Home Depot Tackles Network Challenge

The retailer gains control of its in-store merchandising by bringing distributors and their representatives into a wireless network that monitors how they stock the company's shelves.

The worlds largest home improvement retailer used to be a victim of its own merchandisers—not under siege exactly, but certainly out of control.

Home Depot U.S.A. Inc. sells thousands of products from hundreds of manufacturers in more than 1,900 stores across the country. The problem was that by 2001, there were 342 service organizations responsible for placing their wares into Home Depot stores. They were not held accountable for their merchandising techniques or whether they interfered with one another.

"The way it was done in the past was reps could come when they wanted, do what they wanted and leave when they wanted," said Ed Martin, a director of vendor services at Home Depots Atlanta headquarters.

As a result, Home Depot suffered from guerrilla merchandising tactics. Service representatives would use unorthodox methods to promote the products they were trying to sell.

Most of the service representatives worked directly for a single product manufacturer, and they worked on commission. Left to their own devices, they would place products wherever they wanted, shoving aside their competitors products. A stores attempts at cross-merchandising—placing the doors by the doorknobs, for example—tended to fall by the wayside as merchandisers jockeyed for premium space.

Culture shift

In December 2000, Home Depot hired a new CEO, Bob Nardelli, a former General Electric Co. executive, to modernize store operations and help the company better compete against the likes of Lowes Companies Inc. Under Nardelli, Home Depot started down a path of centralized management and accountability.

"The culture of Home Depot [had been one of] entrepreneurial decision-making," said Tom Armstrong, vice president of vendor services at Home Depot. "Under the new leadership, merchandising decisions were centralized, and, as the culture evolved, the idea of guerrilla marketing didnt work anymore."

Armstrong joined the company in September 2002, after seven years at Black & Decker and nine years at Emerson Electric Co. He spent many of those years supplying products to Home Depot, so he knew the tricks of the merchandising trade.

Under Nardellis leadership, Armstrong, Martin and fellow Vendor Services Director Henry Schmidt immediately jumped into a search for a mobile computing strategy, dubbed the In-Store Services Initiative. ISSI, or Project Roadrunner, would keep track of a far-flung collection of service representatives via thousands of handheld computers.

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The team interviewed a handful of small software companies and zeroed in on EnfoTrust Networks, a field force automation software startup in Kennesaw, Ga., which already served a few of the service representative agencies that served Home Depot. Now the team asked EnfoTrust to help Home Depot make those same agencies get in line. "I needed a process [system] that managed like Home Depot managed now," Armstrong said. "Not by individual factory items but by classes, not by the brand of door locks but [by] the classes of door locks."

EnfoTrust went to work on a custom management system for Home Depot, based on its PACE (professionalism, accountability, communications and execution) application suite. Interestingly, the IT department was not part of the planning process. "We dont usually bring IT in too often. You know how IT is," Martin said.

"Home Depots IT [department] is notoriously slow to move," said Jason Potter, vice president of client services at EnfoTrust.

According to Armstrong, Home Depots IT department actually declined the opportunity to be part of the project. "IT has a very formal planning process and stringent criteria around which products can be funded or supported," he said. "We went outside to do this and, in doing so, chose to outsource."

Next Page: Home Depot and EnfoTrust launch a pilot.