By Karen E. Thuermer, AJOTSpeed to market is as critical an issue for retailers as is keeping the right product mix on the shelves, and keeping inventories to a minimum. The idea is to not overload or under stock a store, but to get the timing just right. This can include the timing of importing goods. Controlling logistics is the issue. “Many companies don’t regard fulfillment, inventory management or distribution to be their core competency,” says Robert Hess, consulting partner with Cushman & Wakefield’s Global Business Consulting Group. “Instead they focus on merchandising and making the product.” Yet some companies do. The Home Depot and Lowe’s—two heavy weight competitors both well known in the home improvement industry, are two of them. With $90.8 billion in net sales for Fiscal Year 2006, The Home Depot is regarded the second largest commercial distribution business in the United States and the largest home improvement retailer in the world. And with fiscal year 2006 sales of $46.9 billion, Lowe’s Companies, Inc. is a FORTUNE 50 company. Behind the scenes, however these two niche retailers operate with differing—yet somewhat similar business models. For one, The Home Depot is more aggressive when it comes to international expansion. For starters, in 2006, China’s rapid economic growth prompted The Home Depot to purchase The Home Way, a Chinese home improvement retailer. This acquisition, with its 12 store locations in six cities, has allowed The Home Depot to enter the booming Chinese home improvement market that is valued at nearly $50 billion and has been growing at a compounded annual rate of 20%. Up until then, The Home Depot only maintained sourcing offices in Shanghai and Shenzhen where important quality control and sourcing functions are performed. CONSTRUCTING A COMPETITIVE EDGEThe Home Depot officials also like to think the company maintains a competitive edge by how it manages its large inventories and wide assortment of items. Inventories are based on the needs, delivery schedules and lead times of its customers. Home Depot focuses on distributing products that leverage its strengths in inventory management, purchasing, specialized sales force, distribution and logistics, credit management and information technology. The business is seasonal to a certain extent. Generally, Home Depot’s highest volume of sales occurs during its second fiscal quarter and the lowest volume occurs during its fourth fiscal quarter. It is also highly competitive, based in part on price, store location, customer service and depth of merchandise. Today Home Depot operates 2,238 retail stores in all 50 states, the District of Columbia, Puerto Rico, US Virgin Islands, 10 Canadian provinces, Mexico and China. In addition, at the end of FY 2006, it operated 34 EXPO Design Center stores, 11 Home Depot Landscape Supply stores and two Home Depot Floor stores. The Home Depot stores average approximately 105,000 square feet of enclosed space, with approximately 23,000 additional square feet of outside garden area. In fiscal 2006, The Home Depot had sales of $79 billion and earnings of $5.3 billion. In addition, The Home Depot operated 18 import distribution centers and 30 lumber distribution centers in the United States and Canada and 10 transit facilities to receive merchandise from manufacturers for immediate delivery to its stores. The lumber centers support the lumber demands of its stores. At that time, approximately 40% of the merchandise shipped to Home Depot stores flowed through its network of distribution centers and transit facilities. As part of its way to leverage inventory, the company uses some larger stores as distribution points. Depending on their geographic area, these stores are capable of leveraging other Home Depot store’s inventory, thereby building a flexible inventory management system that decreases wait times for customers. In addition, the stores are able to effectively offer a wider array of products. To many, this gives The