The first part of this article explored how the economic environment impacts the purchasing decision of the trade 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 practiced by the industry.
The analyzes that follow are based on the results of the Benchmark Survey – Distribution Service, conducted periodically since 1994.
General information:
The Benchmark Survey – Distribution Service, carried out periodically since 1994 by the Center for Studies in Logistics and later by the ILOS, aims to measure the evolution of the importance and quality of the distribution service in the consumer goods industry in the perception of supermarket operators. The work has been sponsored by leading industrial companies in their respective sectors.
The research scope considers 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
The level of trade satisfaction with the industry's distribution service
This analysis concerns the level of retail trade satisfaction with the performance of industries that have best practices, as well as those with typical performance.[1], considering the three main dimensions of the distribution service, which are: Product Availability[2]; Delivery Time Consistency[3] and Order Cycle Time[4].
Figures 3 and 4 indicate that, in general, the supermarket trade was more dissatisfied with the dimensions Availability and Consistency of Delivery Time of the distribution service of its suppliers in 2012, in relation to 2010. In the same period, there was an increase in satisfaction with respect to Order Cycle Time. This seems to indicate that retailers are willing to receive their orders in a longer period, as long as it is in the requested quantity and without delays.
In the evaluation made by the supermarket trade, the distribution service of the industries that hold the best practices showed a significant increase in dissatisfaction in the last two years in terms of Availability and Consistency of Delivery Time, while the level of satisfaction with Cycle Time grew (see Figure 3). Between 2010 and 2012, the number of people dissatisfied with Availability increased from 4% to 9%, and with respect to Delivery Time Consistency, from 14% to 22%. In the case of Cycle Time, dissatisfaction decreased from 9% to 1% over the same period.
Figure 3 – Evolution of the percentage of retailers dissatisfied with the industry's best practices
Source: Benchmark Research – Distribution Service 2013
As shown in Figure 4, the number of people dissatisfied with the typical industry's distribution service also increased with regard to the variables Availability and Consistency in Delivery Time. The number of dissatisfied with Availability increased from 19% in 2010 to 29% in 2012, while in the case of Consistency of Delivery Time, the increase went from 55% to 67% in the period considered. With regard to Cycle Time, there was a significant reduction in the number of dissatisfied people, from 34% to 22%.
Figure 4 – Evolution of the percentage of retailers dissatisfied with the typical industry
Source: Benchmark Research – Distribution Service 2013
It is to be expected that the level of dissatisfaction with the distribution service has remained high in 2013, due to the continued increase in demand, which imposes stress on the pull of products along the supply chain. It is worth assessing whether the industry will be able to adjust its operations to the increases in volume that have been experienced in recent years.
These results reinforce the thesis that reliability is more important than delivery time in a supply chain designed to have a high performance, lean and consistent. Availability and predictability are fundamental for effective integrated planning between partners in the same value chain, aiming at zero stock out on the shelf!
It should be noted 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 regard to the industry's distribution service will be analyzed, the level of demand[5] of retail and industry performance.
Retail demand level and industry performance
The industry's distribution service performance analysis makes more sense when considered in conjunction with the retailer's level of demand. After all, a central question 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 the 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 significant increase in the minimum expectation level of the trade regarding the percentage delivered of the total order in 2012, as shown in Figure 5. Currently, the trade is not satisfied with deliveries that do not comprise at least 90,9% of the total order , while in 2010 this value reached 85,3%.
Regarding the industry's performance in terms of Product Availability, the industry in general presented a positive evolution regarding the performance between 2010 and 2012 (see Figure 5).
Figure 5 - Evolution of the delivered percentage of the total order
Source: Benchmark Research – Distribution Service 2013
In the case of best practices, the percentage delivered, which was 97,3% in 2010, improved to 97,6% of the total order in 2012, while the typical industry maintained its performance at 89,7% in the period considered (see Figure 5 ).
It is observed that the strong increase in the level of expectation of retailers for a better distribution service, in terms of Product Availability, was responsible for the significant evolution of dissatisfied with the services provided by the industry. It should be noted that the slight increase in the performance of best practices was not enough to prevent the growth of dissatisfaction among retailers, from 4% to 9%, in the period considered (see Figure 3).
Delivery Time Consistency
Figure 6 indicates a significant increase in the demand level for Consistency of Delivery Time in the industry by the retail trade in 2012. Currently, the retailer does not tolerate receiving more than 8,7% of late deliveries, while in 2010 this figure reached at the level of 10,2% of orders placed.
Figure 6 - Evolution of the percentage of late deliveries
Source: Benchmark Research – Distribution Service 2013
With regard to performance in terms of Delivery Time Consistency, while best practices outperformed their 2010 performance, decreasing late deliveries from 7,1% to 6,6% in 2012, the typical industry showed increased delays, from 22,9% to 26,3% in the same period.
It is observed, again, that the significant increase in the level of expectation of retailers for a better distribution service, in terms of Delivery Time Consistency, was responsible for the generalized growth of dissatisfied retailers. Not even the increase in the performance of best practices was enough to prevent the growing level of dissatisfaction with this dimension of service, from 14% to 22%, in the period considered (see Figure 3).
Order Cycle Time
As seen in Figure 7, in 2010 retailers lowered the bar in terms of Order Cycle Time. Currently, the retailer does not tolerate a delivery time greater than 5,0 days, while this time could not be greater than 4,1 days in 2010.
Figure 7 - Order Cycle Time Evolution
Source: Benchmark Research – Distribution Service 2013
With regard to industry performance in terms of Order Cycle Time, as seen in Figure 7, while best practices outperformed, from 1,9 days in 2010 to 1,7 days in 2012, the typical industry worsened the service provided to trade, from 3,9 days to 4,2 days in the same period.
It can be seen that the significant drop in retailers' level of demand in relation to the Order Cycle Time was the main factor responsible for the strong reduction of retailers dissatisfied with best practices, from 9% to 1%, in the period considered (see Figure 3).
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 point out that there was a significant increase in the expectations of retailers for a better level of distribution service in the industry in terms of Availability and Consistency of Delivery Time, at the same time that there was a drop in the level of demand in relation to Product Cycle Time. Order. This result reinforces the previously mentioned thesis that commerce signals that it is prone to exchange delivery speed for greater product availability and reliability in the distribution service practiced by industries.
The accentuated worsening of dissatisfaction in the Availability and Delivery Time Consistency dimensions is certainly an opportunity for the industry that wants to stand out as holder of best practices in the performance of the distribution service.
Conclusions
In the first part of this article, we demonstrated that, despite the not very favorable perspectives of the economy, the last seven years were positive for the agents that integrate the supply chain of consumer goods (see Table 1, in the 1st part of this article). In the medium term, it is expected that the government will change to a model of economic growth based on investments in infrastructure and productivity, moving away from the current one, leveraged on stimulating consumption, which signals exhaustion.
At the beginning of the article, we observed that in the last five years there has been a maintenance of the level of importance of the Distribution Service in the purchase decision process of retailers. On the other hand, the Product experienced a consistent increase in relevance in the last six years, to the detriment of the Price and Promotion and Advertising variables. It should be noted that the Product has become the most important decision variable in the last six years. This indicates that retailers are willing to pay more in exchange for improvements in the offer of Products and in the Distribution Service by the industry.
These results are consistent with the process of social ascension observed in recent years, and the consequent desire to improve the population's consumption pattern, which in turn has pushed the supply chain of consumer goods to offer a greater variety and quality of items.
The growing importance of the Distribution Service in 2012 is highlighted by the increase in the retailer's level of demand in two of the main service dimensions: Product Availability and Delivery Time Consistency. However, the performance of the industry's best practices was not enough to prevent the general increase in dissatisfaction with the level of service provided in these two dimensions of the Physical Distribution Service.
In 2013, both the Product and the Distribution Service must have continued to gain relevance in the purchasing decision process of retailers in the consumer goods industry, which in turn may have implied an increase in the demand for the level of service distribution. Industries must pay attention and take advantage of 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 the trade, as well as the growth in the level of demand in the following variables: Product Availability and Delivery Reliability.
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 differentiation potential is even more potentiated at this moment, when there is a growth of dissatisfaction with the performance of the consumer goods industry.
Therefore, it is up to the industry to adapt 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 should condition the your care process.
As a final message, it is important to emphasize that the development of periodic surveys is essential to keep the business relevant and in line 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.
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] 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
[2] Measure: average of the percentage delivered of the total ordered
[3] Measure: average percent delivered of total orders that are delivered late
[4] Measure: average elapsed time from order to product delivery
[5] The level of demand in question refers to the minimum expectation of service performance below which the customer feels dissatisfied.
