Texas Freight Leadership Summit Michelle Livingstone Vice President - Transportation April 3, 2014
Proprietary & Confidential to The Home Depot
Company Overview Founded in 1978 Bernie Marcus and Arthur Blank Atlanta, GA
Total square footage: 235 million Stores: 2,263 United States – 1,977 Canada - 180 Mexico – 106
FY2013 Sales: $78.8 billion USD 300,000+ associates 2
Proprietary and Confidential Property of the Home Depot
The Power of a Values-Based Business
Taking Care of Our Associates and Customers Proprietary and Confidential Property of the Home Depot
The Power of The Home Depot Interconnected Retail
Passionate About Customer Service
Disciplined Capital Allocation Driving Productivity and Efficiency
#1 Product Authority for Home Improvement
Delivering a Best in Class, Interconnected Multichannel Retail Experience 4
Proprietary and Confidential Property of the Home Depot
2014 Financial Targets
Sales growth
~5%
New store openings
8 (1 U.S., 1 Canada, 6 Mexico)
Operating margin expansion ~70 bps to >12% EPS Growth
~17% (after share repurchases)1)
ROIC 5
~24% Proprietary and Confidential Property of the Home Depot
2007 Distribution Center Network Distribution Channels Import DCs Carton DCs Lumber DCs
~ 20% COGS
Import Vendors Transit Facilities
~ 20% COGS
Domestic Vendors Direct to Store ~ 60% COGS
80% of Store SKUs Ordered by the Store 6
Proprietary and Confidential Property of the Home Depot
RDC Concept of Operations Store demand is forecasted for all stores serviced by an RDC…
The Vendor pulls full pallets….
Full truckloads arrive at the RDC…
Product is allocated based on real time demand…
… and aggregated to a single Purchase Order.
…and ships in bulk to the RDC.
…where current store needs are assessed.
… and delivered daily to each store.
Day 1
Days 2-3
Days 4-7
Days 8-9
Product is Not Held in Inventory at RDCs 7
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Current Supply Chain Network Lumber/Bulk DCs
Vendors
Stocking DCs
~ 75% COGS
RDCs
Vendors
Direct to Store
~ 25% COGS
Central Replenishment Systems & Processes 8
Proprietary and Confidential Property of the Home Depot
Optimal Flow Distribution Network Best Used When…
Direct To Store
Full Truckload Manufacturing Close to Stores
Why? Eliminates Additional Distribution Expense Associated with Handling at a DC
High Volume Stores
Rapid Less than a Full Truckload/Store Deployment Demand & Supply is Predictable Center “Flow” Value of Product is Low to Medium
Aggregates Store Demand to
Stocking DC Less than Full Truckload/Store “Stock & Pick” Demand & Supply is Unpredictable
Aggregates Store Demand to
Value of Product is Medium to High
Holds Buffer Inventory at the
Create Full Truckloads
Low Handling Costs
Create Full Truckloads
Stocking DC to Allow for Rapid Replenishment
Lumber/Bulk Handling Bulky, Oversize Materials DC 9
Flatbed Truck Transportation is Optimal
Proprietary and Confidential Property of the Home Depot
Supply Chain Core Distribution Network
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Average Sq Ft Bulk Distribution Centers ~175K Stocking Distribution Centers ~825K Rapid Deployment Centers ~560K Transload / FTZ Proprietary and Confidential Property of the Home Depot
RDC Service Area Map
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Proprietary and Confidential Property of the Home Depot
Home Depot Loves Texas Every Year Across the State:
We have 178 Stores in TX, 10% of the US total
We drive 30,000,000 Miles
7 Distribution Centers in TX, 10% of the US total
Haul 80,000 truck loads
Make 280,000 appliance deliveries
Dallas RDC Dallas SDC Dallas BDC
Houston RDC Baytown SDC Houston BDC San Antonio BDC
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Proprietary and Confidential Property of the Home Depot
Direct Fulfillment
Why we are investing in interconnected retail Papal Inauguration 2005 vs. 2013
The Mobile Mind Shift
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Proprietary and Confidential Property of the Home Depot
Direct Fulfillment
Building New Direct Fulfillment DCs Larger More Capable Operations Closer to our Customers: Improved Speed Stock High Demand SKUs Complemented by Vendor Drop Ship
Direct Fulfillment is Building New Capabilities to Support Interconnected Retail 15 Proprietary and Confidential Property of the Home Depot
Locust Grove, GA Direct Fulfillment DC OBJECTIVES: Supports expansion of SKU assortment and sales growth of hd.com Improved customer service through faster delivery Lower total Supply Chain costs
FACILITY HIGHLIGHTS: Locust Grove, GA ~35 miles South of Atlanta ~1.1 MM SqFt Facility Estimated Go-Live: Q1’ 2014 ~175 Dock Doors Automated, state of the art facility Upgraded WMS System
Locust Grove, GA Facility Enables DF to Meet Long Term Strategic Goals 16
Locust Grove, GA Direct Fulfillment DC
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Transportation Overview
Use All Modes of Transportation
THD shipped 6.4 million loads across the modes in 2013 19
International Logistics Footprint Origin Factory
Origin Operations
• 40+ Countries • ~1,000+Factories (US/CAN] • 6,000+ import SKUs • 3 Origin Cargo Managers (OCM) • 12 CFS Facilities • 4 Overseas Sourcing Offices
Origin Port
On The Water
Destination Port
• 24 Ports Of Entry (US/CAN/MEX] • ~125 Terminals • 9 US Container Management Companies • 2 “Expedited Freight” • 8 Global Ocean Service Providers Carriers • 6 Railroads • 6 Jones Act Carriers • 4 Transloads • 1 Air Freight Broker
Destination Customs
• 85+ Origin Ports • 250 Terminals
THD Facility
• 22 SDCs • 5 Transload facilities • 18 RDCs • 2,200+ Stores • 3 Customs Brokers • 4 FTZ (3 live, 1 pending approval)
• Country Risk Management • C-TPAT • International Security Legislation
International Logistics manages the operations, trade compliance, and trade risk for the 3rd largest container import program into North America (123K FEU) 20
Service Counts! • • • • •
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Inbound on-time service: 97.3% Outbound on-time service: 98.5% Low on-time service scores impact ability to capture new business Provide weekly scorecards to all carriers Traffic congestion impacts metrics
DOT
Keep Freight Flowing!
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Recommendations 1. Routinely include business advisors who move freight in your discussions. Integrate Freight Advisory Committees into the mainstream – no siloes. 2. Remember the first and last mile connectors in your plans. 3. Use technology and innovation wherever possible. 4. Continue to push for infrastructure improvements. 5. Use strategic zoning, smart land use policies, economic development incentives, and effective truck route planning to buffer freight activity centers from population centers. 6. For both short- and long-term, small- and large-scale infrastructure planning, use real-time/real-world data that is readily available from various high-tech sources (Inrix, ATRI, USDOT’s truck data feed). 7. Don’t assume that all truck drivers, shippers, and loads require the same speed and reliability for the haul,
While speed is important, reliability is the key to success. 24
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