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As many consumer goods suppliers continue to observe growing business challenges, a report by Honeywell(NYSE: HON)has revealed that consumer goods suppliers can save millions of dollars by evaluating and improving Direct Store Delivery (DSD) operations, specificallythrough the manner by which products are ordered, sold, delivered and merchandised.
Containing significant feedback from 350 C-level executives and directors from across the globe, the report found that 49 per cent of organisations saw that increased transport costs have severely impacted profit margins in the past 12 months. However, those organisations 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 by US$734,000 or AED2.68 million per year on average.
Approximately 20 per cent of all respondents have experienced, or expect to experience, at least US$1 million or AED3.65 million a year in tangible cost-savings through DSD process re-engineering, and about 20 per cent of companies with 3,000 or more employees anticipate saving at least US$3 million or AED10.95 million.
“The report shows clearly that re-engineering DSD processes provides an opportunity for business transformation and competitive advantage,” said Brian Schulte, industry director for Direct Store Delivery for Honeywell. “Consumer goods companies can improve their revenue while cutting costs, enabling them to strategically grow their business and margins in these challenging times.”
According to the report, the top three areas identified that need cost improvement by respondents from the UAE and Saudi Arabia include:
1.Delivery – AED1.86 million (US$509,063) projected average annual savings
2.Truck loading – AED1.67 million (US$456,500) projected average annual savings
3.Fuel and petrol costs – AED1.42 million (US$390,000) projected average annual savings
Re-engineering: a strategic focus
Time and saving opportunities are critical as the report shows that companies view DSD, the process for consumer goods suppliers to deliver their products directly to retail stores, as a critical focus for their strategy. Nearly 48 per cent of surveyed organisations from the UAE and Saudi Arabia view DSD as key to their company’s business strategy going forward.
Consumer goods suppliers see the primary goal of re-engineering their DSD processes as ‘improving their strategic direction performance’. Currently in the UAE and Saudi Arabia, 32 per cent of respondents said that operational efficiency and productivity have been the primary goal of their re-engineering efforts, whereas 18 per cent and 14 per cent have focused on revenue generation and reducing operating costs respectively, with 14 per cent also identified improving in-store execution such as building in-store promotional displays on time as their primary goal.
“The results of this survey clearly show that business today is increasingly complex and challenging and there is no sign of that letting up. It’s also clear that companies that are looking for ways to address these growing challenges and jump ahead of the competition are well-advised to look at re-engineering their processes and consider upgrading the systems and technologies they use,” Schulte concluded.
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