Monday, June 18, 2012

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.


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.


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.


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


Barcodes Inc: Inventory Control Systems retrieved from

The Seattle Times (January 12, 2010)

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

Retail Management Information Systems retrieved from

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


Home Depot Turns Its Attention to Supplier Performance Management retrieved from


  1. Excellent overview of systems at Home Depot. Where did the information come from? Did you interview a manager? If so, who? What is missing is any definition of terms and relating to textbook topics. What is an ERP? What type of service is Pay Pal? etc etc.

    Where are links to external articles or websites or videos?

  2. Your blog was very interesting & easy to understand. I really appreciate your information which you shared with us. Keep in blogging & Thanks. Warehouse Audit | Fixed Assets Audit | CFA Audit

  3. This comment has been removed by the author.

  4. I’d love to be a part of group where I can get advice from other experienced people that share the same interest. If you have any recommendations, please let me know. Thank you. Continuous Monitoring
    Duplicate Payment Recovery
    AR Customer Helpdesk