CASE STUDY CHAPTER 1:

Home Depot Renovates Itself With New Systems And Ways Of Working

1-12. What problems and challenges did Home Depot experience?

The main problem that the Home Depot faced was technical problems they
failed to keep up to date with the technology, especially the technogoy to track
inventories. At that time, employees spent 60% of their time on stocking and 40%
on helping customers. The logistics infrastructure was expensive because the
supply chain was organized very poorly (as bulky items were delivered directly
to individual stores). Items were often out of stock and trucks often arrived empty.

1-13. Describe the relationship between management, organization, and

technology at Home Depot. How did this relationship change over
time?

At first: everything is not coherent to each other. The inventories were sent
directly to the stores, and the managers had too much work as they had to spend
60% of the time unpacked the items. They basicly handled organizing tasks and
also technology tasks. Managers had to go to the shelves to find items and ordered
themselves when when the items were out of stocks (organizing tasks). Besides,
the Home Depot also lacked the hardware infrastructure for its CEO to send a
companywide email, so the technical system was really poor.

In 2007: Frank Blake invested on information systems to help company with

competitive pricing. He purchased Black Locus a competitive price intelligence
software help it find out how it prices compare with competitors. However the
technology was still outdated.

However, from 2008: CIO Matt Carey worked with Mark Holifield (VP of
Supply Chain) to make a process of managing suppliers by calling 75% of the
inventory to move through Reginal Distribution Centers (RDCs) Each RDC could
serve about 100 stores. The management is now focused, inventory management
became automated. The demand-planning software also help reduce forecasting
errors and increase profitability. 98.8 percent of the time customers found the
products they wanted available.
Finally, the Home Depot spent $64 millions on devices called First Phone, which
not only helped provide all the information that managers/customers needed, but
also had scanner to check the inentories, which was way more convenient. At this
time Management became really easy with a well organized system and better
technology to make things fast and convenient.

1-14. How much was Home Depots management responsible for its
problems? What about the role of technology and organizational
factors?
At first, the management team of Home Depot did not really concentrate on
building a centralized system. When it grew, the old system became really heavy
and expensive, and made a lot of inventory out-of stock errors.

When CEO Robert became chairman, he believed improvement store-by-store

sales were less important. He cut jobs, focused on purchasing software. The
software did work, cutting job did produce some saving, but not enough.
In 2008 Matt Carey helped improve Home Depots information technology
infrastructure. The inventory management became more automated and the
problem seemed to be solved.

1-15 . Mark Holifield, Home Depots Vice President of Supply Chain, has
noted that the company didnt have the most leading-edge technology
but it was still able to make a major change in its supply chain. Discuss
the implications of this statement.
I personally believe that keeping track with technology is really important,
especially to a company which has bulky products and heavy supply chain like
Home Depot. If they dont have an efficient software or some kind of technology
that helps track everything, the RDCs will find it hard to work. The RDCs serve
100 tores and supplies leaves for stores 24 hours of their arrival at the centers. If
the software they use for tracking all of them is not a good one, then they will
face a big problem to with a centralized system. Thats why I think they will not
be able to make a major change in its supply chain, without improving
technology.
SUMMARY

Technical they were behind

Keeping up to date with the technology to track inventories.
Matt Carey introduced a new system that helped them

Home Depot was very low-tech, even by 2000, the Home Depot lacked the hardware
infrastructure for its CEO to send a companywide email items were often out of stock.
For the first 25 years Home Depot set up as many stores as it could, they began bulding
smaller stores lacked of space they didnt have all items in stock. Trucks often arrive
enpty, stocking took too much time, bulky items costed too much because they delivered
directly to individual stores.

Robert became chairman in 2000. The store looked like lumberyards while Lowes
(competitor) were modern and inviting. Robert cut jobs, pushed hard to make the company
more efficient. He doubled earnings, reduced expenses but alienated store managers... He
believed improvement store-by-store sales were less important want the fastest growing
area of business to be in-home instalation services, web retailing, sales to commercial and
international operation.
Homegrown system became expensive to run and modify. Large IT approach
$1 billion to replace point-of-sale(POS) systing data repositore; and software from
People Soft and SAP software access details, features, availability, customer info, plus
check out system.
$2 million in management software to make work efficient. Goal: lower overall cost of
operating, raise returns. Self-service checkout did some saving but not enough.
Still lose to Lowes because they paid less attention to customers.

2007: Frank Blake serving and cultivating customers.

Invest on information systems to help company with competitive pricing.
- Purchased Black Locus competitive price intelligence software help it find out how it
prices compare with competitors.
- Black Locus provided automated and optimized pricing tools for mid-market and large
online-retailers. (which are able to combine competitive pricing data with customers online
data)
Still outdated

2008: CIO Matt Carey (ebay walmart): company techno is like 1990 (Mun xem thiu ci g
vn phi ra k tm. Store manager vn phi order tng ln)
Hng tn kho ch ht v RDCs, mi ci RDCs cha c cho 100 stores. Shipment chuyn
lun trong ngy ko cn phi cha.
Demand planning software: forecast error, ni chung l o c khch hng, hng tn hiu
qu knh phn phi... cc th
D on li hng tn gim ng k. % li ht hng gim mt na, 98.8% khch hng tm
c sn phm c sn. VD ng 2010, Lowes ht hng tn kho nhng HD tr li ngay v
bn th xng xc cc th.
Saving on delivery, service, inventory, transportation cost tng HD cash flow ln $1 billion.
H 2012 thng Lowes.
HD tiu $64 million to supply sale people with 30,000 Motorola (First Phones) c scanner
kim tra xem cn hng khng. speed checkout times thay v ct ngi lm th ngi
lm tp trung KH hn KH mua nhiu hn
Slowed of opening of new stores.
Website p hn, customer friendly, competitive.
Separate business bn Xbox
Allow instore pick up