Inbound Logistics Magazine (Nov 2008) reports that Home Depot is seeing some early success from its strategy to reduce prices by "five to 50 percent on as many as 1,200 items." This strategy was put in place to help drive sales and encourage consumers to purchase more items per visit.
To make this strategy work, the supply chain had to support the initiative. That is, the supply chain had to deliver significant cost savings. The article states that Home Depot undertook
a major supply chain overhaul as the company looks to better manage transportation and increase inventory turns by reducing direct-to-store shipments and progressing toward a more regional DC-centric distribution model. In the past, stores stocked inventory in lieu of using distribution facilities.
This short article underscores the importance of strategic supply chain design. Having the correct number, location, size, and territories of your distribution centers is critical to achieving your objectives. Companies need to stay on top of the structure of their supply chain to ensure that it changes as the business changes. As this story from Home Depot points out, it was initially important for vendors to ship directly to stores. But, as the market changed, it was important to use regional DC's.
Strategic network design products can help you determine how many facilities you need, where those facilities should be, how big they should be, and which stores or customers they should service. Done right, this effort can help you significantly reduce costs, improve service, or both.