Tomorrow I’ll be traveling a short distance to attend the annual Emptoris Empower 2010 customer conference being held in Boston. This strategic sourcing, procurement and contract management technology provider has been on a roll of late, taking maximum advantage of the need to control material costs across many industry settings.
Empower is conference which I look forward to attending every year since the Emptoris management team has been very forthcoming in granting industry analysts and bloggers access to customer attendees. I especially look forward to the annual executive luncheon, where as a community, we can share and exchange viewpoints and perspectives with invited customers and Emptoris executives. This year, there will be the opportunity to sit and have dialogue with quite a number of chief procurement officers and as in previous years, I look forward to sharing current insights on that state of strategic sourcing and procurement. I especially have interest in checking-in on that state of supply chain risk management from the view of the procurement and sourcing executive. At last year’s luncheon, I introduced this topic, and to my surprise, the majority of executives attending did not view procurement as the prime driver of risk assessment and management.
Regarding Emptoris itself, a new and transformed management team has been clearly focused on getting closer to customer needs, while making implementation of its technology easier for customer to navigate and manage. A five step transformation framework was adopted and I’ll be checking for customer feedback on the benefits of this model. Last year, the company acquired the former Click Commerce contract and service management business which is now re-branded as Emptoris Services Procurement. It will be interesting to also check on progress from various viewpoints. Finally, I like my fellow bloggers, remain curious as to which deployment option, traditional license of Software-as-a-Service has been garnering the most attractiveness for current deployments.
Stay tuned to Supply Chain Matters for additional updates.
We believe that one of the unique differentiators of Supply Chain Matters vs. traditional media has been our ability to monitor and provide ongoing commentary on supply chain successes and/or setbacks across many industry settings. We literally tie existing news and developments with some form of context, whether crisis, transformational or renewal related.
Earlier in the year, I penned a somewhat lengthy commentary, Can Home Depot Close it’s Supply Chain Gap? This commentary was on the heels of a Wall Street Journal write-up that noted that Home Depot was challenged with playing catch-up with rival home improvement retailer Lowe’s, and that current executives conceded that because of lack of actions from prior senior management, the company’s supply chain capabilities had a long way to go to become industry competitive. Our previous commentary also noted that previous attempts to implement a “big IT’ an approach that scoped very large projects in scope and budget had very mixed results. Rival Lowe’s on the other hand, practiced a more pragmatic and managed scope of supply chain transformation.
With the endorsement of CEO Frank Blake, the Depot embarked on a $260 million investment in improved supply chain capabilities through 2010, which included moving the majority of inventory through regional flow-through deployment centers, shifting inventory replenishment to the RDC’s themselves. There were also investments in supply chain network design and inventory optimization capabilities, and in January of this year, a $60 million investment in hand-held terminals to improve customer-facing capabilities.
A few weeks back, I made it a point to review Home Depot’s Q2 2010 financial results, and in particular, the transcript of the earnings briefing. I did not have to go far in the transcript to find mention of the supply chain transformation effort. Besides a relatively optimistic report on sales and earnings growth in a tough economic environment, CEO Frank Blake noted that RDC’s 14 through 16 were opened, and that the overall RDC network now serves over 80% of U.S. stores. The goal remains as 100% support by the end of 2010, which is more aggressive than reported earlier in the year. Craig Menear, Executive Vice-President, Merchandising noted that U.S. market share had improved 28 basis points on a 12-month rolling basis, that in-stocks were at record high levels and the combining of import and domestic distribution centers were yielding benefits in more simplified product flow. Also mentioned was the rollout of a Teradata DCM forecasting tool to enable better inventory decisions and respond more quickly to sales needs at store SKU level.
CFO Carol Tome noted that gross margins had increased 41 basis points from last year, and that retail inventory was reduced $38 million from a year ago. During the Q&A sessions with analysts, Tome was asked directly as to what gross margin benefits were directly related to supply chain. Her response was that supply chain was doing a great job of driving the business but the true benefits from the transformation will come next year.
Having Home Depot’s senior executive team endorse the initiatives and accomplishments of the supply chain transformation team is noteworthy, and on the surface, a lot of progress is underway. We trust that this continues, and we extend our Supply Chain Matters ‘thumbs-up’ salute to the entire Home Depot supply chain team for their transformational efforts. We will continue to monitor this effort and hopefully have more detailed commentary in the coming months.