Matthew Zarzycki, CCLP
Logistics Ambassador
DSD: The basics
According to Matt, Direct Store Delivery (DSD) model is a unique delivery model that emphasizes direct routes from suppliers or manufacturers to the retail outlets that stock their products. How it contrasts with previous models of delivery, spoke, and hub, for example, is that DSD eliminates many of the touch points between manufacturers and consumers. It also allows for more frequent deliveries, enabling retailers to adapt to changing demand patterns quickly.
Moreover, fresh produce spends less time in transit and warehouses, meaning it spends more time fresh on shelves.
“One of the primary advantages of DSD,” he said, “is the speed of delivery. By eliminating intermediary steps, products can move from production facilities to store shelves in much shorter time frames.
This is great for perishable goods and things like dairy products or fresh produce by ensuring that items remain fresher longer on the shelves. It results in fewer 50% off stickers because retailers couldn’t get their product out on time.”
A great option for the Canadian landscape
According to Matt, the realities of Canadian geography also make DSD a great option for retailers throughout the country. Why? Unlike the U.S., where large, dense population centres are spread throughout the country, with multiple transportation corridors linking them all, Canada has low density, long distances between centres, and lower consumer saturation.
“Here in Canada, our logistics have to be very adaptable,” he said. “The vastness of the landscape, coupled with a very diverse climate and lower population distribution, make DSD a more viable option. Without building all these hubs and spokes, I can get something from Toronto directly to a consumer in Vancouver without having to stop three or four times.
Certain products are very specific to various regions of the country. You might not have the same need in Brampton as you do in Manitoba. With DSD, retailers can adapt without having to store large inventories that can spoil.”
To help illustrate how the process works, Matt uses the metaphor of a mail carrier that works on a set delivery schedule. With products being delivered by DSD, “It almost becomes like a postal worker running the same route all the time.”
Operational efficiencies
In addition to the speed of delivery, one of the largest benefits of DSD is reducing unnecessary steps in the distribution process. By streamlining the supply chain in this way, shippers and retailers can move away from having to store as many products while still ensuring shelves are filled with goods consumers want and expect.
What makes it all work is that the rise of DSD is running in parallel with the rise of real-time inventory management systems, a factor that is “making it more possible and more attainable than this structure would have been 10 or 20 years ago.” The speed of DSD, coupled with accurate forecasting capabilities, means inventory adjustments can be made in real-time—a game changer when it comes to managing inventory flow, dealing with delays and prioritizing SKUs.
AI, Machine Learning and Predictive inventory
Another factor behind the scenes that’s helping usher in this new delivery model is the rise of AI and machine learning. Thanks to this emerging technology, a lot of the guesswork that went into traditional forecasting is quickly becoming a thing of the past. Instead, shippers and retailers alike can use AI to determine stock levels, predict the impact of weather on delivery times and much more.
“Now, with machine learning, we’re able to provide far more accurate details. In the context of DSD, these technologies are being used to analyze vast amounts of data and make informed decisions about distribution, inventory management, and demand forecasting. Now retailers can say, ‘I’m not going to buy as much. I can use AI and machine learning to buy just the right amount, or at least closer to the right amount, based on what I’m seeing in the marketplace.”
Clearly, the implications here in terms of inventory and warehousing are huge.
“AI can ensure that retailers maintain optimal stock levels, reduce overstock, and prevent stock-outs. By accurately predicting demand, these technologies help ensure that when it comes to perishables, ordered quantities match actual sales.”
What the future holds
As DSD matures, the future for the delivery style is looking bright. One of the biggest benefits will be the ability for retailers to diversify their product mix. Where larger warehouses have traditionally focused on high-volume, high-profit SKUS, thanks to DSD, warehouses can profitably stock niche products from smaller CPG brands.
For those same niche CPG brands, DSD allows shippers to create programs that consolidate similar customer bases onto the same trucks, a factor that will let small brands access stable delivery schedules.
As an example, Matt described an emerging retail trend resulting from populations moving from one region of Canada to another:
“You know, a lot of people from Newfoundland are out to Alberta,” he said. “So, we’re seeing a lot of niche products that were very specific to Newfoundland now increasing in demand out west."
The landscape is constantly changing. Whether it’s trends and products, people wanting to try different things because Instagram is pushing, or they saw an influencer talking about. That’s where we’re at.”
Stay tuned; the story of DSD is just getting started.