Mhlnews 3067 Honeywell

Direct-Store-Delivery Cuts Supply Chain Costs

April 25, 2014
Process re-engineering and transportation efficiencies are said to yield millions in annual savings.

Direct Store Delivery (DSD) can result in millions of dollars in savings by improving the way products are ordered, sold, delivered and merchandised, according to a new report from Honeywell.  The report, which contains feedback from 350 C-level consumer goods executives and directors from around the world, found that 49 percent of organizations surveyed feel increased transportation costs have severely impacted profit margins in the past 12 months. But those organizations that have carried out process evaluations (known as process re-engineering) 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 percent 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 percent of companies with 3,000 or more employees anticipate saving at least $3 million.

“Consumer goods companies can improve their revenue while cutting costs, enabling them to strategically grow their business and margins in these challenging times,” said Brian Schulte, industry director for Direct Store Delivery for Honeywell.

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.

By 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.

Re-engineering: a strategic focus

Consumer goods suppliers saw the primary goal of re-engineering their DSD processes as “improving their strategic direction performance.” 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).

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