The objective of the article is to show the results of the Benchmark Research – Distribution Service, conducted periodically, since 1994, by ILOS[1], on the evolution of the importance and quality of the distribution service of the consumer goods industry in the perception of supermarkets. The analyzes that follow are based on the results of this research.
A first part of this article explored how the economic environment impacts retail purchasing decisions in the consumer goods industry. This second part analyzes the implications of changes in the competitive environment in terms of the needs of supermarkets, as well as the performance and quality of the distribution service provided by the industry.
The level of trade satisfaction with the industry's distribution service
This analysis concerns the level of satisfaction of the retail trade in relation to the performance of the industries that have the best practices, as well as those with typical performance[2], considering the three main dimensions of the distribution service, namely: product availability[3]; delivery time consistency[4] and order cycle time[5].
Figures 3 and 4 indicate that, in general, the supermarket trade was more dissatisfied with the dimensions availability, consistency of delivery time and cycle time of the distribution service of its suppliers in 2010, in relation to 2008. The only exception was regarding availability, on which retailers were most satisfied with best practices.
In the evaluation made by the trade, the distribution service of the industries that hold the best practices has shown a significant increase in dissatisfaction in the last two years in terms of consistency of delivery time and cycle time, with the exception of availability, which in 2010 reached the lowest level of dissatisfaction throughout the period surveyed (see Figure 3). While the number of people dissatisfied with availability decreased from 6% in 2008 to 4% in 2010, in the case of consistency of delivery time, those dissatisfied increased from 11% to 14% and, for cycle time, from 3 % to 9% in the same period.
Figure 3 – Evolution of the percentage of retailers dissatisfied with the industry's best practices
As shown in Figure 4, the typical industry shows a generalized increase in dissatisfaction with the industry's distribution service, regarding the variables availability, cycle time and delivery time consistency. The number of dissatisfied with availability increased from 17% in 2008 to 19% in 2010; with the consistency of the delivery time, the increase was from 52% to 55%, while for the cycle time, the worsening was expressive, going from 24% to 34% in the period considered.
Figure 4 – Evolution of the percentage of retailers dissatisfied with the typical industry
It is expected that the level of dissatisfaction with the distribution service has remained high in 2011 due to the continued increase in demand, which has imposed “stress” on the pull of products along the supply chain. It is worth assessing whether the industry will be able to adapt its operations to the increases in volume that have been experienced in recent years, taking advantage of the slowdown in demand growth in 2011 due to the restrictions that the government imposed on consumption, aiming to quell the high levels of inflation over the course of the year. of the year.
It is noteworthy that the retail trade clearly differentiates the industries that have the best practices by demonstrating a much lower level of dissatisfaction with the distribution service when compared to the typical industry.
In the following sections, the components that determine the retailer's level of satisfaction with the industry's distribution service will be analyzed – the retailer's demand level and the industry's performance.
The requirement level[6] of retail and the performance of the industry
The performance analysis of the industry's distribution service makes more sense if considered in conjunction with the retailer's level of demand for it. After all, a central issue to be understood in order to design a winning service strategy would be: “How to achieve the level of customer satisfaction?” In this sense, this section will address the evolution of these components that determine the level of satisfaction of retailers, considering each of the three main dimensions of the distribution service in the consumer goods industry.
Product availability – There is a slight increase in the level of minimum expectation of the trade referring to the percentage delivered of the total order in 2008, as illustrated in Figure 5. Currently, the trade is not satisfied with deliveries that do not comprise at least 85,3% of the total order, while in 2008 this figure reached 85,0%.
Figure 5 - Evolution of the delivered percentage of the total order
With regard to performance in terms of product availability, the industry in general deteriorated between 2008 and 2010 (see Figure 5).
In the case of best practices, the percentage delivered, which was 98,0% in 2008, decreased to 97,3% of the total order in 2010. In turn, the typical industry had a significant deterioration with the reduction in the percentage delivered, from 92,4% in 2008 to 89,7% in 2008.
It is observed that the small increase in the level of expectation of retailers for a better distribution service, in terms of product availability, combined with the slight worsening of services on the part of best practices in the industry, was not enough to increase the number of retailers dissatisfied. Contrary to expectations, there was a reduction in dissatisfaction with best practices, despite the slight deterioration in performance. In the case of industries with typical performance, the increase in expectations, together with the significant deterioration in performance, explains the increase in the level of dissatisfaction with their services, in this dimension.
Delivery time consistency – Figure 6 indicates a decrease in the level of demand for consistency of the industry's delivery time by the retail trade in 2010. Currently, the retailer does not tolerate receiving more than 10,2% of late deliveries, while in 2008 this value reached the level of 9,4% of orders placed.
Figure 6 - Evolution of the percentage of late deliveries
With regard to performance in terms of delivery time consistency, the industry in general showed an increase in delays in 2010, as seen in Figure 6. In the case of best practices, delays, which reached 5,7% of orders in 2008, increased significantly to 7,1% of late deliveries in 2010. Typical industry increased delays from 19,9% in 2008 to 22,9% in 2010.
It is observed that the drop in the level of expectation of retailers for a better distribution service, in terms of consistency of delivery time, did not compensate for the worse performance of the industry as a whole, which led to an increase in dissatisfaction with this dimension of service.
Order cycle time – As seen in Figure 7, in 2010 retailers raised the bar in terms of order cycle time. Currently, the retailer does not tolerate a delivery time greater than 4,1 days, against 4,4 days in 2008.
Figure 7 - Evolution of order cycle time
As seen in Figure 7, both best practices and the typical industry worsened service to the trade between 2008 and 2010 in terms of order cycle time.
In the case of best practices, the delivery time worsened from 1,6 days in 2008 to 1,9 days in 2010. In turn, the performance of the typical industry also worsened, from 3,5 days in 2008 to 3,9 ,2010 days in XNUMX.
It should be noted that the increase in retailers' expectations, combined with the worsening performance of the industry in general, contributed to an increase in the number of people dissatisfied with the distribution service, in terms of order cycle time.
The survey results analyzed in this section confirm the evidence observed in previous editions, that commerce perceives a clear differentiation in terms of performance between the distribution service provided by the best practices and that provided by the typical industry, considering the three main variables of its purchasing decision process.
It is important to emphasize that there was an increase in the expectations of retailers for a better level of distribution service in the industry in terms of availability and order cycle time, at the same time that there was a drop in the level of demand in relation to the consistency of delivery times. . In other words, trade signals that it is willing to increase its stocks to account for any delays, in exchange for greater availability and speed in product replacement. However, the industry showed a generalized deterioration in the performance of the distribution service, which resulted in an increase in dissatisfied retailers.
Conclusions
In the first part of this article, we demonstrate that the favorable economic environment in recent years, despite the current international crisis, has positively influenced the agents that are part of the consumer goods supply chain in Brazil. However, the government's inflationary containment measures adopted throughout 2011 must have cooled trade relations between supermarkets and consumer goods industries by the end of the year. In this sense, the supermarket trade must have experienced, in 2011, a sales performance below that observed in 2010, putting pressure on the industry for a more efficient distribution service.
As for 2012, an even more challenging environment for the consumer goods industries should be expected, because if there is an effective incentive for the domestic market, aiming to compensate for a probable recession in the global economy, there should be a significant injection of income in the economy . In this scenario, there will be population mobility, which, in turn, will have a positive impact on the volume of sales in the consumer goods industry, driven by the better performance of supermarket retail.
As noted in the first part of this article, the distribution service and the product increased in importance in the retail purchase decision process in relation to the consumer goods industries in 2010, to the detriment of the other variables – price and advertising and promotion. This means that retailers are willing to pay more for products and have less promotion, in exchange for improvements in product offerings and distribution services.
The growth in the importance of the distribution service in 2010 is highlighted by the increase in the retailer's level of demand in two of the main service dimensions: product availability and order cycle time. This, combined with the lower level of service offered by the consumer goods industry, led to a generalized increase in the level of dissatisfaction among retailers with regard to the physical distribution service.
In 2011, both the product and the distribution service must have continued to gain relevance in the purchase decision process of retailers in the consumer goods industry, which in turn may have implied an increase in the demand for the level of distribution service . Thus, for 2012, the industries must be attentive and seize the moment to adjust their operations, aiming to revert the growing level of dissatisfaction in the retail trade observed in recent years.
It is important to point out that the distribution service provided by the industry represents an opportunity to differentiate itself from the competition. This observation is consistent with the observed increase in the relative importance of the distribution service in the purchase decision process by retailers. As noted in previous editions of this survey, the performance of the service offered by companies with best practices is clearly perceived by retailers as superior to that provided by the typical industry. This potential for differentiation based on the distribution service is even more potentiated at this time, when there is growing dissatisfaction with the performance of the consumer goods industry.
Therefore, it is up to the industry to adjust its marketing strategy, paying special attention to the relative changes between the variables (price, product, distribution service and promotion and advertising) that direct the shopping behavior of the supermarket trade, which in turn condition the process of the industry's distribution service.
As a final message, it is important to emphasize that the development of periodic research is essential to keep the business relevant and aligned with the real needs of the market. It is from the continuous monitoring of the competitive environment that opportunities can be identified to better serve the customer, anticipating and surpassing the competition.
Bibliographical References
- FLEURY, PF, LAVALLE, CR Evaluation of the physical distribution service: the relationship between the consumer goods industry and the wholesale and retail trade. Management and Production, vol. 4, nº 2, August 1997.
- CHRISTOPHER, M. Logistics and Supply Chain Management: strategies for reducing costs and improving service🇧🇷 Prentice Hall, 1998.
- BOWERSOX, DJ, CLOSS, DJ Business Logistics: the supply chain integration process. Atlas publishing house, 2001.
[1] General Information: The Benchmark Distribution Service survey, conducted periodically since 1994 by the Center for Studies in Logistics, has been sponsored by industrial companies, leaders in their respective sectors. The scope of the research covers about 600 interviews, carried out in five Brazilian capitals (São Paulo, Rio de Janeiro, Curitiba, Belo Horizonte and Recife), considering three categories of products: perishable food, non-perishable food and hygiene and cleaning. The methodology evaluates eight dimensions (operationalized through their respective distribution service attributes): Product Availability, Order Cycle Time, Delivery Time Consistency, Delivery Frequency, Delivery System Flexibility, Failure Remediation System, Support Information System and Physical Delivery Support.
[2] The best market practices reflect the best performance among suppliers observed during the survey, therefore they should be pursued as a benchmark. The performance of a typical company represents the market practice among the main suppliers of the researched company.
[3] Measure: average of the delivered percentage of the total order.
[4] Measure: average percentage of total orders delivered late.
[5] Measure: average time elapsed from order pick-up to product delivery.
[6] The requirement level in question refers to the minimum expectation of service performance below which the customer feels dissatisfied.