Potential savings within DSD processes for FMCG suppliers
As many consumer goods suppliers continue to report growing business challenges, a new report from Honeywell has found that millions of dollars can be saved by evaluating and improving Direct Store Delivery (DSD) operations – the way that products are ordered, sold, delivered and merchandised.
The report, which contains feedback from 350 C-level consumer goods executives and directors from across the globe, finds that 49 percent of organisations feel increased transportation costs have severely affected profit margins in the past 12 months. But those organisations that have carried out process evaluations (known as process re-engineering) in the past year to improve their DSD processes have cut, or expect to cut, costs on average by $734,000 annually.
Furthermore, approximately 20 percent of all respondents have experienced, or expect to experience, at least $1 million a year in tangible cost-savings through DSD process re-engineering, and about 20 percent of companies with 3000 or more employees anticipate saving at least $3 million.
According to the report, the top five areas identified by survey respondents for cost improvement are:
1. Fuel and petrol costs – $889,000 projected average annual savings
2. Merchandising – $725,000 projected average annual savings
3. Delivery receiving/check-in – $686,000 projected average annual savings
4. Delivery – $682,000 projected average annual savings
5. Payment procedures – $665,000 projected average annual savings
Respondents also declared that time, as well as money, could be saved across key workflow areas. Through making improvements to delivery, truck loading, delivery receiving/check-in, merchandising and order processes, respondents indicate that approximately 30 minutes could be saved in each of those five areas per route, per day, equating to more than 2.5 hours per day for each DSD route.
Time and saving opportunities are critical as the report indicates that the surveyed companies view DSD, the process for consumer goods suppliers to deliver their products directly to retail stores, as a critical focus for their strategy. Nearly 60 percent of surveyed organisations view DSD as key to their company’s business strategy going forward.
Consumer goods suppliers saw the primary goal of re-engineering their DSD processes as ‘improving their strategic direction performance’. Currently, more than a third (35 percent) of respondents say operational efficiency and productivity have been the primary goal of their re-engineering efforts, followed by 19 percent each for revenue generation, reducing operating costs, and improving in-store execution (e.g. building in-store promotional displays on time).