Home Depot is continuing to roll out rapid deployment centers (RDCs), large distribution centers positioned around the country, to help it get products to stores more efficiently. In the process, Home Depot has been able to reduce inventory on-hand at stores and improve turns.
Mark Holifield, senior vice president of Home Depot's supply chain, told attendees of the Janney Capital Markets conference last week, "In Q1 we reported increasing turns, and this is something we expect of ourselves going forward, to continue to improve inventory turns."
According to a Dow Jones Newswires report, Home Depot has $11 billion invested in inventory.
Turns at the chain improved for the first time since 2000, as the home improvement retailer began opening RDCs last year. In all, Home Depot added 5.2 million square feet of new distribution space in 2009, according to a report on the National Real Estate Investor website. Beyond adding space, Home Depot has improved procedures and invested in technology at RDCs to respond more quickly to the needs of stores than with typical distribution centers. Currently about 70 percent of the chain's stores are served by RDCs with the plan to have all locations receiving deliveries by year's end.
More effectively managing the supply chain is critical to Home Depot's success, according to Mr. Holifield. "We're a project-oriented retailer, and if you don't have that one item in stock, the customer might take the whole project down the street," he said.
Discussion Questions: Are supply chain logistics any more or less important in the home improvement channel than in other retail verticals? Does Home Depot have a sustainable advantage in its supply chain strategy?