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Direct Store Delivery (DSD) v Central Distribution
It was discovered that the supply chain alone adds 25% to the normal prices of products. This percentage is shared among transportation, warehousing, profit and labor. However, with direct store delivery, goods can be taken to the retailer directly from the manufacturer or to the consumer and this would invariably reduce the cost price of the product to the final consumer.
Direct store deliveryis basically in two ways: delivery to the point of sales and delivery to the point of consumption. Delivery to the point of sales means the delivery of goods to the retail outlet directly from the manufacturer. This system leaves the distribution center out of the equation. This system is largely preferred for the fast transfer it gives to the distribution of goods. For instance, the farm does not have to work with a wholesaler who finds a storage center to keep the product until he can get demand for it. The farm would get the grocery store’s order and delivery appropriately.
Distribution to the point of consumption is another side to direct store delivery. Manufacturers now sell directly to customers, cutting off middlemen in the process. This is done via the website where consumers can make their orders and get the products shipped to them. The rationale behind this is the markup the supply chain adds to the price of goods.
Since the manufacturer is selling its own products, there need to be in place merchandizing, information gathering, marketing, and all other needed effort to get the goods to the attention of the customers. Direct store delivery works for auto companies and they market their brand by participating in motorsports, and all other events that can get the attention of customers.
Central distributionis a means of organizing the receipt of products from suppliers and its onward delivery to the individual branches of a multiple retailing operation. Deliveries from suppliers are transported to a transported to a central location, usually in full load quantities, rather than to each branch. Loads are then consolidated from a number of suppliers and delivered to the branches, usually in a single full load.
The branches of a retailer receive a single delivery of variety of products from a single source rather than a number of different deliveries from a number of suppliers. This eases administration and work load at branches.
Retailers opt for centralized distribution because it is cost-effective as centralizing operation like warehousing and distribution usually leads to a number of cost reductions. You have fewer buildings to own or rent, which translates into less utility expenses, you don’t need many employees and equipment and computer technology. This can help in achieving lower pricing to customers and higher profit margins.
More, there is focus on the need of the customers as needed shipment has been made. The attention of the retailer is not divided between the customer and the shipment. With this, customer service is made better. There is also lower inbound cost as there is singleness of warehousing location.