketing which increases the speed of delivery. The improved delivery time leads to better product availability and high inventory turnover for grocery stores where the shelf space is limited. 

3. Cost Savings

Under a DSD system, the products skip all the middlemen who deliver the final product to the retail store. They are neither transported, nor stored in a warehouse or a distribution centre. This way you’re saving costs for storage, transportation to the storage, and the staff hired for the same. 

You’re also saving costs on fleet and driver wages involved in the transportation to the warehouse. The direct routes are optimised and are easy to manage, leading to a lower carbon footprint. 

4. Increased Customer Satisfaction 

Retailers and suppliers are in constant contact regarding the stocks. Any stockout issue that they may face is addressed in advance. As suppliers are directly involved with inventory management, they can supply their products accordingly. 

They also check if the products are in great condition before they’re displayed. The quick responses to stockouts and quality issues can be immediately addressed with a DSD model. This results in higher customer satisfaction and even helps with attracting new customers. 

5. Better Manufacturer and Retailer Relationships

This delivery method brings the manufacturer and retailer together and allows them to share ideas and get first-hand information as to what are the latest trends in the market from the manufacturer’s and the customer’s end. 

Retailers get a direct insight into customer trends and patterns and current demand. This way, retailers can also swiftly respond to changing market shifts. It also leads to higher transparency within the supply chain as there are only two primary parties involved and it helps in building lasting relationships. 

Challenges of Direct-to-Store Delivery 

If the DSD model is this beneficial, why don’t all retailers opt for the same? Because of course, it comes with its challenges. Let’s take a look at them. 

1. Higher Transportation Costs

Yes, we talked about saving labor and storage costs in the supply chain but then you cannot say the same about transportation costs. With the benefit of faster delivery, you’re also using a customised transportation mode that translates into higher costs. When a business adopts a DSD model, the supplier is in charge of the end-to-end shipping and the custom packaging and logistics requirements that come with it. The cost of mistakes is also higher in DSD than in normal deliveries. 

2. Unexpected Challenges in Transit 

It can be challenging for retailers and online businesses to adjust to any changes in transportation. Since most times the goods are perishable, they only have a time frame in which they can address any unexpected events in logistics like high traffic or natural calamity. 

They’d need to increase their operational efficiency which wouldn’t be a requirement in a traditional supply chain. And while retailers can leverage micro-fulfilment centres, they’ll still need to manage inventory. 

3. Complex Logistics Coordination 

A logistics manager in the DSD model needs to manage and monitor multiple fleets dispatched to multiple retail stores instead of a dedicated warehouse or a distribution centre. Not only do they have to ensure the fleets reach their destination on the registered time but there is also no room for slip-ups in the process. Suppliers can find this challenging and need to have an efficient staff who can perform these tasks effectively. 

DSD Delivery - Best Practices 

1. Leverage Ample Data

The best part about a direct-to-store delivery model is that because there are only two parties involved, there is less room for information to get lost. Suppliers need to leverage and analyse as much data as they can to manage inventory and make demand forecasts. 

This also clears misunderstandings between retailers and suppliers since they both rely on the same information based on accurate purchase histories and real-time data. They can use it to mitigate inventory risks and mistakes related to stocks and demand. Use inventory management tools that you can rely on for demand forecasting and to manage and update stocks. 

2. Integrate Advanced Technology 

Along with inventory, you also need to integrate other tools that play a crucial role in optimising operations in direct-to-store deliveries and facilitating easy operations and collaborations. 

RFID: This is a tracking technology that involves using tags with unique identifiers on products. It enables automated tracking throughout the DSD process. This helps the suppliers and retailers to trace the fleet and keep track of it in case it gets lost in transit. 

IoT: In DSD, IoT devices can help with monitoring various parameters in logistics and goods such as temperature, humidity, and location. It ensures that perishable goods are in the best conditions during transit and their quality is intact. It also collects data from and provides insights that help suppliers improve their logistics and delivery routes. 

3. Facilitate Omnichannel Visibility 

Any agile delivery system relies strongly on omnichannel visibility. Because, as a supplier, you’re not just taking care of a single aspect in a DSD system. You are managing inventory, fulfilment, order management, and shipping, along with collecting data from all retail locations and platforms. 

You need to have a dedicated platform where you can consolidate this data and get a comprehensive insight into all these channels. This way you can monitor performances across all retail stores. It also makes it easy for you to track your KPIs like inventory turnover and average sales and check which retail channels are performing best and which need improvement. 

Wrapping Up 

Suppliers already have ample things on their plate, especially in the Direct-to-store delivery scenario. Right from inventory management to order fulfilment, you need to be actively involved in each process. This is why, it is ideal to outsource logistics for your distribution.

PACK & SEND can help you with your all micro-fulfilment and delivery requirements. Contact us to know how we can ensure your timely deliveries and exceptional customer experiences.