KILLER SUPPLY CHAINS For most retailers, one of the trickiest links in the supply chain is moving…
KILLER SUPPLY CHAINS
For most retailers, one of the trickiest links in the supply chain is moving goods from the supplier to the warehouse and then on to the store. The Home Depot, Inc., has found a simple way around that problem: Remove it. The Atlanta-based building supplies retailer now moves 85 percent of its merchandise —nearly all of its domestic goods— directly from the manufacturer to the storefront. Product no longer languishes in warehouses, saving both suppliers and Home Depot money. “We’re treating each of our stores as if it were a distribution center, says CIO Ron Griffin. Because of Home Depot’s high volume —its stores average $44 million in sales and 5V2 full inventory turns a year—the products frequently ship in full truckloads, making the system even more cost-effective.
Associates walk store aisles, watching for goods that need replenishment. As they enter orders directly into mobile computing devices, called the Mobile Ordering Platform, the requests can go almost instantly via EDI connections to more than 80 percent of Home Depot’s manufacturers, which can respond immediately. Home Depot offers its partners recognition incentives to get them on board.
Short-term forecasting is handled locally; with up to 65 weeks of data at the store level, store managers are given latitude to adjust for demand based on merchandising programs. Home Depot prepares long-range forecasts of 3 to 5 years on a national level for its suppliers; they contain product volume data, of course, as well as where growth is expected and where Home Depot plans to build new stores. That helps suppliers decide where to build new plants and distribution centers, and it puts Home Depot in the position of helping to determine facility location instead of simply working around it. “Rather than assume fixed capacity, we help shape it,” Griffin says.
Home Depot opens up even more data to its biggest partners. Electric-tool manufacturer Black & Decker is Home Depot’s largest supplier, and Home Depot is its largest customer, so it benefits both companies to share information. Home Depot passes point-of-sale data to Black & Decker, which helps the Baltimore company analyze sales and determine future manufacturing volume.