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Training with Industry: a supply chain transformation.

The Navy's Training with Industry (TWI) Fellowship at The Home Depot originated with the idea that an exchange of supply chain experiences and best practices would benefit both the Navy and Home Depot. The TWI fellowship goals are to observe private sector supply chain practices, improve project management and decision making skills and increase logistical knowledge through participation in projects and in executive level meetings and discussions.

The first TWI Fellow, LCDR Chris Wise, observed the initial planning stages of the Home Depot Supply Chain Transformation. Building on the experiences and recommendations of LCDR Wise, I participated in the development and implementation of Home Depot's supply chain transformation through projects associated with the Rapid Deployment Center (RDC). As the transformation continues, I anticipate that LCDR Jeremy Powell, the next TWI Fellow, will have an equally rewarding experience.

Through participation in the executive discussions as well as meetings in the areas of inventory, transportation, distribution, operations, supplier management, and facilities operation, I became familiar with the RDC process. These meetings also helped me focus on the specific RDC related project areas of metrics, quality assurance, vendor requirements and compliance, mixed department pallets, inventory planning and customer service in order to achieve TWI goals.

The focus of my first project involved metrics. My task was to identify the key metrics that could be used to drive supply chain improvement and align Home Depot with retail best practices. From my Navy experiences, through research of other retail companies and from numerous interviews with Home Depot associates, I identified the following four metrics as the most important: advance shipping notice received correctly; correct quantity received; on time delivery; and correct labeling.

A failure in any of these areas would resonate through the supply chain network and result in increased product lead time, increased labor and transportation costs, and reduced product availability in stores. The metrics I identified were in agreement with the findings of a Home Depot Global Supply Chain team working on these and other metric related issues.

In a business environment where one day of lead time equates to approximately $120 million of inventory, fast and efficient product delivery matters. For the Navy, understanding the factors associated with product lead time in both our service as well as in a joint environment can be the difference between mission capable or not.

In the quality assurance arena, Home Depot is constantly improving. Due to the large volume of product received, previous quality assurance methods were random spot checks and automatic acceptance of product with a small margin for shortages built in to the cost price. Home Depot is implementing the Rapid Deployment Center to fix these inventory issues through electronic accounting. The advantage of these center's metrics and quality assurance is that every piece of merchandise will be individually accounted for prior to allocation and arrival at its store destination.

The next project area I assisted with was vendor requirements and compliance. Home Depot had numerous vendor requirement guides and in response to the transformation of the Home Depot Global Supply Chain and implementation of the Rapid Deployment Center, an updated vendor requirements guide and compliance program was developed. My task was to benchmark and compare current retail compliance practices with current Home Depot compliance practices. From my research, other retailer compliance practices focused on timely delivery, accurate purchase order and bill of lading information, use of electronic data transmission and correct quantity received. The retailers also levied "failure to perform fines" and utilized anonymous vendor report cards. As the last task for my compliance project, I drafted the introduction for the compliance manual to address the compliance policy shift and the phased implementation approach Home Depot would take.

My next assignment provided me the opportunity to interact directly with the receiving department at Home Depot stores. My job was to work with the store Operations Department to conduct store surveys to determine how the increased volume of product from the Rapid Deployment Centers would impact store labor and operations.

Pre-RDC implementation, over 75 percent of all Home Depot products were grouped by departmental category and were transported from individual vendor directly to individual stores. Since the Rapid Deployment Center consolidates mixed department product by store; not by department, the result is a more efficient transportation network and reduced product lead time. The baseline survey conducted was too early to detect a significant impact to store operations so a follow-on survey is scheduled for summer 2008 during higher product flow.

Home Depot also plans to conduct a store labor study to examine the specific operational effects of mixed department pallets and to identify what process standardization can be implemented. By continuing to work with the stores on process improvement, the Home Depot Supply Chain will better understand its internal customers.

My time in the Inventory Planning and Replenishment department of Home Depot showed both how far it has come and how much work still needs to be done. The primary means of ordering products still originates in the stores through manual processes, but is being phased out in favor of a centralized automated reorder system. The automated reorder system will convert Home Depot to current retail inventory practices that consistently demonstrate a better store in stock performance. The two primary obstacles to automated reorder are the Home Depot entrepreneurial culture that fears a loss of inventory control and the complexity associated with such a massive amount of store/stock keeping unit data. The third order method is the headquarters generated orders designed to coincide with unforeseen spikes in demand or specific sales events. The overlap of these three systems allows Home Depot to meet demand and become more responsive every day by utilizing the RDC network.

My last project area involved customer service and training. Connecting with the customer has a greater impact on sales than having product in stock. Since most Home Depot customers already have a project or requirement in mind, it is critical to have knowledgeable and friendly sales associates able to meet customer needs. The RDC will assure product availability but it cannot replace the Home Depot associate knowledge and customer service.

A newer more dynamic training program is required to counter the high employee turnover rate and vast product variety. Part of the new training program is modeled after the Navy Personnel Qualification Standards manual and provides monetary incentives for associates who complete various qualifications.

Home Depot is also documenting and refining existing procedures to provide standardization for an entrepreneurial culture. The Rapid Deployment Center project implementation requires this standardization and the Home Depot leadership supports the training required for continued Home Depot success. While the Supply Chain transformation is the number one internal priority, the customer remains Home Depot's number one external priority. Based on my experience, the Home Depot Global Supply Chain will achieve its mission to, "deliver a competitive advantage through superior customer service, cost efficiency and reliability."

My TWI Fellowship at The Home Depot has been both professionally and personally rewarding. I feel fortunate to have had the opportunity to work with and learn from very knowledgeable supply chain professionals. The unfiltered exposure to the weekly executive supply chain management meetings and discussions provided a unique insight to private sector supply chain practices.

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The transformation of the Home Depot Global Supply Chain system, while Home Depot continues to operate as the world's third largest retailer, offers a collaborative learning environment for the Navy. In addition to the supply chain transformation, the implementation of ERP at Home Depot over the next four to six years, as well as specific efforts in inventory planning and replenishment, distribution, transportation, modeling, and talent retention could offer additional training and learning opportunities for the Navy and the Navy Supply Corps.

The Home Depot must continually evaluate their customer requirements and refine their processes. These requirements are the same for the Navy, except that failure to understand and adapt to change impacts more than the loss of a sale.

LCDR Tony Yanero, SC, USN, Training with Industry Fellow

LCDR Tony Yanero is now serving at the Philadelphia site of Naval Inventory Control Point. Prior to his year with Home Depot he served at Chief of Naval Operations N41, Individual Augmentee at Combined Forces Special Operations Component Command Forward, and Supply Officer on USS Gunston Hall (LSD 44).
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Author:Yanero, Tony
Publication:Navy Supply Corps Newsletter
Date:Jul 1, 2008
Words:1389
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