In a recent blog, I discussed Why DSD? The conversation focused on the financial opportunities for both the retailer and supplier. Today, I would like to go a little deeper into the numbers. Specifically, the topic of how much DSD and DEX account for with respect to grocery products and profits. Let’s begin.
Whenever a customer buys a snack cake, quart of milk, or six-pack of beer, he or she is taking advantage of a crucial operation in the retail grocery and pharmacy business: Direct Store Delivery, or DSD. Many large grocery chains, pharmacies, and big box stores carry items that are date-sensitive with regards to freshness. These products have short shelf lives or need frequent replenishment and cannot be shipped through the retailers warehouse.
DSD and DEX: By The Numbers
Why is this important? The numbers tell the story. Taken together, food, beverage, and consumer packaged goods are an over $2 trillion industry globally. Due to time and shelf life constraints, approximately 24% of all items carried by large format retail operations must be delivered directly to the store via DSD. The data captured, reconciled, and transmitted by Direct Data Exchange, or DEX, tells an even more important tale: these products encompass
7 of the 10 largest grocery food product categories, and account for 52% of retail profits in the grocery channel. DSD and DEX are important because the numbers behind them are important.
Change is Coming
DSD and DEX are hardly new solutions. They’ve been around since the technology dark ages when shipping, receiving, and payment processes were done manually. Since that time, the basic ideas behind DSD and DEX haven’t changed. Suppliers or third-party carriers continue to deliver perishable and short shelf life products directly to individual stores’ back door receiving systems. What has changed dramatically, however, is the process.
Evolution of DEX
DEX has quickly evolved from a slow, error-prone, paper-based system to faster, more accurate computer-driven solutions. Now, DEX is evolving again. More and more of today’s suppliers and carriers have begun to replace wired DEX connections with fast, secure, Bluetooth-enabled wireless connections. DEX has finally entered the 21st Century.
Tell us how DSD and DEX have evolved in your operation. DSD accounts for 25% of the products delivered and 50% of the profits. What else do we need to know?