Table of Contents

I. Introduction

II. Business Strategy

III. Problem Analysis

IV. Recommendations

Reccomendation

Historically, Home Depot has trailed behind the curve in regards to incorporating information technology in the workplace. The only exception was the incorporation of self-check outs into their Point of Sales system. Initially the self-check out systems were a success, but with continuous use the systems proved to lack the durability necessary to withstand the rigorous use brought upon by large bulky items. The incidents range from broken screens, to systems damaged by chemicals, to handheld scanners being dropped and becoming inoperable, rendering the system more burdensome than helpful. Home depot just incorporated Fujitsu software into their check out systems but further measures must be taken to improve on the durability of the system.  Recommendations for evaluating and testing newer “hardy” systems will avoid delays in a self-checkout that was introduce with the saving of customers time in mind.

 The “First Phone” has been a being a great addition to Home Depots information systems. It has the ability to perform price look-ups, check inventory and during heavy customer traffic, scan items from customers waiting on line to speed the check-out process.  The customer receives a receipt with a barcode which then it’s taken to the cashier who in turn scans the barcode on the receipt and processes the payment.  This system, although ideal, lacks the ability to process the customer from beginning to end. The ideal progression for this system would be to one, accept credit cards on the spot. One recommendation for these systems is to provide clients to pick up a scanner and allow customers to scan their own items as they shop along.  Once done the client will take the scanner to cashier for payment.  This will avoid an unnecessary step in the payment process and would save on employee labor hours which would aloud the employee to do more specialized customer service.

Home Depot’s slow approach to incorporating integrated information system actually benefited the company because it afforded technology time to mature into the customized platform it now provides. Going forward one recommendation would be to switch from the Motorola phones to Apple iPhones which have not only proven to be effective in business but provide varied business applications useful for retail environments.  Home Depot would greatly benefit from specialty software from Apple. For one the iPhone is not only a user friendly device, but its popularity will provide ease of employee training while providing a vast amount of possibilities. In addition, the Apple iPhone capability of processing payments anywhere and on the go, will provide an added value to customer service.

Although it originally lagged behind most retailers in technology, Home Depot has gone through great length to developed a more functional integrated information system.  The speed at which they have integrated information systems has created a need for a localized training system.  No longer are videos the most effective way to train employees.  Home Depot should incorporate, as part of their in-house staff,  an Information System Specialist. This will facilitate each store with on-going systems training and provide employees necessary training on how to properly use all available systems and the way they inter-relate to one another to ensure better flow of information.. A video cannot troubleshoot when things occur or provide answers to question that an Information System Specialist can provide. Having an in-house Information Systems Specialist  will reflect positively in the productivity of the employees and in their familiarity with the various information technologies that Home Depot uses on a daily basis.

Going forward Home Depot needs to continue to improve on their services by providing the best customer experience. To accomplish this Home Depot should continue to integrate their information systems but must keep in mind that a system is only as useful as the person accessing it.  An employee information  training program should be implemented that will address all systems changes immediately.  This will ensure the continue  prosperity of Home Depot and help them maintain their dominance as the leading home improvement retailer.

Problem Analysis

One of the key areas of focus among retailers is inventory visibility. To accomplish this it is necessary to device an information system that is specific for retail management purposes.  This system needs to incorporate hardware, software and procedures that enable the integrated management of retail activities such as human resource, inventory control, point of sale applications and supply chain logistic management.  Retail stores such as Home Depot need to make informed decisions on everyday activities.  It is imperative that stores are adequately staffed, that staff is trained and have the necessary tools, the appropriate stock, and up-to date pricing information among other things, to be able to provide flawless customer service. Collectively these systems are referred to as Retail Management Information Systems. These systems provide a linkage between all stores, headquarters, supplier and logistics.  Retail Management information systems allow for the distribution of data among departments for use and analysis and it is shared with suppliers and vendors and logistic personnel to ensure the smooth operation of all its retail activities.  Such complicated systems give rise to information Silos.  Silos occur when there is a break in the flow of information and systems are unable to communicate freely among each other.

Home Depot, is currently the world's largest home improvement specialty retailer.  In 2011, retail sales were $70.4 billion .With more than 2,200 retail stores in the United States, Puerto Rico, U.S. Virgin Islands, Canada, Mexico and now China. With such a large operation Home Depot knows first hands the problems that silos represent and the importance of keeping them under control. In 2002 Home Depots information system underwent a design evaluation that prompted the launching of their first ever data warehouse and what became their first phase of what became their current information system. They have worked to integrate system that support function in various departments from human resources, retail merchandising, inventory and supply change management among others. Their focus is to share information dynamically amongst department providing real-time visibility into companywide performance improving related interdepartmental functions that translates to better work processes, better customer service and improved revenues.

HUMAN RESOURCES

In 2005 Home Depot entered into a partnership with SAP, currently the world’s largest provider of business software solutions.  SAP offers the retail industry solutions that facilitates the integration of retail applications that help optimize sales, reduce cost and improve inventory logistics.  The first phase of integration involved the Human Resource Department. SAP-ERP (Enterprise Resource Planning) helped the Human Resource Department streamline their hiring processes.  Home Depot employs over 300,000 associates and has a high attrition rate. Additionally Home Depot opens an average of 3 stores per week and hires an average of 50,000 employees a year.  To minimize the time spend by managers doing employment related activities Home Depot has instituted an On-Line application process. Home Depots employment application is a through but specific to the type of job the applicant is applying for.  There are 3 options for type of job including store hourly, distribution hourly and corporate and each type generates a specific set of questions that help determine the applicants proper fit to the job applied for. The system saves managers valuable time that can best be utilized performing other business functions.

RETAIL MERCHANDISING

Pricing Strategy

To help with their pricing strategy Home Depot partnered with SAS who is the leader in business analytics software and services.  SAS Revenue Optimization products allow retailers to optimize revenue by monitoring and managing regular prices and markdowns within the cycle of a product. SAS software is integrated to Home Depot’s centralized system and helps evaluate and consolidate pricing, promotions and clearance statistics important in retail sales.  The system collect data from multiple sources and creates clusters of information that are used to improve pricing, increase sales and inventory turnover, reduce markdowns, and provide location related assortment.

Point of Sale

In 2010 Home Depot introduced the “First Phone”   The First phone is a multi-function hand held device that is integrated to the stores POS system. The First Phone is marketed by Motorola as an Enterprise Digital Assistant. One of the product features is its WLAN capabilities. With this in mind the IT department at Home Depot set out to design an application using a NET Compact Framework that allows the First Phones to communicate with stores in house servers. The device requires a user code by an authorized employee and has 6 basic functions which include phone, walkie-talkie, ordering capabilities, mobile register, merchandise look-up and real-time information used by managers that provide financial and merchandising data including department sales and SKU level P&L’s. The Units are outfitted with credit/debit card readers and mini printers.  This feature allows associates to pre- scan customer’s items in shopper carts while on line.  Once the customer get to the register all that is needed is for the customer to provide their credit card and the transaction is completed   

New “Cloud” payment options

Home Depot is currently testing a new PayPal payment feature in some of their stores.   PayPal’s “wallet in the cloud” is a new program that allows customers to pay for their purchases using their PayPal account by typing their mobile phone numbers and their pins at checkout. They can also use their PayPal card with their pin.  Home Depot realized the potential benefits to using PayPal at point of sale.  Currently PayPal has well over 100 million customers and that can translate into increase revenues for Home Depot. The program however is relatively new and further analysis will be required to determine if they will roll it out to all their stores.

Self Check-out Systems

Every Home Depot has been upgraded with a check-out system. The check out systems allow for a better distribution of employee labor time. On average the check outs have freed up 40 hours that were re-infested back into the sales floor.  In 2011 Home Depot partnered with Fujitsu to upgrade their self-check out software.

           

The new software application provides an open integration architecture that utilizes a VPOS (Virtual Point-of-Sale).  The VPOS works on a messaging framework that provides retailers the ability to implement critical changes to their POS software fast.  The benefits is the ability to integrate the new system without lengthy pilot program testing which translate to saving in cost associated with new systems integrations. The system also allows for speedy updates and customization for a better brand experience.

SUPPLY CHAIN MANAGEMENT

One of the areas with most improvement in Home Depot information systems is the area of supply management and supplier relationships. In the past there was no central point of communication for the thousands of Home Depot suppliers that ranged in the 10,000. There was a minimum of 14 different systems the suppliers interacted with in order to communicate with home depot supply chain. There was no set system that allowed Home Depot to maintain tabs on their suppliers to ensure compliance with vendor regulations or quality assurance.  Order fulfillment and delivery monitoring was difficult and most communications happened thru fax and phone which was time consuming and lacked the speed and accuracy necessary to optimize the supply chain.

To improve on this supplier communication Home Depot incorporated the Supplier Center Web site.  The new Supplier Center consistently updates information on the requirements of doing business with Home Depot.  Thru the Supplier’s website Home Depot sets requirements and expectations for social & environmental responsibility programs and  guidelines which cover areas such as wage requirements, working conditions, health and safety standards, emergency planning, and equal opportunity and treatment among others.

In addition Home Depot introduced supplier “scorecards” which provided a color coded “graphical representation” of the supplier’s performance against expectations. The colors used are green, yellow and red (same as in traffic lights) and the areas that are rated are “compliance to shipping-platforms standards, and import on-time delivery”. Suppliers are able to view their scores over a 13 month period and the colors let them know at a glance their overall performance against expectations. To ensure data accuracy Home Depot uses a Six Sigma quality compliance matrix to compares data from its own sources to the data submitted by its suppliers. This helps in maintaining the integrity of the scoring system

Resources:




Barcodes Inc: Inventory Control Systems retrieved from

http://www.barcodesinc.com/articles/inventory-control-system.htm


The Seattle Times (January 12, 2010)

Depot spending $60M on handheld devices to aid customer service


Retail Management Information Systems retrieved from

http://www.ehow.com/about_5564925_retail-management-information-systems.html


The Home Depot Partners with SAP to Accelerate the Company’s Technology Strategy

Retrieved http://www.sap.com/press.epx?PressID=177


Home Depot Turns Its Attention to Supplier Performance Management retrieved from

http://www.supplychainbrain.com/content/nc/industry-verticals/retail/single-article-page/article/home-depot-turns-its-attention-to-supplier-performance-management/

Home Depot

Introduction

Kevin Conti, Ivonne Santiago, Patrick Paul, & Jeffery Toledo

Professor Abraham 

MGS3040

This report will inform about the information systems used by Home Depot. It will further discuss Home Depot's business strategy a well as how Home Depot's information systems help them to accomplish their business strategy.  We will also recommend ideas and solutions that Home depot could implement that will hep solve problems, avoid mistakes, achieve goals.

Company Overview

Bernie Marcus, Arthur Blank, Ron Brill, and Pat Farrah founded Home Depot in 1978. Their idea was to construct large home-improvement warehouses that were double or even triple the size of most hardware stores. The first two Home Depots opened in 1979 in the greater Atlanta area. Home Depot is currently the largest home-improvement retailer in the United States. Home Depot Currently has over 2,250 stores and employs over 320,000 people. As of 2012 Home Depot has in all 50 United States, the District of Columbia, Canada, Mexico, Puerto Rico, Guam, and even China. An average Home Depot warehouse stretches 105,000 square feet, with the largest one located in Union, New Jersey at an amazing 225,000 square feet.  Since 1991 Home Depot has sponsored the United States Olympic teams and has given olympic athletes job opportunities that were lenient about their training regimens. in 2002 Home Depot opened the Home Depot foundation and since then it has donated over $200 million to causes such as Habitat for Humanity.

http://www.homedepot.com/

Business Strategy

Porter’s Five Forces Model

Bargaining Power of Customers 

• Home Depot limits its bargaining power by putting everything a customer needs on the
   shelf.
• So the demand for different products or control of the price of the product is low.
• They target three different customers which are do it yourself customers, buy it yourself customers, and professional contractors. 

Bargaining Power Of Supplier

• Home Depot has about 12,000 suppliers in which it keeps good relationships with.
• Home Depot is very much in control of its bargaining power with it suppliers.
• Home Depot can buy in bulk from suppliers that they get the best discounts, in which then the suppliers don’t really make money.
• They eliminate the third party which are the distributing centers because they have control of its merchandising inventory. 

Threat Of New Entrants

• There isn’t that much threat of new entrants because Home Depot and Lowe’s have so much advantage over any new entrant in this industry.
• Home Depot’s advantages is it’s brand name, a big variety of products, it’s big economies of scale, and its cost leadership quality.
• So for new entrants its very difficult because all the barriers they have to go through like how home depot and loew’s have influence over suppliers and distributors, their ability to be able to price cut on products, and their brand names. 

Threat of Substitutes 

• There really is not a true threat of substitutes for Home Depot in which it’s products are home improvement supplies.
• The reason why is because Home Depot has very low prices and many varieties of products and services.

Rivalry 

• One of Home Depot’s biggest rivals in this industry is Lowe’s in which both over very similar products and services. 
• Lowe’s is the second largest competitor to Home Depot.
• Home Depot compete’s by buying and taking over stores to expand their company.
• Home Depot is not doing so well, sales are down and Lowe’s is becoming more and more profitable.
• Lowe’s is is similar to Home Depot but are different in that Lowe’s target more of the women customers and Home depot target more men customers. 

Competitive Strategy 

Home depot is using the Best Cost Provider Strategy that provides low prices and quality products to customers. Home Depot want to deliver supportable and profitable growth by extending business and expanding their markets. Home Depot has a saying which is “ You Can Do It. We can Help”, and it means as it creates customer closeness and a collaborative structure between its customers and employees, it can also provide a long-term competitive advantage.