The Home Depot Operations Management

9189 words (37 pages) Business Assignment

13th May 2020 Business Assignment Reference this

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INTRODUCTION

Home Depot is one of the largest retail home improvement public company in the United States. It supplies tools, construction products, and services. The company is headquartered at the Atlanta Store Support Center in unincorporated Cobb County, Georgia. The company is ranked #23 on the Fortune 500 rankings of the largest United States corporations by total revenue. The industry has nearly 400,000 associates and more than 2200 stores in U.S., Canada and Mexico (The Home Depot, n.d.).

HOME DEPOT CANADA

The company operates 182 stores in ten Canadian provinces. It has more than 27,000 employees.

The Home Depot caters to do-it-yourselfers, as well as home improvement, construction and building maintenance professionals.

  • Installation Services: For a complete home renovation, many customers prefer to have qualified professionals for getting the job done. The company offers installation services.
  • Pro & Tool Rental: The company’s stores offer professional customers, including repair and remodel contractors, special services and support to make them more successful on the job site. These services include a contactor loyalty program (ProXtra) and an on-site tool rental department (The Home Depot, n.d.).

HISTORY

The Home Depot was founded in 1978. Its co-founders are Bernard Marcus, Arthur Blank, Ron Brill, and Pat Farrah. Their proposition was to build home-improvement superstores, larger than any of their competitors’ facilities (The Home Depot, n.d.).

S.No. Year
1. 1978-1999       First two stores opened in metro Atlanta.

      Home Depot joined New York Stock Exchange on April 19,1984.

      19 stores with sales of over $256 million by 1984.

      Became largest home improvement store in U.S. by 1989.

      New program called EXPO (installation program for quality home improvement) launched in 1991.

      In 1994, the company acquired the Canadian hardware chain known as Aikenhead’s Hardware.

      By 1995, it was operating 350 stores with sales of $10 billion.

      The Home Depot purchased Maintenance Warehouse company in 1997.

      It also acquired Apex Supply in 1999.

2. 2000-2007       The EXPO Design Center division was reorganized in 2001 with three divisions based in the Northeast at South Plainfield, New Jersey, the West at Orange, California, and the Southeast at Atlanta, Georgia.

      In 2002, Home Depot Landscape Supply was launched but it lasted for only 5 years.

      Online home-furnishing store,10 Crescent Lane, was launched in September 2005.

      Acquired Home Decorators Collection in mid-2006.

3. 2007-present       In 2008 and 2009, Home Depot announced the layoff of several thousand associates and closed 54 stores nationwide, including the entire EXPO Design Center chain.

      Closed the big-box style stores in 2012 that they had in China.

      Two large distribution centers were established in Atlanta and Los Angeles in the year 2013.

      Because of the practice of entering credit card numbers directly into the computers, a data breach occurred in September 2014.

      Home Depot acquired Interline Brands from P2 Capital Partners in 2015.

      Interline Brands website merged with The Home Depot website after full integration in August 2016.

The Home Depot entered Canada in 1994 with its first store in Greater Toronto area. The first store in western Canada was opened in Edmonton, Alberta in March 1994. The company started growing with around 60 stores by 2000. The first store in eastern Canada was opened in Quebec (Laval, QC). The Home Depot’s 100th Canadian store is in Thunder Bay, Ontario, which was opened in November 2003 (The Home Depot, n.d.).

HOME DEPOT: MISSION, VISION AND VALUES

Mission Statement:

Home Depot mission statement is “to provide the highest level of service, the broadest selection of products and the most competitive prices.”The company focuses on providing a high quality of service. They try to ensure that the people who visit the stores can access everything they need for home improvement. They also make sure that the prices it has on these items are affordable. Therefore, the company has three pivotal points in its mission (The Home Depot, n.d.):

  • The level of service
  • The selection of products
  • The price of the products

Vision Statement:

Home Depot vision statement is “to create a company that would keep alive the values that were important to us. Values like respect among all people, excellent customer service and giving back to communities and society.” Home Depot vision hinges on two primary aspirations.

  • Showing respect to everyone through its values.
  • Going beyond respecting everyone by giving back to the community.

Values

The company’s values guide the beliefs and actions of all associates on a daily basis. Their values are the fabric of their unique culture and are central to their success. These are their competitive advantage in the marketplace (The Home Depot, n.d.).

  1. “Taking care of our people”:

The key to their success is treating people well. They encourage associates to speak up and take risks, by recognizing and rewarding good performance and by leading and developing people so they may grow.

  1. “Giving back to our communities”:

They give time, talents, energy and resources to worthwhile causes in communities and society.

  1. “Doing the right thing”:

They believe in “doing the right thing” instead of just “doing things right”. They understand the impact of their decisions and accept responsibility for their actions.

  1. “Excellent customer service”:

The company exercise to give customers knowledgeable advice about merchandise and to help them use those products to their maximum benefit.

  1. “Creating shareholder value”:

They are committed to provide the capital necessary to the investors to allow their company to grow need and expect a return on their investment.

  1. “Building strong relationships”:

They build strong relationships on trust, honesty and integrity. They listen and respond to the needs of customers, associates, communities and vendors, treating them as partners.

  1.  “Entrepreneurial spirit”:

The company encourage their employees to initiate creative and innovative ways of serving their customers and improving the business and to spread best practices.

  1. “Respect for all people”:

They strive to maintain work environment of mutual respect, free of discrimination and harassment where each associate is regarded as part of The Home Depot team.

THE HOME DEPOT: PRODUCTS AND SERVICES

The main goal of The Home Depot is to help the customers in creating and maintaining the home that they dreamed, whether they want complete their dreams of home themselves or have it done for them by Home Depot. (The Home Depot, n.d.). In Canada, The Home Depot has presence of 182 stores at convenient locations. In size and space, store average is more than 100,000square feet and outdoor seasonal space is 20,000 square feet. (The Home Depot, n.d.). The Home Depot do not produce any product themselves, but the company stock more than 40,0000 home improvement products according to the demand of their customers. The Home Depot offer great services to their customers. (The Home Depot, n.d.). They serve to do-it-yourselfers, as well as home improvement, construction and building maintenance professionals. Following are the services that are given by The Home Depot:

  • Installation Services: Many customers want professionals to complete the renovation of their home. Customers can get their installation with the help of The Home Depot who are having experienced, licensed contractors, always ready to assist their customers for different products. (The Home Depot, n.d.).
  • Appliance Repair Service: The Home Depot can fix different appliances as customers ask for and if it cannot be repair then they can replace it with a new one, even that were not bought from the company. (The Home Depot, n.d.).
  • Home Delivery & Tool Rental: The Home Depot also offer delivery to their customers. They also offer rental trucks at competitive prices which allows to transport items safely at their homes. (The Home Depot, n.d.).

OPERATIONS THE HOME DEPOT OPERATES

Mark Holifield, the executive president of home depot Synchronize the flow of goods from supplier to customers in given diagram.

Hence, The Home Depot process management divide primary operation of their company into three different parts:

  • Purchasing products from suppliers
  • Transporting those products from suppliers to local stores of Home depot
  • Selling those products to customers.

OPERATIONAL FUNCTIONS

“Operation functions refers to the transformation of the inputs into the outputs.”  (Stevenson, Operations Management, 2018) In terms of input, The Home Depot provides building, workforce, machines like radial alarm saw, reach trucks, order picker, forklifts, electric ladder, electric pallet jack. With the help of these inputs the company transformation process consists of picking up the overhead stocked merchandise that the customer wants to buy or the lumber that the customer wants to get cut in shorter pieces being it lumber or plywood we offer cutting services for both the type of materials. when it comes to the output that the company produces would be happy customer because with the help of the inputs the company is able to transform the process such as for example there is a customer who wants to buy 25 cases of flooring and they are on the pallet which is kept overhead in an aisle thus, with the help of a reach truck the associate who has the license to drive can grab the pallet and help it load to customers vehicle. Also, in the control process the employees and customers gives feedback to the management by filling out online surveys and internal through Voice of Associates survey. Similarly, the labor as an input helps in transformation process such as people who work in receiving get the product ready on the pallet and put it outside for the night crew, then the crew get the product stocked up in the overhead bins and lastly, when the associates come in they pack down the merchandises as per the requirements of their departments.

COMPETITIVE PRIORITIES

Competitive Priorities of the Home Depot are based on the following:

Competitive Priority How does The Home Depot focus on them
Cost They focus on competitive price and they price their products and services according to it. They also offer price meet and beat. For example: The biggest competitors of the Home Depot are Lowes, Rona, Brick etc. thus, if they offer a lower price than us than we meet the price and beat it by 10 percent.
Delivery At the Home Depot they offer First 1+ customer service and provide home delivery options for all the products we carry in the store as well as online. They provide on-time delivery and as fast as possible.
Quality They provide quality products and they only keep top brands in the store and online to provide best customer service. For example: Samsung, GE, Kitchen Aid for appliances, Husky, Milwaukee, Rigid for Hardware etc.
Flexibility They provide variety of services such as Credit, Pro Referral and installation services for their customers. It helps them shop more and get everything done at one stop shop.

The table shown above is based on reference from our textbook. (Stevenson, Operations Management, 2018)

CUSTOMER REQUIREMENTS ON PRODUCTS/SERVICES

Ever customer needs and experience vary depending on the store location, employee-customer interaction and the products they are purchasing. Some of the requirements for services and products placed by the customers are summarized below:

Services:

  • On-time delivery of products.
  • Excellent customer service.
  • Excellent installation services.

Products:

  • Delivery of non-damaged products.
  • Customer want to see only available products on the online store.
  • Non defective electronic products.

Technical Requirements to Meet Customer Needs:

  • Home Depot should coordinate and track the delivery of their products even if they are hiring any other company to deliver the products. Or the company should set up a new unit to deliver the products also after they are purchased by the customers. With their own tracking system, they will be able to answer the customer the exact delivery status.
  • The response time for the customers should be reduced. The customer representative should be technically sound to find out the issue as soon as the customer give its order number. If the call has to be transferred to another department, the customer should not be put on hold for a long time.
  • The company may stop advertising about a product if it is not available at that moment. The products should be updated timely so that the customers do not get disappointed by seeing lower prices, but the product is out of stock.
  • While customers are buying an electronic product, they can be asked to open up the product and check to see if it is functioning properly. If the product does not work at home after purchasing it, it is very annoying for the customer. The company should try not to lose the faith which the customers have in them.
  • An inspection team should be sent after each installation and a NOC should be signed by the customer stating that they are satisfied with the service. In this way, both the parties know that the work was done in a right way at the time of installation.

GENERIC OPERATION STRATEGIES

Generic operation strategies are developed by Michael Porter that every company use to gin competitive advantage. (Mind Tools, n.d.). Five different competitive strategies are:

  1. Low cost strategy: In this company target large market and offer lower overall cost than competitors. (Mind Tools, n.d.).
  2. Differentiation strategy: In this company provide unique product or services by targeting a broad market. (Mind Tools, n.d.).
  3. Best Cost strategy: Giving customers more value for their money by providing product or services at lower prices. (Mind Tools, n.d.).
  4. Cost Focus strategy: In this company target small market having little competition and offer lowest possible cost. (Mind Tools, n.d.).
  5. Differentiation Focus strategy: in this company target small market having little competition and offer unique product or service. (Mind Tools, n.d.).

In case of Home Depot, their initial generic strategy was low cost strategy. Every day they emphasized low prices to attract the customers, however their current and main strategy is differentiation strategy which means they trying to offer unique product and services to compete against their competitors. At present, their primary strategy is differentiation strategy and secondary strategy is low cost strategy in this huge competitive market. (Nathaniel Smithson, 2017).

ISSUES INFLUENCING THE PRODUCT/SERVICE

Higher Transportation Costs

The company Home Depot is facing transportation expenses throughout fiscal 2018, which result in reduction of gross margin by 10 basis point. This issue is due to increasing shift toward online space, and addition of some other facilities such as delivery on the same day which continues to put pressure on gross margin in upcoming years also and it is expected to increase by roughly 34bps in fiscal 2019. (Forbes, 2019).

  • Strong competition:

As there is a huge competition in this market due to which The Home Depot compete, both online and in-store and offer number of home improvement retailer, plumber. Moreover, they focus more on delivery service, low pricing products, free shipping. To compete with their competitor like Canadian Tire, Lowe’s, Home Depot use advertising and promotional programs to attract customers and compete effectively, but this aggressive promotional strategy and liquidation events can adversely influence their prices, margins or demand for their products or services and can also decrease their market share. (The Home Depot, 2018).

FACTORS INFLUENCING THE CAPACITY OF COMPANY

The factors that influence the capacity of a company can be measure by PESTLE analysis.

  • Political and Economic factors:

There are some factors like political, economic which are beyond the control of company and can affect negatively. Also, the financial measurement of company depends remarkably on the Stability of the housing and home improvement markets. Factors such as change in gross domestic products, unemployment, fuel cost, labor healthcare cost, terrorism can impact negatively on customers purchasing decision and also affect costs of doing business and demand of product and services. (The Home Depot, 2018).

  • Information technology system:

Information technology plays an important part in Home Depot to analyze, process, store, manage, protect transaction and data. Moreover, this system is also used by customers in form of their personal electronic devices to connect with their company. But disruption, failures or other performance issues with technology in company’s system or in customers device can become reduce the advantages that they can give to their company and can negatively affect the relationships with their customers. (The Home Depot, 2018).

  • Environmental factors:

Any business is subject to seasonal influence, separately or together with natural disasters can negatively impact the business. Unexpected natural disasters such as floods, storms, fires, earthquake or extreme climatic conditions such warm temperature during winters, may experience losses of properties, equipment, disruption of utility services, reduction in inventories which could affect income and profits of a company adversely. (The Home Depot, 2018).

PROCESS DESIGN

The structure how the company manufactures or provide the service to run the business and mainly to satisfy the needs of consumers, employees and the management in the best managed manner. This structure will be determined as process design. The process followed by Home Depot to run their business all over North America (including United States, Canada, Mexico) includes factors i.e logistics, operations and sales. This process allows correct product to reach to the correct customer and right training provided to the right department to expert ice in what they sell (Webpages.uidaho.edu, 2019).

The processes involved in the process design of Home Depot are:

Procurement Process: This process involves buying inventories from the suppliers and stocking it in the warehouse to make it ready to ship it to customers, stores and the contractors.

Distribution Process: This process involves the shipping to be done to the stores, customers and the contractors. Further the stores need to receive the goods in receiving and transferring them to their assigned departments.

Sales Process: So, major player in this process is stores, online websites where customers can reach and get the desired product. Sales persons, managers and administrators play the major role in bringing this process to success.

Support Process: This process includes the support team which provide support to employees, customers, vendors and management and are with them to solve their issues with the help of the access they have to the entire portal.

HR- Training Process: Human resources play a major role in hiring associates, mangers and the admin staff, further providing them training and keeping them updated for all the promotions, tasks and opportunities.

Administration- Goal Setting Process: They are responsible to look on the performance of all the stores, warehouses, sales strategies and as per those reports they have to set the future and the current goals for the company.

Layout Design

Layout can be determined as how the department are defined any organization, store or company that makes it easy for the customers to shop around if they are going to the same store irrespective of the location of the store. The layout is the image that comes in the customers or the employees mind when they are in that store to shop or work.

Home Depot has various departments in their store, so their layout is huge and to make it easy they aisles designated to each department which makes it easy for customers, employees and management to find department and product are located at which spot. To make it easy for the customers to understand the layout, they have maps that the customers can have as they enter the store. They carry around 100,000 products all around the store and 17 department and over 50 aisles which vary from store to store. But the layout of the departments will be founded in the same format and design.

Job Design

Job design can be defined as the designated task and work that an associate must perform during the shift. Job Design makes it easier for the associate to understand their job role and the duties they need in their work hours. This makes the management to review their job performance as per the job they do and how they perform as per that.

Working at Home Depot all the associate work as a team and try to help all the customers. At the same time, they are assigned different departments and different individual goals as per their job role. All the associates must work as per their job design and must fulfill their targets on time. Around 90-100 employees work at a single store which includes a store manager, 3 assistant store managers, 1 HR (human resource) manager, 16 department supervisors, 4-5 sales specialists, 10 merchandising associates, 10-15 cashiers and ample of regular associates.

They all have different job designs and different role to perform. As per their experience and learnings, they are given that position. Talking about the job role and critical job functions followed by each kind of associates, there is a brief given below on that:

Store Manager: Store Manager is the leader of the whole store who is responsible for the performance of all the other associates and has to keep an eye on the sales goals and the job performed by all the associates. He is reportable to the district for the performance that the store performs. He divides the tasks further to the assistant store manager and makes them to keep an eye on the department supervisors and keep him updated about them. This does not mean that department supervisor or any other associate can’t approach the store manager. Anyone can come and communicate with the store manager in need of anything important.

Assistant Manager: There are three assistant store managers who are assigned three areas of the store that are:

      Specialty: Departments covered: Appliances, Kitchen and Bath, Flooring and Décor, Millwork.

      Operations: Departments covered: Cashiers, Special services, Receiving, Tool Rental, Merchandising, Pro Services

      Hardline: Departments covered: Electrical and Lightning, Plumbing, Paint, Hardware, Lumber, Building Material, Seasonal and Garden Centre.

All the three must manage their own areas need to have enough knowledge of their areas. Operations Assistant Store Manager is the most knowledgeable and has the biggest responsibility as his are majors in supply chain and he must be updated with all the latest supply chain techniques and need to imply it in his/her area. Specialty is the hardcore sales that is the most profitable departments for the company, that’s why they have specialists in their departments instead of just the regular associates. Hence, the Specialty Assistant Store Manager needs to have great experience in sales. Hardline Assistant Store manager deals with the area which carries the products that are required in the day to day needs and they are not that expensive. All the departments under him/her lies in the similar category. All the assistant store managers are reportable to the store manager.

HR Manger: He / She is the one who is responsible for the hiring process in the company and need to take care of the personal and the work issues faced by all the employees and help them in the best possible manner. HR is responsible for providing trainings to the associates and to lead in the ongoing activities going on in the store. HR is the one who makes the weekly schedules with the help of other managers for the associates working in that week. HR needs to look after the promotions and updates about the store. HR is reportable to the store manager and the district HR manager.

Department Supervisors: Each department has their designated supervisor who leads their department as a team and evaluates the performance of the associates working in that department. He needs to help the HR in scheduling task. He has to give day to day tasks to his teams and need to evaluate them on their performance. All the department supervisors are reportable to the assistant store managers and the store manager.

Sales Specialists: They play a major role in their designated departments as they are given the weekly sales targets and must achieve their targets. They are considered to be experts of their areas and they must have the power to convince the customers to buy the product. The specialists are available for Appliances, Kitchen Design, Flooring, Décor and Millwork. Their job is to learn about all the kind of products they sell in their area. They need to know their competitors and try to convince customers to buy from us than from the competitors. They are reportable to their department supervisors and the assistant store managers.

Merchandising Associates: Their job is to take care of the displays that are displayed in aisles. They must regularly change displays and clean or repair them when needed. Their job is basically to take care of the image shown to the customer when they enter the store. That’s the reason their working hours is different than the regular associates. They have the early morning shifts. They are reportable to their department supervisor who gives them daily tasks which they have to achieve.

Cashiers: They are one’s available in the front of the store whom all the customers will see whenever they enter or leave the store. Their job is to greet the customers, scan their product, take payments, check products and keep the front-end neat and tidy. They are responsible for taking the returns and solving customer queries when they are at the special services. They are located at several tills all over the store.

Associates: All the other associates are given tasks according to their department where they work and need to have an idea of the department where they are working. Their job is to maintain the bays, help the customers, do the pack downs, fill the empty spaces, help the specialists and the supervisors. The associates working the receiving department has to receive the shipments and maintain the receiving area. They further have to make the stock ready to go in the department which will be taken care by the associates working in the nights, whose job is to just fill the inventories. All the hard work done by the associates is paid off in the outcome of customer satisfaction which is the priority for Home Depot. All the associates have to report to their department supervisors. For any help they can go to the higher management whenever needed.

DIMENSIONS OF QUALITY

  1. “Dimensions of quality”

Contrary to what people usually think that the term “quality” is only used for goods, there are also dimensions of quality for service. Understanding those dimensions and managing them well are critical to satisfying customers and retaining their loyalty to the business.  As Home Depot resell products of different brands and provides customer service as well as installing service, several dimensions can be used to describe their service quality such as:

1 Tangibles –          Retail stores are clean with fully lighting and products are organized into various sections corresponding to various types.

–          Staff appearance is neat and homogeneous due to wearing brand uniform.

2 Convenience An advantage competitive- proximity:

–          182 stores in convenient locations across Canada with approximately 20,000 square feet of outdoor space for parking.

–          Retail stores open from very early (6am or 7am vary according to locations) and close at late evening (10pm) so customers can visit the Home Depot anytime they want

3 Reliability The Home Depot provides trusted installers who passed background check and are committed professionals. The installers guarantee the safe work site, thorough cleanup and follow-up inspection.
4 Responsiveness The Home Depot always welcomes customers and is able to answer every questions. Instead of consulting only at store, they even send a salesperson to customer’s house to analyze the situation and make sure customers purchase right items.
5 Timeliness Time to complete the work done is quite long – from 2 weeks to over a month. Appointments with contractors is usually delayed and wrong items shipped to customers quite often making installation time longer.
6 Assurance The Home Depot provides Protection Plans which is an enhanced version of manufacturer warranties with more benefits for customer. It includes:

–          Coverage beyond the expiration of the manufacturer’s warranty.

–          Coverage of 100% of the parts and labor for mechanical and electrical defectives.

–          Replacing items if fixing is impossible

–          Etc.

7 Courtesy Staffs acquire sufficient knowledge in order to answer any questions and are trained well to be polite and friendly with customers.
  1. Continuous improvement tools

As there is a wide and expanding product range in home improvement industry, carrying every possible product in retail stores is impossible because the cost would be huge. Hence, purchasing process is very important as it decides how much to carry in stock and when to re-order. Regarding to the tools used for continuous improvement, The Home Depot has been used KPI (Key Performance Indicator) and control chart to measure the sale ratio, inventory integrity and enhance customer satisfaction. Managing stock issues does not only help gaining more sale and profit but also control costs.

2.1.Sale KPI

Sale KPI is used to track the effectiveness of sale activities in the retail stores and shows how well they create consistent monthly profit, satisfy customers and make them come back in the future. The KPI template could be described as the table below:

Name of KPI April 15 May 15 % change Comment
Profit % # # The difference between the period of time recorded (increase or decrease?) Reason for these changes
Revenue # #
% new customer # #
% returning customer # #
Refund % # #

2.2.Control chart

Control charts contain variation that provide more insights of the process as well as easily indicate a problem when it occurs.  The main purpose of using control chart is maintaining inventory level so they can hold stock for minimal cost. Several key elements for this control chart are:

Maximum level –          Max level of stock that The Home Depot can or wants to hold.

For example: The warehouse is able to keep 30000 units of Oak Natural Hardwood flooring, etc.

Re-order level –          Acts as a trigger point. When stock falls to this level, next order should be made with suppliers.

For example: Re-order level of Round shower door is 100 units, etc.

Lead time –          Amount of time between placing the order and receiving the stock

For example: 5 business days, etc.

Minimum stock level –          Minimum amount of product that The Home Depot want to hold in stock.
Buffer stock –          A quantity of stock regarded as a contingency in case of unexpected orders or any delays from suppliers, so that such orders can be met on time.

COMPANY’S SUPPLY CHAIN

The Home Depot is one of the biggest retail chains in North America with 2,200 stores all over Canada, Mexico, US. When it comes to the supply chain of the company, they have evolved their supply chain procedure during the time. Earlier they used to have different supply chain departments for each of the stores located around the globe which made their job a bit tough and was proving to be costly. Thus, with the help of the innovation and technology they adopted the right software’s to order the replenishments for their stores. which further helped them to increase their overall performance, decreasing the cost of operations and increasing accuracy of the demand. Now only a single department manages the inventory of all the stores across the globe and not only the supply chain improved but also their efficiency to fulfill online orders have increased. It is very important for a company to adopt the right change which helps them manage, plan and deliver the right thing at right time. And the Home Depot is the best example for this. (Kucukcay, 2017)

USE OF FORECAST

Forecasts are basic elements for any types of decisions in any businesses. It is useful in every aspects of a business such as marketing, finance, accounting, human resources, operations, and production. The main technique is utilizing historical data as inputs to determine how to match supply to demand and allocate the budgets or plan according to anticipated future trends. Regarding to The Home Depot, forecasting plays one of the most important role of the business in order to maintain its competitive advantage. There are three kinds of uses for demand forecast in operations:

–          To help managers design the system

–          To help managers plan the medium – term use of the system

–          To help managers plan the short – term use of the system

In term of designing the system, the forecasts help The Home Depot know more about the trend in renovating houses that managers can create long-term plans about which goods and services to offer. For instance, the forecasts show that homeowners are taking more on large, discretionary home improvement project instead of just sticking to necessary maintenance. Hence, managers will adjust the product list based on which categories are preferred by customers such as remodeling bathroom, painting home’s exterior or building garage, etc. Moreover, understanding the consumer purchasing pattern leads to efficient use of shelf and display place within the retail stores, which helps a lot in planning which capacity, facility and equipment to have.

Besides, the forecasts also help the managers to plan the medium – term use of the system optimize inventory effectively, enhance turn – over rate and reduce holding cost. The reason why they are really helpful is because there is a wide and expanding product range in home improvement industry which usually causes a high inventory cost if the managers do not manage it well…. Scheduling the short-term use of the system involves products list making, purchasing process managing, and staff scheduling. Otherwise, beyond just predicting the demand of products and services, forecasting also includes being able to predict profits, revenue and many other variables

TOOLS FOR FORECASTING

As the home improvement industry depends heavily on the health of overall economy as well as the construction – related market, The Home Depot uses the gross national product (GNP), which is a total value of all finished goods and services produced in a country by its nationals to forecast its demand for inventory. Moreover, it is also able to predict the housing market by using reports from Canada Real Estate Association. However, due to the current state of the housing market, The Home Depot is finding it difficult to forecast inventory stocks precisely. It results in a surplus of unsold goods and missed sales opportunities because of the shortage of other merchandise. Home Depot also uses a forecasting system that tracks extreme weather events such as hurricanes, tornadoes, and thunderstorms with data from national forecasting channel from. The damage from these bad weather events is often the most devastating and cause installation process postponed which results in time and cost consuming. (Justin, 2014)

INVENTORY CONTROL METHODS

Inventory control methods at The Home Depot are quite amazing as it uses all the three different models of the inventory management system in the company. According to an expert the company adopted a new software of supply chain management in their stores which helped the receiving workers to receive more quickly than before, the software was nicknamed as ‘Project Sync’ at the home depot.  With the help of the new software store associates, freight team workers and receiving workers are able to determine what is coming up in the trucks, with the help of which they can determine through a diagram how many pallets or boxes they are going to off load from the trailer. It has also been successful in reducing the working efforts for the employees by reducing their average walk by 144 km annually. (Tepper, 2016)

1)     Fixed-interval model: With the help of this model the Home depot is able to track the on-hand quantity of their induvial store and it automatically updates the inventory as soon as a sale is made through the cash tills located in the store which helps them to send the order automatically to the suppliers. This is the most common scenario in Kitchens and Flooring departments. (Stevenson, Operations Management, 2018)

2)     Continual tracking model: With the help of this model the company keeps a track on the on-shelf capacity of the store/ department, this can be seen on the First phones that are present in each department to keep a track on the stock of the products in the store. Other than this receiving also uses this model as they get to know what upcoming products in trailers is, they need to receive. (Stevenson, Operations Management, 2018)

3)     Economic Order Quantity model: This type of model is mostly seen in the lumber department and Millwork department of the home depot as they keep a minimum number of quantities after which the vendor gets notified about the supply that they need to make at the specific store. (Stevenson, Operations Management, 2018)

THE SCHEDULING PROCESS

The Home Depot’s scheduling is the process of arranging, controlling and optimizing workload in three categories: purchasing, distribution and selling process (including selling at stores and providing installation for customers). The purpose of scheduling is to minimize the purchasing and distribution time and cost as well as fulfill the evolved demands of customers.

Purchasing The Home Depot has established a simple process:

Potential suppliers fill out an application form on The Home Depot webpage to become a candidate to be its supplier. The form outlines what The Home Depot purchases, how to apply, supplier qualifications, a calendar of events, and frequently asked questions

The application is guaranteed to be acted within 72 days and the selection process will be done within 60 days.

By encouraging a diverse supplier, the customer satisfaction has been increased due to the availability of wide range of products.

Every order with suppliers is made with Make-To-Stock strategy, which means the company just need sufficient stocks to meet future demand that they had been forecasting. When the amount of goods reaches re-order level, new orders are placed.

Distribution The Home Depot established new distribution method, which is shipping products from suppliers to Rapid Deployment Center (RDC). Vendors do not deliver thousands of orders to Home Depot stores anymore, but create 18 aggregate orders bound for 18 RDCs across North America.

The cost has been reduced and responsiveness from center has been increased. Flow-through process almost in the same day.

Selling (Goods and services) Develop training program which cut down the amount of works and focus on the ratio “60/40”: spending 60% of an employee’s time on direct customer service, and only 40% on other tasks, such as unpacking boxes, stocking shelves, and checking inventory.

Create staff scheduling based on the forecast of amount of work that needs to be done per day of a week with the effort to try cover the requirement with minimum number of staff.

For example: In summer, people tend to renovate their houses so more staff should be assigned

Make appointment with consultant and installers for customers after processing their orders within 5 to 7 days.

OBSTACLES AND HOW TO OVERCOME

  Obstacles How to overcome?
Purchasing Forecasts are required to be precisely

Relatively impossible due to many related variances

Use separate number for specific products, review data every week, compare and plan a decision with a set time.
Distribution Supplier delays

Lack of goods which leads to time and cost consuming. Otherwise, the customers will look for other alternative brand due to unfulfilled needs.

Identify roles clearly and real-time data system with defined expectations. For example: all new orders must be entered by close of day, or all late work orders must be rescheduled in the system by close of day. Then keep track the shipping to make any back up plan.
Selling (Goods and services) High turnover rate

Lack of staff and time consuming which leads to poor customer service.

Provide employee self-scheduling
External factors such as bad weather: Sales for Home Depot could also be influenced by weather related factors. For example: customers tend to postpone home improvement projects in bad weather, which is the main reason why Q1 usually is the weakest quarter for The Home Depot.

The postpone of installation could make projects overlap and result in exceeding the installation time of every projects.

Forecast the bad weather events based on data from national forecasting channel.

SHORT TERM OPERATIONS RECOMMENDATIONS FOR THE COMPANY

  • In-store issues: Issues that include insufficient shelf stocking, likely caused by lead time or outright merchandising mismanagement, and misplaced parts not being returned to their rightful places. These issues may cost the company sales and result in customers making the wrong purchases. Such ineffective operations may go on without the company ever knowing it if customers lack effective communication channels to report problems. Even if customers do contact a customer representative, the information may not be shared further with responsible department. An associate can help customers look around but may not be able to address any issue on the spot if the problem proves somehow systematic. Hence, effective communication channels for the customers should be built to report their issues. One recommendation could be to place tech-enabled management system in stores to respond to customers in real time. This could help the company to rely on for competitive purposes.
  • Home Depot Mobile Application: The company has a mobile app that customers can use on the go to search for products and make purchases. However, the mobile application is only an extension of the full version of the company website, and its goal is to only help the company make more sales online. The app can be useful for in-store shopping with functions such as accessing the in-store map, product aisle information, and inventory look-up. But some form of technology-enabled, physical customer workstations inside store could be more advantageous to customers’ onsite shopping experience. For example, instead of labeling items manually, if certain parts are scannable by the customers, it would prevent misplaced parts from being wrongly identified.
  • Technology Advancement: The company uses a limited amount of aisle space to display a relatively small number of products. With little physical room to add, the store could simply install some in-store digital devices with high-definition screens to showcase a much wider range of high-margin products, which would also have the ability to process orders and arrange for shipments or pickups. A tech-enabled physical store can provide a much better in-store shopping experience by allowing customers to simulate the ease of online shopping while retaining the physical feel of strolling and browsing inside a store.

LONG TERM OPERATIONS RECOMMENDATIONS FOR THE COMPANY

  • Location: Around 90% of the Home Depot stores are in U.S. Home Depot’s success is directly related to the macroeconomic factors of U.S. Any discrepancy in the economy can severely affect the company’s economy.In this situation, it could make sense for Home Depot to diversify its operations across other countries to face the risks associated with any particular market.
  • High Debt Levels: Home Depot’s current debt level is $31.95 billion which is very high when compared to Lowe’s which is at $20.61 billion. These high debt levels, along with future interest payments could have a negative impact on company’s cash flows, profitability, and also constraining their ability to expand their footprint in the market.

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