After over 30 years in business Home Depot admitted their supply chain processes were not a priority for many years. The main priority was expanding the business. When the housing market crash began in 2006 they knew they had to shift their focus. As Home Depot CEO Frank Blake explains, “A downturn is a terrible thing to waist.”
Most Home Depot stores are large warehouse stores with ample extra room for inventory and storage, but they began opening smaller stores in smaller markets that could not hold the same amount of inventory. This lead to stock-outs and unhappy customers. They realized it was time they completely changed their supply chain processes starting with centralizing operations by rebuilding their distribution process. Before 2006 only 30% of the orders were store-centric, while managers made 70% of the orders. The transportation model had its own similar shares of changes to be made. They started with the construction of 24 new rapid deployment centers located throughout the country, each would serve about 100 stores. These facilities were to be flow-through facilities for quick cross-docking and little storage. The RDCs allowed their products to be shipped with 24 hours of arrival now. Currently, one third of the RDCs are built and being used. Home Depot is already seeing the benefits.
It seems Home Depot may have chosen the perfect time for their restructuring because now that their new processes are beginning to run the housing improvement and construction markets are growing. Home depot’s margins increased 35%, net income for the fourth quarter increased 32%, and sales rose 6%. Ms. Tome, the chief financial officer of Home Depot, claims the restructuring of their supply chain processes is the reason for these large increases.
Home Depot is not only the leader in the improvement industry, but is the second largest retailer in the country, second to Wal-Mart. Can we expect to see greater growth as the last two thirds of their RDCs are implemented? How can other retailers learn from Home Depot’s changes?
After learning about forecasting in class I found it a compelling subject. What I was most interested in was how it was used in business. After doing some research I found a lot of information on how South Korea is using their forecasting to increase sales and productivity in the cell phone industry. South Korea is using forecasting to predict an incredible increase in 4G LTE phone usage.
Currently, the United States has more users engaging in 4G mobile technology, but South Korea has a higher percentage of users, at about 14% right now, compared to 4% in the United States. This is expected to more than double in the next couple of months. South Korea expects the LTE users to be around 15 million by the end of the year, and be over 33 million by the end of 2013. This forecast predicts that this new technology will give South Korean LTE users the ability to download media faster than any other country.
This impressive usage forecast is predicted not only because South Korean technology users demand the best, but it is so great because many cell phone companies are offering large subsidies for 4G devices, and fading out the old non-4G devices, leaving users the only choice to purchase the new, faster technology.
This could be an major change in the 4G LTE market and in the cell phone industry if this growth does happen, which assumingly would not only take place in South Korea, but also in many other countries around the world. What I find most limiting for this forecast is the amount of infrastructure that will need to be installed to run this large amount of LTE service. Will the world, or more specifically South Korea, be able to handle this enormous increase?