The Home Depot, Inc. lives by a simple premise: customers come first. To guarantee successful shopping experiences, a lot needs to happen behind the scenes.
The company is continually building relationships with vendors to secure the distribution of an array of products within its many aisles to ensure that the right products for the customer are available at the right time.
These relationships are built on mutual trust between both parties: vendors will ship merchandise to The Home Depot and, in exchange, the retailer will disperse payment on time. But what happens if communication breaks down and the correct merchandise is not received?
Expansion
Number of Home Depot stores is 2,295 in the US, Canada and Mexico
Diverse Products
Each store carries approximately 35,000 products
In a supply chain, there’s a warehouse that vendors stock with product for the retailer — in this case, The Home Depot. That product will then ship to stores. Ideally, the vendors have an idea of what they’ve shipped, and the retailer has an idea of what they’ve received. Trusting that the right product has arrived, the retailer then releases payment to the vendor for the goods.
“We have to trust our supply chain that everything’s being received appropriately,” explains Brian Quartel, Director of Financial Operations at The Home Depot. “We have to trust what the vendor is telling us is accurate. When any of that is off, it creates a problem for us.”
The ultimate problem is many blind spots lie on a supply chain. If a transaction dispute occurs along the chain, it could take months to pinpoint where the discrepancy originated as no communication is occurring in real time. Whether it’s a human error associated with manual processes or a system issue, these breakdowns of trust cost time and money and require the intervention of important personnel on both sides to solve the problem.
“We’re always looking for better ways to do things. My team is in charge of paying the suppliers for merchandise that goes into our stores,” says Quartel. “Being able to have the visibility into what they say they shipped versus what we say we received at more of a real-time basis helps us better understand where the issues lie.”
Looking to IBM for help, the home improvement retailer implemented IBM® Blockchain technology to improve its communications with vendors.
“Supplier relationships with The Home Depot are really one of the keys to our business,” says Dave Richa, Senior Director of Financial Operations. “They’re providing the innovation that we need to deliver on our promise to our customers.”
IBM Blockchain technology provides the real-time visibility, and if a variance occurs at any stopping point on the supply chain, both The Home Depot and its vendors can address the issue right away. Being able to quickly identify where the problem began allows the retailer and suppliers flexibly in handling situations.
By design, blockchain creates a permanent, unchangeable record of real-time data — so no one can alter or remove it. Role-based access means that vendors see only what they need to see. No other vendor is going to see another vendor’s information.
“We’re essentially allowing vendors to have visibility into our receiving, and they’re allowing us visibility into what they’ve shipped,” explains Quartel. “It’s almost like a settlement is happening with every single transaction versus waiting six, nine, twelve months down the road.”
“We start running through the different smart contracts. Is it a unit of measure issue?” Quartel continues. “Is it, ‘I received it in one location, but for whatever reason, I’m not receiving it in the second location?’ Each one of those is a stop point where we can potentially make the call as to whether there was an issue with the vendor or an issue with us. And we’re making that call in real time.”
The vendors that have come on board with The Home Depot’s new supply chain system have provided a great start to bridging the gaps in visibility and communication, and the result has been a true collaboration between the entities. The new process has greatly improved efficiencies for vendors and The Home Depot team, allowing the retailer to focus on other ways to improve the customer experience within its stores.
“What really appealed to me is a real-time interaction with the vendor where we’re both looking at the same thing. It allowed us to really speak the same language when we’re going through disputes,” says Richa. “It also puts data at our fingertips to determine what’s really causing the dispute in the beginning. The more that we can do that in a seamless fashion, it takes manual intervention out from both us and our suppliers.”
“So far, the feedback has been excellent,” says Richa. “Being able to see the data in real time, work it, and try to get to the core of what the issue is has been super helpful for both us and our vendors. It’s a win-win.”
This is just the beginning for The Home Depot’s journey with blockchain as it looks to onboard more vendors in the near future.
“When you think about the vendors that are coming on board, the way that blockchain is going to be able to help us with those relationships is truly tremendous,” says Richa. “We’re here to make everybody better. We can actually start helping them solve their issues and, in turn, helping us solve ours.”
Founded in 1978, The Home Depot (link resides outside of ibm.com) is the largest home improvement retailer in the US, with over 2,200 locations. Headquartered in Atlanta, Georgia, the retail giant employs nearly 400,000 people and offers customers more than 35,000 products in each of its stores and one million products online.
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