Home Depot Expands DC Mechanization

Retailer Home Depot is stepping up mechanization of the rapid deployment centers it credits with supply chain improvements that helped the company boost third quarter profit 12 percent.

Home Depot unveiled the rapid deployment centers in 2007 and completed their development last year. Now the company is increasing mechanization at the centers, which now funnel most goods to the retailer’s 2,246 stores.

Eighteen of the 19 facilities, which act as flow-through distribution centers, will be mechanized by the end of 2012, CEO Frank Blake told analysts as the company issued its quarterly results Tuesday.

“Not all of those facilities were mechanized from the start,” Blake said. “This was a conscious decision to gain speed in the rollout and to learn about the processes within the RDCs before committing to mechanization. As we’ve added mechanization, we’re seeing benefits in capacity, efficiency and accuracy.”

About 65 percent of the cost of Home Depot’s U.S. goods moved through the centralized distribution centers in the first three quarters of this year. That compares with just 25 percent in 2007, Blake said. The company’s goal is 75 percent by 2015.

Carol Tome, chief financial officer, said Home Depot hopes its supply chain improvements during the next several years will increase inventory velocity while improving in-stock availability of merchandise. Home Depot said its inventory turned over at an annual rate of 4.3 times in the third quarter, a slight improvement from a year earlier.

Tome said the company’s supply chain improvements already are showing up in inventory quality. “Our clearance levels are as low as they had ever been in our company history,” she said.

-- Contact Joseph Bonney at jbonney@joc.com. Follow him on Twitter @josephbonney.