It is tempting to lump big box retailers together into one indistinguishable blob, but there are ways in which even the seemingly most similar big box stores are distinct. Take Home Depot and Lowe’s, the two large hardware and home improvement chains. Lowe’s apparently has been eating Home Depot’s lunch. Over the last decade, Lowe’s stock price has doubled but Home Depot’s has been cut in half. According to the Wall Street Journal, Home Depot is now taking steps to, if not reverse that trend, at least hold on to what it has left (Home Depot Undergoes Renovation, Feb 24). A goal is to improve customer service out on the floor — that is, to assure someone in an orange apron can be found when you need to ask a question. Part of the solution is technological:
To tackle the perception that Home Depot workers are always too busy to help customers, the company is spending $60 million on hand-held devices that will help workers check on the spot if something is in stock. Marvin Ellison, a former Target Corp. executive who is Home Depot’s executive vice president of U.S. stores, conceded there was no good reason it took so long to devise the devices, which replace consoles resembling EKG heart machines that workers would constantly leave customers to go use.
The other part is actually revamping their supply chain:
The most dramatic change is that Home Depot is phasing out the antiquated practice of having suppliers send dozens of half-empty trucks directly to its more than 2,200 stores. A network of “rapid deployment” warehouse centers being completed this year will combine shipments, trim costs and cut truck trips to stores by up to 50%. That will let more of Home Depot’s orange-apron-wearing workers shift from shipping docks to store aisles, in hopes of tackling a festering reputation for bad service.
“We realized we were dissatisfying a fair number of our customers,” said Chief Executive Frank Blake in an interview, adding that he believes the company has found “the path to fix it.
So first let’s think about whether this new supply chain configuration makes any sense. It seems it might. Home Depot has a large, fairly dense network of stores. Essentially centralizing where you “break bulk,” i.e., where you do the work of breaking down large in bound shipments into store-sized quantities, should allow for highly utilized labor in the warehouse. Fewer deliveries of larger amounts to the stores should reduce the amount of time spent on doing paperwork for deliveries and may allow for a more rational approach to unloading trucks and restocking the floor. That all seems good.
That said, I am dubious the extent to which this will feed into better customer. First, one has to acknowledge that this has been a tough couple of years to be in the home improvement business. When real estate prices are crashing it is hard to be in a business that depends on what kind of home equity lines people can get. That puts pressure on cost cutting. If these supply chain changes really make large differences in in-store labor needs, it will take some backbone for management to keep the staff and shift what they do. (That also assumes that the guy with a strong enough back to unload and schlep boxes all day is also comfortable dealing with customers.)
The second issue, is how many trucks were they unloading on Saturday morning under the old system? This may free up worker time on Tuesday morning and if you happen to be looking for tile and a new commode on Tuesday morning, you win. But is that how people shop at Home Depot? Business there has to peak on the weekend and I can’t imagines that is when they are getting a steady stream of half full trucks. (More accurately, consumer business — as opposed to contractor business — peaks on the weekend and they are the one’s needing support.) Stated another way, customer service at Home Depot has been lackluster for most consumers because management hasn’t scheduled enough people on the floor during busy times. It is unlikely that the people they had scheduled were distracted with taking deliveries at the loading dock simply because you don’t get that many deliveries on Saturdays. Maybe the new system relaxes the labor budget at the store enough that you can shift workers’ hours so that more are there on Saturday morning. Maybe. Given that Lowe’s has been cleaning up over the last decade, simply adding more staff at busy times would seem like an obvious and possibly not too expensive solution even without revising the supply chain. If that’s all that’s required, presumably they would have done it already. So maybe the issues run deeper than just head counts.