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Direct Store Delivery for Dairy: Taking Steps to Gain More Customers A JUNCTION SOLUTIONS eBOOK

DIRECT STORE DELIVERY FOR DAIRY | TAKING STEPS TO GAIN MORE CUSTOMERS

Table of Contents 1

Direct Store Delivery for Dairy

2

Standardizing the DSD Process

3

Automating the DSD Process

4

Mobilizing the DSD Process

5

Pulling It All Together

6

Information about Junction Solutions

DIRECT STORE DELIVERY FOR DAIRY | TAKING STEPS TO GAIN MORE CUSTOMERS

1

Direct Store Delivery for Dairy

In today’s dairy industry, maintaining a competitive

optimizing inventory control, responding to mercurial

edge calls for dairy enterprises to manage the growing

consumer demands, fostering healthy retail customer

demands of retail company customers, which stem

relationships, and growing the customer base.

from changing consumer demands. Similarly, grocery retailers’ customers are looking for greater degrees

Against this backdrop, dairy manufacturers and other

of service from their dairy goods suppliers. All of this

consumer packaged goods (CPG) companies have

underscores the need for dairy manufacturers to

leveraged DSD to effectively manage these types of

understand and meet the challenges of working with

industry complexity while also using it as a platform

highly perishable products while meeting the demands

for further growth. Acting as the bridge between

of retail customers ranging in size from convenience

manufacturers and point of sale, DSD models are

stores to large-scale grocery stores.

helping dairy manufacturers understand consumer preferences while also garnering competitive

In this context, Direct Store Delivery (DSD) models

intelligence and supporting the collection and

play a critical role in providing greater levels of service

management of the real-time data necessary to

to retail company customers and achieving greater

respond to retail customer requests and last minute

responsiveness to consumers. Though DSD models

order changes.

are not necessarily a new concept to dairy enterprises, the pressures to develop and extend their processes are rapidly unfolding as retailers look for ways to achieve faster and more efficient support.

The inherent complexities of the dairy industry coupled with the demands of retail clients create a scenario in which dairy manufacturers are tasked with the substantial challenge of simultaneously

DIRECT STORE DELIVERY FOR DAIRY | TAKING STEPS TO GAIN MORE CUSTOMERS

“Acting as a bridge between manufacturers and point of sale, DSD models are helping dairy manufacturers understand consumer preferences, ... respond to retail customer requests and last minute order changes, and garner competitive intelligence.�

At the most basic level, DSD is a strategy and a

While DSD models are regarded as ripe with

technology that improves effectiveness of operations

opportunity for increased customer satisfaction and

through enabling communication between suppliers

potential cost reduction, the management of DSD

and retail customers at every stage of the supply

processes is a multi-dimensional endeavor that can

chain process. The result is a symbiotic relationship

impact DSD efficiency and overall success. In order

between these two entities that manages inventory in

for dairy companies to realize benefits and gain

relation to customer demand. Better management of

competitive advantage with DSD, they must execute

inventory and synchronized communication translates

DSD processes efficiently and effectively.

to reduction in out-of-stock conditions, invoice errors, and time required in the invoice-to-cash cycle.

Underscoring the importance of execution, a recent Aberdeen Group Sector Insight report used survey

At the same time, achieving better retail customer

data to drill down into how leading consumer goods

satisfaction with better inventory management

companies managed their DSD processes, finding

and a pulse on consumer demand, facilitates the

distinct differences between companies implementing

broadening of the customer base. Underscoring these

successful DSD strategies and those struggling to

benefits, Nielsen data reveal that the largest grocery

meet the performance standards of their competitors.

categories, including dairy products, are managed by

This eBook for the dairy industry will take a similar

DSD processes, and that between 2003 and 2007,

approach, providing a high-level outline of DSD models

products delivered using DSD processes realized a 14.9

for delivery to retail customers as well as the basics of

percent growth rate. For these and other reasons,

implementing successful DSD strategies.

dairy manufacturers as well as a growing number of other CPG companies are looking to DSD processes to power growth and add margin to the bottom line.

DIRECT STORE DELIVERY FOR DAIRY | TAKING STEPS TO GAIN MORE CUSTOMERS

2

Standardizing the DSD Process

With 77 percent of US-based retailers indicating DSD

processes in an environment in which a single

will remain constant or increase in the foreseeable

miscalculation or reporting error can result in

future, a Grocery Manufacturers Association (GMA)

considerable unnecessary expense. As a fundamental

report on DSD shows both suppliers and retailers

tool for tracking transactions and inventory as well as

moving toward DSD models for the opportunity to

managing cash, leading dairy distributors know that

realize more responsive replenishment with lower

standardizing acts as a catalyst to promote accuracy

pipeline inventory, while also aligning more closely

and efficiency. Standardizing DSD processes is no

with consumer demand.

different, resulting in both simplification and increased efficiencies.

For the dairy industry, growth of private label products, changing consumer preferences, and

Highlighting the importance of standardization,

market regulation policies have all contributed to

Aberdeen Group found that nearly three-quarters

a fiercely competitive environment in which dairy

of leading CPG companies have standardized their

suppliers utilizing DSD can gain competitive advantage

DSD processes, an integral component of which

by leveraging greater connectivity to achieve increased

involves strengthening their underlying systems

responsiveness to consumer desires and differentiate

and processes. Aberdeen Group found these

offers that are specific to those demands. While DSD

same industry leaders to be twice as likely as their

has for some time played a pivotal role in improving

competitors to automate the actual DSD business

supply chain efficiency and connecting dairy suppliers

process itself. It is no coincidence that market leaders

to consumers, dairy manufacturers are also now

are more likely to incorporate both standardization

finding similar levels of success with well implemented

and automation, as standardization makes automating

DSD processes.

the process substantially simpler.

From managing customer demand to generating invoices, leading CPG companies know that standardization is fundamental to advancing DSD

DIRECT STORE DELIVERY FOR DAIRY | TAKING STEPS TO GAIN MORE CUSTOMERS

3

Automating the DSD Process

The dairy industry network is decidedly complex and

and miscalculation. For example, out-of-stock (OOS) items

highly dependent upon accurate, timely information,

represent a significant cost to dairy distributors and are

leading many prudent dairy companies to automate

often a direct result of inventory miscalculation or poor

production in order to drive down costs, improve

forecasting. Across the entire marketplace, the OOS rate

blending accuracy, and reduce waste. Many true leaders

averages 8.3 percent, and is generally higher for dairy

in the industry have taken automation one step beyond,

products specifically, ranging between 8 and 10 percent,

however, and extended it to sales and distribution, further

with replenishment issues constituting one of the greatest

leveraging their opportunities for cost reduction. The

contributors to the problem. Because it addresses these

need for such automation can be seen in components

sorts of challenges, automating DSD has the potential to

like inventory and invoicing, where errors can influence

improve the quality/quantity of information gathered in

availability and operational expenses. The need is also

the field and to facilitate accurate, real-time information

evident when considering the actions of route drivers,

sharing between retailers and dairy manufacturers. The

who are an integral part of invoicing, placing orders,

result is that accuracy in inventory accounting is increased

and maintaining inventory, giving them great potential

while labor costs and accounting redundancy are reduced.

to improve the business process and drive down cost.

Correspondingly, errors made in invoicing, inventory, and

Underscoring the value of this opportunity, Aberdeen

other areas can equate to significant losses of both time

Group found that CPG companies using automated DSD

and money, potentially jeopardizing transaction accuracy

processes measured significant reductions in operational

and route speed reconciliation. These are just a few of the

and inventory costs as well as improved labor and

reasons that tracking the delivery process and increasing

transportation utilization, each of which would represent a

inventory visibility lies at the heart of a solid DSD model

cost benefit for dairy producers. Automating DSD

that achieves cost savings.

also affords players such as route drivers and sales personnel greater ease of use and flexibility with respect

It comes as no surprise that automating DSD processes

to invoicing and inventory tracking. These illustrations

can be a critical step toward cost saving, based the

serve as only two examples of a range of process

increases in accuracy and visibility that result. In

improvements that result from automating repetitive sales

calculating the real value of a step like automation, dairy

tasks that have the potential to amass significant value for

producers may consider such components as how much

dairy manufacturers.

their manual procedures actually cost them in terms of labor required, as well as the potential for slow processing

DIRECT STORE DELIVERY FOR DAIRY | TAKING STEPS TO GAIN MORE CUSTOMERS

4

Mobilizing the DSD Process

Standardization and automation are also essential

well as high quality downstream information. More

underpinnings for one of the most important aspects

timely point of sale data also improves production

of a successful DSD process for dairy manufacturers of

scheduling and warehouse forecasting. For example,

all sizes – mobilization. While technology for mobilizing

sales commitments for dairy products are often made

DSD processes has been used by large dairy

before the quantity of milk available for processing

manufacturers for many years, today’s dairy industry

is even known, making production scheduling and

is seeing dairy manufacturers of all sizes have access

accurate forecasting essential elements of production

to mobile technology, making it a critical component

optimization in the dairy industry.

of creating and maintaining competitive advantage.

Highlighting the importance of mobilization,

Dairy manufacturers also have to address challenges

Aberdeen Group found that the most successful CPG

related to complex distribution channels composed

distributors have standardized, automated, and most

of multiple and overlapping sales channels. This

importantly, mobilized their DSD processes.

complexity dictates the dairy industry’s requirement for technology equipped to support visibility through

Mobilization offers distributors the ability to access

all channels, during every stage of the sales and

data at the point of sale and transmit real-time

distribution process. Fortunately, today’s technology

information characterizing DSD processes visibility.

is fully capable of supporting connectivity

For dairy distributors, this means that route drivers

requirements of DSD applications for the dairy

and sales personnel have access to back-office

industry, including those for mobile devices. For

information at their fingertips and decision-makers

example, RFID can be used to collect the regulatory

can monitor in real time the transactions that form

compliance information necessary to meet strict dairy

the fiscal and operational audit trail. In addition,

industry regulations; it may also collect temperature

mobilized DSD supports easy implementation of

and other traceability information.

executive actions with customer-specific information, such as promotions and dynamic inventory, which are achieved through supply chain transparency as

DIRECT STORE DELIVERY FOR DAIRY | TAKING STEPS TO GAIN MORE CUSTOMERS

“The Aberdeen Group found

Similarly, mobile devices used for DSD are now also

Automation eliminates manual procedures that have

that both leading CPGs and

making it possible to create entire mobile offices and

high potential for accounting errors. Mobilization

operation centers for route drivers, allowing dairy

technology offers distributors the ability to handle

manufacturers to achieve two primary goals. The first

large volumes of data while also functioning as a

is supporting route drivers and the merchandisers

platform for instant notifications through bidirectional

to capture signatures for

in validating inventory, taking orders, and generating

data synchronization. Mobilized route accounting,

invoices at the time of delivery or in a vendor-

used in conjunction with automated systems, gives

proof of delivery.�

managed inventory scenario at the time of the

dairy manufacturers the ability to access real-time

consumer sale. In this scenario, mobile devices permit

information in the field, thereby increasing account

the gathering of trade intelligence, from analyzing

inventory and invoicing accuracy.

followers use mobile devices

consumer behaviors and buying trends to monitoring competitor activities at each individual point of sale.

Again, Aberdeen Group suggests that leading CPGs

The second goal is achieving visibility throughout

are aware of the need to cut latency out of the

the entire sales process, from truck loading and

business process with immediate information as a

routing, to in-store stock presentation, to ordering

response to retailers who are compressing delivery

and payment collection. Reconciliation time and

windows while also demanding lower costs.

days sales outstanding are significantly reduced with technologies that capture on-location information and

DSD processes that are automated and mobilized

automate tedious processes.

are also better equipped to gather information that may be re-used for more accurate forecasting and

While Aberdeen Group found that both leading

inventory management, improved route preparation,

CPGs and their less competitive counterparts in the

and reduced reconciliation time. Mobilized DSD

marketplace use mobile devices to capture signatures

also empowers route drivers and field sales

for proof of delivery, industry leaders are twice as

representatives with real-time access to critical

likely to employ mobile devices that have the ability

information that drives the on-the-fly promotions and

to operate barcode or RFID readers. These data

seasonal discounts that allow them to meet specific

underscore the need for dairy manufacturers to

consumer demands.

embrace technologies that automate, mobilize, and ultimately improve the supply chain of dairy enterprises.

DIRECT STORE DELIVERY FOR DAIRY | TAKING STEPS TO GAIN MORE CUSTOMERS

5

Pulling It All Together

While standardization, automation, and mobilization

While it is clear that DSD has the potential to yield

are central to reaping the business benefits of

significant cost reductions for dairy manufacturers,

DSD, having the right technology to support DSD

individual DSD process vary, and best practices are

mobilization is equally important. In fact, Aberdeen

required for those who want to maximize the benefits

Group found that industry leaders were strategic

they offer. To that end, leading analyst research in

about using the most efficient and effective technology

the dairy and CPG industries suggests three critical

enablers for mobilizing their DSD, with 41 percent

components: standardization, automation, and

of market leaders using mobile devices running

mobilization. Effective implementation of these

applications that require batch upload/download of

elements creates optimized DSD processes capable of

data through Wi-Fi connection. Twenty-nine percent

driving drive down the bottom line and supporting a

used mobile devices that can run applications in both

competitive advantage.

wide area continuous connection and disconnected (off-network) states. These data suggest that the most forward-thinking organizations understand the business value of implementing multiple connection types, thereby allowing automation and mobilization their DSD processes using a standardized method for any circumstance. It is important to note that the majority of industry leaders surveyed employed wireless connectivity.

DIRECT STORE DELIVERY FOR DAIRY | TAKING STEPS TO GAIN MORE CUSTOMERS

Junction Solutions provides vertical-specific on-premise, hosted and cloud-based software and services that

6

Information about Junction Solutions

enhance operational performance, reduce costs, expand delivery channels and strengthen relationships. Built in Microsoft Dynamics® AX and designed specifically for food and beverage and multi-channel retail companies, Junction Solutions’ portfolio includes ERP, supply chain management (SCM–demand, warehouse, yard and transportation management), production and scheduling optimization, trade promotions management, direct store delivery management, merchandising, order entry and call center management, and mobile/web-enabled product sourcing and traceability.

For more information, please visit www.junctionsolutions.com

DIRECT STORE DELIVERY FOR DAIRY | TAKING STEPS TO GAIN MORE CUSTOMERS