Home Depot Inc.'s five-year, $1.2 billion investment in its supply chain will focus on leveraging the company's scale and experience in moving large and tricky-to-install items, not on chasing the delivery offerings of e-commerce giant Amazon.com Inc., said Mark Holifield, Home Depot's executive vice president of supply chain and product development.
Speaking at the 2018 Retail Industry Leaders Association's Supply Chain Conference in Phoenix, Holifield said Home Depot wants to take advantage of its expertise in moving cumbersome merchandise, such as large amounts of house siding or bulky appliances. But an Amazon-like model, where customers can get two-day delivery for easy-to-ship items like apparel, is not in Home Depot's future.
"Big-time supply chain transformation is hard," Holifield said during a presentation Feb. 26. "But we're not going to out-Amazon Amazon. We can't offer what we want to do for $99 a year."
The home improvement retailer will open new direct fulfillment centers and bolster its delivery capability, Home Depot had said at its investor day on Dec. 6, 2017. During a Feb. 20 conference call with analysts, Craig Menear, the company's CEO, chairman and president, said the investment will total about $1.2 billion.
Home Depot moves more improvement goods than any other company, Holifield told S&P Global Market Intelligence at the conference. The company is the third-largest container importer in the U.S. and manages thousands of inbound truckloads per week. For delivery, the company is "geared for the unique requirement of home improvement," which includes flatbed truck delivery and appliance installation, he said.
Holifield said he sees Home Depot's biggest growth opportunity in its supply chain as the company's "pro" category, which serves contractors, instead of customers who shop for do-it-yourself projects. The pro category represents about 40% of Home Depot's business, and it is growing at a faster rate than the home improvement chain's stores, he said.
"The pro customers, they have different needs," Holifield said. "It's a big logistics challenge, but one that we can get right."
While the company already effectively moves merchandise from vendors to distribution centers, he said, the next step for pro customers is to figure out how to get that merchandise to construction sites. As part of its $1.2 billion investment to achieve this, Home Depot will open about 25 local direct fulfillment centers with the aim of delivering merchandise on the same day or next day in the company's top 40 markets, Holifield said.