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.
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.
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.”
Home Depot and EnfoTrust
launch a pilot”>
The IT department did conduct an architectural review, which served the purpose of vetting the chosen company in a way that the merchandising organization couldnt.
“What the review board does is to really get in the weeds of the company,” Potter said. “Tom [Armstrong] had narrowed it down to EnfoTrust, but not being a technologist by trade, he was feeling a little naked.”
The review board required only minor tweaks to the plans that EnfoTrust submitted: that the Web interface adhere to HTTPS (HTTP Secure) rather than HTTP and that EnfoTrust host its data with SunGard Data Systems Inc., a disaster recovery center in Alpharetta, Ga.
Home Depot and EnfoTrust signed a contract in August 2003, launching a pilot program with the Electrical and Lighting Department that November. Within two years, every department was on board except for the one handling live goods, such as plants and garden supplies.
Built to run on handheld computers based on Microsoft Corp.s Windows Mobile, the new management system walks service representatives through specific steps to ensure that products are displayed the way Home Depot wants them. With a series of “yes” or “no” questions, plus room for comments, the PACE software covers a variety of tasks: replacing missing labels, building set displays, making sure related items are displayed together, returning defective merchandise to the vendors and so on. The task lists vary by store department but remain consistent companywide.
Service representatives are required to sign in and out of the stores via an infrared “beacon point,” which notes the date, time and location of the store.
At the end of each day, representatives synchronize their handhelds with the EnfoTrust server, usually via a dial-up connection. The service data is downloaded onto a Web site that tracks all store service activity. Home Depot and service agency executives can analyze the data in the form of monthly report cards, which lets them make educated changes to the process.
For example, in cases where there are too many “no” answers on the yes/no forms, “we can aggregate the information and figure out whats wrong,” said Alan Mishkoff, vice president of sales at Black & Decker, also in Atlanta. “It helps us plan for the future.”
Key to the process is a large service photo gallery. Service representatives are required to take and send pictures of their work, proving that they are doing their jobs.
“We look for before service pictures and after service pictures,” Martin said. “That way, everyone can see whats going on with service in the store and answer a lot of questions.”
A major task of the ISSI team was to winnow the number of service agencies serving Home Depot from 342 to 33. Black & Decker, Behr Process Corp. and a few other large manufacturers were allowed to keep their service contracts generally intact, but others had to form new contracts with third-party service agencies that Home Depot hired.
Armstrong sent out an RFP (request for proposal) that included several new requisites: service representatives would now serve Home Depot directly, they would be held accountable for all their in-store actions with the new technology, and they would be required to foot the bill for the PDAs and a software contract with EnfoTrust. While it behooved the agencies to keep better track of their employees, it was still a tough sell.
“Our biggest challenge was getting the factory reps to buy into the idea,” Armstrong said.
“When they first proposed it, we were not in favor of going down that path,” Mishkoff said. “Its not cheap.”
Enfotrust charges a monthly licensing and service fee of $100 per handheld computer, Mishkoff said, not to mention the prices of the computers themselves. Wanting to keep costs palatable, Armstrong and the team initially eschewed rugged but expensive PDAs from Symbol Technologies Inc. and Intermec Technologies Corp.
“They saw some of the prices of the Symbols and the Intermecs of the world, and they started choking,” Potter said. “They said, We cant ask these service agencies to pay $2,000 per device.”
In September 2003, EnfoTrust and Home Depot chose Dell Inc.s Axim X5 handheld computers, deploying about 1,600 of them to the service agents. Axims dont have cameras, which were key to the merchandising process. So the team jury-rigged the Axims with Photo Traveler cameras from Veo International and modems from Socket Communications Inc., which fit into the Axims expansion slot. EnfoTrust wrote the drivers.
Finding the right equipment
It didnt take long for everyone to realize that the hardware they chose was not suitable for industrial environments. “What a learning experience that was,” Armstrong said. “The Veo cameras were a consumer product in an industrial application.”
Added Potter: “Veo hates us right now. All these people were sending thousands of broken cameras back to them. They said they never meant them to be used in commercial environments.”
The Axims, designed for the corporate office, proved to be vulnerable to dust and falls. Mishkoff said his service representatives reported numerous broken screens. Newer X50 models have fared better but still require peripheral cameras.
In December 2003, the team again contacted Symbol, of Holtsville, N.Y. Symbol announced its MC50 handheld computer in October 2004, aiming it at vertical markets that needed something between a corporate PDA and a super-rugged one. It wasnt weatherproof, but it had some built-in shock protection and, more important, an integrated camera and modem.
Home Depot received a deal of $950 per device, including the modem.
“That is roughly twice the cost of otherwise similar models from Hewlett-Packard [Co.] or Dell,” said Todd Kort, an analyst at Gartner Inc., a consultancy in Stamford, Conn. “But all it takes is one major breakage incident with [HPs] iPaq or Axim and you have lost your cost advantage relative to the MC50. An important factor is that these ruggedized devices are typically used for five to seven years, whereas most enterprises use iPaqs or Axims for 12 to 24 months before moving to another device.”
The service agencies are still in the process of switching over to the Symbol devices; some are still beholden to leasing agreements with Dells VARs, and it may be 18 to 24 months for some of them to make the switch. Meanwhile, Home Depot is always looking for less expensive alternatives.
“Id like to see the price come down,” Armstrong said. “We have a big spend. I love our relationship with Symbol relative to in-store service, but Id like to see the prices drop.”
In general, Home Depot is happy with the results of the system. EnfoTrust processes and stores some 340,000 photographs from some 11,500 handheld computers each day.
Before the implementation, a typical service representative worked an average of 28 hours each week, Armstrong said, citing a recent labor study. Now, they work an average of 40 hours per week.
“Were feeding [Home Depot] the information that they need, but were also tracking it for ourselves,” Mishkoff said. “We know now how many hours our reps are in the stores, which is a good thing. Before, we basically managed by walking around the stores and just seeing how they looked.”
While they clock in daily on the infrared beacon and record all their data in the stores, most service representatives still synchronize their devices with EnfoTrusts server only once a day—and not from the store. Often, representatives use a dial-up connection from their home or hotel. Armstrong said he is looking to replace the beacon-based check-in system with a more technologically advanced way to locate service representatives, but there are no definite plans for GPS or any other location-based technology.
Home Depot is also in early pilot tests that involve pushing data to and from BlackBerry devices from Research In Motion Ltd. via a cellular connection. Many service representatives already use BlackBerry devices, Armstrong said. RIM recently launched a BlackBerry that runs on the Cingular Wireless high-speed EDGE (Enhanced Data for Global Evolution) network, and RIM has been touting it as the perfect tool for mobile field force automation. The higher the bandwidth of the network, the more graphic-heavy data it can process.
In the meantime, Potter and the Home Depot services team are hoping to integrate their system with Home Depots in-store Wi-Fi network in the next year, so that service representatives can send data directly from the stores.
Wi-Fi integration will mean building a secure VLAN (virtual LAN) connection; otherwise the powers that be will not sign off on it. This also means working with the IT department again.
Early in 2004, Cisco Systems Inc., of San Jose, Calif., beat Symbol in a bid for a vast WLAN (wireless LAN) installation at Home Depot stores, an account so coveted that Cisco CEO John Chambers was personally involved in securing it, according to sources close to Cisco. Neither company has officially announced the deployment.
“The current thought process is to go over the wireless LAN eventually,” Martin said.