help wanted
Housing and construction may be slumping, but Home Depot is
pressing ahead with plans to open 24 new fast-flow rapid deployment centers (RDCs) around the country. Eight centers are now open
and more are under construction. Still, Mark Holifield, the company’s
senior vice president of supply chain, isn’t ready to relax. Nothing can
be accomplished, he says, until he has hired the right people to staff
the facilities.
Holifield is currently looking for capable people to help manage the
new RDCs. Check out https://careers.homedepot.com/cg if you’d like
to make Home Depot your new home away from home.
conditions—had changed. Home Depot was
confronting several challenges that were about
to thrust the supply chain into the spotlight
and put Holifield at the center of the action.
One was the downturn in the housing sector. As construction and credit began to dry
up, Home Depot moved swiftly to cut expenses by streamlining its operations. As Chairman
and CEO Frank Blake puts it, “A downturn is
a terrible thing to waste.”
Another was the realization that the retailer could no
longer afford to ignore the logistics side of the business.
After nearly three decades of operation, Home Depot had
little in the way of a formal distribution network. Vendors
and suppliers shipped merchandise 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.
But as the business evolved, that model began to fall apart.
Over the years, the retailer, which had saturated the major
metropolitan markets, had turned its sights on secondary
markets, where it had begun building smaller stores that were
more in keeping with the markets they served. But the smaller stores lacked the space to house vast inventories, making
them particularly vulnerable to stock-outs and other forecasting errors. Eventually, customers began to notice that
items weren’t always available
when they came looking for
them. And that was something
Home Depot was unwilling to
tolerate. “In-stock is a key issue
with any retailer,” Holifield says.
Old versus new
Although it was clear they were
looking at the supply chain
equivalent of a total rehab,
Holifield and his team were
undeterred. After conducting a
distribution network study, they
came up with a strategy for
rebuilding Home Depot’s distribution process and reining in
costs by centralizing operations.
That would be a big change
for Home Depot, which had traditionally left many key
decisions to the individual stores. Take ordering, for example. When Holifield came on board in 2006, about 70 percent of items were ordered by store managers; only 30 percent were ordered centrally.
The retailer’s transportation model was equally store-cen-tric. At the time of Holifield’s arrival, about 80 percent of
products were shipped directly from vendors to stores. The
remaining 20 percent moved through a variety of distribution channels, including company-owned lumber handling
facilities, import warehouses, and centers known as “carton
DCs” that were designed to handle bulky items. In addition,
a small percentage of orders moved through Home Depot-operated LTL consolidation points, known as transit centers.
That will all change under the new strategy. While in the
past, only 20 percent of goods moved through company-run
DCs, the new plan calls for half of the goods sold by the
company (by value) to move through Home Depot facilities.
At the core of the new strategy is construction of 24 rapid
deployment centers (RDCs). The RDCs, which will be
strategically located throughout the country, will each serve
approximately 100 stores. These will be flow-through distribution facilities engineered for the swift cross-docking of
large volumes of merchandise, so very little will be stored in
them. Most products will ship within 24 hours of arrival,
according to Holifield.
The RDCs will receive freight in pallet loads that can be broken down for case-level shipments, but they will also have the
flexibility to accommodate limited split-case picking. Some—
but not all—of the facilities will be automated. The first automated facility, which features print-and-apply systems as well
as a sliding shoe sorter, opened in April in Valdosta, Ga.
Right now, eight RDCs are operational. All 24 are expected to be up and running by the end of 2010. As the facilities
come on line, responsibility for ordering is being transferred
from the stores to the RDCs. The plan calls for 75 percent of
items to be centrally ordered through these centers.
