Home Depot Supply Chain Essay
Supply chain has never been Home Depot’s key strategic priorities in the past. Instead, the Atlanta-based home improvement’s management had always been focusing on expanding its stores. At the time, the company’s emphasis on expansion was appropriate considering the history of massive growth.
What originally helped Home Depot’s growth was a decentralized business model where stores were populated with highly knowledgeable sales persons with backgrounds in various building trades. Regional and store-level managers, those closest to the customer, were empowered with decisions of merchandising and inventory mix instead of the people at the head quarters. IT also played a significant role. Home Depot relied heavily on home grown systems. By building its own applications, it didn't get bogged down in customizing off-the-shelf software and didn't invest time and money in endless enterprise …show more content…
With network expansion and competition, per store sales dropped and a decentralized ordering model caused high inventory problems for Home Depot. The majority of supplier shipments flowed directly to the stores and resulted in the Home Depot being the single largest less-than-truckload shipper in the United States, since about 80% of goods were flowing direct to store on half-empty trucks, which was inefficient, lead to poor inventory turns, poor in-stock and high logistics cost. Meanwhile, most retailers, such as rival Lowe’s and discount powerhouse Wal-Mart, ship to distribution centers that can serve up to 100 stores. There, they break down larger shipments into smaller ones that are parceled out to stores. Home Depot’s individual stores were their own stocking centers and store associates had to spend more time in unloading trucks than serving customers. The business model became compromised as to who had the most stores in the most locations vs. superior customer
What originally helped Home Depot’s growth was a decentralized business model where stores were populated with highly knowledgeable sales persons with backgrounds in various building trades. Regional and store-level managers, those closest to the customer, were empowered with decisions of merchandising and inventory mix instead of the people at the head quarters. IT also played a significant role. Home Depot relied heavily on home grown systems. By building its own applications, it didn't get bogged down in customizing off-the-shelf software and didn't invest time and money in endless enterprise …show more content…
With network expansion and competition, per store sales dropped and a decentralized ordering model caused high inventory problems for Home Depot. The majority of supplier shipments flowed directly to the stores and resulted in the Home Depot being the single largest less-than-truckload shipper in the United States, since about 80% of goods were flowing direct to store on half-empty trucks, which was inefficient, lead to poor inventory turns, poor in-stock and high logistics cost. Meanwhile, most retailers, such as rival Lowe’s and discount powerhouse Wal-Mart, ship to distribution centers that can serve up to 100 stores. There, they break down larger shipments into smaller ones that are parceled out to stores. Home Depot’s individual stores were their own stocking centers and store associates had to spend more time in unloading trucks than serving customers. The business model became compromised as to who had the most stores in the most locations vs. superior customer