This assignment requires the submission of a “reaction paper” by each individual student. After reviewing the reading materials relating to The Home Depot Supply Chain Innovation provided in Module 1
Assignment Questions In what ways have innovation and transformation of The Home Depot’s supply chains impacted and enhanced customer/consumer experience? As the supply chains at The Home Depot have evolved and transformed over time, what types of supply chain technology do you feel have been needed to facilitate these changes?  A helpful way to respond to this question is to first identify examples of relevant supply chain technologies and then to comment on how they have impacted THD’s supply chains.  Also, please feel free to consider technologies in addition to those that may have been discussed in the readings for this lesson. What do you think is next for the future of The Home Depot’s supply chains?  In the interest of focusing on end-to-end supply chain performance, what do you feel would be some of the relevant expectations for the supplier networks that serve The Home Depot? Assignment Guidelines Each student should submit one written paper in MS Word format, consistent with the guidelines in the Course Syllabus. Please structure your paper in a Q&A format. (In other words, show each question in bold followed by your response.) Length should include a title page plus no more than 3 pages of text, single-spaced, with a space between paragraphs Submit your completed assignment to Dropbox by the due date provided on the course schedule.
This assignment requires the submission of a “reaction paper” by each individual student. After reviewing the reading materials relating to The Home Depot Supply Chain Innovation provided in Module 1
HOME DEPOT INC 10-K FILING TO THE SEC March 15, 2023 (Excerpted content below) INTRODUCTION The Home Depot, Inc. is the world’s largest home improvement retailer based on net sales for fiscal 2022. We offer our customers a wide assortment of building materials, home improvement products, lawn and garden products, décor products, and facilities maintenance, repair and operations products. We also provide a number of services, including home improvement installation services and tool and equipment rental. As of the end of fiscal 2022, we operated 2,322 stores located throughout the U.S. (including the Commonwealth of Puerto Rico and the territories of the U.S. Virgin Islands and Guam), Canada, and Mexico. The Home Depot stores average approximately 104,000 square feet of enclosed space, with approximately 24,000 additional square feet of outside garden area. We also maintain a network of distribution and fulfillment centers, as well as a number of e-commerce websites in the U.S., Canada and Mexico. When we refer to “The Home Depot,” the “Company,” “we,” “us” or “our” in this report, we are referring to The Home Depot, Inc. and its consolidated subsidiaries. OUR STRATEGY The retail landscape has changed rapidly over the past several years, with customer expectations constantly evolving. In fiscal 2022, we continued to operate with agility to meet the challenges created by a fluid domestic and global business environment, including supply chain disruptions, tight labor market conditions, and ongoing inflationary pressures. Our ability to operate successfully and meet the needs of our customers was due in significant part to our investments over the past several years aimed at creating an interconnected, frictionless shopping experience that enables our customers to seamlessly blend the digital and physical worlds. Going forward, we will leverage the momentum of these investments and continue to invest in our business in support of the following goals: We intend to provide the best customer experience in home improvement; We intend to extend our position as the low-cost provider in home improvement; and We intend to be the most efficient investor of capital in home improvement. OUR CUSTOMERS We serve two primary customer groups — consumers (including both DIY and DIFM customers) and professional customers — and have developed varying approaches to meet their diverse needs: DIY Customers These customers are typically homeowners who purchase products and complete their own projects and installations. Our associates assist these customers both in our stores and through online resources and other media designed to provide product and project knowledge. We also offer a variety of clinics and workshops both to share this knowledge and to build an emotional connection with our DIY customers. Professional Customers (or “Pros”) These customers are primarily professional renovators/remodelers, general contractors, maintenance professionals, handymen, property managers, building service contractors and specialty tradespeople, such as electricians, plumbers and painters. These customers build, renovate, remodel, repair, and maintain residential properties, multifamily properties, hospitality properties, and commercial facilities, including education, healthcare, government, institutional, and office buildings. We have a number of initiatives designed to drive growth with our Pros, including a customized online experience, a dedicated sales force, an extensive delivery network, our Pro Xtra loyalty program, enhanced credit offerings, and inventory management programs. Building on our historical strength as a destination for urgent purchase needs, we are investing in capabilities that will help us better serve our Pros’ planned purchase needs (in-store or via our dedicated sales team), including our expanded supply chain capabilities and advance ordering through our interconnected digital platforms. We believe that focusing on meeting the Pros’ planned purchase needs, particularly for larger renovator/remodeler Pros, will help us drive growth and deliver value to our shareholders. We extended our reach in the MRO marketplace with our fiscal 2020 acquisition of HD Supply, a leading national distributor and provider of MRO products and related value-added services to multifamily, hospitality, healthcare, and government housing facilities, among others, and in fiscal 2021 we integrated our legacy Interline Brands business into HD Supply. Our MRO operations use a distribution center-based model that sells products primarily through a professional sales force and through e-commerce platforms and print catalogs. We recognize the great value our Pros provide to their clients, and we strive to make their jobs easier and help them grow their businesses. We believe that investments aimed at deepening our relationships with our Pros are yielding increased engagement and will continue to translate into incremental sales to these customers. DIFM Customers Intersecting our DIY customers and our Pros are our DIFM customers. These customers are typically homeowners who use Pros to complete their project or installation. Currently, we offer installation services in a variety of categories, such as flooring, water heaters, bath, garage doors, cabinets, cabinet makeovers, countertops, sheds, furnaces and central air systems, and windows. DIFM customers can purchase these services in our stores, online, or in their homes through in-home consultations. In addition to serving our DIFM customer needs, we believe our focus on the Pros who perform services for these customers helps us drive higher product sales. OUR PRODUCTS AND SERVICES A typical The Home Depot store stocks approximately 30,000 to 40,000 items during the year, including both national brand name and proprietary products. Our online product offerings complement our stores by serving as an extended aisle, and we offer a significantly broader product assortment through our websites and mobile applications, including homedepot.com, our primary website; homedepot.ca and homedepot.com.mx, our websites in Canada and Mexico; hdsupply.com, our website for our MRO products and related services; blinds.com, our online site for custom window coverings; and thecompanystore.com, our online site featuring textiles and décor products. We believe our merchandising organization is a key competitive advantage, delivering product innovation, assortment and value, which reinforces our position as the product authority in home improvement. In fiscal 2022, we continued to invest in merchandising resets in our stores to refine assortments, optimize space productivity, introduce innovative new products to our customers, and improve visual merchandising to drive a better shopping experience. At the same time, we remain focused on offering everyday values in our stores and online. To help our merchandising organization keep pace with changing customer expectations and increasing desire for innovation, localization, and personalization, we are continuing to invest in tools to better leverage our data and drive a deeper level of collaboration with our supplier partners. As a result, we have continued to focus on enhanced merchandising information technology tools to help us: (1) build an interconnected shopping experience that is tailored to our customers’ shopping intent and location; (2) provide the best value in the market; and (3) optimize our product assortments. Our merchandising team leverages technology and works closely with our inventory and supply chain teams, as well as our supplier partners, to manage our assortments, drive innovation, and adjust inventory levels to respond to fluctuations in demand, which helped us navigate the challenges of continuing global supply chain disruption in fiscal 2022. As cost pressures have risen in several product categories in the current environment, our tools have helped our merchandising, finance and data analytics teams as they work with our supplier partners to manage these pressures. To complement our merchandising efforts, we offer a number of services for our customers, including installation services for our DIY and DIFM customers, as noted above. We also provide tool and equipment rentals at locations across the U.S. and Canada, providing value and convenience for both Pros and consumers. To improve the customer experience and continue to grow this differentiated service offering, we are continuing to invest in more locations (including piloting rental locations in Mexico), more tools, and better technology. Sourcing and Quality Assurance We maintain a global sourcing program to obtain high-quality and innovative products directly from manufacturers in the U.S. and around the world. During fiscal 2022, in addition to our U.S. sourcing operations, we maintained sourcing offices in Mexico, Canada, China, India, Vietnam and Europe. To ensure that suppliers adhere to our high standards of social and environmental responsibility, we also have a global responsible sourcing program. Under our supplier contracts, our suppliers are obligated to ensure that their products comply with applicable international, federal, state and local laws. These contracts also require compliance with our responsible sourcing standards, which cover a variety of expectations across multiple areas of social compliance, including supply chain transparency, compliance with local laws, health and safety, environmental laws and regulations, compensation, hours of work, and prohibitions on child and forced labor. To drive accountability with our suppliers, our standard supplier buying agreement includes a factory audit right related to these standards, and we conduct factory audits and compliance visits with non-Canada and non-U.S. suppliers of private branded and direct import products. Our 2022 Responsible Sourcing Report, available on our website at https://corporate.homedepot.com under “Responsibility > Sourcing Responsibly,” provides more information about this program. In addition, we have both quality assurance and engineering resources dedicated to establishing criteria and overseeing compliance with safety, quality and performance standards for our private branded products. COMPETITION AND SEASONALITY Our industry is highly competitive, very fragmented, and evolving. As a result, we face competition for customers for our products and services from a variety of retailers, suppliers, service providers, and distributors and manufacturers that sell products directly to their respective customer bases. These competitors range from traditional brick-and-mortar, to multichannel, to exclusively online, and they include a number of other home improvement retailers; electrical, plumbing and building materials supply houses; and lumber yards. With respect to some products and services, we also compete with specialty design stores, showrooms, discount stores, local, regional and national hardware stores, paint stores, specialty and mass digital retailers, warehouse clubs, independent building supply stores, MRO distributors, home décor retailers, and other retailers, as well as with providers of home improvement services and tool and equipment rental. The internet facilitates competitive entry, price transparency, and comparison shopping, increasing the level of competition we face. Both in-store and online, we compete primarily based on customer experience, price, quality, product availability and assortment, and delivery options. We also compete based on store location and appearance, presentation of merchandise, and ease of shopping experience. Our Pros also look for a dedicated sales team, competitive credit and pricing options, project planning tools, and product depth and job lot quantities, particularly for their planned purchase needs. Furthermore, with respect to delivery options, customers are increasingly seeking faster and/or guaranteed delivery times, low-price or free shipping, and/or convenient pickup options. Our ability to be competitive on delivery and pickup times, options and costs depends on many factors, including the success of our supply chain investments, described more fully under “Our Supply Chain” below. Our business is subject to seasonal influences. Generally, our highest volume of sales occurs in our second fiscal quarter, as we move into the spring season in the regions in which we operate. INTERCONNECTED SHOPPING EXPERIENCE We continue to enhance our capabilities to provide our customers with a frictionless interconnected shopping experience across our stores, online, on the job site, and in their homes, focusing on continued investments in our website and mobile apps to enhance the digital customer experience. Digital Experience Enhancements to our digital properties are critical for our increasingly interconnected customers, who often research products online and check available inventory before going into one of our stores to view the products in person or talk to an associate and then make their purchase in store or online. While in the store, customers may also go online to access ratings and reviews, compare prices, view our extended assortment, and purchase additional products. Our investments in a truly interconnected experience are focused on bringing together the power of our physical retail presence and the frictionless interaction of our digital capabilities. A significant majority of the traffic in our digital channels is on mobile devices. Mobile customers expect more simplicity and relevancy in their digital interactions. As a result, we have made investments to our digital properties to improve the overall presentation and ease of navigation for the user. We have also enhanced the “shopability” of an online product by including more information on the product’s landing page, including related products and/or parts of a collection, as well as various fulfillment options. We believe our focus on improving search capabilities, site functionality, category presentation, product content, speed to checkout, and enhanced fulfillment options has yielded higher traffic, better conversion and continued sales growth. Further, we do not view the interconnected shopping experience as a specific transaction; rather, we believe it encompasses an entire journey from inspiration and know-how, to purchase and fulfillment, to post-purchase care and support. Customers expect more personalized messaging, so we are continuing to focus on connecting marketing activities with the online and in-store experiences to create seamless engagement across channels. From the inspirational point of the purchase journey to providing product know-how, we continue to invest in the infrastructure and capabilities needed to deliver the most relevant marketing messages to our customers based upon what is important to them today. Store Experience Our stores remain the hub of our business, and we continue to invest to improve the customer shopping experience through easier navigation and increased convenience and speed of checkout. In fiscal 2022, we continued to leverage the investments made in our stores over the past several years to operate effectively and meet changing customer expectations. These investments include wayfinding signage and store refresh packages; self-service lockers, online order storage areas at front entrances and curbside pickup to provide convenient pickup options for online orders; electronic shelf label capabilities; and the re-design of front-end areas, including reconfigured service desks, improved layouts in checkout areas, and expanded and enhanced self-checkout options. To improve the customer’s experience in our stores, we have also empowered our customers with additional self-help tools, including mobile app-enabled store navigation. Our app provides store-specific maps, which allow customers to pinpoint the exact location of an item on their mobile devices. We believe these investments are driving higher customer satisfaction scores, and we will continue to invest to improve the customer experience going forward. Investing in Associate Productivity. We continually strive to improve our store operations for our associates. Our goal is to remove complexity and inefficient processes from the stores to allow our associates to focus on our customers. To this end, we have continued to focus our efforts in such areas as optimizing product flow to decrease the amount of time a store associate spends locating product and to improve on-shelf product availability; creating a simpler order management system; expanding in-aisle, real-time mobile learning tools for our associates’ own development and to assist with customer questions; and using labor model tools to better align associate activity with customer needs. For several years, our associates have used web-enabled handheld devices to help them more efficiently meet the needs of the business and serve customers. In fiscal 2022, we began rolling out the next generation of digital phones to our stores, which we call “hdPhones,” so that each associate will have a digital device during their shift. The new devices offer enhanced functionality to allow associates to readily query inventory, access applications that support customer service, and drive on-shelf availability of product. Investing in Safety. We are committed to maintaining a safe shopping and working environment for our customers and associates. We empower trained EH&S associates to evaluate, develop, implement and enforce policies, processes and programs on a Company-wide basis. Our EH&S policies are woven into our everyday operations and are part of The Home Depot culture. Common program elements include daily store inspection checklists (by department); routine follow-up audits from our store-based safety team members and regional, district and store operations field teams; equipment enhancements and preventative maintenance programs to promote physical safety; departmental merchandising safety standards; training and education programs for all associates, with varying degrees of training provided based on an associate’s role and responsibilities; and awareness, communication and recognition programs designed to drive operational awareness and an understanding of EH&S matters. OUR SUPPLY CHAIN We continue to focus on building best-in-class competitive advantages in our supply chain to be responsive to our customers’ expectations for how, when and where they choose to receive our products and services. As part of enhancing the interconnected shopping experience, we continue to invest in expanding our supply chain network, with the goal of achieving the fastest, most efficient and most reliable delivery capabilities in home improvement. Our efforts are focused on ensuring product availability and increasing the speed and reliability of delivery for our customers while managing our costs. Our supply chain investments have helped us to operate effectively and meet our customers’ needs throughout the challenging environment over the past few years. We centrally forecast and replenish the vast majority of our store products through sophisticated inventory management systems and utilize our network of distribution centers to serve both our stores’ and customers’ needs. Our supply chain includes multiple distribution center platforms in the U.S., Canada, and Mexico tailored to meet the needs of our stores and customers based on types of products, location, transportation, and delivery requirements. These platforms include rapid deployment centers, stocking distribution centers, bulk distribution centers, and direct fulfillment centers, among others. As part of the expansion of our supply chain, we have invested to further automate and mechanize our rapid deployment center network to drive efficiency and faster movement of product. We are also continuing to expand our fulfillment network, investing in a significant number of new fulfillment facilities to drive speed and reliability of delivery for our customers and to help us ultimately meet our goal of reaching 90% of the U.S. population with same or next day delivery for extended home improvement product offerings, including big and bulky products. These facilities include omni-channel fulfillment centers, which deliver product directly to customers, and market delivery operations, which function as local hubs to consolidate freight for dispatch to customers for the final mile of delivery, with a focus on appliances. In fiscal 2022, we realized our goal to control more of our appliance delivery end-to-end and began managing all of our appliance delivery volume through our market delivery operations. We have also added flatbed distribution centers, which handle large items like lumber and building materials that are transported on flatbed trucks. As of the end of fiscal 2022, we have opened a number of additional fulfillment facilities, and we will continue to build out our fulfillment network to support our business. Our network is designed to create a competitive advantage with unique, industry-leading capabilities for home improvement needs for both Pros and consumers. In addition to our distribution and fulfillment centers, we leverage our stores as a network of convenient customer pickup, return, and delivery fulfillment locations. Our premium real estate footprint provides a distinct structural and competitive advantage. For customers who shop online and wish to pick up or return merchandise at, or have merchandise delivered from, our stores, we have implemented four interconnected retail programs: BOSS, BOPIS, BODFS, and BORIS. We also provide curbside pickup to complement our BOPIS offerings, in addition to the self-service lockers at the front entrance of many of our stores. We also offer express car and van delivery service that covers over 80% of the U.S. population. For fiscal 2022, approximately 50% of our U.S. online orders were fulfilled through a store. We also continue to focus on developing new capabilities to improve both efficiency and customer experience in our store delivery program. Our strategic intent is to have a portfolio of efficient, timely and reliable sources and methods of delivery to choose from, optimizing order fulfillment and delivery based on customer needs, inventory locations and available transportation options. 8
This assignment requires the submission of a “reaction paper” by each individual student. After reviewing the reading materials relating to The Home Depot Supply Chain Innovation provided in Module 1
PSU #007 Revised 5/1/23 Home Depot’s Supply Chain Innovation 1,2 Founded in 1978, the remarkable story of The Home Depot has many chapters. Although in earlier years this Atlanta-based home improvement giant recorded double- and even triple-digit annual growth, changing economic and market conditions forced the company to create and implement competencies in the area of supply chain management: Based on net sales for fiscal 2022, The Home Depot, Inc. is the world’s largest home improvement retailer. Customers are offered a wide assortment of building materials, home improvement products, lawn and garden products, décor products, and facilities maintenance, repair and operations products. Also provided are a number of services, including home improvement installation services and tool and equipment rental. As of the end of fiscal 2022, The Home Depot operated 2,322 stores located throughout the U.S. (including the Commonwealth of Puerto Rico and the territories of the U.S. Virgin Islands and Guam), Canada, and Mexico. The Home Depot stores average approximately 104,000 square feet of enclosed space, with approximately 24,000 additional square feet of outside garden area. Individual stores are maintained via a network of distribution and fulfillment centers, as well as e-commerce websites in the U.S., Canada and Mexico. The Home Depot serves two primary customer groups – consumers (including DYI and DIFM customers) and professional customers. The retail landscape has changed rapidly over the past several years, with customer expectations constantly evolving. In fiscal 2022, The Home Depot continued to operate with agility to meet the challenges created by a fluid domestic and global business environment, including supply chain disruptions, tight labor market conditions, and ongoing inflationary pressures. The company’s ability to operate successfully and meet the needs of its customers was due in significant part to investments over the past several years aimed at creating an interconnected, frictionless shopping experience that enables customers to seamlessly blend the digital and physical worlds. Going forward, the company plans to leverage the momentum of these investments and continue to invest in the business in support of the following goals: Provide the best customer experience in home improvement; Extend its position as the low-cost provider in home improvement; and Be the most efficient investor of capital in home improvement. The sections below provide some interesting background regarding The Home Depot and its supply chains. Please be sure to read the additional materials that are included in the reading assignment for this case study. Early Years (1978-2008). During these formative years, The Home Depot had little in the way of a formal distribution network. Most merchandise was shipped from vendors and suppliers directly to the retailer’s cavernous warehouse stores, which served as their own distribution centers. At an average of more than 100,000 square feet, the facilities were easily able to accommodate vast inventories of building materials and supplies. Combined with a very store-centric ordering and replenishment process, results included high transportation and inventory costs, and some issues with out-of-stock situations. Rapid Deployment Centers (2007-2013). As a replacement to having most products shipped direct from suppliers to stores, and under the leadership of Mark Holifield, SVP Supply Chain, The Home Depot embarked on a massive supply chain transformation that included the building of 18 rapid deployment centers in North America. The purposes of these RDC’s were to receive most shipments coming from suppliers, and then to disseminate these items to retail stores in the company’s network. At the same time, the company adopted a far more centralized inventory management and replenishment model, which helped to create additional supply chain efficiencies. Overall, economies of scale have dramatically improved logistics costs both into and out of the RDC’s, and suppliers are able to better manage production runs. Omni-Channel Capabilities (2014-2017). To address the growing demands of omni-channel retailing, The Home Depot announced in 2014 the addition of three e-Commerce distribution centers. Located in Georgia, Ohio and California, these facilities provided more rapid delivery for many shipments and additional capacity to carry large numbers of additional SKU’s. “One Home Depot” (2018-present). To further realign its supply chain to a changing retail landscape, The Home Depot embarked in 2018 on a $1.2 billion plan to speed up delivery of goods to homes and job sites. As it became apparent that the rise of online shopping was resetting consumer expectations, plans were to add 150 distribution facilities across the U.S. to facilitate reaching 90% of the population in just one day or even less. These facilities were to include dozens of direct fulfillment centers to speed delivery of commonly-ordered products, as well as 100 local hubs where bulky items like patio furniture and appliances could be consolidated for direct shipments to customers. The above enhancements to The Home Depot’s supply chain strategy included the building of four types of distribution centers to support the differing needs of its customers: Flatbed delivery centers (35) – typically in major markets to handle most building materials Market delivery centers (5-7) – cross-docks to handle local deliveries of products like appliances, doors, windows, and other larger and bulky items Market delivery operations (100) – basically serve smaller markets and enable expansion of next-day delivery capabilities Direct fulfillment centers (7) – significantly mechanized and automated to quickly turn around parcel orders. Additionally, and to build out the capabilities of its direct-to-consumer supply chain, The Home Depot has introduced a number of interconnected customer offerings like Buy Online – Ship to Store, Buy Online – Deliver from Store, and Buy Online – Curbside Pickup. These initiatives are tangible evidence of the commitment at The Home Depot to realigning and transforming its supply chain in a dramatically-changing retail landscape. A typical The Home Depot store stocks approximately 30,000 to 40,000 items during the year, including both national brand name and proprietary products. Online product offerings complement the stores by serving as an extended aisle, that is able to offer a significantly broader product assortment through our websites and mobile applications. The merchandising organization is a key competitive advantage for The Home Depot, delivering product innovation, assortment and value, which reinforces its position as the product authority in home improvement. In fiscal 2022, investment priorities included merchandising resets in our stores to refine assortments, optimizing space productivity, introducing innovative new products to our customers, and improving visual merchandising to drive a better shopping experience. At the same time, we remain focused on offering everyday values in our stores and online. To help its merchandising organization keep pace with changing customer expectations and increasing desire for innovation, localization, and personalization, the company continues to invest in tools to better leverage data and drive a deeper level of collaboration with our supplier partners. As a result, there has been a continued focus on enhanced merchandising information technology tools to help: (1) build an interconnected shopping experience that is tailored to our customers’ shopping intent and location; (2) provide the best value in the market; and (3) optimize our product assortments. The merchandising team leverages technology and works closely with our inventory and supply chain teams, as well as supplier partners, to manage our assortments, drive innovation, and adjust inventory levels to respond to fluctuations in demand, which helped to navigate the challenges of continuing global supply chain disruption in fiscal 2022. As cost pressures have risen in several product categories in the current environment, our tools have helped our merchandising, finance and data analytics teams as they work with our supplier partners to manage these pressures. An interesting figure is that half of its sales – about 45% – comes from home professionals, even though they make up less than 5% of its customer base. The overall experience at The Home Depot suggests that once something is developed for their contractor or professional business customers, it works very well for their DIY and DIFM customers as well. An overall priority at The Home Depot is the creation of strong and flexible supply chains to better serve its customers and consumers. For these reasons, the next phase of innovation and transformation for The Home Depot may accurately be referred to as “Agility, Fulfillment, and Customer Experience.” (Author: C. John Langley Jr., Ph.D., Penn State University) 1 The content of this case has been adapted from materials available at: Josh Bond, “The Home Depot Builds an Omni-Channel Supply Chain,” Modern Materials Handling, www.mmh.com, February 1, 2015; Mike Hockett, “Home Depot to Spend $1.2B on 170 Distribution Facilities by 2023,” Industrial Distribution, www.inddist.com, June 12, 2018; Team Trefis and Great Speculations, “Why is Home Depot Making a Considerable Investment in its Supply Chain?,” Forbes, www.Forbes.com, June 13, 2018; Jennifer Smith, “Home Depot Sets $1.2 Billion Supply Chain Overhaul,” Forbes, www.Forbes.com, June 11, 2018; Dan Gilmore, “Home Depot and the Arc of Today’s Supply Chains, SupplyChainDigest, www.supplychaindigest.com, June 29, 2018, Melissa Repco, “Home Depot Wants to Speed Up Deliveries with New Distribution Centers as Pandemic Fuels Home Projects,” CNBC.com, August 4, 2020; Shefali Kapadia, “Home Depot Adds 3 Warehouses as DIY Demand Grows,” Supply Chain Dive, August 4, 2020; John Paul Hampstead, “The Home Depot’s Culture of Supply Chain Innovation,” FreightWaves, February 3, 2021; and Home Depot, Inc. 2023 10-K Filing to the SEC. 2 Efforts have been made to see that the details in this case are accurate. Also, the author has suggested several time frames in the write-up that are intended to help understand the evolution of supply chain strategies at The Home Depot. The time frames do not represent any official statements on behalf of The Home Depot, Inc., or members of its executive staff. 4
This assignment requires the submission of a “reaction paper” by each individual student. After reviewing the reading materials relating to The Home Depot Supply Chain Innovation provided in Module 1
Supply Chain Home Depot To Spend $1.2B On 170 Distribution Facilities By 2023 Home Depot is planning to significantly boost its distribution network so that it can offer same-day or next-day delivery to 90 percent of the U.S., with those plans including the build-out of dozens of distribution centers and smaller operation centers. Mike Hockett Jun 12, 2018 This past December, Home Depot announced an ambitious plan to spend more than $11 billion to build out its “One Home Depot” customer experience and enhance everything from its stores, associates and online offering to its supply chain. The home improvement retailer has now revealed details of that plan specifically for its distribution network, and they are significant. Speaking at the Bernstein 34th Annual Strategic Decisions Conference May 31 in New York City, Home Depot chairman and CEO Craig Menear told a moderator that company plans to spend $1.2 billion over the next five years to build out a downstream distribution network. That investment will include the addition of 170 distribution facilities across the U.S., which will enable Home Depot to offer same-day or next-day delivery for 90 percent of the U.S. population. Menear broke down that 170 figure, detailing that Home Depot will build out 40 flatbed distribution centers to handle building material-type products that need to go direct to a job site for Pro customers. The company will build out approximately 100 market delivery operation centers for bulky customer items like patio products, grills and appliances direct through there to the customer through a delivery agent. The remaining ≈30 facilities will be local direct fulfillment centers that will handle a smaller subset of product that moves direct to customers. He added Home Depot will build out a couple more ‘parcel plus big direct fulfillment facilities’ that handle a mix of small products and bulk. Menear acknowledged that, upon completion, the investment will enable Home Depot to offer the same shipping capabilities like that of Grainger, Fastenal and Amazon. “Yes, the reason that we actually purchased and align brands was to get back in a subset of the MRO space that we felt was important to our business and that’s multifamily, hospitality and institutional,” he said, referring to the company’s business additions in recent years. “We did not have the capabilities in the orange box business to be able to serve those customers the way we needed to do that, and delivery is an important element of that in terms of same day, next day.” With its brick-and-mortar offering already in place, Home Depot boosted its MRO offering by enhancing its digital business and then made a major move by buying Jacksonville, FL-based Interline Brands — No. 14 on Industrial Distribution’s 2017 Big 50 List — in 2015 for $1.63 billion. Interline’s fiscal information hasn’t been shared since the acquisition, but it had 2014 sales of $1.7 billion and its website has stated the company is “approaching $2 billion in sales” since that time. “So we have to merge all of that, and part of merging that is truly merging a One Home Depot supply chain so that we could be able to both fulfill for those MRO customers’ daily needs in terms of product for maintenance and repair but, at the same time be able to, if they need a water heater, a toilet or something from the stores, we will flow all of that together in one shipment to that customer in an expeditious fashion, and that’s what we’re building on in the supply chain,” Menear said. Home Depot posted 2018 first quarter sales of $24.9 billion, up 4.4 percent year-over-year, while total profit of $2.4 billion increased from $2.0 of a year earlier. As of the end of Q1, Home Depot has approximately 2,280 stores company-wide. The Wall Street Journal reported Tuesday at e-commerce accounted for only 6.7 percent of Home Depot’s 2017 full year sales, but that total digital sales jumped 21 percent from 2016. The WSJ quoted Home Depot executive vice president of supply chain and product development, Mark Holifield, telling a logistics conference last week that, “Customers expect delivery to be free, they expect it to be timely. Sometimes they want it fast, and are willing to pay for that. Sometimes they want it free, and they’re willing to wait for it. We need to have the options right there.” Holified reportedly outlined the same plan details with the conference that Menear did on May 31, adding, “This is part of an $11 billion overall plan to re-engineer our company to ensure that we are prepared for the future in retail.” Do you like this content? 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February 28, 2023 Business Technology Lighting the Path to Dark Warehouses Advanced automation and fewer available workers are helping to generate momentum for this shift. February 17, 2023 Supply Chain How Two Digi-Key Engineers Reimagined Electronic Component Shipping The company was awarded a U.S. patent for a safer and more efficient way of transporting broken pack integrated circuits. February 16, 2023 Supply Chain Subscription Service Changes the ROI on Vending — for the Better SupplyPro’s Floyd Miller on why vending isn’t just for big accounts anymore. February 13, 2023 Supply Chain Will 2023 Be Any Easier for Supply Chain Leaders? Steps to ensure more successful, resilient supply chains. February 7, 2023 Economy Predictions for Manufacturing in 2023 – Part II Industry leaders offer their thoughts on what to expect in 2023. January 17, 2023 Supply Chain Supply Chain Woes Caused U.S. Auto Sales to Fall 8% Last Year Vehicle sales dropped to their lowest level in more than a decade. January 5, 2023 Supply Chain U.S. Construction Spending Up 8.5% in November Spending was up 10.5% during the first 11 months of the year. January 4, 2023 Supply Chain Astronaut to Headline NAW Gala Chris Hadfield has served as commander of the International Space Station. December 19, 2022 Supply Chain Creating Resilience Against Future Supply Chain Attacks Cyber criminals are evolving and growing the complexity of their supply chain attacks, and gaining a frightening amount of access. December 16, 2022 Subscribe To Our Newsletters Subscribe to receive the latest information. 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This assignment requires the submission of a “reaction paper” by each individual student. After reviewing the reading materials relating to The Home Depot Supply Chain Innovation provided in Module 1
Assignment Questions In what ways have innovation and transformation of The Home Depot’s supply chains impacted and enhanced customer/consumer experience? As the supply chains at The Home Depot have evolved and transformed over time, what types of supply chain technology do you feel have been needed to facilitate these changes?  A helpful way to respond to this question is to first identify examples of relevant supply chain technologies and then to comment on how they have impacted THD’s supply chains.  Also, please feel free to consider technologies in addition to those that may have been discussed in the readings for this lesson. What do you think is next for the future of The Home Depot’s supply chains?  In the interest of focusing on end-to-end supply chain performance, what do you feel would be some of the relevant expectations for the supplier networks that serve The Home Depot? Assignment Guidelines Submit one written paper in MS Word format, consistent with the guidelines in the Course Syllabus. Please structure your paper in a Q&A format. (In other words, show each question in bold followed by your response.) Length should include a title page plus no more than 3 pages of text, single-spaced, with a space between paragraphs
This assignment requires the submission of a “reaction paper” by each individual student. After reviewing the reading materials relating to The Home Depot Supply Chain Innovation provided in Module 1
Supply Chain Home Depot To Spend $1.2B On 170 Distribution Facilities By 2023 Home Depot is planning to significantly boost its distribution network so that it can offer same-day or next-day delivery to 90 percent of the U.S., with those plans including the build-out of dozens of distribution centers and smaller operation centers. Mike Hockett Jun 12, 2018 This past December, Home Depot announced an ambitious plan to spend more than $11 billion to build out its “One Home Depot” customer experience and enhance everything from its stores, associates and online offering to its supply chain. The home improvement retailer has now revealed details of that plan specifically for its distribution network, and they are significant. Speaking at the Bernstein 34th Annual Strategic Decisions Conference May 31 in New York City, Home Depot chairman and CEO Craig Menear told a moderator that company plans to spend $1.2 billion over the next five years to build out a downstream distribution network. That investment will include the addition of 170 distribution facilities across the U.S., which will enable Home Depot to offer same-day or next-day delivery for 90 percent of the U.S. population. Menear broke down that 170 figure, detailing that Home Depot will build out 40 flatbed distribution centers to handle building material-type products that need to go direct to a job site for Pro customers. The company will build out approximately 100 market delivery operation centers for bulky customer items like patio products, grills and appliances direct through there to the customer through a delivery agent. The remaining ≈30 facilities will be local direct fulfillment centers that will handle a smaller subset of product that moves direct to customers. He added Home Depot will build out a couple more ‘parcel plus big direct fulfillment facilities’ that handle a mix of small products and bulk. Menear acknowledged that, upon completion, the investment will enable Home Depot to offer the same shipping capabilities like that of Grainger, Fastenal and Amazon. “Yes, the reason that we actually purchased and align brands was to get back in a subset of the MRO space that we felt was important to our business and that’s multifamily, hospitality and institutional,” he said, referring to the company’s business additions in recent years. “We did not have the capabilities in the orange box business to be able to serve those customers the way we needed to do that, and delivery is an important element of that in terms of same day, next day.” With its brick-and-mortar offering already in place, Home Depot boosted its MRO offering by enhancing its digital business and then made a major move by buying Jacksonville, FL-based Interline Brands — No. 14 on Industrial Distribution’s 2017 Big 50 List — in 2015 for $1.63 billion. Interline’s fiscal information hasn’t been shared since the acquisition, but it had 2014 sales of $1.7 billion and its website has stated the company is “approaching $2 billion in sales” since that time. “So we have to merge all of that, and part of merging that is truly merging a One Home Depot supply chain so that we could be able to both fulfill for those MRO customers’ daily needs in terms of product for maintenance and repair but, at the same time be able to, if they need a water heater, a toilet or something from the stores, we will flow all of that together in one shipment to that customer in an expeditious fashion, and that’s what we’re building on in the supply chain,” Menear said. Home Depot posted 2018 first quarter sales of $24.9 billion, up 4.4 percent year-over-year, while total profit of $2.4 billion increased from $2.0 of a year earlier. As of the end of Q1, Home Depot has approximately 2,280 stores company-wide. The Wall Street Journal reported Tuesday at e-commerce accounted for only 6.7 percent of Home Depot’s 2017 full year sales, but that total digital sales jumped 21 percent from 2016. The WSJ quoted Home Depot executive vice president of supply chain and product development, Mark Holifield, telling a logistics conference last week that, “Customers expect delivery to be free, they expect it to be timely. Sometimes they want it fast, and are willing to pay for that. Sometimes they want it free, and they’re willing to wait for it. We need to have the options right there.” Holified reportedly outlined the same plan details with the conference that Menear did on May 31, adding, “This is part of an $11 billion overall plan to re-engineer our company to ensure that we are prepared for the future in retail.” Do you like this content? Subscribe to our newsletters to receive the latest information Latest in Supply Chain Sponsored Industrial Media Unboxing Video May 5, 2023 Future-Proofing Supply Chains April 19, 2023 How Incentive Programs Can Protect Channels from Economic Stress March 23, 2023 Trimble, Distributor Data Solutions Announce Product Data Partnership March 9, 2023 5 Minutes with ID: President of the Industrial Supply Association, Brendan Breen   Related Stories Supply Chain Sustainability Won’t Improve Unless Suppliers Are Empowered Supply Chain Trimble, Distributor Data Solutions Announce Product Data Partnership Supply Chain Lowe’s Announces Return of ‘Product Pitch Event’ Sponsored Today in Manufacturing Podcast More in Supply Chain Sponsored Today in Manufacturing Podcast Today in Manufacturing has a new podcast brought to you by the editors of Industrial Media. In each episode, we discuss the five biggest stories in manufacturing, and the implications they have on the industry moving forward. May 8, 2023 Supply Chain Future-Proofing Supply Chains The future of global logistics is brighter than ever — as long as we can learn from the past. April 19, 2023 Supply Chain How Incentive Programs Can Protect Channels from Economic Stress Channel incentive programs can build incremental revenue and loyalty when you need it most. March 23, 2023 Supply Chain Trimble, Distributor Data Solutions Announce Product Data Partnership The companies currently serve more than 60% of the U.S. mechanical, electrical, plumbing and HVAC distributor market. March 9, 2023 Supply Chain Lowe’s Announces Return of ‘Product Pitch Event’ The retailer invited businesses and entrepreneurs to apply for the opportunity to become Lowe’s suppliers. March 9, 2023 Supply Chain Important Supply Chain Considerations for Franchisees Although they can rely on franchisors’ support to an extent, franchisees face the same risks as independent businesses. February 28, 2023 Business Technology Lighting the Path to Dark Warehouses Advanced automation and fewer available workers are helping to generate momentum for this shift. February 17, 2023 Supply Chain How Two Digi-Key Engineers Reimagined Electronic Component Shipping The company was awarded a U.S. patent for a safer and more efficient way of transporting broken pack integrated circuits. February 16, 2023 Supply Chain Subscription Service Changes the ROI on Vending — for the Better SupplyPro’s Floyd Miller on why vending isn’t just for big accounts anymore. February 13, 2023 Supply Chain Will 2023 Be Any Easier for Supply Chain Leaders? Steps to ensure more successful, resilient supply chains. February 7, 2023 Economy Predictions for Manufacturing in 2023 – Part II Industry leaders offer their thoughts on what to expect in 2023. January 17, 2023 Supply Chain Supply Chain Woes Caused U.S. Auto Sales to Fall 8% Last Year Vehicle sales dropped to their lowest level in more than a decade. January 5, 2023 Supply Chain U.S. Construction Spending Up 8.5% in November Spending was up 10.5% during the first 11 months of the year. January 4, 2023 Supply Chain Astronaut to Headline NAW Gala Chris Hadfield has served as commander of the International Space Station. December 19, 2022 Supply Chain Creating Resilience Against Future Supply Chain Attacks Cyber criminals are evolving and growing the complexity of their supply chain attacks, and gaining a frightening amount of access. December 16, 2022 Subscribe To Our Newsletters Subscribe to receive the latest information. Top of Form Email Bottom of Form Topics Big 50 Business Technology Economy Mergers & Acquisitions New Products Operations Sales Staffing Changes Supply Chain 5 Minutes with ID Workforce Resources Video About Us Contact Us Advertise User Tools Newsletter Signup Subscribe – Today in Manufacturing Podcast Subscribe – Security Breach Podcast Follow Industrial Distribution About Us Contact Us Advertise Privacy Policy Terms & Conditions CA Consumer Privacy Act Site Map © 2023 Industrial Media, LLC. All rights reserved.
This assignment requires the submission of a “reaction paper” by each individual student. After reviewing the reading materials relating to The Home Depot Supply Chain Innovation provided in Module 1
Assignment Questions In what ways have innovation and transformation of The Home Depot’s supply chains impacted and enhanced customer/consumer experience? As the supply chains at The Home Depot have evolved and transformed over time, what types of supply chain technology do you feel have been needed to facilitate these changes?  A helpful way to respond to this question is to first identify examples of relevant supply chain technologies and then to comment on how they have impacted THD’s supply chains.  Also, please feel free to consider technologies in addition to those that may have been discussed in the readings for this lesson. What do you think is next for the future of The Home Depot’s supply chains?  In the interest of focusing on end-to-end supply chain performance, what do you feel would be some of the relevant expectations for the supplier networks that serve The Home Depot? Assignment Guidelines Submit one written paper in MS Word format, consistent with the guidelines in the Course Syllabus. Please structure your paper in a Q&A format. (In other words, show each question in bold followed by your response.) Length should include a title page plus no more than 3 pages of text, single-spaced, with a space between paragraphs
This assignment requires the submission of a “reaction paper” by each individual student. After reviewing the reading materials relating to The Home Depot Supply Chain Innovation provided in Module 1
HOME DEPOT INC 10-K FILING TO THE SEC March 15, 2023 (Excerpted content below) INTRODUCTION The Home Depot, Inc. is the world’s largest home improvement retailer based on net sales for fiscal 2022. We offer our customers a wide assortment of building materials, home improvement products, lawn and garden products, décor products, and facilities maintenance, repair and operations products. We also provide a number of services, including home improvement installation services and tool and equipment rental. As of the end of fiscal 2022, we operated 2,322 stores located throughout the U.S. (including the Commonwealth of Puerto Rico and the territories of the U.S. Virgin Islands and Guam), Canada, and Mexico. The Home Depot stores average approximately 104,000 square feet of enclosed space, with approximately 24,000 additional square feet of outside garden area. We also maintain a network of distribution and fulfillment centers, as well as a number of e-commerce websites in the U.S., Canada and Mexico. When we refer to “The Home Depot,” the “Company,” “we,” “us” or “our” in this report, we are referring to The Home Depot, Inc. and its consolidated subsidiaries. OUR STRATEGY The retail landscape has changed rapidly over the past several years, with customer expectations constantly evolving. In fiscal 2022, we continued to operate with agility to meet the challenges created by a fluid domestic and global business environment, including supply chain disruptions, tight labor market conditions, and ongoing inflationary pressures. Our ability to operate successfully and meet the needs of our customers was due in significant part to our investments over the past several years aimed at creating an interconnected, frictionless shopping experience that enables our customers to seamlessly blend the digital and physical worlds. Going forward, we will leverage the momentum of these investments and continue to invest in our business in support of the following goals: We intend to provide the best customer experience in home improvement; We intend to extend our position as the low-cost provider in home improvement; and We intend to be the most efficient investor of capital in home improvement. OUR CUSTOMERS We serve two primary customer groups — consumers (including both DIY and DIFM customers) and professional customers — and have developed varying approaches to meet their diverse needs: DIY Customers These customers are typically homeowners who purchase products and complete their own projects and installations. Our associates assist these customers both in our stores and through online resources and other media designed to provide product and project knowledge. We also offer a variety of clinics and workshops both to share this knowledge and to build an emotional connection with our DIY customers. Professional Customers (or “Pros”) These customers are primarily professional renovators/remodelers, general contractors, maintenance professionals, handymen, property managers, building service contractors and specialty tradespeople, such as electricians, plumbers and painters. These customers build, renovate, remodel, repair, and maintain residential properties, multifamily properties, hospitality properties, and commercial facilities, including education, healthcare, government, institutional, and office buildings. We have a number of initiatives designed to drive growth with our Pros, including a customized online experience, a dedicated sales force, an extensive delivery network, our Pro Xtra loyalty program, enhanced credit offerings, and inventory management programs. Building on our historical strength as a destination for urgent purchase needs, we are investing in capabilities that will help us better serve our Pros’ planned purchase needs (in-store or via our dedicated sales team), including our expanded supply chain capabilities and advance ordering through our interconnected digital platforms. We believe that focusing on meeting the Pros’ planned purchase needs, particularly for larger renovator/remodeler Pros, will help us drive growth and deliver value to our shareholders. We extended our reach in the MRO marketplace with our fiscal 2020 acquisition of HD Supply, a leading national distributor and provider of MRO products and related value-added services to multifamily, hospitality, healthcare, and government housing facilities, among others, and in fiscal 2021 we integrated our legacy Interline Brands business into HD Supply. Our MRO operations use a distribution center-based model that sells products primarily through a professional sales force and through e-commerce platforms and print catalogs. We recognize the great value our Pros provide to their clients, and we strive to make their jobs easier and help them grow their businesses. We believe that investments aimed at deepening our relationships with our Pros are yielding increased engagement and will continue to translate into incremental sales to these customers. DIFM Customers Intersecting our DIY customers and our Pros are our DIFM customers. These customers are typically homeowners who use Pros to complete their project or installation. Currently, we offer installation services in a variety of categories, such as flooring, water heaters, bath, garage doors, cabinets, cabinet makeovers, countertops, sheds, furnaces and central air systems, and windows. DIFM customers can purchase these services in our stores, online, or in their homes through in-home consultations. In addition to serving our DIFM customer needs, we believe our focus on the Pros who perform services for these customers helps us drive higher product sales. OUR PRODUCTS AND SERVICES A typical The Home Depot store stocks approximately 30,000 to 40,000 items during the year, including both national brand name and proprietary products. Our online product offerings complement our stores by serving as an extended aisle, and we offer a significantly broader product assortment through our websites and mobile applications, including homedepot.com, our primary website; homedepot.ca and homedepot.com.mx, our websites in Canada and Mexico; hdsupply.com, our website for our MRO products and related services; blinds.com, our online site for custom window coverings; and thecompanystore.com, our online site featuring textiles and décor products. We believe our merchandising organization is a key competitive advantage, delivering product innovation, assortment and value, which reinforces our position as the product authority in home improvement. In fiscal 2022, we continued to invest in merchandising resets in our stores to refine assortments, optimize space productivity, introduce innovative new products to our customers, and improve visual merchandising to drive a better shopping experience. At the same time, we remain focused on offering everyday values in our stores and online. To help our merchandising organization keep pace with changing customer expectations and increasing desire for innovation, localization, and personalization, we are continuing to invest in tools to better leverage our data and drive a deeper level of collaboration with our supplier partners. As a result, we have continued to focus on enhanced merchandising information technology tools to help us: (1) build an interconnected shopping experience that is tailored to our customers’ shopping intent and location; (2) provide the best value in the market; and (3) optimize our product assortments. Our merchandising team leverages technology and works closely with our inventory and supply chain teams, as well as our supplier partners, to manage our assortments, drive innovation, and adjust inventory levels to respond to fluctuations in demand, which helped us navigate the challenges of continuing global supply chain disruption in fiscal 2022. As cost pressures have risen in several product categories in the current environment, our tools have helped our merchandising, finance and data analytics teams as they work with our supplier partners to manage these pressures. To complement our merchandising efforts, we offer a number of services for our customers, including installation services for our DIY and DIFM customers, as noted above. We also provide tool and equipment rentals at locations across the U.S. and Canada, providing value and convenience for both Pros and consumers. To improve the customer experience and continue to grow this differentiated service offering, we are continuing to invest in more locations (including piloting rental locations in Mexico), more tools, and better technology. Sourcing and Quality Assurance We maintain a global sourcing program to obtain high-quality and innovative products directly from manufacturers in the U.S. and around the world. During fiscal 2022, in addition to our U.S. sourcing operations, we maintained sourcing offices in Mexico, Canada, China, India, Vietnam and Europe. To ensure that suppliers adhere to our high standards of social and environmental responsibility, we also have a global responsible sourcing program. Under our supplier contracts, our suppliers are obligated to ensure that their products comply with applicable international, federal, state and local laws. These contracts also require compliance with our responsible sourcing standards, which cover a variety of expectations across multiple areas of social compliance, including supply chain transparency, compliance with local laws, health and safety, environmental laws and regulations, compensation, hours of work, and prohibitions on child and forced labor. To drive accountability with our suppliers, our standard supplier buying agreement includes a factory audit right related to these standards, and we conduct factory audits and compliance visits with non-Canada and non-U.S. suppliers of private branded and direct import products. Our 2022 Responsible Sourcing Report, available on our website at https://corporate.homedepot.com under “Responsibility > Sourcing Responsibly,” provides more information about this program. In addition, we have both quality assurance and engineering resources dedicated to establishing criteria and overseeing compliance with safety, quality and performance standards for our private branded products. COMPETITION AND SEASONALITY Our industry is highly competitive, very fragmented, and evolving. As a result, we face competition for customers for our products and services from a variety of retailers, suppliers, service providers, and distributors and manufacturers that sell products directly to their respective customer bases. These competitors range from traditional brick-and-mortar, to multichannel, to exclusively online, and they include a number of other home improvement retailers; electrical, plumbing and building materials supply houses; and lumber yards. With respect to some products and services, we also compete with specialty design stores, showrooms, discount stores, local, regional and national hardware stores, paint stores, specialty and mass digital retailers, warehouse clubs, independent building supply stores, MRO distributors, home décor retailers, and other retailers, as well as with providers of home improvement services and tool and equipment rental. The internet facilitates competitive entry, price transparency, and comparison shopping, increasing the level of competition we face. Both in-store and online, we compete primarily based on customer experience, price, quality, product availability and assortment, and delivery options. We also compete based on store location and appearance, presentation of merchandise, and ease of shopping experience. Our Pros also look for a dedicated sales team, competitive credit and pricing options, project planning tools, and product depth and job lot quantities, particularly for their planned purchase needs. Furthermore, with respect to delivery options, customers are increasingly seeking faster and/or guaranteed delivery times, low-price or free shipping, and/or convenient pickup options. Our ability to be competitive on delivery and pickup times, options and costs depends on many factors, including the success of our supply chain investments, described more fully under “Our Supply Chain” below. Our business is subject to seasonal influences. Generally, our highest volume of sales occurs in our second fiscal quarter, as we move into the spring season in the regions in which we operate. INTERCONNECTED SHOPPING EXPERIENCE We continue to enhance our capabilities to provide our customers with a frictionless interconnected shopping experience across our stores, online, on the job site, and in their homes, focusing on continued investments in our website and mobile apps to enhance the digital customer experience. Digital Experience Enhancements to our digital properties are critical for our increasingly interconnected customers, who often research products online and check available inventory before going into one of our stores to view the products in person or talk to an associate and then make their purchase in store or online. While in the store, customers may also go online to access ratings and reviews, compare prices, view our extended assortment, and purchase additional products. Our investments in a truly interconnected experience are focused on bringing together the power of our physical retail presence and the frictionless interaction of our digital capabilities. A significant majority of the traffic in our digital channels is on mobile devices. Mobile customers expect more simplicity and relevancy in their digital interactions. As a result, we have made investments to our digital properties to improve the overall presentation and ease of navigation for the user. We have also enhanced the “shopability” of an online product by including more information on the product’s landing page, including related products and/or parts of a collection, as well as various fulfillment options. We believe our focus on improving search capabilities, site functionality, category presentation, product content, speed to checkout, and enhanced fulfillment options has yielded higher traffic, better conversion and continued sales growth. Further, we do not view the interconnected shopping experience as a specific transaction; rather, we believe it encompasses an entire journey from inspiration and know-how, to purchase and fulfillment, to post-purchase care and support. Customers expect more personalized messaging, so we are continuing to focus on connecting marketing activities with the online and in-store experiences to create seamless engagement across channels. From the inspirational point of the purchase journey to providing product know-how, we continue to invest in the infrastructure and capabilities needed to deliver the most relevant marketing messages to our customers based upon what is important to them today. Store Experience Our stores remain the hub of our business, and we continue to invest to improve the customer shopping experience through easier navigation and increased convenience and speed of checkout. In fiscal 2022, we continued to leverage the investments made in our stores over the past several years to operate effectively and meet changing customer expectations. These investments include wayfinding signage and store refresh packages; self-service lockers, online order storage areas at front entrances and curbside pickup to provide convenient pickup options for online orders; electronic shelf label capabilities; and the re-design of front-end areas, including reconfigured service desks, improved layouts in checkout areas, and expanded and enhanced self-checkout options. To improve the customer’s experience in our stores, we have also empowered our customers with additional self-help tools, including mobile app-enabled store navigation. Our app provides store-specific maps, which allow customers to pinpoint the exact location of an item on their mobile devices. We believe these investments are driving higher customer satisfaction scores, and we will continue to invest to improve the customer experience going forward. Investing in Associate Productivity. We continually strive to improve our store operations for our associates. Our goal is to remove complexity and inefficient processes from the stores to allow our associates to focus on our customers. To this end, we have continued to focus our efforts in such areas as optimizing product flow to decrease the amount of time a store associate spends locating product and to improve on-shelf product availability; creating a simpler order management system; expanding in-aisle, real-time mobile learning tools for our associates’ own development and to assist with customer questions; and using labor model tools to better align associate activity with customer needs. For several years, our associates have used web-enabled handheld devices to help them more efficiently meet the needs of the business and serve customers. In fiscal 2022, we began rolling out the next generation of digital phones to our stores, which we call “hdPhones,” so that each associate will have a digital device during their shift. The new devices offer enhanced functionality to allow associates to readily query inventory, access applications that support customer service, and drive on-shelf availability of product. Investing in Safety. We are committed to maintaining a safe shopping and working environment for our customers and associates. We empower trained EH&S associates to evaluate, develop, implement and enforce policies, processes and programs on a Company-wide basis. Our EH&S policies are woven into our everyday operations and are part of The Home Depot culture. Common program elements include daily store inspection checklists (by department); routine follow-up audits from our store-based safety team members and regional, district and store operations field teams; equipment enhancements and preventative maintenance programs to promote physical safety; departmental merchandising safety standards; training and education programs for all associates, with varying degrees of training provided based on an associate’s role and responsibilities; and awareness, communication and recognition programs designed to drive operational awareness and an understanding of EH&S matters. OUR SUPPLY CHAIN We continue to focus on building best-in-class competitive advantages in our supply chain to be responsive to our customers’ expectations for how, when and where they choose to receive our products and services. As part of enhancing the interconnected shopping experience, we continue to invest in expanding our supply chain network, with the goal of achieving the fastest, most efficient and most reliable delivery capabilities in home improvement. Our efforts are focused on ensuring product availability and increasing the speed and reliability of delivery for our customers while managing our costs. Our supply chain investments have helped us to operate effectively and meet our customers’ needs throughout the challenging environment over the past few years. We centrally forecast and replenish the vast majority of our store products through sophisticated inventory management systems and utilize our network of distribution centers to serve both our stores’ and customers’ needs. Our supply chain includes multiple distribution center platforms in the U.S., Canada, and Mexico tailored to meet the needs of our stores and customers based on types of products, location, transportation, and delivery requirements. These platforms include rapid deployment centers, stocking distribution centers, bulk distribution centers, and direct fulfillment centers, among others. As part of the expansion of our supply chain, we have invested to further automate and mechanize our rapid deployment center network to drive efficiency and faster movement of product. We are also continuing to expand our fulfillment network, investing in a significant number of new fulfillment facilities to drive speed and reliability of delivery for our customers and to help us ultimately meet our goal of reaching 90% of the U.S. population with same or next day delivery for extended home improvement product offerings, including big and bulky products. These facilities include omni-channel fulfillment centers, which deliver product directly to customers, and market delivery operations, which function as local hubs to consolidate freight for dispatch to customers for the final mile of delivery, with a focus on appliances. In fiscal 2022, we realized our goal to control more of our appliance delivery end-to-end and began managing all of our appliance delivery volume through our market delivery operations. We have also added flatbed distribution centers, which handle large items like lumber and building materials that are transported on flatbed trucks. As of the end of fiscal 2022, we have opened a number of additional fulfillment facilities, and we will continue to build out our fulfillment network to support our business. Our network is designed to create a competitive advantage with unique, industry-leading capabilities for home improvement needs for both Pros and consumers. In addition to our distribution and fulfillment centers, we leverage our stores as a network of convenient customer pickup, return, and delivery fulfillment locations. Our premium real estate footprint provides a distinct structural and competitive advantage. For customers who shop online and wish to pick up or return merchandise at, or have merchandise delivered from, our stores, we have implemented four interconnected retail programs: BOSS, BOPIS, BODFS, and BORIS. We also provide curbside pickup to complement our BOPIS offerings, in addition to the self-service lockers at the front entrance of many of our stores. We also offer express car and van delivery service that covers over 80% of the U.S. population. For fiscal 2022, approximately 50% of our U.S. online orders were fulfilled through a store. We also continue to focus on developing new capabilities to improve both efficiency and customer experience in our store delivery program. Our strategic intent is to have a portfolio of efficient, timely and reliable sources and methods of delivery to choose from, optimizing order fulfillment and delivery based on customer needs, inventory locations and available transportation options. 8
This assignment requires the submission of a “reaction paper” by each individual student. After reviewing the reading materials relating to The Home Depot Supply Chain Innovation provided in Module 1
Why Is Home Depot Making A Considerable Investment In Its Supply Chain? Trefis Team Contributor Great Speculations Contributor Group Jun 13, 2018,03:07pm EDT This article is more than 4 years old.   Home Depot (NYSE: HD) has stated its intention of investing roughly $1.2 billion into its supply chain over the next five years. Given the changing retail landscape, the company believes “a great customer experience depends on great supply chain capability.” Over the past decade, the company has made big strides in its upstream supply chain – moving product to the stores and direct fulfillment centers (DFCs) – and more recently, it has undertaken significant expenditure to build its downstream supply chain – delivering to customers directly. However, the home improvement giant feels there is still some way to go to fully leverage its upstream network, as well as build the fastest and most efficient delivery system. We have a $212 price estimate for Home Depot, which is higher than the current market price. The charts have been made using our new, interactive model. If you don’t agree with our analysis, you can click here for our interactive dashboard to modify our driver assumptions to see what impact it will have on the company’s revenues, earnings, and price estimate. Meaningful Achievements So Far In terms of its upstream network, Home Depot has made a meaningful improvement in devising an optimal flow network with its RDCs (Rapid Deployment Centers), improving its inventory management capabilities, and driving further efficiency through the Supply Chain Sync initiative. For an enhanced direct-to-consumer supply chain, HD has introduced a number of interconnected customer offerings like Buy Online, Ship To Store, and Buy Online, Deliver From Store. The home improvement retailer has also built a network of DFCs, which gives them the capacity to reach 95% of the U.S. population in 2 days or less, and 30% in one day. Moreover, for the professional segment, the company has introduced 2- and 4-hour windows for deliveries. PROMOTED Potential For Improvement Home Depot feels its downstream network consists of four unconnected and independent components – store-based delivery, online delivery from DFCs and vendors, appliance delivery, and Interline brands delivery – which may not be the most ideal situation. Moreover, the current process of packing and shipping from the store leaves room for improvement. Another area that could be upgraded is the speed of delivery from DFCs in cases where the time taken to reach customers is over a day. Keeping all this in mind, the company is taking the following steps: Add 170 distribution facilities across the U.S. to reach 90% of the U.S. population in one day or less. Open market delivery operation, which are local hubs that will consolidate the freight for dispatch on to final-mile delivery vehicles appliances for Interline MRO, Pro and DIY delivery from DFCs, vendors, and stores, in about 100 locations. This will allow consolidation and sorting capability for big and bulky freight and parcel freight and extend HD’s delivery reach. Investing Digest: Know what’s moving the financial markets and what smart money is buying with Forbes Investing Digest. You may opt out any time. By signing up for this newsletter, you agree to the Terms and Conditions and Privacy Policy Consolidate store-based delivery in fewer stores in secondary markets, which will be linked to the upstream network. Open 40 flatbed direct fulfillment centers to serve HD’s top 40 markets. These centers will specialize in big and bulky building material SKUs (Stock Keeping Units), such as lumber, building materials, and flooring, which will be delivered on a next day and same-day basis. Open about 25 local direct fulfillment centers that will carry the most delivered store SKUs and Interline MRO SKUs, to ensure delivery on a next-day and same-day basis direct-to-customers in the top 40 markets. Continue the rollout of van and car delivery options in top urban markets in 2018. For car delivery, HD has partnered with app-based delivery providers, as this results in lower cost and often faster delivery for smaller orders. By undertaking this investment, HD aims to create the “fastest and most efficient delivery in home improvement.” Given the enormous scale and scope of this initiative, the company has given itself a period of five years to complete the actions. Such efforts come at a time when Home Depot is grappling with high transportation costs, as a result of the increase in oil prices. In the first quarter, HD faced transportation headwinds which had an eight basis points negative impact on the gross margins. With the increasing shift toward the online space, as well as the addition of features such as same-day delivery, transportation costs may continue to be a hindrance this financial year. However, the overhauling of its supply chain may be a step toward overcoming such headwinds. Retrieved from website: https://www.forbes.com/sites/greatspeculations/2018/06/13/why-is-home-depot-making-a-considerable-investment-in-its-supply-chain/?sh=546905004a2b
This assignment requires the submission of a “reaction paper” by each individual student. After reviewing the reading materials relating to The Home Depot Supply Chain Innovation provided in Module 1
PSU #007 Revised 5/1/23 Home Depot’s Supply Chain Innovation 1,2 Founded in 1978, the remarkable story of The Home Depot has many chapters. Although in earlier years this Atlanta-based home improvement giant recorded double- and even triple-digit annual growth, changing economic and market conditions forced the company to create and implement competencies in the area of supply chain management: Based on net sales for fiscal 2022, The Home Depot, Inc. is the world’s largest home improvement retailer. Customers are offered a wide assortment of building materials, home improvement products, lawn and garden products, décor products, and facilities maintenance, repair and operations products. Also provided are a number of services, including home improvement installation services and tool and equipment rental. As of the end of fiscal 2022, The Home Depot operated 2,322 stores located throughout the U.S. (including the Commonwealth of Puerto Rico and the territories of the U.S. Virgin Islands and Guam), Canada, and Mexico. The Home Depot stores average approximately 104,000 square feet of enclosed space, with approximately 24,000 additional square feet of outside garden area. Individual stores are maintained via a network of distribution and fulfillment centers, as well as e-commerce websites in the U.S., Canada and Mexico. The Home Depot serves two primary customer groups – consumers (including DYI and DIFM customers) and professional customers. The retail landscape has changed rapidly over the past several years, with customer expectations constantly evolving. In fiscal 2022, The Home Depot continued to operate with agility to meet the challenges created by a fluid domestic and global business environment, including supply chain disruptions, tight labor market conditions, and ongoing inflationary pressures. The company’s ability to operate successfully and meet the needs of its customers was due in significant part to investments over the past several years aimed at creating an interconnected, frictionless shopping experience that enables customers to seamlessly blend the digital and physical worlds. Going forward, the company plans to leverage the momentum of these investments and continue to invest in the business in support of the following goals: Provide the best customer experience in home improvement; Extend its position as the low-cost provider in home improvement; and Be the most efficient investor of capital in home improvement. The sections below provide some interesting background regarding The Home Depot and its supply chains. Please be sure to read the additional materials that are included in the reading assignment for this case study. Early Years (1978-2008). During these formative years, The Home Depot had little in the way of a formal distribution network. Most merchandise was shipped from vendors and suppliers directly to the retailer’s cavernous warehouse stores, which served as their own distribution centers. At an average of more than 100,000 square feet, the facilities were easily able to accommodate vast inventories of building materials and supplies. Combined with a very store-centric ordering and replenishment process, results included high transportation and inventory costs, and some issues with out-of-stock situations. Rapid Deployment Centers (2007-2013). As a replacement to having most products shipped direct from suppliers to stores, and under the leadership of Mark Holifield, SVP Supply Chain, The Home Depot embarked on a massive supply chain transformation that included the building of 18 rapid deployment centers in North America. The purposes of these RDC’s were to receive most shipments coming from suppliers, and then to disseminate these items to retail stores in the company’s network. At the same time, the company adopted a far more centralized inventory management and replenishment model, which helped to create additional supply chain efficiencies. Overall, economies of scale have dramatically improved logistics costs both into and out of the RDC’s, and suppliers are able to better manage production runs. Omni-Channel Capabilities (2014-2017). To address the growing demands of omni-channel retailing, The Home Depot announced in 2014 the addition of three e-Commerce distribution centers. Located in Georgia, Ohio and California, these facilities provided more rapid delivery for many shipments and additional capacity to carry large numbers of additional SKU’s. “One Home Depot” (2018-present). To further realign its supply chain to a changing retail landscape, The Home Depot embarked in 2018 on a $1.2 billion plan to speed up delivery of goods to homes and job sites. As it became apparent that the rise of online shopping was resetting consumer expectations, plans were to add 150 distribution facilities across the U.S. to facilitate reaching 90% of the population in just one day or even less. These facilities were to include dozens of direct fulfillment centers to speed delivery of commonly-ordered products, as well as 100 local hubs where bulky items like patio furniture and appliances could be consolidated for direct shipments to customers. The above enhancements to The Home Depot’s supply chain strategy included the building of four types of distribution centers to support the differing needs of its customers: Flatbed delivery centers (35) – typically in major markets to handle most building materials Market delivery centers (5-7) – cross-docks to handle local deliveries of products like appliances, doors, windows, and other larger and bulky items Market delivery operations (100) – basically serve smaller markets and enable expansion of next-day delivery capabilities Direct fulfillment centers (7) – significantly mechanized and automated to quickly turn around parcel orders. Additionally, and to build out the capabilities of its direct-to-consumer supply chain, The Home Depot has introduced a number of interconnected customer offerings like Buy Online – Ship to Store, Buy Online – Deliver from Store, and Buy Online – Curbside Pickup. These initiatives are tangible evidence of the commitment at The Home Depot to realigning and transforming its supply chain in a dramatically-changing retail landscape. A typical The Home Depot store stocks approximately 30,000 to 40,000 items during the year, including both national brand name and proprietary products. Online product offerings complement the stores by serving as an extended aisle, that is able to offer a significantly broader product assortment through our websites and mobile applications. The merchandising organization is a key competitive advantage for The Home Depot, delivering product innovation, assortment and value, which reinforces its position as the product authority in home improvement. In fiscal 2022, investment priorities included merchandising resets in our stores to refine assortments, optimizing space productivity, introducing innovative new products to our customers, and improving visual merchandising to drive a better shopping experience. At the same time, we remain focused on offering everyday values in our stores and online. To help its merchandising organization keep pace with changing customer expectations and increasing desire for innovation, localization, and personalization, the company continues to invest in tools to better leverage data and drive a deeper level of collaboration with our supplier partners. As a result, there has been a continued focus on enhanced merchandising information technology tools to help: (1) build an interconnected shopping experience that is tailored to our customers’ shopping intent and location; (2) provide the best value in the market; and (3) optimize our product assortments. The merchandising team leverages technology and works closely with our inventory and supply chain teams, as well as supplier partners, to manage our assortments, drive innovation, and adjust inventory levels to respond to fluctuations in demand, which helped to navigate the challenges of continuing global supply chain disruption in fiscal 2022. As cost pressures have risen in several product categories in the current environment, our tools have helped our merchandising, finance and data analytics teams as they work with our supplier partners to manage these pressures. An interesting figure is that half of its sales – about 45% – comes from home professionals, even though they make up less than 5% of its customer base. The overall experience at The Home Depot suggests that once something is developed for their contractor or professional business customers, it works very well for their DIY and DIFM customers as well. An overall priority at The Home Depot is the creation of strong and flexible supply chains to better serve its customers and consumers. For these reasons, the next phase of innovation and transformation for The Home Depot may accurately be referred to as “Agility, Fulfillment, and Customer Experience.” (Author: C. John Langley Jr., Ph.D., Penn State University) 1 The content of this case has been adapted from materials available at: Josh Bond, “The Home Depot Builds an Omni-Channel Supply Chain,” Modern Materials Handling, www.mmh.com, February 1, 2015; Mike Hockett, “Home Depot to Spend $1.2B on 170 Distribution Facilities by 2023,” Industrial Distribution, www.inddist.com, June 12, 2018; Team Trefis and Great Speculations, “Why is Home Depot Making a Considerable Investment in its Supply Chain?,” Forbes, www.Forbes.com, June 13, 2018; Jennifer Smith, “Home Depot Sets $1.2 Billion Supply Chain Overhaul,” Forbes, www.Forbes.com, June 11, 2018; Dan Gilmore, “Home Depot and the Arc of Today’s Supply Chains, SupplyChainDigest, www.supplychaindigest.com, June 29, 2018, Melissa Repco, “Home Depot Wants to Speed Up Deliveries with New Distribution Centers as Pandemic Fuels Home Projects,” CNBC.com, August 4, 2020; Shefali Kapadia, “Home Depot Adds 3 Warehouses as DIY Demand Grows,” Supply Chain Dive, August 4, 2020; John Paul Hampstead, “The Home Depot’s Culture of Supply Chain Innovation,” FreightWaves, February 3, 2021; and Home Depot, Inc. 2023 10-K Filing to the SEC. 2 Efforts have been made to see that the details in this case are accurate. Also, the author has suggested several time frames in the write-up that are intended to help understand the evolution of supply chain strategies at The Home Depot. The time frames do not represent any official statements on behalf of The Home Depot, Inc., or members of its executive staff. 4
This assignment requires the submission of a “reaction paper” by each individual student. After reviewing the reading materials relating to The Home Depot Supply Chain Innovation provided in Module 1
Supply Chain Home Depot To Spend $1.2B On 170 Distribution Facilities By 2023 Home Depot is planning to significantly boost its distribution network so that it can offer same-day or next-day delivery to 90 percent of the U.S., with those plans including the build-out of dozens of distribution centers and smaller operation centers. Mike Hockett Jun 12, 2018 This past December, Home Depot announced an ambitious plan to spend more than $11 billion to build out its “One Home Depot” customer experience and enhance everything from its stores, associates and online offering to its supply chain. The home improvement retailer has now revealed details of that plan specifically for its distribution network, and they are significant. Speaking at the Bernstein 34th Annual Strategic Decisions Conference May 31 in New York City, Home Depot chairman and CEO Craig Menear told a moderator that company plans to spend $1.2 billion over the next five years to build out a downstream distribution network. That investment will include the addition of 170 distribution facilities across the U.S., which will enable Home Depot to offer same-day or next-day delivery for 90 percent of the U.S. population. Menear broke down that 170 figure, detailing that Home Depot will build out 40 flatbed distribution centers to handle building material-type products that need to go direct to a job site for Pro customers. The company will build out approximately 100 market delivery operation centers for bulky customer items like patio products, grills and appliances direct through there to the customer through a delivery agent. The remaining ≈30 facilities will be local direct fulfillment centers that will handle a smaller subset of product that moves direct to customers. He added Home Depot will build out a couple more ‘parcel plus big direct fulfillment facilities’ that handle a mix of small products and bulk. Menear acknowledged that, upon completion, the investment will enable Home Depot to offer the same shipping capabilities like that of Grainger, Fastenal and Amazon. “Yes, the reason that we actually purchased and align brands was to get back in a subset of the MRO space that we felt was important to our business and that’s multifamily, hospitality and institutional,” he said, referring to the company’s business additions in recent years. “We did not have the capabilities in the orange box business to be able to serve those customers the way we needed to do that, and delivery is an important element of that in terms of same day, next day.” With its brick-and-mortar offering already in place, Home Depot boosted its MRO offering by enhancing its digital business and then made a major move by buying Jacksonville, FL-based Interline Brands — No. 14 on Industrial Distribution’s 2017 Big 50 List — in 2015 for $1.63 billion. Interline’s fiscal information hasn’t been shared since the acquisition, but it had 2014 sales of $1.7 billion and its website has stated the company is “approaching $2 billion in sales” since that time. “So we have to merge all of that, and part of merging that is truly merging a One Home Depot supply chain so that we could be able to both fulfill for those MRO customers’ daily needs in terms of product for maintenance and repair but, at the same time be able to, if they need a water heater, a toilet or something from the stores, we will flow all of that together in one shipment to that customer in an expeditious fashion, and that’s what we’re building on in the supply chain,” Menear said. Home Depot posted 2018 first quarter sales of $24.9 billion, up 4.4 percent year-over-year, while total profit of $2.4 billion increased from $2.0 of a year earlier. As of the end of Q1, Home Depot has approximately 2,280 stores company-wide. The Wall Street Journal reported Tuesday at e-commerce accounted for only 6.7 percent of Home Depot’s 2017 full year sales, but that total digital sales jumped 21 percent from 2016. The WSJ quoted Home Depot executive vice president of supply chain and product development, Mark Holifield, telling a logistics conference last week that, “Customers expect delivery to be free, they expect it to be timely. Sometimes they want it fast, and are willing to pay for that. Sometimes they want it free, and they’re willing to wait for it. We need to have the options right there.” Holified reportedly outlined the same plan details with the conference that Menear did on May 31, adding, “This is part of an $11 billion overall plan to re-engineer our company to ensure that we are prepared for the future in retail.” Do you like this content? 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