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 delivery is 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.
One major reason for the direct store delivery is the speed at which goods move in the supply chain. Perishable goods are goods that spoil quickly for instance fish, meat, milk, grocery majorly etc. these goods have a short life span and they can’t be changing hands and changing stores incessantly. Direct store delivery helps the retailer to supply fresh product from the source to the final consumer. It interests the average consumer to find out that the products on display are fresh from the farm or from the manufacturer’s factory. Fresh products have the enticing look and feel that contrasts with that of stale products.
Distributors may not handle goods carefully and appropriately and thus reduce the value of the product before it gets to the final consumer. Fragile goods like glassware, ceramics and others have to be carefully handled and they can hardly be trusted to get to the consumer intact because of the changing of hands and warehouses before it gets stocked in a retail outlet. Goods like these are best taken to retail outlets from the manufacturer. This would ensure that if anything happens to the product, the manufacturer would be accountable.
Direct store delivery may require more of logistics investment by the manufacturer but its benefits cannot be overshadowed by this.