The Home Depot Inc. is improving how it makes inventory available to business customers as well as consumers, the company says.
Key to that goal is a new Supply Chain Synchronization project with Internet software designed to improve the annual turn rate of its more than 35,000 in-store available SKUs, the retail chain’s executives said last month during Home Depot’s Investor & Analyst Conference.
A year-long pilot of the supply chain software project, nicknamed Project Sync, has enabled Home Depot’s warehouse workers to more quickly receive inventory delivered to distribution centers and stores, Mark Holified, executive vice president, supply chain and product development, said at the conference. CEO Craig Menear added that Home Depot will use savings it gains from more efficient warehouse operations to pass on lower prices to business customers and consumers.
The new software improves Home Depot associates’ process of moving freight off trucks, into receiving areas, from receiving areas and onto customer-facing shelves, said Marc Powers, executive vice president of U.S. Stores. Once logged on to the Internet on a desktop or mobile device, store associates can use the program to see exactly what is on every inbound truck load, how many small cartons and pallets are necessary for bringing freight into a retail store and view a diagram that instructs how to stage carts and pallets to reduce associates product touches and footsteps. The system has been in pilot for a year, and reduced 90 miles of walking for each receiving associate, Powers said.
After products are loaded in the store, software will then direct associates on the exact order products should be placed on the shelves. This initiative has proven to reduce one to two footsteps per associate per carton. “Our stores receive on average over 4,500 cartons of freight per week,” Powers said. “Now that is a lot of footsteps taken out of the process.”
Fulfillment centers and retail locations in the Houston area have been testing this software in pilot mode for the past year, Holifield said.
By using the software “we are on a path to grow our inventory turns from 4.8 times in fiscal 2015 to a targeted 5.7 times by the end of fiscal 2018,” said Carol Tome, chief financial officer and executive vice president of corporate services. Inventory turns refers to the number of times a retail location replaces its entire stock. The company’s 2015 fiscal year ends on Feb. 1, 2016.
Project Sync organizes into a database information like suppliers’ shipping schedules; carriers’ transportation times, load capacity and pricing; and the available receiving space and manpower at Home Depot fulfillment centers and retail stores. Data scientists then use the information to develop a shipping schedule that optimizes what inventory should be routed to which location, and when.
Executives said the software lowered the time necessary for Home Depot’s supply chain to respond to changes in demand from shoppers, weather disruptions and other surprises. “For the suppliers here we previously had volatile lead times of six to 12 days; we now have stable lead times to fulfillment centers of three days,” Holifield said. The company also said that thanks to the software’s reduction of product touches, it noticed that its Houston retail store locations received fewer damaged goods.
Menear said the increased productivity will be passed on as discounts to customers. “There are a number of productivity benefits that we receive from Supply Chain Sync,” he said. “And we will appropriately use those savings to drive pressure in the market.”
Tom Shortt, vice president of supply chain and development, oversees the software initiative.
Home Depot plans to scale the technology across its 1,900 U.S. stores and fulfillment centers during the next three years, the company said. Holifield admitted this will take a “considerable effort.” He declined to comment on the cost of developing and deploying the software, but said “the great thing about Sync is it is not a huge capital investment. We are doing the I.T. development that allows us to scale the program ourselves.”
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