CSCMP's Supply Chain Quarterly
August 17, 2019
Forward Thinking

Home Depot launches pilot for ambitious outbound delivery plan

Four-year, $1.2 billion initiative aimed at making next-day deliveries to all U.S. customers.

The Home Depot Inc. has launched a four-year, $1.2 billion initiative to streamline its outbound delivery operations in an effort to shave one day off its nationwide delivery times, the home improvement giant's top supply chain executive said today.

The program, currently in the pilot phase, is aimed at providing next-day delivery by 2022 to every U.S. customer, and same-day deliveries to a large percentage of the population, Mark Q. Holifield, Home Depot's executive vice president, supply chain and product development, told an industry conference in Atlanta today. Virtually all of Home Depot's outbound deliveries are made via two-day parcel services, but Holifield said that in a world where customers demand delivery speed and flexibility, "we need to be one-day (deliveries) to every customer."

The new network will consist of an array of consolidation centers, local direct fulfillment centers in major markets, specialized parcel fulfillment centers, and what Holifield described as "market delivery" centers that will be installed in an undisclosed number of second-tier markets.

Under the plan, Home Depot will build local direct fulfillment centers in 25 locations, with each location capable of holding 35,000 stock keeping units, or SKUs, Holifield said. It will build "parcel plus" direct fulfillment centers in seven locations, and direct fulfillment centers for flatbed truck deliveries in its 40 largest markets to support deliveries of high-volume, lower-value products to projects and job sites, he added.

The company will also utilize direct deliveries, and it will roll out van and passenger-car services to support local deliveries of small parcels, according to Holifield.

The direct fulfillment center and market delivery operations are underway, said Holifield, who called 2018 the "year of the pilot." The company, which currently employs 15,000 in its logistics and supply chain operations, is in hiring mode for the initiative, he added.

The plan, which has been rumored for months, is a major step in Home Depot's ongoing expansion of its outbound delivery program. The company already operates five massive direct fulfillment centers serving nationwide end markets, and is pushing the so called BOPIS initiative, which stands for "buy online, pick up in store." Home Depot's stores will play key roles in the new initiatives as delivery nodes, Holifield said today.

One challenge may be ensuring that store inventory is well stocked across the network to support online ordering. Home Depot has about 1 million SKUs online, while the typical store supports about 30,000 SKUs, Holifield said.

By the time it is completed, the outbound program could mirror in scope and significance Home Depot's program of nearly a decade ago to centralize product ordering and inventory management functions from vendors to distribution centers. The inbound program continues to be fine-tuned eight years or so since its launch, but it has been successful in streamlining what had once been a disorderly process, Holifield said.

Prior to the revamp, inventory ordering and management were handled at the store level. Holifield estimated that, at one time, 37,000 company employees were responsible for those functions.

The conference was put on by Eye for Transport, a British consulting firm.

Mark Solomon is executive editor—news at DC Velocity, a sister publication of CSCMP's Supply Chain Quarterly.

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