Reference no: EM133327029

Home Depot's Supply Chain Transformation 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 make and implement competencies in the area of supply chain management:

1. 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.

2. Rapid Deployment Centers (2007-2013). As a replacement to having most products shipped direct from suppliers to stores, 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 RDCs 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 make additional supply chain efficiencies. Overall, economies of scale have dramatically improved logistics costs both into and out of the RDCs, and suppliers are able to better manage production runs.

3. Omni-Channel Capabilities (2014-present). 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 Atlanta, Toledo, OH, and one on the west coast of the United States, these facilities provided more rapid delivery for many shipments and additional capacity to carry large numbers of additional SKUs. In 2018, a plan was developed for the company to invest $1.2 billion over a 5-year time frame to add 170 new distribution facilities across the United States. This would facilitate reaching 90% of the population in just one day or even less. 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, and Buy Online, Deliver from Store. 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.

Which of the approaches to network design discussed in this chapter would be of greatest help to The Home Depot as they pursue the strategies that have been highlighted?