- The Home Depot opened 12 last-mile delivery facilities in 2019 with plans to open 12 more in 2020, executives said on the retailer's fourth-quarter earnings call Tuesday.
- These facilities, called Market Delivery Operations (MDOs) are intended to speed delivery of large items like appliances. The company is handling 20% of such deliveries in-house, while the rest are farmed out to third parties, CEO Craig Menear said. The company expects to more than double that share in 2020, Menear said at an investor conference in December.
- "[MDOs] are staffed with orange aprons, The Home Depot associates who are ensuring that the freight comes into those locations and is dispatched properly to the customer damage free," said Mark Holifield, executive vice president for supply chain and product development Tuesday.
Home Depot is in the midst of a multi-year $1.2 billion supply chain upgrade that includes dozens of new facilities including MDOs. Most new facilities will come online in 2021 and 2022. In December, Menear said Holifield was "just getting going."
Part of the upgrade has been to take control of more of the upstream supply chain — especially for products like lumber that are not easily handled, purchased in bulk and ripe for more efficiency. The retailer's new flatbed delivery center in Dallas brings lumber from the mill to professional customers and 61 stores in the delivery range.
"In the old days, the product would come through that bulk distribution center and go to the store and then we pull it back out of the store, load it on a truck and deliver it to the customer," Menear explained. "It's much more efficient to launch that from a central flatbed delivery center." More of these facilities are coming in 2020.
Downstream, the retailer has opened three direct fulfillment centers in recent years, which enabled two-day shipping for more than 90% of the U.S. population. Two more are on the way in 2020 (in Dallas and Seattle), which Menear said would bring 90% of U.S. consumers within one-day shipping distance.
Home Depot sees fast delivery as a driver of sales. In the category of furniture and appliances, the full selection of which can only be found on the retailer's website, fast delivery by Home Depot staff is a competitive advantage, executives say.
MDOs bring delivery speed to large items that are often excepted from the speed-ramping across e-commerce in the last year. The retailer will eventually build 150 MDOs over several years, said Menear.
"Every time we take time out of the delivery lead time, we increase conversion," Menear said in May.