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Home Depot drives toward simplicity

Frank Blake and Marvin Ellison, Home Depot's CEO and executive VP U.S. stores, walked analysts through some of the key initiatives at the world's largest home improvement retailer during the Goldman Sachs Global Retailing Conference in New York.

If there was one overriding theme at Home Depot’s presentation, it was the home improvement giant’s increased efforts to simplify operations.

“We’re a very complex retailer, but that doesn’t mean we can’t find ways to drive simplicity all the way from the corporate level down to the stores,” Ellison said.

“We always think there’s an opportunity to improve our business and do it better. It lives in a couple of different areas,” Blake said. “Sometimes it’s an application of technology to do a task. So it’s a task that you’re now doing by hand that you can put technology in to do it better. Sometimes it’s a task that you’re doing that you just say: ‘Don’t need to do it.’ ”

One very large part of that is the company’s latest effort to improve its supply chain management through the use of new rapid distribution centers. Already Home Depot has 16 RDCs up and running, and Blake said the remaining five will be operational by the end of the year.

On the merchandising end, Blake talked about the company’s earlier efforts to centralize merchandising functions and build an IT infrastructure to support it back in 2000 and 2001.

“We’ve got a lot of work still to do around our merchandising systems,” he said. “Just as one example, over the last several years we’ve put in place a centralized forecasting program. We’ve just upgraded that really to something that’s more state of the art this summer.”

Blake also talked about the company’s efforts to improve its online relevancy. He said 70% of Home Depot customers research their in-store purchases online, and that the company needs to maintain an interconnected retail experience between its online and brick-and-mortar stores.

“Having a site that effectively serves those customers' interests and establishes that connectivity with the customer is actually in our view hugely important,” he said. “We think we stand for our product knowledge in the stores. We need to stand for the same thing on our virtual presence on the Web.”

Ellison also said the company is ramping up its online customer service by employing associates to monitor social networking sites and blogs to find customer complaints.

“So if we hear or see dialogue between customers or people to people with anything having to do with the Home Depot that’s negative, we proactively contact that individual and resolve it before it comes up as an official complaint,” Ellison said. “From a customer connectivity standpoint, not only to draw commerce but also to solve problems, this is something we have to get really good at really fast.”

Blake also recognized the company’s special order system is so dated and inefficient, only a handful of associates in each store know how to operate it.

“Our special order system is a relic of the early 90s; it’s a green screen,” he said. Blake said the current system also fails because it doesn’t provide visibility to either the merchants or the store management to monitor the fulfillment process.

“We see putting a lot of effort on the IT side by putting together an e-catalog and see ultimately a much easier order interface for ourselves and our associates and much more visibility for our merchants and our supply chain on how we’re fulfilling the customer needs.”

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