The Home Depot at the end of 2000 stands on rock solid financial footing as the World’s largest home improvement Retailer. As they continue to grow in size, so has their outcome of success. Home Depot’s net revenues have grown 208% between FY 1995 and FY 2000. Home Depot’s growth in net earnings over the same period has been 284%. The revenue that the firm is retaining as profits is outweighing the total amount being brought into the company. In 1998, Home Depot was leading Lowes in all earnings except earnings per share. Lowe’s EPS equaled $1.37 to Home Depot’s $0.73.It is important to note the activity ratios when talking about an industry where competitors need to carry a lot of inventory to effectively compete. In 2007, Home Depot had a huge supply chain transformation, which led them to the highest sales in fiscal years. After the fiscal year of 2007, there was a huge decrease in sales due to the recession crisis that happened from 2007to 2009. Home Depot was still able to make profit, but it was lower about 2 million. In 2012, Home Depot had a huge recovery in profits due to the housing market and the demand for supplies to fix the damages made from Hurricane Sandy. Home Depot continually leads in total asset turnover as well as inventory turnover. Home Depot also sells out of their stock 6.71 times per year as to Lowe’s 5.91 times.
Supply Chain Operations
In 2007 Home Depot began to transform their supply chain operations. These changes were revolutionary for the retailer market. During their transformation, it was decided that they would distribute merchandise from, what they named Rapid Deployment Centers (RDC). These RDC’s are from 400,000 – 700,000 square feet and hold all of the merchandise from their suppliers. Aggregated orders are placed and then distributed to the various store depending on their sales volume. Home Depot maintains relationships with many suppliers that stock Home Depot stores with over 30,000 different products. Although Home Depot has a significant amount of suppliers they are still able to force them into offering price discounts due to the fact that Home Depot makes up a large portion of the supplier’s sales. These discounts have gone a long way in driving down the cost of home improvement as well as further increasing Home Depot’s margins and competitiveness with Lowes and others in hotly contested markets. Home Depot has also begun to redefine the market in which they operate. This redefinition has opened up the buy-it-yourself and professional customer segments to Home Depot.
Specifically the buy-it-yourself customer segment are those consumers that like to pick out the materials being used in their homes, but want a professional to install them. Home Depot has many competitive strengths that make them a very difficult company to compete against. Home Depot’s strengths include, extensive product offerings, well know brand names, and the ability to continue to grow. Home Depot has grown at a fast pace, which has been good for business but a logistics nightmare. Since they have expanded aggressively into new markets, they have seen their operating expenses rise in direct proportion with their growth in revenue. This has caused Home Depot delay in being able to capitalize on economies of scale in logistics and distribution provided to them by their market saturation strategy. Home Depot has collaborative relationships with various manufactures and are distributing to the various manufactures. They have an array of merchandise suppliers which enables them to sale a variety of products, specifically appliances. It is evident that they use technology to their advantage by having a separate website specifically set up for merchandise suppliers. There is an application process that each supplier must complete before merchandise is sold at any of the Home Depot stores. The application process is very simple and requires generic...
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