Weighing the Direct-to-Store Delivery Model

Consumer goods manufacturers are increasingly using a direct-to-store delivery model to drive efficiency in their supply chains and improve their levels of service to retailers.

In a direct-to-store delivery model, products are taken from a CPG manufacturer warehouse or cross-dock straight to a retail outlet. Vehicles typically make multiple stops and then “close the loop” back to the warehouse. Is your operation a good candidate for such a delivery model? There are several issues to consider.

Direct-to-store makes sense when control of deliveries and customer service are very important. If you have tight delivery windows open only during certain times of the day, this requires a high level of scheduling precision.

Another consideration is whether your market share of a product is threatened by not being on store shelves. Consider this scenario: A brand-loyal consumer stops in at a retail outlet to buy a bottle of Diet Pepsi on her way home from work. If Diet Pepsi is not on the shelf, she will buy a Diet Coke instead, even though this is not her preference, resulting in a “lost sale” for Pepsi.

Lastly, if your company is challenged with security and product theft — especially in the case of high-value goods like alcohol and jewelry — a direct-to-store model can help mitigate these risks.
Convenience store retailers are typically good candidates for this model because their storerooms are relatively small and unable to hold much excess inventory. And smaller stores may only be staffed by one individual, so deliveries can’t be made during peak traffic periods when that person is manning the cash register.

Determining optimal routes for deliveries to multiple retail outlets can be complicated. It’s best to start with the demand profile, based on the orders that need to be fulfilled on a particular day. There’s a long list of variables to consider, such as traffic patterns, speed limits, distance and time calculations. The good news is that there are a variety of software systems that will marry the demand profile, the variables and the vehicle capacities for a specific route. It’s important to determine if your company has the expertise to manage this type of route planning and, if not, to consider consulting with an outside provider.

Product theft while in transit or at the time of delivery is a serious concern for CPG manufacturers and retailers alike. Creating a defined plan for training employees and drivers on how to prevent theft — and how to respond when a theft situation unfolds — is mission critical. Training programs should address awareness of suspicious vehicles and loiterers, especially around delivery doors. When a security situation develops, drivers trained on protocols such as using code words and hidden alarm buttons help ensure a safe resolution.

At Ryder, we take several additional measures. Vehicles are tracked with the latest GPS technology, and we use a variety of alarm systems and cameras throughout our facilities, dock yards and in our vehicles. Our drivers are in constant communication with our command center, which is staffed 24/7 and directly connected to law enforcement.

Technology not only plays an important role in security, but also in facilitating payment between CPG manufacturers and retailers. Electronic proof of delivery via handheld devices has greatly impacted the retail and CPG industries. For one customer, Ryder utilizes handheld devices to transmit successful delivery information at the exact time a retailer takes receipt of goods. That triggers a direct debit from the retailer’s bank account — in essence, paying the CPG manufacturer immediately after the delivery is made. This has reduced that customer’s order-to-cash cycle time from 27 days to less than 24 hours.

Technology also enables you to gather and evaluate data on an ongoing basis in support of a “green” transportation network. The efficiency of your network, including the ability to reduce your carbon footprint with reduced miles traveled and less fuel consumed, depends on how frequently you can evaluate your metrics and make adjustments.