As competition increases and consumer demand changes, retailers are always hunting for new ways to improve supply chain efficiency.
Some retailers optimize their supply chain through little tweaks: a process improvement that saves a couple hours here and there, or a technology upgrade that shaves off cost.
But for others, small tweaks aren’t enough. Retailers looking to improve their bottom lines may want to consider cutting out an entire supply chain phase through direct store delivery.
Direct store delivery is not always easy to implement, nor is it always the most efficient option. But when implemented correctly, it has the power to deliver massive cost-savings and other benefits that can help a business defend its competitive advantage in the future.
In this article, we’ll cover what direct store delivery is, the benefits and challenges that accompany it, and how ShipBob can help your business implement direct store delivery in its B2B channels.
What is direct store delivery?
Direct store delivery is a supply chain model in which the manufacturer or supplier delivers goods directly to a retail store or location, rather than a centralized warehouse or distribution center.
Benefits of direct store delivery
Direct store delivery can be a cost-effective option for retailers looking to simplify their supply chains, reduce spending, and streamline their operations. Here are some of the benefits of DSD for merchants to consider.
Better care for fragile and perishable goods
The longer perishable items like fresh foods spend in the supply chain, the higher the risk of expiration and the shorter the inventory’s shelf life will be. Similarly, the longer fragile goods remain in the supply chain, the more opportunity there is for them to be damaged.
By cutting out transportation to and from a retailer’s distribution center entirely, you minimize the number of times fragile items are moved (lowering the risk of damage), and get perishable items to shelves more quickly. For this reason, many companies in the grocery industry choose to employ the DSD business model.
It can be cheaper
With direct store delivery, consumer products are neither transported to nor stored in a warehouse. This cuts your logistics costs since you don’t have to spend money on transportation expenses (including gas or driver wages), or on renting, maintaining, or staffing a warehouse.
Faster delivery to retail stores
Since inventory travels directly from the manufacturers or suppliers to the retail store, it can get to retail stores faster.
Consumer goods taking less time in transit helps retailers ensure better product availability and higher inventory turnover, which is especially important for both CPG brands and convenience stores where shelf space is limited.
Improves customer satisfaction
With faster and cheaper stocking for retail locations, customers are less likely to experience stockouts and more likely to find the items they want in pristine condition more quickly. This increases customer satisfaction, and helps you build up your customer base.
Direct store delivery challenges
Although the benefits of direct-to-store delivery are abundant, that’s not to say that it doesn’t come with its own set of challenges. There are several challenges associated with direct store delivery that you should consider before you commit to the model.
It can be expensive
Although the direct store delivery model eliminates warehousing and labor costs, it can still be expensive when transportation costs rise.
Inventory stocking mistakes are also more costly, as the cost of receiving, returning, and replacing incorrect SKUs is high — especially if you experience the opportunity cost of lost sales while correcting the problem.
It makes DTC fulfillment much harder
In the absence of one or multiple distribution centers, fulfilling DTC ecommerce orders can be challenging logistically.
While it is possible to use retail stores as micro-fulfillment centers and ship from store, you’ll have to carefully monitor your inventory levels to ensure you don’t accidentally sell units you don’t have. Fulfilling and shipping from store can also be expensive, as you’ll need additional labor and may need to ship longer distances depending on where your retail stores are located.
While we initially used ShipBob exclusively for our retail fulfillment, we quickly outsourced DTC fulfillment to them as well once we experienced how easy and effective it was.
ShipBob’s omnifulfillment solution could handle every sort of order we had, including retail, DTC, and B2B, and had no qualms whatsoever about facilitating our FBA prep orders for Amazon.
We’re currently fulfilling 100% of our orders through three of ShipBob’s fulfillment centers, as we’ve done for the last couple of years. With ShipBob, we can fulfill both DTC orders and orders for our retail partners (including Leisure Pro, Divers Direct, Swim Pro, and small surf shops in Hawaii) through a single solution.
Nathan Garrison, Co-Founder and CEO of Sharkbanz
Direct store delivery vs. centralized distribution
Direct store delivery is an alternative to the centralized distribution model. In the centralized distribution model, retailers keep all of their inventory in a warehouse or fulfillment center. Suppliers or manufacturers will send goods to that retailer’s warehouse or fulfillment center, where it is received and stored until:
- It is picked & packed for a DTC order
- It is set aside for safety stock
- It is divided and transported to a retail location in need of restocking
In the centralized distribution model, the warehouse or fulfillment center serves as a hub for inventory and management, order fulfillment, and shipping, even if the retailer sells through multiple stores and sales channels.
Direct store delivery, on the other hand, is a form of decentralized distribution —meaning that there is no one hub for logistics operations, but rather each retail store houses a portion of a business’s inventory.
But while direct store delivery never involves a warehouse or fulfillment center, other forms of decentralized distribution do. Some businesses split their inventory across multiple fulfillment centers, each of which can pick, pack, and ship DTC ecommerce orders and also send stock to retail locations.
Additionally, direct store delivery is also different from a decentralized supply chain in which businesses distribute their inventory across multiple fulfillment centers. With this model, the goods are stored at different fulfillment centers until they’re ready to be transported to the end customers or to retail locations.
Direct store delivery trends
With the growing availability of advanced technology, there are also new trends shaping the direct store delivery industry. These trends are helping to solve some of the biggest challenges faced by businesses that opt for this distribution model.
Many direct store delivery operations struggle to connect the dots between retailers and suppliers. However, that’s slowly changing with the use of technology that allows delivery personnel to automatically record and communicate pickup and delivery activities. Connected mobile devices enable merchants and suppliers to get real-time access to route plans, GPS, and inventory data.
Moreover, mobile printers and EDI integrations simplify the process of providing invoices and delivery receipts so information is accurately and automatically recorded.
In addition, the need to minimize time spent in the supply chain to keep products fresh is also fueling some of the direct store delivery trends. Better route planning using automation and historical data, as well as automated order processing, are enabling businesses to speed up deliveries.
Direct store delivery best practices
To reap the most benefits from direct store delivery, it’s important to be strategic with your approach. Here are some best practices to follow when implementing direct store delivery in your business.
Establish omnichannel visibility
Without a single hub through which to manage inventory, orders, fulfillment, and shipping, you’ll need a unified source of truth that extends across all your retail locations and sales channels.
The right omnichannel solution will enable you to monitor inventory levels across retail stores, track important metrics like inventory turnover and average sales for both each store and all of them collectively, and identify which sales channels need improvement.
“This year alone we introduced 17 new SKUs. We’re launching them on Target, Ulta, Amazon, and selling them DTC. Each channel has its own complexities so having reliable partners to manage the launches is absolutely key. Overall, the goal is to be truly omnichannel. Acne doesn’t discriminate. It impacts people of all ages and walks of life and so it’s important that our products be easily accessible.”
Dwight Lee, co-founder and COO of Hero Cosmetics
Optimize customer service
Establish a feedback loop with your customers to ensure that the direct store delivery approach can get goods into customers’ hands effectively. By improving your customer service, you’ll learn more about consumer trends, which improves your demand forecasting and enables you to tailor your manufacturing orders accordingly.
Make sure your team is backed up with data
Information gets lost, even in a streamlined supply chain. To mitigate miscommunications and mistakes between suppliers and retail stores, utilize easy-to-use software that provides real-time data to all parties. This way, everyone will be using updated data, and can better time inventory replenishment.
How to get started with direct store delivery
If you think that the direct store delivery model is the right choice for your business, you may want to get started right away. Here are a few tips to help you make a strong start.
Start with a demand profile
Take a look at your sales data, and find the products that experience high demand and high inventory turnover. This will help you identify which products would be most suitable for direct store delivery, since this model is best suited for products that see high replenishment rates.
Establish optimal routing for deliveries
Suppliers and manufacturers often have to deliver to hundreds of stores across multiple locations, so an efficient route planning tool is essential to ensure that you get your goods delivered on time and as cost-effectively as possible — just make sure to account for each retail store’s windows of availability so as to minimize wait time.
Have a loss prevention system in place
Accidents happen, even in direct store delivery. Make sure you have anticipatory safety measures set up to minimize loss resulting from accidents, last-mile transportation disruptions, inventory lost in transit, and goods damaged in transit.
Preventative measures include accurately allocating goods based on each vehicle’s carrying and loading capacity, using appropriate packaging, and maintaining real-time visibility into inventory movement.
“We sell flammable goods that need to be shipped via ground, so ShipBob has been a great ally as they have fulfillment centers all over the US, facilitating a 2-3 day delivery time for any customer in the US. This is helpful especially when weather challenges happen; being able to have different locations to ship from allows for a more seamless supply chain.”
Andrea Lisbona, Founder & CEO of Touchland
How can ShipBob help you with direct store delivery?
ShipBob is a global omnichannel logistics platform that can help you streamline inventory and order management, fulfillment, and shipping across both your B2B and DTC channels.
In addition to storing your inventory in one or multiple of our dozens of strategically placed fulfillment centers (where orders are picked, packed, and shipped to DTC customers for you),
ShipBob also offers retail distribution services through EDI integration with major retailers. We can automate the process of receiving orders from retailers, and even help you arrange freight transportation from a manufacturer or supplier.
ShipBob supports retail distribution for a wide range of major retailers including CVS, Neiman Marcus, Nordstrom, Sephora, Target, and Walmart. By working with leading EDI providers like SPS Commerce, LogicBroker, and Cymbio, you can ensure that direct store delivery orders are fulfilled according to the compliance guidelines of each retailer, every time.
Direct store delivery FAQs
Here are answers to the top questions about direct store delivery.
Is direct store delivery going away?
While some businesses are abandoning direct store delivery, others are choosing to expand their DSD channels with the help of 3PLs like ShipBob. Direct store delivery isn’t going away — rather, it’s evolving along with advancements in tech and service solutions.
What is a DSD buyer?
In the DSD model, the retailer is the buyer, as the retailer purchases goods from another business (i.e. the supplier or manufacturer) that they then sell to consumers.
How does direct store delivery work?
In direct store delivery, a retailer’s supplier or manufacturer transports finished goods directly to one or multiple retail stores, rather than transporting goods to a centralized warehouse or fulfillment center. This ensures that goods don’t sit unsold for too long, and spend less time in transit.