Supply Chain News: Home Depot Integrates Its Two Supply Chain Networks to Address Order On-Line, Pick Up In Store

In recent weeks, retail giant Home Depot was in the news for opening its third fulfillment center, a massive 1.6 million square foot facility in the Toledo, OH area built to serve its ecommerce customers.

Adding to its network of two other fulfillment facilities, one near its headquarters in Atlanta and one on the West Coast, Home Depot says it now has the capability to deliver to some 90% of the US population in two days without express shipping.

A number of years back, Home Depot was also very much in the news, as it embarked on an ambitious strategy to transform its logistics network. Throughout its history, Home Depot had used primarily a direct to store (DTS) sourcing model, in which individual retail locations (some 2200 stores) placed their own orders for merchandise, with vendor shipping directly to a store rather than a retail distribution center (there were some exceptions, such as some bulk goods and lumber, which did flow through Home Depot DCs.

There were a number of challenges with this model, including high transportation costs due to many LTL or even parcel shipments to the stores, near constant and often disruptive receiving activities at the stores, lack of procurement leverage, and higher than needed store inventories, as the stores might be required by the vendor to order a full carton when only a few items were really needed on the shelf.

Under then new VP of Supply Chain Mark Holifield, Home Depot revamped this strategy starting in 2007, ultimately building almost 20 new Rapid Deployment Centers that operate as flow through facilities, with vendors shipping larger quantities of items to the RDCs, which then either cross dock the goods or break them down into smaller units for store replenishment. The goals, largely achieved, were to reduce inventory costs and improve turns, reduce transportation costs, and improve customer service. The vast preponderance of store orders now are routed through the RDCs, almost completing flipping the order mix versus what it was before the effort.

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