The Home Depot's supply chain has come a long way since 2017.
Eight years ago, the home improvement retailer outlined a vision for a two-day parcel delivery network focused on placing inventory close to the end customer, Jordan Broggi, EVP of customer experience and president of online, said at an investor and analyst conference last week.
But Home Depot has managed to sail past two-day shipping speeds since then — 55% of its deliveries for in-stock SKUs today are made either the same day or the next day, more than triple its 2022 amount, per a company presentation.
Powering Home Depot's acceleration are nearly 200 facilities the retailer has added over the past eight years to fill various roles in its supply chain, according to Broggi.
Another reason for Home Depot's shipping improvements is the company's proprietary "ship from best location" algorithm, which analyzes the company's distribution assets to determine the most effective way to deliver products to customers, Broggi said. Shipping from the best possible location weighs several factors, including customer profile, geography, available assets and inventory positioning.
"Our distribution assets, combined with inventory investments and technology enhancements have significantly increased the speed of our delivery," Broggi said.
Home Depot has "essentially completed" the buildout of its market delivery operation, direct fulfillment center and flatbed distribution center networks, EVP and CFO Richard McPhail said at the conference. Now, the company is looking to maximize these assets to gain share in a market challenged by consumer uncertainty and tariff-related pressures.
One way Home Depot is looking to boost its business is expanding the number of products available for fast shipping.
For example, the average Home Depot store may be stocked with about 25 different Rheem water heaters, but that selection may not meet a customer's specific needs, said Billy Bastek, EVP of merchandising. Home Depot has worked with Rheem to stock more water heaters at its direct fulfillment centers, enabling next-day delivery by shipping orders from those facilities to market delivery operation locations. The latter serve as last-mile distribution points.
"Importantly, this increased our delivery coverage and speed dramatically even compared to a year ago," Bastek said at the conference. "Historically, if we stocked it in our stores, you could get it really fast. But if we didn't, it would take anywhere between five and nine days. Now with our enhanced coverage, over half of our extended aisle deliveries are now one or two days."
The retailer is also exploring ways to expand the shipping reach of its flatbed distribution centers. These facilities help deliver larger orders like lumber and other building materials to job sites, freeing up space in Home Depot's stores.
Home Depot deployed a new type of delivery method earlier this year called Relay, which uses the company's network of flatbed distribution centers, per Michael Rowe, EVP of Pro. Through Relay, delivery drivers from those facilities in the Atlanta market can drop off flatbed trailers overnight at certain store parking lots, which are then delivered to job sites the next morning.
"This allows us to get greater coverage in our Atlanta market while also extending our reach into adjacent markets like Chattanooga, Tennessee," Rowe said during the conference. "And we've done this in several FDCs, which has allowed us to expand into an incremental 18 markets."
Enabling fast deliveries at a 100% on-time rate is a tall order, particularly for a company that fulfills a variety of orders across several product categories, said Broggi, the customer experience EVP. When deliveries fall short of expectations, Home Depot focuses on what went wrong and how to eliminate future instances of failure, Broggi said. This approach has aided the company's efforts to reduce its missed delivery rate while improving customer satisfaction, he added.
"We don't celebrate that the vast majority of our deliveries are perfect," Broggi said. "We obsess over the misses and use each failure as an opportunity to improve our processes."
