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Supply Chain Digest staff
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Nestlé U.S. announced last month that it was ending its DSD (direct store delivery) program for brands including DiGiorno and Skinny Cow in a supply model that seems to be about to disappear outside of bread, soda and beer.
Nestlé will instead ship goods to retailer distribution centers for them to move to individual stores — meaning lots of drivers, merchandisers and other staff will no longer be needed. Some 4,000 jobs will be lost as the operation covers 230 facilities, 1,400 trucks and 2,000 different delivery routes.
Despite cost reduction measures, the direct store model was too expensive, even once the company "reached the maximum point of efficiency," Steve Presley, CEO of Nestlé USA, told Bloomberg.
"You can't have that duplicative cost in the structure," Mr. Presley added, referring to both a retailer and some vendors making deliveries to stores.
In 2017, Kellogg announced plans to eliminate 1,200 distribution jobs as it exited direct store delivery for similar reasons.
Paul Norman, president of Kellogg North America, said at the time, "We see the warehouse model as a clear advantage for us. In fact, we realize both higher service levels and share in the U.S. Snacks categories and channels that sell through warehouse distribution already."
In 2012, Hostess’ new owners decided it would end DSD and ship to retail DCs. Beyond reducing logistics costs, the bakery snack maker found shipping to retail DCs led to more stable demand and better forecast accuracy.
Snack giants Mondelez International and PepsiCo's Frito-Lay both still rely on DSD, arguing it helps boost sales to have employees in stores stocking products and ensuring freshness — at least for now.
State laws often mandate DSD in categories such as beer and soft drinks. Bread makers still use DSD due to freshness and handling challenges.