Home Depot Distribution Efficiencies Improve In-Stock Positions

Supply chain investments by Home Depot are putting more product within customers' reach. The retailer's 19 Rapid Deployment Centers (RDCs) play an important role in improving both stores' efficiency and in-stock levels.

"When product comes from the RDC, over 80% goes directly from receiving to the sales floor," said Home Depot's EVP of U.S. stores Marvin Ellison during a recent conference call. "If you walk our stores today, you'll see less product in the overhead [racks] than in the history of the company. It's not because we're doing anything other than getting the right product at the right place at the right time. We have some very fundamental things that we're doing in the store¼so that we can limit the amount of inventory and have product on the shelf for customers to buy."

Home Depot executives identified a number of initiatives that are improving product movement logistics, including a forecasting system that "has helped us better manage the inventory on a day-in, day-out basis," said Craig Menear, EVP of merchandising. "Obviously, the RDC allows us to effectively put inventory where it's needed."

The RDCs themselves are becoming more efficient. The facilities were built last year, but "not all of those facilities were mechanized from the start," according to CEO Francis Blake. "This was a conscious decision to gain speed in the rollout and to learn about the processes within the RDCs before committing to mechanization."

However, automation is on the rise: "As we've added mechanization, we're seeing benefits in capacity, efficiency and accuracy," Blake added. "We're now underway with mechanizing three more facilities and by the end of fiscal 2012, 18 of the 19 facilities will be mechanized."

He added that Home Depot is on a multi-year path to make its distribution processes more efficient. "Year-to-date in the U.S., we've handled approximately 65% of our cost of goods through centralized distribution, compared to approximately 25% for all of 2007," said Blake. "We have a goal of 75% by 2015."