Home Depot to boost rapid supply chain order fulfillment by opening 3rd direct fulfillment centre

home-depotMaximizing order fulfillment is an important objective in any supply chain, particularly in the retail market and even more so in an omni-channel environment with customer orders coming in from all sorts of directions.

Home Depot, the US retailer who brand themselves as being the world’s largest home improvement specialty retailer with stores in all 50 states of the US, has recently announced it will be opening its 3rd direct fulfillment centre to support their burgeoning online strategy. The new centre, which will be located in Troy Township, Ohio, will provide 1.6 million square feet of additional storage space, bringing the group’s overall direct fulfillment storage capacity up to 3.6 million square feet.

Online order intake increases 25% over 12 months

According to Stephen Holmes, Home Depot’s director of corporate communications, the home improvement retail giant will now be capable of fulfilling 90% of its order received online within 2 days through their ground parcel service provider. It’s a necessary improvement to their supply chain capability. It will facilitate supporting the increasingly popular online order service which has increased in size and value by an enormous 25% over the past year.

Apparently the majority of Home Depot’s orders that come through their supply chain online are now shipped from their new order fulfillment centers either directly to businesses or straight to homes. It has now eclipsed the amount of orders which are shipped to the various stores in the 50 states for local collection by customers, a service they still intend to fully support.

Home Depots interconnected retail strategy

To speed up the supply chain operation even further, Home Depot is trialing a new part of what it calls its “interconnected retail strategy.” This new initiative is something that other retailers already offer; shipping direct from the stores closest to the client delivery address, the goal being to reduce delivery time from 2 days to 1, and maybe even eventually, same day. The idea is that products can be picked off the stores’ shelves, loaded onto company owned vehicles and delivered to the customer.

Keeping delivery costs under control

The 3 direct fulfillment centers however are stand-alone facilities that will remain outside of the store delivery program. The 2-day deliver option is something that can be supported within the organizations cost structure. Many companies have tried the same day delivery option but have withdrawn the service due to its high cost, which reduces profit; a prime example being Walmart.

What is your view on the costs of rapid delivery? Can companies afford to soak-up same day costs and lower profits as a result or should more retailers offer optional speeds at optional costs and put the onus back on the consumer? 

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