While the details of logistics and supply chain management can get very complex, the basic concepts surrounding them are really quite simple. I’m always telling people who don’t know much about my job that it isn’t rocket science and a lot of it has to do with good common and business sense. I was reminded of this when I read this article on Home Depot’s plan to overhaul their supply chain. While the implementation on such a wide scale for such a large company is bound to be complex and possibly difficult, the concepts behind them are not. Via the Atlanta Journal-Constitution:
When CEO Frank Blake first took the helm of Home Depot, he visited a store in Prescott, Ariz. There, he saw a pyramid of John Deere tractors.
He looked around the arid landscape and thought to himself, “It doesn’t look like [Prescott] has seen a blade of grass, ever.”
He asked the store manager whether he sold a lot of tractors.
“I sold one last year,” the manager told Blake.
“Well, you’ve got 35 years of supply then,” the CEO replied.
Blake recounted this anecdote (to laughter) at a recent meeting of the Cobb County Chamber of Commerce to describe just how broken Atlanta-based Home Depot’s supply chain had become.
Another revealing quote:
“We are the single-largest less-than-truckload shipper in the United States,” Blake said. “A lot of trucks are going to stores that aren’t full. It’s not efficient.”
This says a lot about Home Depot’s supply chain problems and the need to fix them. Again, the concepts are easy to get – why are you distributing John Deere tractors to a desert store where demand for them will be incredibly low, forcing yourself to carry unnecessary inventory that will most likely never get sold? Full truck load shipments are cheaper and more efficient than less than truckload shipments, so increase the full truck loads you are doing and cut back on the LTL loads. However, overhauling the supply chain for such a large company and changing the way people think, analyze, and perform in a large organization is easier said than done:
“Home Depot admitted themselves that they are playing catch-up, not only with Lowe’s but with most other retailers,” said Brian Nagel, a retail analyst with UBS in New York.
“Home Depot stores are typically in a state of disarray, and they will admit that their stores need to be cleaned up.”
Part of this new initiative is to get the forklifts out of stores and reduce the amount of inventory piled up in stores, he said.
“Even high-volume stores end up looking cluttered. Conversely, you go to Lowe’s, which is a much cleaner shopping environment,” Nagel said.
Holifield, however, says the switch hasn’t been easy. The roll-out of two of the RDCs came last spring, right in the middle of Home Depot’s home improvement season.
Since then, Home Depot has slowed implementation of the project until they can get it right.
“I don’t envy that guy’s job,” said Doug Caldwell with ParcelPool.com, a Portland, Ore., logistics consultant. “They have a huge number of SKUs.”