Improved logistics boost The Home Depot's revenue

Home Depot associate
The Home Depot improved delivery logistics to boost revenue. (The Home Depot)

The Home Depot began working with Descartes back in 2006, but a big overhaul in 2014 allowed the home building retail giant to begin on a new goal of reaching professional contractors with a faster, more reliable delivery option. 

The biggest challenge was reaching nearly 2,000 stores with the retailer's 1,000 delivery trucks. Through Descartes' transportation management technology and its routing and telematics solutions, The Home Depot was able to offer a two- to four-hour delivery windows for both consumers and construction professionals. 

"In addition to improving the retailer’s delivery strategy, using a routing solution to support time-definite deliveries was a contributing factor to boosting revenues, and market basket of what was purchased by customers was shown to expand," Chris Jones, Descartes executive VP of marketing, told FierceRetail. 

In addition to time-definite deliveries, the monumental supply chain transformation has impacted the growth of e-commerce overall.  

"The transformation has played a significant role in allowing the company to achieve some aggressive growth, margin and return on investment targets. According to The Home Depot, original goals were set in 2015 to be achieved by the end of 2018, and The Home Depot's 2018 revenue target of $101 billion in sales and 35% Return on Invested Capital (ROIC) have already been achieved," he said. 

The Home Depot knew that the changes were necessary to keep up with the rapid evolution of logistics. Jones notes that what was state of the art five years ago can be a basic capability today. 

Another challenge for logisticians is educating senior management on the advanced capabilities and practices that can truly enable retailers to be more competitive and grow both the top and bottom line. 

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"The benchmark studies we have conducted show that, if management understands the strategic value of transportation, the company uses it more aggressively and performs better financially," Jones said. 

In addition, from an operations perspective, costs and capacity are the two biggest challenges. 

"Besides being expected to execute faster and more flexibly than ever, delivery and logistics organizations are also expected to keep down costs. Right now, a big contributor to rising costs is the driver/capacity shortage, which is also impacting the ability to deliver or expand delivery services," Jones added. 

And while there are some retailers who are unwilling to make the investment in delivery technology, Jones says these merchants are not understanding the total value that can be delivered. 

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As an example, he cites that advanced home delivery can drive incremental revenue, as seen with The Home Depot. And home delivery technology can change the overall buying experience. 

"Consumers don’t only want deliveries to be faster, they want delivery choice and to be engaged from the time they buy until the goods are delivered. The difference in value can be 10 times or more when looking at top line growth. It can also help reduce costs in call centers by eliminating the need for customers to call and ask, 'Where is my delivery?'" Jones said. 

And Jones says that getting new management software in place does not necessarily need to be a lengthy process. If the strategy is simple and the retailer’s existing solutions are current, the solution can be live in weeks. And for larger retailers looking to use delivery to become more competitive, it takes months.

"In this case, the solutions will be tightly integrated to the retailer’s customer-facing system and interact directly with the customer. We find that getting the strategy straight with all of the stakeholders takes time and the technology is not the issue. However, the level of effort here is commensurate with the value received," Jones said. 

Overall, Jones believes it is advances in shipping and logistics technology that are transforming e-commerce. Research shows that advanced logistics operations can be a competitive differentiator for retailers. However, it doesn’t end there, as customers evaluate the whole buying experience. 

"You can either wow the customer with that experience or chase them away," Jones said. "Now, the delivery experience starts before they press the 'buy button' and ends after the delivery was made. Technology-enabled logistics is in the middle of all of this and you can easily say that many e-commerce business models are based on their logistics and related technology capabilities."