Consumer goods suppliers identify $3 million in potential annual savings
April 24, 2014 - MMH Editorial
A new report from Honeywell has found that millions of dollars can be saved by evaluating and improving direct store delivery (DSD) operations – namely the way that products are ordered, sold, delivered and merchandised.
“We saw a need for additional information and released this study to focus specifically on DSD,” said Brian Schulte, industry director for direct store delivery for Honeywell, in a recent interview. “In looking for confirmation about whether DSD as a model continues to be important, the message came through strongly; many customers see the value in staying close to the consumer from a competitive standpoint.”
The report contains feedback from 350 C-level consumer goods executives and directors from across the globe. Results indicate that 49% of organizations feel increased transportation costs have severely impacted profit margins in the past 12 months. But those organizations that have carried out process evaluations in the past year to improve their DSD processes have cut, or expect to cut, costs on average by $734,000 annually.
Additionally, approximately 20% 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% of companies with 3,000 or more employees anticipate saving at least $3 million.
“SKU proliferation is one of the areas where we see the most pressure in warehousing and distribution,” Schulte said. “Customers realized they were carrying a lot of SKUs not knowing which might be hot and take off, but wanting to be ready just in case. This strategy ended up creating losses instead of gains.”
Instead, consumer goods companies are shifting focus to the demand side, he said. “Companies are monitoring and trying to work with social media to stay on top of which products to promote. Some retailers might use this data to inform the design of smaller format stores tailored to local demand. Others didn’t feel capable of dealing with all the available data.”
In the meantime, organizations are working to streamline the relationship between the store and upstream fulfillment. 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.
Nearly 60% of surveyed organizations view DSD as key to their company’s business strategy going forward. More than a third (35%) of respondents say operational efficiency and productivity have been the primary goal of their re-engineering efforts, followed by 19% each for revenue generation, reducing operating costs, and improving in-store execution (e.g. building in-store promotional displays on time).
According to the report, the top five areas identified by survey respondents for cost improvement are:
● Fuel and petrol costs – $889,000 projected average annual savings
● Merchandising – $725,000 projected average annual savings
● Delivery receiving/check-in – $686,000 projected average annual savings
● Delivery – $682,000 projected average annual savings
● Payment procedures – $665,000 projected average annual savings
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