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Monday, October 25, 2004Part 1 of the excerpts from Chief Executive. Here is the second and final part:
On Data Mining - Bob says, today’s retailers can tell you at five or six o’clock in the morning what they sold by department, by category, by class. I can’t get that right now. I can get it, I can’t get it as quickly as I may need it to make more timely decisions. And our merchants down there, are somewhat handicapped, that’s No. 1.
No. 2 is that we are still doing our whiteboard “planograms” manually. It would not be uncommon to go into a store and they got 25 toilet seats, and then they’re looking at the price points, and they’re trying to do product line reviews, and pricing reviews. They’re way too manual there.So the next big megaplatform in this company is going to be a retail platform that’s going to give my merchants and my stores the ability to do this much more seamlessly and much more quickly and accurately. Price changes are still way too manual.
Coming back to the technology, the data mining has the potential to tell you what to put on the shelves and how to price it, right -we tend to get macro numbers, and you’ve really got to drill down to get the store, the district and the region.This ability to do data mining will be an unbelievable tool for our merchants. It’s going to take a couple of years to get there.
On new roles for people :- We’ll be able to reapply human capital to other areas. Just like we do in the store, we’ll be able to put more people on new categories, new trends, new marketing approaches, new merchandising presentation, and all that. The customer will see the benefit of this because we’ll continue to enrich the merchandising mix in the stores. If you looked at the facts, we went from $48 an average ticket (sales receipt) to $55 the end of the first quarter. That’s not an accident. That’s by bringing distinctive and innovative merchandising. We may be able to get innovative merchandise certified, answered, distributed, priced, shelved, much quicker, through automatic planogramming, through an overall merchandising program, so that we know what goes in and what goes out.
Our strategy is pretty clear. What we’re trying to do with our technological innovation is to become much more market-focused and customer-centric.
Efforts on inventory and supply chain management. Right now, it’s very manual. The model that was built was “full truck load to the store.” The more you brought, the more it would force you to sell, because you kind of get jammed. The old adage in the book was “stack it high and watch it fly.” But customers are looking for a different shopping experience. They’re looking for less intimidation. They’re looking for more orderliness.
On Using technology to break the full-truckoad mentality down to less than a truckload?
A Two things. We recently realigned our current logistics operation and took it from a function into the operations. So now our VP of operations runs the logistics centers we have today. Again, they were totally decentralized with different policies, different practices. We’re now bringing visibility to fill rates. We’re now bringing visibility to accuracy. We’re now bringing some order and accountability to our inventory. That’s Point 1.
Part 2 is,we want to be $100 billion company. But it’s not a $100 billion company of the past, where you basically had a single channel to market, the orange box (Home Depot stores). Now we have Home Depot supply we’ve created. We’ve got at home services. We’ve got B to B. We’ve got government. We’ve got online.
So what we’re seeing is a multi-dimensional logistic system that has to be in place to support, minimally, $100 billion plus business. I want to make sure that the systems I develop support the business I want to have when I get there. And that probably is going to be a combination of central distribution, probably have the ability to ship direct, to fulfill call, click or visit orders.
On how getting logistics right would help the business - If we get the logistics thing right, The most precious thing in the world—additional square footage in the store can be optimally used. Today, I may have four faces. That means I may have four of the same items, because there is a minimum on reorder quantities. If I get efficiencies in the logistics system, I go to two faces. If you think about that collectively across the store, it’s like getting 10 percent more square footage for either more mix within the category, or new categories. That is a home run, to be able to bring new categories in the store, to be responsive with emerging megatrends.
The technology piece of the logistics challenge - It’s sales times square footage, times margin. What you want to have is the ability to use a system almost as a rheostat (similar to a Humistat) and dial in market preferences, square footage, times sales, times margin. You bring a level of sophistication that we try to introduce now manually. I think we could do better because we’ll be able to do it faster, more accurately. We’ll take some emotion out of it, not all. Retail is emotion. But we’ll be able to get at it faster, a lot faster. I would say my goal is to be more on parity with technology evolution with some of these other guys like Target and Wal-Mart. But We've got some catching up to do.
A very insightful, dynamic transformation story and provides a glimpse of the thinking pattern of this once top notch GE executive. |
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