Q&A with Mark Holifield, a supply chain transformer

To lead its supply chain transformation, The Home Depot didn’t turn to just any retail veteran with PowerPoint skills and a familiarity with trucking. In Mark Holifield, the Atlanta-based retail giant found an executive with a background tailor-made for the task of updating its logistics from a store-as-warehouse model to a rapid deployment system. His career in retail—at Office Depot and HEB Grocery—and his college major in distribution and transportation form a foundation for his current job.

To lead its supply chain transformation, The Home Depot didn’t turn to just any retail veteran with PowerPoint skills and a familiarity with trucking. In Mark Holifield, the Atlanta-based retail giant found an executive with a background tailor-made for the task of updating its logistics from a store-as-warehouse model to a rapid deployment system. His career in retail—at Office Depot and HEB Grocery—and his college major in distribution and transportation form a foundation for his current job.

Home Channel News spoke with Holifield at his office in Atlanta, where he talked about the company’s goals, the evolutionary nature of supply chain improvements and a future where other retail initiatives will happily replace the supply chain on Home Depot’s center stage.

Home Channel News: Two years ago, Frank Blake told us the supply chain transformation is the biggest initiative here at Home Depot. Do you feel the pressure?

Mark Holifield: This has been an incredible experience for the company and personally as well. I think every executive should, at some point in their career, own the No. 1 initiative for the company just to see what that’s like. I’ll be happy when the supply chain transformation is no longer the No.1 initiative, and I think we might be at that point already. Supply chain is usually a background function. We’re looking forward to taking our rightful place in the background.

HCN: How does your background and experience at Office Depot influence you today?

Holifield: Well, it’s interesting that at Office Depot the company was founded with an intent to copy liberally from the Home Depot formula. It was more than just the name. Another thing they copied was the direct-to-store distribution model that the Home Depot had adopted from its beginning. But those stores sell far less product than a Home Depot, so their direct-to-store model failed to perform for them much earlier than the direct-to-store model failed to perform for The Home Depot. So, very quickly, we transitioned away from that, and that was great experience preparing me for our supply chain transformation.

HCN: So, the idea of the store as the “Home Improvement Warehouse”—do you still think in those terms?

Holifield: It is a “warehouse with a wow,” as we say. It is truly a warehouse, but I also think there are some differences that can happen with stores, though, with a different logistics model. You know, maybe the racks don’t have to be so high, and maybe we could have better sight lines in the store over time. The stores’ configuration can, I think, be simplified and changed a bit as a result of a new logistics model as the company evolves. The direct-to-store warehouse model worked great for years, helped to grow the company to its dominant position in this home improvement retail space. But, for the future, a more developed supply chain makes more sense.

HCN: Why is that, and what are the big changes for your people in the stores, your customers and your vendors?

Holifield: The key deliverables for our supply chain are pretty much like any other supply chain. First, how do we make sure that we’re in stock for the customer? Secondly, how do we make sure we’re utilizing our inventory well and not having too much cash tied up in inventory? Thirdly, are we moving our freight efficiently through the system? Can we do that at a cost that is competitive? And then, fourth, are we serving our stores well and helping them to sell to the customer by making things simpler for the store?

HCN: And what’s been the impact on vendors?

Holifield: The vendors have been incredibly helpful and cooperative in the transformation. When we talk to them, every vendor has gotten it. They clearly understood why we’re wanting to do what we do. Each time we [get] a vendor [on board] to the RDC program, we negotiate an allowance with them that helps to offset the costs that we’re taking on and taking out of the vendors’ supply chain. Vendors have been incredibly cooperative in working with us on that. No vendor has said, “We don’t want to play.” Having to pick individual store orders for The Home Depot wasn’t really something they really wanted to do in many cases because they’re used to shipping to other retail customers to their warehouses and not direct-to-store.

HCN: Your RDCs will all be in line at the end of fiscal 2010. What’s going to happen then?

Holifield: I wouldn’t look for a massive sign that says, “Hey, Home Depot’s done, and now it’s transformed, and there’ll be a new awakening.” I don’t think it’s going to be like that at all. I think we’ve begun the process of seeing improving results as a result of the RDC program, and we’ll continue to see those results as we move forward.