Supply Chain and Business Integration Strategy for HD Supply

Supply Chain and Business Integration Strategy for HD Supply

MGT 323: Principles of Supply Chain Management

A supply chain represents the process that goods and services are delivered and transported from the raw materials all the way to the end consumer. This network of vendors, manufacturers, suppliers, partners, and retailers produce, distribute, and sell these products in a cost effective and efficient manner. A neighborhood community restaurant’s supply chain might include trips to local markets for the raw materials and ingredients using a business owned vehicle, the creating of meals at the place of business, and delivering customer to-go orders. While a multi-national corporations supply chain network with a large growth rate, changing industry trends, intelligent consumers, and expanding business entities are more complex and interconnected to deliver products to consumers around the globe. “Supply chain management (SCM) is the management of the flow of goods and services and includes all processes that transform raw materials into final products.  It involves the active streamlining of a business’s supply-side activities to maximize customer value and gain a competitive advantage in the marketplace. SCM represents an effort by suppliers to develop and implement supply chains that are as efficient and economical as possible” (Investopedia, 2018). Supply chain management systems deliver products as fast as possible using the most effective cost saving measures while still maintaining quality. They can provide a competitive advantage in the industry and sustain profitability and growth. Other benefits of a supply chain management system include the reduction of unnecessary steps, maximizing worker performance, ability to better predict product demand, mitigate risk, eliminate waste and minimize delays.

Supply chain management involves rectifying, adjusting, and adapting operations and production services that augment cost, hasten speed, and sustain efficiency in delivering products that consumers demand when the customer requires while maintaining value and quality. The most successful organizations accomplish these tasks by implementing resource control procedures, like supply chain management software programs and enterprise resource management systems that integrate and substantiate the most advantageous actions and the collection of information regarding shipments and processes that enable employees to collect order information and coordinate their processes in real time. “Successful supply chains develop a strategy, embrace innovation and design, maintain a primary focus on customers, promote cost savings, collaborate with suppliers, and sustain integrity and corporate responsibility. Supply chain management refers to the oversight of materials, information, and finances as they move in a process from supplier to manufacturer to wholesaler to retailer to consumer. Supply chain management involves coordinating and integrating these flows both within and among companies” (Gilling & Ulmer 2016, p. 4).

Maintenance Warehouse was founded in 1974 offering products and services for multifamily properties like apartment complexes and townhome communities. They opened their first warehouse in San Diego, California in 1975 to perpetuate and establish dependable delivery services using their own fleet of trucks and operators. Continuing their business strategy and mission, they established exclusive brands, opened a centralized call center to help with customer orders, and created an industry first plumbing repair parts guide. Their commitment to a rewarding customer experience involved the creation of a customer advocate team which focuses on questions, issues, and consumer problems. With Home Depot’s purchase of Maintenance Warehouse in 1997 it allows the organization to utilize their industry reputation and power to effectively control processes and procedures while passing on those savings to customers. Maintenance Warehouse changed their name to The Home Depot Supply to further develop brand recognition and customer loyalty in 2004. Home Depot Supply and Hughes Supply were purchased in 2007 by private equity firms Bain Capital LLC, The Carlyle Group, and Clayton, Dubilier, & Rice to further enhance the ability to meet their customer goals and continue business operations as HD Supply. “They are one of the largest industrial distributors in North America and provide a broad range of products and value-added services to approximately 500,000 customers in maintenance, repair, operations, water infrastructure, and residential and non-residential constructions sectors. HD Supply has an expansive product offering of quality, name-brand and proprietary products at competitive prices. With approximately 260 locations across 36 states and six Canadian provinces, our 11,000 associates provide localized, customer-driven services including jobsite delivery, will call or direct-ship options, diversified logistics, and innovative solutions that contribute to our customers’ success” (About Us, HD Supply, 2017). Their business idea allows customers to benefit from the delivery of maintenance products while staying on-site to help build and grow the relationship between customer and company. Their continued partnership in improving the relationships with customers, suppliers, and partners remains the foundation for growth and to further build on how we can partner to improve things around the customers needs.

Supply chain management and integration with warehousing, customer service and product support divisions are essential to HD Supply’s long-term success and overall customer satisfaction. Problems are analyzed and diagnosed through the advocate department, disruption in service and deliveries is managed through warehouse and logistical services, and products are transported mainly through company owned delivery trucks and commercial vehicles. Logistics is a necessary and critical component of supply chain management and successful delivery services for HD Supply. Logistics comprises the ordering, planning, transferring, and management of goods, services and information from distribution centers to consumers. Logistics coordinates and supports transportation, shipping and receiving, imports and exports, warehouse operations, management of inventory, purchasing, and customer service. “The goal of logistics management is to have the right amount of a resource or input at the right time, getting it to the appropriate location in proper condition and delivering it to the correct internal or external customer. Proper logistics ensure the fulfillment of each customer order, making sure resources move quickly and efficiently from one section of the supply chain to the next” (Investopedia, 2018). A successful supply chain management system involves customer service, the reduction of operating costs, an improvement in the company’s financial position, and upgrade the overall quality of life.

Customers are unable to function without products and businesses cannot grow without consumers. Customer expectations and demands in the marketplace are changing. Supply chains need to be personalized to meet each customer need to further improve retention and the customer experience. Working closely with partners in the supply chain facilitates service improvements and knowledge regarding supplier requirements and helps to determine the concerns and viewpoints important to current and future customers. When you are aware of customer demands and their obligations, the organization can align processes and procedures, services and people to meet those requirements. Knowing what the customer has to say about the products and services within the company framework results in a more personalized solution, goal setting with current customers, and improving relationships with potential future customers.

Customers expect their ordered products and respective quantities to be delivered promptly. They want product availability at their local distribution center. Customer satisfaction increases when delivery instructions and times are met with regularity. Support is provided quickly when problems arise with product performance. To meet the ever-increasing demands of the established customer base and to create future consumer loyalty, HD Supply has in place a guaranteed next day delivery service, same day service on critical products like water heaters and air conditioning units, local distribution centers servicing over eighty six percent of the customer base, sales staff support for a personal experience, appliance pickup and installation services, and ongoing training for customer service associates. The essential goal for customer service associates is in the forming and ongoing cultivation of relationships. Strong relationships start with answering the phone in a respectful and courteous manner. Display active listening skills to truly understand the customer’s needs and desires. Provide your undivided attention to addressing complaints, follow through with promises, and be helpful without regard to profit.

Another strategic initiative for a supply chain management system is the reduction of operating costs. Proper forecasting and inventory control procedures allow companies to avoid storing to much inventory and paying unnecessary holding costs due to overstocks. The expected demand for products identifies production parameters for the manufacturers in the supply chain. Part delays, resource shortages, and other shutdowns can be avoided with accurate projections of supplies needed based on consumer orders to further manage costs. HD Supply has a staggered warehouse personnel schedule to accommodate deliveries, receiving, stocking, and pulling order responsibilities for controlling expenses. Benchmarked procedures for receiving inventory, cycle counts, and serialized inventory helps to mitigate costly return procedures and reduced customer satisfaction. Companywide employee incentives and bonuses for target year end remaining inventory levels brings a vested employee interest in doing a good job and a personal responsibility in the company’s success.

When the organizations overall strategy aligns with the supply chain management system, the financial position of the firm remains positive. The reduction of operating costs results in an increased in profit and available cash to make both short-term and long-term decisions for the enhancement of the customer experience and the expansion of business assets. Local warehousing buildings and the lack of brick and mortar stores permits consolidation of services to areas of customer concentration. Warehouse operations have gone from having 48 distributions centers across the United States to currently having 36 which diminishes building expenses and outlay of financial resources. “Capacity planning helps organizations to know their capabilities to produce. Organizations can respond to forthcoming production forecasts by exploiting this potential and maintaining desired rate of production. This proactive response can manage production imbalances and succeeds in retaining existing customers” (Haider, Mirza, & Ahmad, 2015, p. 169.). The next day delivery schedules at each distribution center allows the customer to be invoiced quickly and increases the incoming cash flow. Exclusive and proprietary product lines and brands provide HD Supply with absolute ownership and control over these types of products.  The product’s price, quality, branding, and image are all controlled by the company and sales and marketing strategies are developed specifically to build brand awareness for those specific products.  These types of products, rather than national brands, provide larger profit margins without sacrificing quality and value.

Proper supply chain management strategies enhance societies quality of life by providing an infrastructure foundation, improvement in the standard of living for all people, the creation of jobs, and opportunities to manage pollution and energy use. The interstate highway system, established railroad networks, vast sea ports, airports, and international customs regulations all streamline product delivery systems between businesses and consumers that also contribute to economic growth. This modernized and developed transportation network give consumers the ability to exchange goods and services at a minimal cost thereby directing incomes to buy additional products which increase their standard of living. Individuals direct transportation networks manage warehouses and logistics facilities, control inventories, purchase packaging materials, and analyze the accumulation of data in supply chains which result in employment opportunities. “Current transportation avenues account for 30% of world energy use and 95% of global oil consumption. Paper and paperboard account for 34% of United States landfill waste and only 50% of the 84 million tons of paper and paperboard waste was recycled. Carbon dioxide emissions from transportation accounted for 33% of total U.S. CO2 output” (Council of Supply Chain Management Professionals, 2018). Supply chain professionals have a responsibility and duty to design supply chain networks using sustainable methods and processes while reducing energy consumption and utilizing fewer resources. “HD Supply is dedicated to being a responsible global corporate citizen in all aspects of our business. From fostering a culture in which Service, Performance, Integrity, Respect, Innovation, and Teamwork are core values to supporting charitable activities and environmentally conscious practices, we strive to make every customer, associate, stakeholder, and community experience exceptional” (HD Supply, 2018)

“Whether dealing with day-to-day product flows or dealing with an unexpected natural disaster, supply chain experts roll up their sleeves and get busy. They diagnose problems, creatively work around disruptions, and figure out how to move essential products to people in need as efficiently as possible” (Council of Supply Chain Management Professionals, 2018). Having a poor understanding or deficient guidelines and established protocols for the coordination of business strategies and objectives along with supply chain management system integration can adversely affect company performance, profitability, and the flexibility to adapt to the continuously changing corporate and industry landscape. Supply chain and logistics professionals need to display the necessary tools and knowledge in inventory control procedures, sustainability, quality, and operational efficiency. These individuals are confronted by a diverse set of challenges, disputes, and complexities and having the ability to correctly predict and assess master production scheduling and comprehend the lean production philosophy become increasingly more important. Regulating the flow of materials and employing both upstream and downstream processes, supply chain managers will continue to maintain their organizations competitive advantage and strategic initiatives.

References

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