Fine-tuning distribution: Cross-dock system of nationwide transit facilities strives to boost efficiency by consolidating deliveries - Home Depot: A Different Direction

Home Channel News, Dec 17, 2001 by Brae Canlen

At the chain-link security gate of Home Depot's newest distribution center in Rialto, Calif., there's no hint of the world's largest home improvement retailer.

No Home Depot sign, no logo and not a touch of orange. One hundred white trailers, stacked in rows like piano keys, sit anonymously on the asphalt. A sign on the gate says, simply, "Power Logistics."

Power Logistics is the Chicago-based third-party logistics provider that runs Home Depot's 134,880-square-foot, cross-docking facility in Rialto, Calif. Over the next couple of years, more of these "3PLs," as they're called, will be hanging their shingle outside facilities that are, for all intents and purposes, Home Depot distribution centers. The Atlanta retailer is rolling out a nationwide network of 16 "transit facilities" that will substantially change the way it replenishes its stores.

Home Depot began studying the idea of cross-docking in 1996, when it opened its first transit facility in Philadelphia. The company -- which currently receives 85 percent of its inventory directly from vendors -- wants to reduce its reliance on a variety of LTL (less-than-truckload) carriers that deliver merchandise to its stores. This will squeeze some costs out of its supply chain, and, at the same time, consolidate deliveries to its stores. Home Depot is ready to take control of its inbound freight, which will require the retailer to develop a system of internal distribution -- with a little help from its friends.

By design, Home Depot is relying on several 3PLs and transportation companies. J.B. Hunt will handle store deliveries from both Rialto and Philadelphia, but other freight haulers may handle outbound merchandise at future transit facilities. USF Logistics, Excel Logistics and Saddle Creek Corp. have been hired to provide the building and operations staff at some of the other sites.

"We'll be comparing them on a monthly basis and taking the best ideas," said Lenny Kapiloff, divisional merchandise manager for Home Depot. Relying on others' expertise made sense in this venue, Kapiloff said. "These folks do it for many other retailers, and they probably have some better ideas than we do."

One of these better ideas, a joint solution devised by Home Depot and J.B. Hunt, addressed the issue of stacking merchandise in outbound trucks. Although everything is shipped to stores in wrapped pallets and sealed cartons, breakage concerns limited how high the loaders would go. Trucks were leaving the Philadelphia facility with five feet of empty space. J.B. Hunt equipped all trucks with "captive beams" that divide the truck in half horizontally and slide up to the ceiling when not in use.

Other attempts at efficiency were not as successful. Back-hauling, always a simple concept in theory, sometimes resulted in trailers getting stranded at loading docks. "There are a lot of moving parts" to keep track of, explained Kapiloff, taking the long view. But Home Depot has fine-tuned its cross-docking system to the point that, by 2003, it intends to roll out 13 more transit facilities in the United States and one in Canada. The next scheduled opening, in January 2002, will be outside of Orlando in Clermont, Ha. Other locations include Chicago; Los Angeles; Sunnyvale, Texas (outside of Dallas); Baltimore; Detroit; Sutton, Mass.; and the San Francisco/Seattle area. Some will be ground uppers while others, like Atlanta, will take over an existing facility.

On average, the transit facilities will each supply 130 to 140 Home Depot stores. Like in Rialto, every retail unit will be assigned its own numbered bay and corresponding trailer. As the merchandise arrives from the vendors, it will be loaded into the trailer by rotating crews. (The facility is open 24 hours a day) Each store has its own order sheet. Low-volume retail units may find themselves sharing a "co-loaded" trailer, an arrangement that tested well in Philadelphia.

Under the new distribution system, most Home Depot stores will receive one daily delivery from their respective transit facilities, Monday through Friday instead of a stream of trucks delivering two or three pallets apiece. Full truckloads will still arrive from various destinations, and some merchandise -- lumber, copper pipes and roofing materials, for example -- will remain with LTL carriers. But otherwise, all of Home Depot's inbound freight is a candidate for cross-docking. "We're looking at every vendor we do business with over the next couple of years," Kapioff said. "We think we're better able to determine how the freight should come into our stores."

Under Home Depot's SPI initiative, trucks can be unloaded at the store level only between 4 p.m. and 5 a.m. This puts outbound transit and receiving on a tight schedule, something that Home Depot tried to accommodate. "In a lot of supply chains they look at [distribution] from the manufacturing side," Kapiloff observed. "But we wanted to look at it from the receiving end, from the store's point of view." To that end, Kapiloff and other Home Depot executives spent hours on receiving docks, watching trucks disgorge their merchandise. At times, they wanted to conjure up some of their manufacturing partners to watch along with them. Ultimately, they shared their observations with several vendors and enlisted their help in streamlining the process.