Analysis of Supply Chain Strategy of Home Depot

Analysis of Supply Chain Strategy of Home Depot
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Introduction
In the modern global economy, the balance between customers and suppliers has become much more dynamic than ever before due to new computing and communication technologies and open international trade regimes. Customers now have more choices as other customers share their opinion, and alternatives are easily visible. Therefore, there is a need for businesses to be highly customer-centric. This development has resulted in businesses needing to re-evaluate their customer value proposition, as just supplying the product/service to the customer alone is not viable enough. Therefore, there is a need for businesses to not only address the customers' needs but also create additional value to remain ahead of the competition (Teece, 2010).
Businesses analyze their business models to understand and improve the design and architecture so that value creation for customers can be enhanced (Teece, 2010). One aspect that can enhance the value for customers is the effectiveness of the supply chain. Pentina and Hasty (2009) argued that the supply chain could create value by making logistics more efficient that can reduce the time for a product to reach the customer and/or reduce the cost of logistics, leading to increased profitability for business or reduce cost for customers.
One such organization for which the supply chain plays a crucial role in its success is Home Depot. Therefore, this paper analyzes the business strategy of the business, supply chain strategy of the business, and alignment between the two strategies. Also, based on the analysis, certain recommendations are made to enhance the supply chain strategy of the business.
Background to the Organization
Home Depot, Inc. is the market leader of the US home improvement market. The Georgia-headquartered company offers construction products, building materials, tools, and services through various brands, including Behr Paints, Homelite, Chem-Dry, Ryobi and Ridgid, American Woodmark, Thomasville Furniture Industries, Martha Stewart Living Omnimedia, Husky, Workforce, Hampton Bay, HDX, Glacier Bay, Commercial Electric, and Home Decorators Collection (Home Depot, 2021)
The company operates stores across the US, Canada, Mexico, Puerto Rico, Guam, and Columbia. Over 70 distribution centers support these stores. The company earned a revenue of US$ 110.2 billion in 2019 and a profit of US$ 11.2 Billion in the same year (Home Depot, 2021).
Business strategy
According to Teece (2010), a business strategy outlines the design for revenue, cost, and profit so that a value can be created and delivered to customers. For a business strategy to be effective, all the elements must be interrelated. Also, for a business to achieve sustainable competitive advantage, the business strategy must be successful and better than that of the competitors. This is necessary as a successful business model can be imitated, therefore for sustainable competitive advantage, the strategy must be dynamic enough to differentiate itself from that of the competitors (Casadesus-Masanell & Ricart, 2009).
According to Stojkovic et al. (2016), the modern commerce industry can be characterized by a multi-channel strategy, where different channels are used to fulfill the diverse needs of customers. While earlier multi-channel business strategies were considered detrimental to offline channels, products' cost is generally lower in the online store than in a physical store. However, in recent times, offline and online channels are complementary to one another, where the customer understands the product via the first channel, buys through a second channel, and receives through a third channel (Stojkovic et al.,2016). This multi-channel integration has become a significant part of modern commerce and can be observed in the case of Home Depot and discussed below.
According to Visnji (2019), there are four key elements of the business strategy of Home Depot: The first key element is to acquire and sustain market leadership across different business segments. This element has a twofold strategy: organic growth in retail products and inorganic growth by acquisitions in MRO (Maintenance, Repair, and Operations) segment. The company has established market leadership in the retail segment by developing a wide portfolio through multiple stores conveniently located in different countries. The company provides products at low prices to beat the competition. Also, the company offers installation services for customers wanting home renovation through pre-screened independent contractors. In the MRO segment, the company has undertaken several acquisitions, a significant one being Interline in 2015, which gave it a 5% share of $50 billion worth of the MRO market in the US. These acquisitions help the company acquire associates and distribution capabilities, thereby making it physically closer to customers (Visnji, 2019). The second key element is to offer products and services for end-to-end home improvement. An important aspect of the portfolio of products is that the end-to-end needs of consumers for home improvement are available through professionals (Visnji, 2019). The third key element is that company is focused on growing both individual and professional customer segments. The individual customer segment is further divided into Do-it-yourself (DIY) and Do-it-for-me (DIFM) customers. The company is working on offering an interconnected shopping experience for DIY customers by using technology to support offline sales. The company utilizes in-store mobile technology to facilitate company associates in helping customers with their DIY projects. Also, various installation services are available for customers through technology. The company also conducts various workshops to share knowledge with customers and also bring an emotional connection. For DIFM customers, the company maintains tie-ups with professional contractors and offers unique programs for these customers, including expanded credit programs, dedicated staff, delivery, and will-call services, bulk pricing programs, and designated parking space. The company also has a loyalty program for professional customers by offering discounts on exclusive product offers, additional business services, and dedicated purchase tracking tools. The company also helps its customers get funds for their projects by offering private credit through third-party credit party providers (Visnji, 2019). The fourth element of the strategy is through various initiatives like Buy Online, Return in Store (BORIS); Buy Online, Pick-up in Store (BOPIS); Buy Online, Deliver From Store (BODFS); and Buy Online, Ship to Store (BOSS) (Home Depot, 2021).  These initiatives help the company expand its product as well as service revenue (Visnji, 2019).
According to Wallace (2015), an important aspect of the above four key elements is that the company has seamlessly integrated different elements and channels by upgrading its technological capabilities in the supply chain, distribution, web, and store inventory. Thus, it can be inferred that the company's business strategy is focused on seamless integration of physical and digital capabilities. Therefore, the company came up with the 'One Home Depot' strategy in 2018 to transform the operations and culture of the company (Danziger, 2020). This strategy has six pillars. The first pillar is people: Annually, the company has planned to train associates more than 1 million hours over the period 2018-2023, to enhance service quality for both professionals and DIY customers. Also, associates will be receiving a success-sharing bonus (Danziger, 2020). The second pillar is refreshed stores: Approximately 60% of the stores have transformed to enable faster checkouts and returns by setting up lockers and service desks for online as well as store order pick-up and returns. This has increased the overall customer satisfaction level (Danziger, 2020). The third pillar is product innovation: The company has significantly invested in product assortments and visual merchandising. For example, in most stores, the paint department is now known as Color Solution Center. This product innovation has encouraged customers towards higher-end and big-ticket products. Another product innovation is the enhanced delivery experience for high-end customers, where high-end deliveries have been transitioned to a company-controlled model (all other deliveries are still outsourced). This has further enhanced customer satisfaction (Danziger, 2020). The fourth pillar is supply chain and delivery: the company is adding new facilities to its network so that there are fewer 'touchpoints and products can be moved quickly (Danziger, 2020).
The fifth pillar is interconnectedness and digitization. As discussed earlier, the e-commerce platform serves as a driver for growth for overall business: increasing online traffic as well as store footfall. The company is working on further enhancing this interconnectedness by off...