Supply Chain Services Impact Big Boxes and Mini-Marts

A recent report highlighted one of The Home Depots biggest challenges: after three decades of letting stores choose their own supply chain services, inventory has gotten out of hand. Analysts estimate the company sits on over $11 billion dollars of product, with little consistency among locations. Frustrated consumers shifted some of their business to Lowes, which has built a reputation on carrying larger quantities of fewer items.

Disorganized supply chain services affect more than just physical inventory in the retail environment. It can change the atmosphere of a retail space, especially when multiple third party logistics providers try to make deliveries throughout the day. Company leaders at The Home Depot reflected on complaints from customers who found stores cluttered and difficult to maneuver, especially when dodging forklifts in the middle of the day. Trucks and tractor-trailers in the stores parking lots during peak shopping hours discourage consumers, while inconveniencing contractors and other professional supply purchasers.

When Supply Chain Issues Clog Parking Lots, Retailers Must Shift Strategies
Customer service issues caused by supply chain problems dont just plague big box retailers, however. By serving a selection of fresh made sandwiches, pastries, and regional specialties along with traditional convenience store fare, Wawa Food Markets has become essential to customers throughout the Mid-Atlantic region of the United States. Its commitment to fresh ingredients requires a constant supply of fruit, vegetables, soft pretzels, and Philadelphia-style hoagie rolls.

With store locations about one-tenth the size of a typical big-box store, managers at Wawa locations started feeling the same struggle for space as their big-box colleagues. Delivery trucks from bakeries, soda bottlers, and grocery distributors clogged the chains small parking lots. As Wawa rapidly expanded into gasoline distribution, keeping driveways clear became a high priority.

Supply Chain Services Streamline Operations, Increase Revenues
At Wawa, changing relationships with suppliers and vendors helped clear a path to success by reducing the number of daily deliveries to each store. First, Wawa executives partnered with some of the countrys most experienced third party logistics providers to overhaul the chains inventory procedures. Moving from a location-based stock process to a regional supply chain system eliminated some of the overstock issues experienced by store managers.

With inventory under closer scrutiny, the convenience store chain developed a supply chain strategy that required vendor deliveries to a centralized distribution facility. The supplier for the companys trademark hoagie rolls even spun off a new company, locating its plant near Wawas new distribution center. Wawa now ships full trucks to each store for consolidated morning deliveries instead of accepting rolling drop-offs from vendors. Managers can spend less time managing stock and more time serving customers, who can now more easily enter and exit the chains parking lots.

Analysts hope that The Home Depot can execute a similar strategy, on a much larger scale. The company recruited a top supply chain expert from a leading office supply retailer and quickly moved to integrate third party logistics providers into its IT infrastructure. Over the next few years, the Atlanta retailer expects to spend close to a half billion dollars on centralized distribution centers and inventory tracking programs designed to make it more competitive with smaller specialty stores. By following Wawas lead, the company should be able to improve customer service while creating more value for shareholders.

Sources
Atlanta Journal Constitution
Catalyst International
Philadelphia Inquirer
Supply Chain Brain
Supply Chain Digest
The Home Depot
Wawa Food Markets
ZDNet