The Home Depot’s chief executive sees supply chain as key to customer service

The top executive of The Home Depot – Georgia’s largest public company – believes the key to customer service is having a supply chain that delivers the right product in the right quantity available for in-store pickup when a customer wants it. “Customer service really starts with in-stock,” Craig Menear, The Home Depot’s chairman, president and chief executive officer, told an April 1 Georgia Logistics Summit audience that earlier had heard from such notables as the Peach State’s governor.

“We’ve had a phenomenal transformation in the supply chain at The Home Depot,” Menear said, noting that online sales have been a major instigator of change, representing about 4.5 percent of the company’s $83.2 billion in 2014 sales. “Our business definitely is evolving, and it’s evolving because of additional capabilities that exist.” Of The Home Depot’s $4 billion in 2014 sales growth, $1 billion came through digital assets, Menear said, adding that the suburban Atlanta-based home improvement mega-retailer focuses its supply chain on delivering online-ordered products to stores for customer pickup. That’s because, when customers come to pick up that product, between 25 percent and 30 percent of them buy more items to the extent that the total sales ticket is twice the company average, he said, commenting, “That has caused us to think very differently about our supply chain.” While 40% of digital sales are picked up at stores, The Home Depot also is enhancing its direct fulfillment capabilities, adding a 1 million-square-foot center in Ohio to similar ones in Georgia and California, and is advancing a program for deliveries from stores to professional and do-it-yourself customers within a two-hour window. Menear was far from the only Georgian to speak enthusiastically at the March 31-April 1 state-sponsored summit. “We have a lot to be proud of,” said Georgia Gov. Nathan Deal, citing dynamic growth and advancement of harbor deepening at the Port of Savannah, the major intermodal rail hubs of Atlanta, Atlanta’s world’s-busiest airport and decisions to make investments in the state by companies such as Porsche, Mercedes, Caterpillar, Baxter Pharmaceuticals and Comcast. “Logistics and infrastructure are critical components in the decisions these companies make,” Deal said.

The governor did add a note of caution regarding the nationwide shortage of holders of commercial driver’s licenses. a concern anticipated to grow with burgeoning volumes at the Port of Savannah, to be further accelerated when deepening of that port’s harbor to 48 feet is completed in late 2018 or early 2019. “If we don’t have enough CDL drivers right now,” Deal said, “just think what demand we’ll have when we expand our port.” To help fill truck driver’s seats, he said, Georgia is advancing workforce development and job initiative efforts aimed at adding commercial drivers. Curtis Foltz, executive director of the Georgia Ports Authority, noted that Savannah already has the busiest single container terminal in the nation and the containerport trails only Los Angeles, Long Beach and New York/New Jersey to rank fourth in the U.S. in total volume. Foltz said West Coast port labor and congestion issues, as well as capacity challenges at other East Coast seaports, are driving “a tsunami of business on the container side of the business” to Savannah, which has seen its box volume up 13.7 to date this year compared with early 2014. While Georgia has been able to keep pace, thanks to solid trucking and rail partnerships and foresighted investment, Foltz said other U.S. ports have proven less fortunate. “Ports have not invested at the level they need to be,” Foltz said. “The U.S. port system is extremely fragile.” Speaking on the same panel following the governor’s address, Ed Crowell, president and chief executive officer of the Georgia Motor Trucking Association, said that, whereas he is concerned about federal regulations that are making driving trucks less and less attractive, “In Georgia, we have great advantage in terms of logistics.” Charles Tarbutton, president of the Georgia Railroad Association, cited the role played by CSX Corp. and Norfolk Southern Corp. and their on-dock facilities at the Port of Savannah, while Miguel Southwell, aviation general manager at Hartsfield-Jackson Atlanta International Airport, said his facility is improving its infrastructure for handling perishables, including imports of flowers, fish, meat and produce from South America, as well as in-transit exports bound for Asia and Europe. In another session, logistics leaders pointed to the importance of rail in their supply chains. Sally Wells, corporate logistics manager of Birdsong Peanuts Inc., said the inland port of Cordele Intermodal Services Inc., which became a supply chain hub after her firm began shipping nuts to China a little more than two years ago, now handles 90 percent of Birdsong’s export business on short-line trains that run the 170 miles between Cordele, Ga., and Savannah. Paul Stykitus, director of sales for Strafford, Mo.-based Christenson Transportation Inc., said his motor carrier firm relies upon Norfolk Southern and Florida East Coast Railway LLC to take loads from its Lebanon, Tenn., hub to South Florida – delivering capacity, pricing and asset utilization benefits. “The FECR has been a great partner for us,” Stykitus said. “We’ve expanded our capabilities by using intermodal.” FECR’s senior vice president, Robert Ledoux, said that, while the Jacksonville, Fla.-based Class II railroad continues to move four times as many loads southbound as it does northward, it is making inroads to grow volumes up from Florida. An example, he said, is the northward return by rail of finished underwear from Honduras via South Florida ports through which trains brought export cotton from the Carolinas. Tony Spoto, who goes by the title of lean six sigma master black belt for corrugated packaging supply chain and board sales at Duluth, Ga.-based Rock-Tenn Co., said equipment shortages are a regular challenge for his company, which is merging with MeadWestvaco Corp. “Lack of railcars, lack of intermodal containers, lack of trucks can shut us down,” said Spoto, who added that customers want products increasingly fast, meaning shorter lead times and smaller, more frequent deliveries. “The key is building a partnership.” Timothy Riordan, vice president for supply chain and chief procurement officer for LaGrange, Ga.-based Interface Inc., the world’s largest manufacturer of modular carpet, said his firm’s challenge is finding logistics partners with global reach plus local teams everywhere. “Our carriers and transportation partners need to be integral to the customer experience,” Riordan said. Expressing a view echoed throughout the summit, Scott Hyde, senior global logistics manager for Jacksonville, Fla.-based cellulose product maker Rayonier Advanced Materials, said beneficial cargo owners find it easy to collaborate with Georgia port officials. “At the Georgia Ports Authority,” Hyde said, “they really take it as more of a partnership with us. They really try to listen to us and customize things.”