The Home Depot

The Home Depot also uses transportation auctions ([34]). The Home Depot was founded in 1978 in Atlanta, GA. Home Depot is the worlds largest home improvement retailer. The 1,000 stores are supplied by thirty-seven distribution centers in forty-five states. The supply chain includes over 7,000 suppliers who provide over 40,000 SKUs to stores and DCs across locations. Over 90% of the products move on trucks. In 1999, the company made 7.1 milUon less-than-truckload shipments and 219,000 full truckload shipments. These were expected to change to 4.7 million less-than-truckload and 877,000 full truckload shipments in 2003. 

Until 1996, the Home Depot asked carriers to submit bids on a standard Excel spreadsheet. Procurement still continued by lane separately, and thus carriers were unable to make informed bidding decisions that reflected synergies across lanes. Carriers also did not have adequate visibility of demand across Home Depot s network. 

The bids were accepted at sealed-bid, single-round auction. Once bids were submitted. Home Depot solved an integer program whose goal was to (1) provide service on all lanes (2) allocate a lane to one single carrier  

The model used by the Home Depot to choose successful carriers is described in Section 1.9.3. In October 2000, the bidding was carried out with 111 carriers. The bidding process was expected to involve one round only, but decisions were made for 80% of the lanes in round one. For the remaining 20% of the lanes, Home Depot held a second round of bidding and invited sixty-two bidders, of which thirty-six submitted bids. Even after this round, some lanes were not covered because Home Depot felt that carriers available for some lanes were not acceptable. The average number of carriers bidding on each lane was 14, with a minimum of two and a maximum of 33 across lanes. Home Depot claimed that it received lower rates, while carriers expressed satisfaction from the part of the business they were awarded. 

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Execution making growth happen at The Home Depot... 

With more than 325,000 orange-blooded associates. The Home Depot is the eighth largest employer in the United States. In the last two years, the company has created over 20,000 net new jobs, more than any other US business. Since its fonnding, the company has employed over 1.2 million people. 

But shareholders have not been the only beneficiaries of The Home Depot s snccess. While the business itself was growing, its impact on consumers and the home improvement indnstry in general has been dramatic. The Home Depot has made home improvement more affordable for millions of consumers. Professor David Bell of the Harvard Business School compared The Home Depot s prices today on a basket of everyday home improvement items to a comparable basket from 1978, adjusted for inflation, and found that the company has reduced prices by an average of 54%. For example, the cost of redoing a kitchen floor with 45 square feet of vinyl tile was 35 in 1978. Today, cnstomers can buy it at 26. Back then a refrigerator s average price per cnbic foot was approximately 77. Today it is only 48. Overall, the stndy fonnd that The Home Depot shoppers have saved more than 500 billion over the past twenty-five years. 

We have recently added unique urban formats on both coasts of North America. We opened two stores in Manhattan and a successful urban store in Park Royal, Vancouver. Virtually everything about these stores from their design and layouts to their merchandising selection and use of technology was specifically designed to meet the needs of their local communities and provide us access to an almost entirely new and untapped customer base. These stores demonstrate another opportunity for new store growth by bringing The Home Depot to previously underserved markets. 

The success of this three-pronged strategy hinges largely on executing well. That s not new. Excellence in execution has always been part of the lifeblood of The Home Depot. Our founders knew that great... 

Our experience has led me to conclude that execution is not just a matter of running a tight ship. Execution helps drive growth. How Based on The Home Depot experience, particularly during the recent years of transformation, I see five important lessons of execution that apply to us and to many other companies. 

Technology enables faster, better execution, and is a powerful tool that we at The Home Depot are still learning to master. 

The remainder of this chapter explores and elaborates on these five lessons and how we came to learn them at The Home Depot. 

Our core purpose at The Home Depot is to improve everything we touch. Retailing is a tough game, and to survive - and thrive - we must deliver on our brand promise at every touch point. In other words, what we tell our customers must be exactly what we execute, with no disconnects between what people see in our advertisements and what they experience in our stores. If we run a TV commercial about a father and son building a treehouse and picking out the lumber at The... 

The survey also revealed that people did not understand the benefits of working at The Home Depot, and they felt they did not have any outlet for asking questions or raising concerns about HR issues. So once a month, in every store, we now have HR Information Day, where HR representatives are available to talk with associates and answer any questions they might have. 

These and other efforts to strengthen communication over the past few years have made us a more flexible organization, and one that is much more open to new ideas. Our associates wanted to tell us how they felt about working for The Home Depot, and as we have acted on the results, we have improved in the areas that we targeted to improve. Participation levels in the survey are off the charts, and employee turnover is down. And, as noted earlier, our average ticket is up, which we attribute partly to happier and better-motivated associates who simply sell more effectively. 

This was exactly the sort of entrepreneurial spirit that The Home Depot s founders had in mind when they created the company twenty-five years ago, and we have every intention of preserving it. 

A key lesson for The Home Depot over the past ten years has been the need to pay close attention to tracking performance along multiple dimensions. We now have many more metrics - and much more granular ones - in place than we did in the early years, allowing us to respond to competitive trends and address customer service issues more quickly. 

When The Home Depot was still a relatively new concept and the competition was less intense, growth came easily pretty much all we had to do was open new stores and customers would come. And, as long as we were growing fast and launching new stores without cannibalizing existing ones, we did not need to pay attention to most items below the sales line. So there was not much discussion of - or need for -performance metrics beyond sales. 

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