0213-l-1210-1 quofore dsd3 white paper

8/4/2019 0213-L-1210-1 Quofore DSD3 White Paper

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2010, Quofore. All Rights Reserved

Quofore Executive White Paper

DSD3: Driving new opportunity

How innovation helps drive productivity andcompetitive advantage in Direct Store Delivery

December 2010

This White Paper, prepared by Quofore, offers insights intopractical strategies being implemented by Consumer Productscompanies around the world to transform their fieldrepresentatives into agents of business value development.


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Contents

Quofore

1 Introduction 11.1 Enter the world of DSD3 1

2 DSD and modern trade in transition 22.1 Better brand health on the shelf 22.2 Proliferation of smaller, high frequency stores 32.3 Purchase patterns of poorer shoppers 3

3 The critical contribution of DSD3 53.1 The retailers need: more efficient DSD 53.2 The manufacturers response: blended roles 63.3 Sales and merchandising models 73.4 Being seen as tech-savvy by shoppers 8

4 DSD3 in a connected field presence 10 5 Replacing older systems 11

5.1 What to seek in a next-generation handheld 116 In closing 127 References 13


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1.1

Enter the world o f DSD3

Here, direct store delivery (DSD) practices are crisply

executed, store-aligned, and consumer-centric. Greater brand

presence at the shelf showcases products for shoppers,

strengthens category presentation, and accurately reflects

strategies set by retailer and consumer packaged goods

(CPG) trading partners.

Good things happen when DSD3 delivers innovation.

DSD3 drives multiple benefits through the power of in-field

synergy: a fresh, cohesive approach that builds brand

presence by providing capabilities to: a) expand thetraditional role of DSD drivers; and b) to coordinate the

efforts of complementary groups of field workers.

DSD3 transcends the barriers imposed by rigid roles that

have traditionally isolated the tasks of drivers, sales reps and

merchandisers. Not only can drivers now do more in store,

they can alert supervisors and central headquarters, as well

as sales representatives and merchandisers in their regions,

to any field situation they observe that requires prompt

attention. Schedules can be reprioritized in real-time based

on a constant flow of in-store information.

Quick, coordinated responses unite field workers in their

ability to achieve key business objectives and win at the

shelf. No longer isolated individuals; they are interconnected

teammates lifting their brands.

All members of the team can think and act as in-store brand

advocates; each has a keener sense of the fierce competition

around their brands (from traditional foes and private label

alike). They know the roles their brands play in categories,

and their need to align with shifts in customer needs store

by store and in local consumer demand. They work more

purposefully and positively to protect their brand sales, profits

and market position.

And in this new paradigm, everyone who touches a store on

behalf of a brand is capturing data that can help Consumer

Products companies make better strategic and tactical

decisions.

This is a giant leap for brand-kind.

1 Introduction

in-store

tasks

field

sales

deliveries

WHY READ THIS PAPER?

Technology developments have the

potential to redefine business as

usual.

In the right hands, powerful mobile

devices, connected to high-speed

networks, can drive innovative

approaches to direct store delivery

(DSD) that were not previously

possible.

If youre a Consumer Productscompany considering new systems

for your DSD operations; looking for

ways to better integrate your field

sales, delivery and merchandising

operations; or wanting to increase

competitive advantage through

higher levels of in-field service and

productivity this white paper is in

the right hands.

Read on to learn more about DSD3

an advanced paradigm for the

business of direct store delivery.


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2.1

Better brand health on the shelf

DSD3 could soon become the new performance standard for

dairy, soft drinks, snacks, breads, juices and other core

direct-store-delivered food and beverage categories. These

staples, which people buy in any economy, are key to

attracting trips.

Trips are the lifeblood of retail stores, and superior DSD helps

them attract more. In the United States and other Western

trade markets, supermarket trips are under siege by mass

merchants, supercenters, drug chains, dollar stores and

wholesale clubs that are aggressive sellers of food and

beverage.

When deciding where to shop, the physical condition of DSD

categories can be an important influence on consumer

loyalty. But, while stores feel more pressure to present well,

they still have the challenge of controlling costs and labor is

one of the biggest.

Better on-shelf brand display is an aspiration shared by CPG

manufacturers, so it makes sense that any opportunity to

optimize shelf presence is in everybodys best interest.

Empowering DSD personnel to play an integral part in brandhealth provides field managers with more options for

improving in-store performance. It also allows them to

provide more value-add to their retail customers leveraging

their DSD team to fill an in-store labor gap thereby driving

the merchandising excellence that builds repeat shopper trips

to specific retail destinations.

Theyll also use the greater information power of DSD3 to

collaborate with retailers on multiple levels2, such as to:

Leverage DSD capabilities to enhance in-storemerchandising.

Coordinate with retailer marketing departments tounbundle consumer insights and bring both the

innovation and consumer demand to life at the shelf.

Drive sales, improve stock rotation and ease productchoice in the store, and reduce unsaleables.

2 DSD and modern trade in transition

GLOBAL DEMAND DRIVERS

In a review of global demand for

DSD Solutions1, industry analysts,

VDC, estimated the market for

next-generation solutions that

provide sales and merchandising

capability would more than double

between 2007 and 2012.

VDC highlighted specific factors that

are contributing to this demand

around the world:

NORTH AMERICA

...economic

conditions are opening up new

opportunities as distributors turn

to next generation mobile DSD

solutions to streamline increasing

operational costs.

EUROPE

EU driver regulationsare expected to fuel growth as

distributors look for ways to

improve driver efficiency during

their more limited work hours.

ASIA PACIFIC

Markets for mobile

DSD are opening up among local

distributors who perform a

rudimentary DSD process.

A SaaS offering combined with a

commercial-grade device are

expected to be popular components

to meeting the needs of these local

distributors.


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2.2

Prolife ration of smaller, high frequency stores

In the US, the small, convenience-oriented format of Tesco

Fresh & Easy has prompted Walmart, Giant Eagle, Albertsons

and other chains to develop their own small stores in the

10,000- to 20,000-square-foot range to build trip frequency

and penetrate urban or smaller markets.

Indeed, Walmart is banking on

this growth: it has been testing

10,000-square-foot Marketside

by Walmart stores in Arizona

and a 20,000-square-foot

version ofNeighborhood Market.

The company also plans to open

convenience stores similar to its

4,000-square-foot and up

Bodega Aurrera Express stores

south of the border.

Our group in Mexico and Latin

America operates small formats

very well and very profitably, and we are going to beg,

borrow, steal and learn from them as quickly as we can, said

Bill Simon, president and CEO of Walmart U.S.3

As food and beverage distribution outlets expand in numbers,

DSD brands will be pressed to service more stores more

expediently and theyll aim more intently to optimize routes

and in-store tasks.

2.3 Purchase patterns of poorer shoppersIn 2009, 3.7 million Americans joined the poverty bracket

(defined as families of four living on less than $22,000 per

year). As a consumer group, they now represent 14% of the

U.S. population and their purchasing patterns are also havingan impact on the frequency of store visits.

Our group in Mexico and

Latin America operates small

formats very well andvery profitably, and we are

going to beg, borrow, steal

and learn from them as

quickly as we can.

Bill Simon, President & CEO, Walmart U.S.


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Visits are heavily influenced by the receipt of benefits fromthe Supplemental Nutritional Assistance Program (federally

funded, state-administered) which post to their accounts at

the start of each month. People making their replenishment

runs to Walmart that first morning commonly fill baskets with

hundreds of dollars worth of goods to restock their household

pantries and refrigerators.4

Walmart understands the monetary ebb and flow of these

low-income shoppers. It displays larger item packs at the

start of the month when pantry reloads occur, and smaller

sizes later in the month, when these families fill in as needed.

For example, about one-fourth of Walmarts stores carrysmaller pack sizes of household goods such as toilet paper,

garbage bags and paper towels that cost $1 or less.

Nevertheless, driven in part by food and beverage needs,

trips to dollar stores rose 2.6% in the 12 months ended June

2010 while trips to mass merchants fell by 7.0%, noted

SymphonyIRI Group.5

These households primarily purchase early in the month, and

DSD brands that synchronize their in-store service levels with

these demand surges will help retailers better satisfy the

needs and significant opportunity of this demographic

sector.


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3.1

The retailers need: more efficient DSD

The recession that flattened Consumer Products sales growth

in the U.S. and other western trade markets has made

retailers more demanding about lower net product costs. This

heightened emphasis on lower costs threatens business as

usual. DSD that fails to excite stores with added value;

unimpressed merchants would rather move items from a

backroom to a shelf with their own workers if they think it

would be cheaper overall.

Indeed, 7-Eleven president and CEO Joseph DePinto griped to

Convenience Store News in 20086 about inefficiencies in the

convenience channels DSD system, which was built for the

grocery industry, and the way product is delivered today is

basically the same as 30 years ago but costs are higher

labor, credit card fees, distribution costs, fuel.

His chain tested a different DSD model in 2010 one that

had Coca-Cola Enterprises deliver soft drinks to 7-Eleven

stores in southern California by using Costco Wholesale Corp.

as an intermediary. CSN cited published reports for this

description, Drinks will be shipped to a Costco business

center, where a third-party logistics company will pick them

up and deliver them to a warehouse. When 7-Eleven storesneed replenishment, the drinks will ship to the stores with

other products as well.

By contrast, once unified and involved DSD3 practitioners

bolster each others efforts and keep reproving their value to

retailers, brands can more effectively counter such

challenges. Since DSD teams are a highly public face of CPG

brands, they affect the tenor of retailer-supplier trading

relationships, from store-level up to headquarters.

The importance of data-driven in-store merchandising and

execution excellence, carried out by manufacturers, isunderscored in a recent Grocery Manufacturers Association

(GMA) report7: Many retailers scrambling to differentiate

expect customized products, shelf sets and promotions and

require CPGs [consumer packaged goods companies] to

translate consumer insights into localized plans. Access to

local information is critical for CPGs of all sizes a small CPG

without store-level point-of-sale data is at a significant

disadvantage.

3 The critical contribution of DSD3


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To augment POS data with near real-time insights on in-storeconditions puts DSD3 brands in an optimal information state

to deliver the customization retailers seek. Brands that

consistently bring stores this edge often earn a warm seat at

the category leadership table.

3.2 The manufacturers response: blended rolesCPG manufacturers commonly outsource support activities,

yet questions loom over the most productive uses of sales

and marketing agencies (SMAs). Relative to in-store

activities, the latest findings (published in the same GMA

report cited, above) suggest that: the most progressive CPGcompanies tailor in-store use of SMAs by retailer, season and

category, and that best results are achieved through active

and ongoing structure and management of the CPG-SMA

relationship. In the U.S. more than 90% of CPG companies

($3 billion or less in annual revenues) outsource, as do nearly

three-quarters (73%) of larger CPG.

These users include DSD companies with greater in-store

coverage needs than their own field forces can provide.

In the world of DSD3, these companies can achieve many of

their in-store objectives by implementing a blended role fortheir DSD drivers combining traditional road rep activities

(such as mobile order taking, deliveries and replenishment)

with a broad range of in-store merchandising tasks (such as

price checks, promotions and POS ordering).

This gives companies the ability to optimize the value of their

mobile representatives by integrating on-road and in-store

activities to best address their customer needs and business

goals.

In the face of a turbulent economy, CPG manufacturers are

looking for new opportunities to improve efficiencies so they

can continue to deliver maximum value to consumers, said

Logan Kastner, GMA senior manager of industry affairs.

A blended DSD3 approach helps deliver exactly those types of

productivity gains. One center-store supplier told Quofore

that it saves $6 million a year in outsourcing fees by having

its own drivers and sales representatives hang POS

materials8.


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. Already on-hand delivering product or filling shelves, thecompanys drivers also help merchandise in targeted stores

and conduct short consumer intercept surveys, transmitting

responses directly and instantly to the HQ marketing

department via wireless. The surveys often relate to new

product or packaging development and consumer

preferences; time-sensitive questions that help formulate

rapid responses to shoppers needs.

This serves as an example of a CPG company redefining its

use of mobile technologies and its performance expectations

of DSD drivers. As CPG companies move to replace and

update expiring technologies, more of them think broadlyabout ways to produce more within their organizations, drive

costs down, build program compliance rates and share

essential data quickly. Thats the mindset of DSD3.

3.3 Sales and merchandising modelsDSD brands follow one of three sales and merchandising

models: the driver does all tasks in one store visit; or two-tier

(sales representatives take the orders, drivers deliver the

next day, the rep returns to the store days later to build

displays and merchandise); or pre-sales (sales representative

schedules an order to be delivered and merchandised dayslater). The DSD3 approach empowers them all.

Especially with scan-based trading on the rise, suppliers that

feel they have a rightful place on the retail floor (since they

own inventory until it goes through the cash register) are

more motivated to closely manage stock and build

compliance, and they want more capabilities in their hands.

One key controlling element of DSD3: a store-delivery invoice

may not be issued with scan-based trading, but CPG still

needs to track what it delivered. The ruggedized handhelds

can do stop counts by cartons on a truck, at a supplier-ownedwarehouse, or at a shared third-party freezer-refrigerator

warehouse to enable timely, accurate replenishment. Better

here than in a store to avoid counting items at the shelf

although the day could come soon when a PDA reads low-cost

RFID tags on items and does automated stop counts and

issues exception reports.

WHAT MORE COULD BE DONEIN THE FIELD?

Heres a quick sampler:

Field workers use store printersto issue purchase incentives and

coupons on the spot to offset a

competitors two-for-one

promotion.

Field staff access Walmart RetailLink data to help stay in

consistent compliance, and

immediately reschedule labor

priorities if needed. Product recall alerts beam to all

DSD3 handhelds to remove

affected items from store

shelves, and real-time reports

back from the field verify the

action. (Rapid recalls can

differentiate brands; nearly half

of consumers have changed

shopping patterns due to food

safety concerns and they dont

equate higher prices or brand

names with safer food.9

Store-by-store memory of pastperformance, promotions anddisplay preferences are instilled;

this enhances productivity and

brand presence, and makes field

staff turnover a moot point.

Field workers take photos of acompetitors new packaging or

promotion and transmit

immediately to HQ.

During periodic reviews withretailers, account teams can

document that their field force

spent, say, 20,000 hours

servicing the chains stores; can

detail achievements (e.g. no

voids in endcaps, minimal out of

stocks); and document category

performance lift as a direct

outcome of these efforts.


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3.4

Being seen as tech-savvy by shoppers

According to recently published research10, most retailers

(54%) say that more personalized attention from store

employees is an absolutely vital component to differentiate

the store experience from an online retail transaction. The

biggest upside lives with technologies that empower in-store

employees, those that help store associates save the sale,

and those that make their employees more productive.

The same research highlighted the top two business

challenges:

Improve customer service while holding the line on payrollcosts (49% in 2010, up from 39% in 2009).

More consistent store execution (45% in 2010, up from40% in 2009).

And some of the in-store technologies rated as having a lot

of potential value:

Cross-channel customer and inventory synchronization(48%).

Software that schedules the right mix of labor soemployees can complete all activities (40%).

Software to assign actions for specific stores/departmentsin response to underperforming Key Performance

Indicators (38%).

KPIs and alerts to store managers on mobile devices(22%).

Specific to merchandising execution, retailers say their top

three operational challenges are:11

Getting merchandising and supply chain to work together(60%).

Getting stores to execute merchandising plans (53%). Overall execution (45%).While a majority of the retailers overall (53%) regarded store

management execution technology as very valuable, just

20% say theyve had it in place for more than one year. Only

31% of fast-moving consumer goods retailers (grocery, for

example) say if they had a budget for such technology, they


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would have an install underway. This indicates the historicallysignificant gap between execution sought and execution

fulfilled in stores will continue to be filled by DSD field forces,

in particular those empowered to the DSD3 level.

Atop these operational concerns, CPG brand manufacturers

and stores should want consumers to perceive them as at

least their technological equals. Increasing percentages of

shoppers use cell phones and PDAs to compare products and

prices, receive coupons, see reviews and glean nutritional and

promotional information at the shelf, so it makes sense to

visibly use wireless technology on the selling floor to optimize

in-store conditions and improve the shopping experience. Itlikely matters little to shoppers if the wireless users belong to

the store or the brand, as long as their presence on the

selling floor results in smarter, easier shopping. This is

another reason why retailers would view DSD3 brand teams

as supportive assets.


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DSD3 not only allows companies to blend the activitiesperformed by deliver drivers, it also allows the drivers role to

be integrated into an end-to-end field operations process.

By utilizing mobile technologies and applications that interact

across field managers, sales reps, in-store merchandisers and

DSD drivers, companies can respond more quickly to brand

performance issues in the field.

These may be related to out-of-stocks, new product launches,

in-store promotions and point-of-sale display, share of shelf

or competitor activity. Co-coordinating field team members to

address these issues in a timely manner (that can have a

positive remedial impact on revenue and brand performance)

is a significant challenge that can be addressed through

DSD3, as illustrated in the scenario, below.

4 DSD3 in a connected field presence

In this scenario (used for illustrationpurposes), the DSD driver is an integral,

connected part of a coordinated field team,utilizing advanced mobile technology and

business processes to achieve betteroutcomes for the customer and the brand .


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5.1

What to seek in a next-generation handheld

Several motives drive the decision of CPG manufacturers to

replace older technology. First, the costs to continue to

support end-of-life hardware and software become unwise or

prohibitive. Second, increasing demands on CPG field teams

to perform create the need for more powerful, advanced

devices with new capabilitiesand ruggedized units with

larger screens, higher resolutions, faster speeds and longer

battery life are available at comparable costs. Third, todays

more robust technologies enable DSD drivers to get more

involved, to expediently complete and report on a broader

range of tasks.

The fast pace of technology advances keeps CPG seeking

more robust solutions for their DSD teams.

Devices with capabilities on this checklist will equip brands

with the information power and industrial engineering their

teams need in the field:

well-supported sales and merchandising functions, such ascompliance, distribution and share-of-shelf checks,

competitor price checks, shelf resets, consumer intercept

surveys, delivery and invoices

web-based integration with SAP to ensure invoice pricesare 100% accurate based on back-end systems

pre-sales functions DSD solutions on a ruggedized PDA/smartphone choice of a tablet or laptop, which is sales and

merchandising focused

choice of a cell phone for simpler field condition audits the ability to barcode scan the outside of case cartons modern, scalable architecture that could fill needs for the

next decade

rapid deployment

5 Replacing older systems

WHICH DEVICE TO CHOOSE FOR DSD3?

Despite the media

hype about Apple

and Android, when

companies choose

ruggedized devices

for their enterprise

applications,

Windows Mobile

rules.

87% of rugged handheld devicesshipped last year run Windows Mobile,

and its dominance is expected to

continue, says VDC Research.12

Microsofts commanding market

share is expected to nearly double:

from 2.3 million units shipped in

2009 to more than 4.3 million units

shipped by 2014. VDC estimates the

global installed base at 11.9 million

units, with replacement or upgrade

every 4.5 years on average.

VDC found that enterprise users

require higher performance standards

than consumers with respect to,

among others: enterprise lifecycle

support; application development

tools and application portability;

integration with back-end enterprise

platforms; device and security

management; and data capture.

Demand for handheld devices in the

enterprise continues unabated as

organizations look to equip theirincreasingly mobile workforce with

the requisite tools to support real-

time decision making and transaction

processing in distributed or remote

environments, noted VDC.


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It is axiomatic to say that the world inhabited by ConsumerProducts companies is one of constant change. Anyone who

has lived through the past few years would be hard pressed

to argue otherwise.

In modern trade markets, the seismic changes that have

reshaped the competitive landscape have also created

opportunities for companies to reshape their operations to

service customers more efficiently and more productively.

Direct store delivery, long regarded as a logistics function at

the end of a highly optimized supply chain, is one such area

of opportunity.

New thinking about the role of the delivery driver as an agent

of in-store brand presence and of DSD as an integral part of

the consumer demand chain can be a powerful lever for

competitive advantage.

This kind of thinking is no longer just wishful. The availability

of powerful handheld devices, high-speed mobile networks

and innovative applications provide the tools that can drive

game-changing initiatives for forward-thinking companies.

With traditional DSD solutions nearing the end of their shelf

life, and with a growing expectation from retailers that thereis more value these systems can deliver, Consumer Products

companies are in the position to drive a welcome change.

6 In closing


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1 Mobile DSD Solution Market Review: Executive Summary, VDCSlide Presentation, July 7, 2008.

2 2010 Survey of Collaborative Supply Chain Effectiveness Report,The Food Marketing Institute and Grocery ManufacturersAssociation Trading Partner Alliance and Kurt Salmon Associates,February 2010.

3 Walmart lines up sites for smaller stores, Financial Times,September 19, 2010

4 Midnight Shopping on the Brink of Poverty, National Public Radio,October 2, 1010.

5 Stores Scramble to Accommodate Budget Shoppers, New YorkTimes, September 21, 2010.

6 Teamsters Detail 7-Eleven DSD Plan, Convenience Store News,May 24, 2010.

7 Maximizing the Impact of Outsourcing: How CPGs Can Best UseSales and Marketing Agencies in a Changing Environment,Grocery Manufacturers Association, ASMC Foundation, and Bain &Company.

8 Data on file, Quofore.

9 Det Norske Veritas study, Food Safety Certification: A Study ofFood Safety in the U.S. Supply Chain, and H. Christopher Peterson,director, Michigan State University Product Center for Agriculture

and Natural Resources, September 20, 2010.10The Customer-Centric Store: How Retailers Engage Tech-Enabled

Customers, Retail Systems Research, June 2010.

11Defining Twenty-first Century Merchandising, Retail SystemsResearch, Benchmark Report: September 2010.

12Microsoft Extends Commitment to Enterprise Handheld DeviceMarket with Release of Windows Embedded Handheld Platform.VDC Research Group, June 2010.

7 References


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Quofore

Quofore

Quofore is the worlds leading developer of mobile software

solutions that help Consumer Products companies transform

the effectiveness and productivity of their field teams.

In use by leading companies in more than 30 countries,

Quofore solutions automate and optimize field sales,

marketing, merchandising, van sales, and direct store

delivery operations.

Working closely with customers, Quofore can demonstrate

quantifiable increases in rep productivity, retailer compliance,

brand performance, and revenue growth.

Today, Quofore is recognized by leading industry analysts

as the premiere top tier company delivering retail execution

solutions across multiple geographies.

For more information visit www.quofore.com

Quofore (kw-for) derives from the Latin Quo meaning to where, for what purpose, for which reason? and fore which means at the front.

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