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Sourcing
Changes
Class #7517
Page 2 of 42 Sourcing Changes Version 1
Table of Contents
This guide is yours to keep. Please write whatever notes you require, answer questions and complete
activities directly in the guide. At times, you will be provided direction to complete an exercise in
the training environment. Your Business Coach will assist you in how to log onto the system to
complete these activities.
Throughout the guide, you will see icons to cue you to take particular action or describe the content.
These icons include:
Icon Meaning/Action
Read the objectives for the course or module.
The course will provide an approximate time to complete each activity. Depending upon your
background and level of expertise, you may already be familiar with some tasks discussed. In those
cases, you will likely complete the activities in less time than suggested. Regardless of your
experience and expertise level, you will want to complete all of the modules to ensure you are
familiar with the processes, tools and resources that are unique to our company and THD Tools.
To complete this facilitated guide, work with your Business Coach to schedule time to complete each
module/course and conduct follow up with your Coach to review your progress and answer your
questions. It is important to schedule training and follow up to ensure you are able to complete daily
job related tasks and still execute the learning you require to be successful.
The Sourcing Changes course provides an overview of the various processes used to set up a new
store, new vendor, new distribution center (DC), or to make other sourcing changes. Upon
completion of this course, the Analyst will be able to:
Getting Started
The first step to understanding sourcing changes is building a common language of terms and
concepts. The following module provides a list of key concepts and terms.
Please Note:
The THD Tools system uses the terms article and site to describe a specific item and store or DC.
The F&R system uses the terms product and location in place of article and site. The terms article
site and location product are interchangeable but are used in conjunction with the system
discussed.
Below is a list of key concepts and terms that appear frequently throughout this course. Take a few
minutes to review each of these terms.
Article Master The article master holds all article records, known as master data,
necessary for selling a product at The Home Depot. There is only one
article master record at The Home Depot. Article master records capture
both manual data entered by an Analyst and automatic data, like the
distribution center address, generated from the system.
For example, an article master record for the Hampton Bay 6 Light
Forged Iron Chandelier contains descriptive data such as size,
dimensions, weight and article type for this chandelier.
Site Master A site master record contains key information on all sites (both
distribution centers and stores). Address and phone numbers, site groups
and listing information are examples of site master data. The Home
Depot uses this information for inventory management.
For example, a site master record for store 9001 contains the store’s
phone number, address and important information.
For example, DeWALT is the supplier of power tools to the store 9001.
DeWALT would be known as the source.
Target A location that receives the product. The site (distribution center or
store) is know as the target location.
For example, store 9001 is the target location for DeWALT power tools.
Retail Replenishment Acquiring product on a recurring basis to support anticipated need in The
Home Depot Stores.
For example, The Home Depot usually sells a large amount of screws
and nails year round. Therefore The Home Depot needs to utilize retail
replenishment to acquire this produce on a regular basis and keep the
shelves stocked with these articles.
Reference Site A reference site is a set of repeated information used to simplify the entry
procedure when creating a new site. Reference site information may
include general site data, calendar, valuation/ inventory management and
requirements planning.
For example, a new store opening occurs in the Toronto area. Another
store already established in Toronto with similar attributes is used as the
reference site for the new store.
Procurement Cycles The procurement cycle determines order and delivery days for a product
pertaining to a specific source and target location combination.
For example, the procurement cycle for a specific article may be weekly
on Mondays, whereas another article could be bi-weekly on Tuesdays.
For example, the source for power drills is DeWALT for store 9001,
which is the target.
Restriction Profiles Restriction profiles contain information that is used for the release of
order proposals from F&R to THD Tools.
THD Tools THD Tools is a software package solution for The Home Depot provided
by SAP, an industry leader in Enterprise Resource Planning (ERP)
software applications. This software integrates all functional areas of
The Home Depot into one transactional system connecting the business
as a whole to provide efficient and effective communication through
shared information.
The Sourcing Changes course covers the New Store and New Vendor Setup Processes for The Home
Depot, and the Sourcing Change process in the THD Tools and F&R system. In addition, the course
covers the roles and responsibilities of the Forecasting and Replenishment (F&R) Inventory Analysts
in the New Store, New Vendor and Sourcing Changes Processes.
The process to set up a new store is a collaborative effort across numerous functional areas including
Finance, Merchandising, Data Management, F&R and IT support. The New Store Opening Process
is owned by Merchandising. The New Store Opening Process is reviewed further in the High Level
Overview of the New Store Ordering Process module.
After a new store is open for business, the F&R system receives supply chain master data to forecast
demand by location product and to generate order proposals for ongoing replenishment needs. The
Central F&R group’s responsibilities for this step in the New Store Process are covered in more
detail in the Change from THD Tools to F&R module.
Merchants may choose to add location products from a new vendor to a store’s assortment. New
vendors are created in THD Tools by the Data Management Associates. The supply chain master
data for the new vendor is transferred to F&R to forecast and replenish the location product for that
vendor. The New Vendor Setup module covers the Central F&R group’s role in the New Vendor
Setup Process.
Merchants may choose to change a source of supply for a new or existing article. A source of supply
change means that there is a change in the flow path from the original location of the product to the
store or a DC. The responsibilities of the Central F&R group for this change are outlined in the
Managing Sourcing Changes module.
The next section will discuss an overview of the New Store Ordering Process.
This module provides an overview of the New Store Setup Process and the role and responsibility of
the Inventory Analyst within the process.
To create the purchase orders necessary to provide inventory to open a new store, The Home Depot
uses the Retail Replenishment function in THD Tools. Merchants and Merchant Assistants (MAs)
are responsible for the initial new store setup and new store ordering.
The New Store Ordering Process involves numerous functional areas across The Home Depot.
Below is a diagram of each group’s responsibility for the New Store Opening Process. Notice that
the Central F&R group only has a responsibility in the New Store Setup Process at the beginning and
the end of the process.
Choose
Reference Site
Merchant
Meet to Agree
Assistant
Request
Enter Site Maintain
Data
Upload of
Master Data Reference
Historical
Data
Data
Finance
Upload
Historical
Consumption
Data
Below is a high-level walkthrough of the New Store Setup Process. Each step is discussed in the
process flow below.
Merchant
Merchant
Assistant
F&R
Management
Data
Finance
IT Support
The first two prerequisite steps of the process flow address initial site setup. Sites are created in
another instance of the system called EFI. Sites are then passed over to the Canadian instance of the
system, known as THD Tools, where Data Management sets up the basic master data elements of the
site which is, in this case, a store. Once the basic setup is complete, this process is ready to begin in
THD Tools.
Various master data elements, held both in THD Tools and F&R, determine how much of the article
is forecasted and replenished and how frequently it is replenished. The Merchants work together
with the Inventory Analysts to determine these settings.
The initial order for the store, e.g., the first purchase order sent to vendors to fill an order for the
brand new location, takes place in THD Tools. In order to create the new store orders, the new
store’s articles remain in THD Tools and are not transferred to F&R.
After the New Store Ordering Process is complete, relevant supply chain master data is transferred to
F&R, and the normal replenishment process begins.
The Merchant and Merchant Assistant (MA) select a reference site to fill the initial orders of a new
store. A reference site is another location whose consumption history is similar to the expected
consumption history of the new store. A reference site may be selected per merchandising
department or class. For example, the garden department in the new store may be much larger than
the garden department in the reference site. Another reference site with a similarly-sized garden
department may be selected. After the reference site is selected, Data Management enters the site(s)
into THD Tools and executes the transaction to copy the appropriate information from the reference
site(s).
Merchant
Merchant
Assistant
F&R
Management
Data
Finance
IT Support
When all master data elements have been set up, Data Management requests that IT Production
Support start the process of retrieving historical data for reference site(s) and article(s) for the new
site to use for the replenishment calculation. This process is typically done in groups of articles
based on a common delivery date.
Merchant
Merchant
Assistant
F&R
Management
Data
Finance
IT Support
Step 4: Execute Retail Replenishment in THD Tools and Create Purchase Orders
Once Data Management completes the master data setup in THD Tools and IT Production Support
retrieves historical data for referenced site(s) and article(s), IT Production Support runs Retail
Replenishment to generate purchase requisitions and communicates to the Merchant Assistant that
the purchase requisitions are created.
The following day, the MA runs the Open Purchase Orders report (YDMM0001) to ensure that the
total PR or PO quantity is within budget. Any necessary update to the quantities may then be made
to the blocked POs, which are then released for transmission to the vendor.
Merchant
Merchant
Assistant
F&R
Management
Data
Finance
IT Support
Part of the MA’s responsibility is to ensure that POs have been created for all articles in the new
store’s assortment. The Merchants make frequent changes to the assortment, and the MAs must have
the ability to identify any missing articles from outstanding POs. The MAs review the New Store
Ordering report on a regular basis prior to the new store opening to ensure that POs have been
created for all articles. If any articles are missing, the MA must select a new reference site from
which to pull those articles and create a new PO(s).
Prior to the new store grand opening, the Merchant may request an additional round of ordering using
this process. This allows them to get the new store discount on as many orders as possible and, at
this point, does not count towards their new store opening budget. As long as the purchase order date
is less than or equal to the grand opening date, the new store discount will be considered.
Merchant
Merchant
Assistant
F&R
Management
Data
Finance
IT Support
The next module reviews Step 6 in the New Store Opening Process, Enter F&R Master Data into
F&R.
Page 17 of 42 Sourcing Changes Version 1
What are the first five steps of the New Store Setup Process flow?
Write the answer below.
Notes:
The previous module, New Store Ordering Process, reviewed the first five steps of the process to
setup a new store. Step 6 details the change from retail replenishment in THD Tools to auto-
replenishment in F&R.
Choose
Reference Site
Merchant
Assistant
Meet to Agree
on Supply Chain Execute Retail
Create Purchase Run THD Tools
Master Data Replenishment
Orders Report
in THD Tools
F&R
Enter Site
Data
Request Upload
Master Data Maintain
of Historical
Reference Data
Data
Finance
Remove Order
Change RP
Block in EFI
Type
IT Support
Upload
historical
consumption
data
Once the store grand opening date has passed, the replenishment process moves to F&R for all F&R-
relevant articles. Data Management changes the replenishment type to the appropriate RP type
agreed upon by the Merchant and the Inventory Analyst. Once the RP type is changed, the master
data is transferred to F&R via an overnight batch run.
Notes:
Activity: Complete the knowledge check questions to review the material covered to this point
in the course. The answers are in the Solutions Key at the end of this course.
Multiple Choice
1. Who is involved in the moving of the information from THD Tools to F&R?
a) Merchant Assistant (MA)
b) Data Management
c) IT Production Support
d) Both A and C
3. Once the initial order is complete and the required store orders have been placed through
THD Tools, the replenishment process can be moved from ____________________.
a) THD Tools to THD Tools
b) THD Tools to F&R
c) THD Retail to THD Replenishment
d) None of the above
The Merchandising group is responsible for product sourcing. To ensure that The Home Depot has
the right assortment of products for a particular department or category, Merchants annually review
their assortment in the process called the product line review.
In order for products to have the lowest possible cost and the best overall vendor service, Merchants
occasionally add new vendors to the list of existing vendors. They do so for two purposes:
Notes:
Merchants may confer with the Central F&R group or may decide independently that a new vendor
should be used to source a new or existing product. For more information on the process to add a
new location product, please see the Article Lifecycle Management course, which covers the steps
required to add a new product for replenishment in F&R.
Once the decision is made to use the new vendor, the Merchant communicates this decision to the
Inventory Analyst along with any relevant replenishment information known at that time in the
weekly line review meeting.
If the new vendor is brought on-board with The Home Depot to source new articles, this exchange of
information would follow the New Article Introduction Process found in the Article Lifecycle
Management course. If this vendor is brought on-board with The Home Depot to source existing
articles whose article numbers will not change, the process of setting that article up for replenishment
is not necessary.
The Merchant may also decide that he/she does not want to have two vendors sourcing toasters and
discovers that the new vendor can also make a two and four slice toaster that is identical to those
currently in their assortment. In that case, the new vendor master data setup still must take place. The
relationship between the new vendor and the existing articles needs to be set up, but no discussion
needs to take place around the articles, since they already exist in the assortment.
The Merchant works together with the IA to determine the required settings in THD Tools and F&R
when a change is made to the source of supply. Various master data elements held in F&R determine
how the order quantities are calculated or what types of exceptions should be reviewed prior to
releasing orders to the vendor. A Vendor Setup Form is completed with all THD Tools and F&R
required settings and parameters. Refer to the table below to see the F&R supply chain data elements
that must be determined. Please note that F&R Master Data elements only need to be determined if
the vendor is relevant for F&R. A copy of the Vendor Setup Form can be found in the Appendix of
this course.
Notes
Procurement Procurement Procurement cycles define the order days and frequency of order
Cycle Cycle proposal generation for a source/target location (when assigned on
the transportation lane for subrange level) or a specific article
(when assign on the transportation lane for product level).
Restriction Restriction This profile assigns order proposal restrictions to a vendor. It
Profile Profile defines minimum quantities, multiples and discount scales. At The
Home Depot, restriction profiles are used to apply vendor
minimum restrictions on order proposals.
Optimization OptimHorizon This parameter defines the number of demand periods that are
Horizon considered in the optimization of forecasting and replenishment.
After the Merchant and IA agree on the relevant supply chain master data elements listed above, the
Merchant or the MA fill out the Vendor Request Form. The Merchant then communicates the
information to the Data Management Analyst via the Vendor Request Form. A copy of the Vendor
Request Form can be found in the appendix of this course.
Data Management enters all vendor information in THD Tools including contact information and
address, purchasing information, vendor partners and sub-vendors. The F&R settings are entered for
vendors that use The Home Depot Forecasting and Replenishment process to automatically replenish
their products.
It is important for the vendor master record to be created in THD Tools for F&R relevant vendors
before the vendor master data records are transferred to the F&R system in the overnight batch. If
the info record is not created prior to the overnight batch run, it will not be sent to the F&R system
the following day.
Each night, an overnight batch run sends all stock vendor records to the F&R system. Any additions
and changes made to F&R related information in the vendor master record are exported from THD
Tools and imported into F&R as part of the nightly batch jobs.
It is important to note that although all vendor master records are sent to F&R, not all stock vendors
are relevant for F&R. Some vendors choose to replenish their articles manually, meaning that their
replenishment process stays in THD Tools.
Once the vendor master data is transferred from THD Tools to F&R in the overnight batch run, Data
Management enters additional F&R master data into the F&R system. For more information on the
process to enter F&R master data into F&R, please refer to the Article Lifecycle Management course.
Activity: Complete the knowledge check questions to review the material covered to this point
in the course. The answers are in the Solutions Key at the end of this course.
Multiple Choice
1. What functional areas are involved in the New Vendor Setup Process?
a) Merchandising, Data Management, and F&R
b) IT Production Support, Data Management, and Merchandising
c) Finance, Data Management, and F&R
d) None of the above
2. What master data is critical in the transition from THD Tools to F&R?
a) F&R master data
b) Vendor master data
c) Article master data
d) Both A and B
A sourcing change is a modification in the route or flow path that the article goes through to get to
the store.
Merchandising determines the product assortment for all stores and DCs. Each product in the
assortment must have a vendor and/or DC source to supply that product to The Home Depot stores.
That vendor is known as a source location in F&R. The vendor supplies the product to a target
location, either a distribution center (DC) or a store. If the vendor supplies product to a DC, the DC
is also a source location in F&R and supplies to stores. The relationship between the source and
target locations from vendor to store is known as a flow path. Determining the flow path is one of
the key decisions that a Merchant makes when adding a new product to the assortment. The decision
on what flow path to choose for a given vendor can affect lead time, safety stock, and product cost.
In selecting a flow path to move products from a vendor to the store, the Merchant looks to minimize
cost in order to maximize the product profit margin. For that reason, a product may have more than
one vendor in different parts of the country to minimize transportation costs. Import products may
have a domestic fill-in vendor to minimize lead time on the outset of a season, when it is most
difficult to predict demand and react quickly in order to greatly reduce out of stocks. Import
Distribution Centers (IDCs) help reduce the cost of additional safety stock that results from such long
lead times.
Notes:
Below is the process flow for changing a store’s source of supply for a location product:
Merchants may choose to change a source of supply for a new or existing location product. Changing
a source of supply may mean any of the following takes place to get articles to the correct location:
The steps to complete the change in source of supply are the same for each of these options. Once the
new source of supply is set up in THD Tools, settings that affect forecasting and replenishment must
be reviewed and updated accordingly.
Once the decision is made to change a source of supply, the Merchant communicates this decision to
the IA along with any relevant replenishment information known at that time.
Notes
Step 3: Update Vendor Specific Master Data in THD Tools and F&R
Vendor master data for articles changing supply sources is updated in THD Tools by the MAs and
transferred via the overnight batch to F&R. An example of a master data element that may need
updating is the planned delivery time. Planned delivery time is the time it takes to get the product
from the source (vendor or DC) to the site.
After the overnight batch run takes place, location specific master data in F&R is updated to reflect
the changes that were made in THD Tools.
Step 5: Review and Update Location Product Specific Master Data in THD Tools and F&R
Article location master data is also updated in THD Tools and in F&R. Information on articles is
stored in F&R at the location level and the location product level.
This process is used when the source of supply is changed for the stores serviced by a particular DC
(adding or subtracting stores or products). As mentioned in the Forecasting course, two years of
store forecast history is aggregated to serve as the consumption history for the DCs. An aggregate of
the stores’ demand influencing factor (DIF) effects is applied to the DC as a time series metric DIF.
For more information on the aggregation of DC History and DIFs, please see the Forecasting training
course.
Notes:
Activity: Complete the knowledge check questions to review the material covered to this point
in the course. The answers are in the Solutions Key at the end of this course.
Multiple Choice
1. When a Merchant chooses to change a source of supply, who does the Merchant notify?
a) Finance Associate
b) Inventory Analyst (IA)
c) Data Management group
d) None of the above
3. Two years of store forecast history is aggregated to serve as the consumption history for
the DCs. An aggregate of the stores’ DIF effects are applied to the DC as a
_____________________.
a) Boolean DIF
b) Time series metric DIF
c) Not a DIF
d) DIF effect
The process of integrating a sourcing change requires communication between several groups. The
master data maintenance and transactional data must be maintained so that the F&R system can
properly manage the replenishment process. The Inventory Analyst should now be able to:
Please review the steps in the New Store Setup Process in the following table:
Step in Process Associate who Performs Step
Step 1: Meet to Agree on Supply Chain Master Data Merchant and Inventory Analyst
Step 2: Choose and Maintain Reference Site Merchant and Merchant Assistant
Step 3: Request Upload of Historical Data Merchant Analyst
Step 4: Execute Retail Replenishment in THD Tools Merchant Analyst
Step 5: Run THD Tools Report Merchant Analyst
Step 6: Enter F&R Master Data into F&R Data Management and F&R
Please review steps in the New Vendor Setup Process in the following table:
Step in Process Associate who Performs Step
Step 1: Decision to Add a New Vendor Merchant
Step 2: Communicate New Vendor to Inventory Analyst Merchant
Step 3: Meet to Agree on Supply Chain Master Data Merchant, Inventory Analyst
Step 4: Populate the Vendor Form and Communicate All Merchant
New Supply Chain Master Data to Data Management
Step 5: Create New Vendor in THD Tools Data Management
Step 6: Enter F&R Master Data in F&R Data Management
Please review steps in the Change Source of Supply Process in the following table:
Step in Process Associate who Performs Step
Step 1: Decision to Change a Sites Source of Supply Merchant
Step 2: Communicate Decision to Inventory Analyst Merchant
Step 3: Review and Update Vendor Master Data in THD Merchant, Data Management
Tools and F&R
Step 4: Review and Update Location Master Data in F&R Data Management
Step 5: Review and Update Article Location Master Data in Data Management
THD Tools and F&R
Step 6: Re-aggregate DC History Inventory Analyst
Complete the knowledge check questions to review the material covered to this point in the course.
The answers are in the Solutions Key at the end of this course.
Short Answer
1. The New Store Setup process is a collaborative effort between what five business
functions at The Home Depot?
True or False
4. The Merchant or MA is responsible for obtaining supply chain master data from the
vendor. True or False?
5. One year of store forecast history is aggregated to serve as the consumption history for the
DCs. True or False?
In addition, THD Tools has several help functions. These help functions provide information about
the components of the THD Tools and explain how to use them.
The [F1] button opens the help section of THD Tools. The following options can also be selected
from the help menu:
In addition, the SAP Help Portal, located at Help.SAP.com, provides web-based documentation for
all SAP Solutions.
Analysts can access practice exercises in the training environment and use the current log on
information for future use. If there are any other questions that cannot be answered using these
options, please direct them to the Coach.
CONGRATULATIONS!
Supporting Documentation
Simulations
This course does not require Simulations.
Use the instructions below to access supporting documentation to assist in performing transactions in
the training environment.
Cue Card Short text version of a BPP or MPP with expandable links.
Work Instruction Full text version of a BPP or MPP.
Simulation* Flash drive HTML 1. Auto Demonstration viewed by
file that appears in a Playback Analyst
separate browser.
Simulations can be 2. Standard
Interactive Demonstration
run in two modes: Tutorial:
*Simulations are only available for select transactions.
Question: What are the first five steps of the New Store Setup Process flow?
Answer: Merchants agree on the master data that will be used for the new site. The
steps in the process to setup a new store are as follows:
1) Meet to agree on supply chain master data
2) Choose and maintain reference site
3) Request Upload of Historical Data
4) Execute retail replenishment in THD Tools
5) Run THD Tools Report
Question 1: Who is involved in the moving of the information from THD Tools to F&R?
Answer: c. IT Production Support
Question 3: Once the initial order is complete and the required store orders have been
placed through THD tools, the replenishment process can be moved from
.
Answer: b. THD Tools to F&R
Question 1: What functional areas are involved in the New Vendor Setup Process?
Answer: a. Merchandising, Data Management, and F&R
Question 2: What master data is critical in the transition from THD Tools to F&R?
Answer: d. Both A and B
Question: What are two of the goals that a Merchant is looking to achieve when selecting
a flow path for location products? Write the answer below.
Answer: In selecting a flow path to get a product from a vendor to the store, the
Merchant looks to minimize cost in order to maximize the margin from that
product's sales.
Question 1: When a Merchant chooses to change a source of supply, who does the
Merchant notify?
Answer: b. Inventory Analyst (IA)
Question 1: The New Store Setup Process is a collaborative effort between what five
business functions at The Home Depot?
Answer: Finance, Merchandising, F&R, IT Production Support, Data Management
DESIGN
The activities and exercises gave me sufficient practice and feedback 1 2 3 4 5
Time allowed for each topic, practice and the learning experience
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overall was sufficient
DELIVERY
The learning was delivered effectively and enabled me to learn the
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subject matter
The material was delivered in a manner that was clear and easy to
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understand
Learning objectives were clearly presented and achieved 1 2 3 4 5
IMPRESSIONS
The knowledge and/or skills gained through this learning experience
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are directly applicable to my job
I will use the knowledge and/or skill gained through this learning
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experience on my job
ADDITIONAL FEEDBACK
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