Hardware Retailing

JAN 2019

Hardware Retailing magazine is the pre-eminent how-to management magazine for small business owners and managers in the home improvement retailing industry.

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EXECUTIVE Q&A DISTRIBUTOR PROFILE SERIES HARDWARE RETAILING 39 Hardware Retailing (HR): Can you give readers an update on True Value's supply chain as we enter 2019? Abhinav Shukla (AS): We're in year three of five of our Supply Chain Network Optimization program, which is a central piece of a wider strategic plan. At the end of it, we'll have significantly reduced operation costs and improved productivity by 25 percent. In the next year, we'll have almost completely transitioned to a hub-and-spoke model. We are focused heavily on this, especially following our announcement of $100 million in investments into the program. In early December, we launched the first iteration of our hub-and-spoke distribution model in the midwest to address capacity issues and enhance our customers' product fulfillment and delivery experience. This strategy delivers many benefits, such as improved efficiency, streamlined deliveries and greater in-stock probability for low-volume SKUs. This system also allows us to provide increased distribution center capacity to support their future growth. Leading up to the switch to hub-and-spoke, we looked at our stocking strategy and optimized it across our central facility and regional centers. In the last three years, separate from this five-year plan, we've invested in voice-pick technology, which frees up operators' eyes and hands, leading to greater efficiency without requiring more employees and improving operations. HR: From a retailer's perspective, what are the efficiencies that have been delivered so far? AS: We pride ourselves on having competitive prices. For example, in 2016, despite increasing cost headwinds that have worsened since, we lowered our base freight rates and kept them at reduced levels. Consolidated receipts have allowed efficiencies at stores, and we want to make it easier to adopt these programs. We have industry-leading fill rates. The more you trust your primary distributor, the easier it is to do business with us. HR: What are you seeing in terms of inbound efficiency moving forward? AS: The broader supply industry is facing serious challenges from record low levels of unemployment, trade-related increases and commodity inflation, as well as persistent shortages in warehouse and driver labor pools. Distributors have struggled with inbound service levels, and we have adopted a multitude of strategies to insulate our customer fill rates from these challenges. On the pricing side, with the tremendous volatility around trade agreements and an inflationary raw material environment, we are protecting our customers by negotiating timing and level of price changes from our vendors. We're supporting our retailers by helping them with pricing strategies that preserve and grow margins in this volatile and rising price environment, and we guaranteed our Fall Reunion pricing, regardless of tariff activity, and plan to do the same for our Spring Reunion. HR: What are some operational challenges moving forward? AS: Our central objective is to support retailer growth and profitability by recognizing the reality of the world we live in. Consumers are seeking flexibility and choice through an omnichannel offering. That requires constant focus on in-stock accuracy, quality and cost to serve, and a strong focus on order to delivery, or lead times. New digital programs, such as customized circulars and retailer-specific e-commerce programs, will help us be more responsive and cost-effective. One of our differentiators on the e-commerce side is that 80 percent of our retailers participate in the ship-to-store program. Ship-to-store drives consumers into the store, so regardless of where they begin or end their journey, there is an interaction with a brick-and-mortar True Value, which builds the value and success for the customer with our retailers. For special orders, if a consumer walks into a store and a particular item is not in stock, they can place a direct-to-consumer order. It's providing retailers an extended capability supported by True Value. Supply Chain to Improve With New Investments An Efficient Supplier Abhinav Shukla Senior Vice President and COO Shukla is responsible for all aspects of supply chain management, global sourcing and strategic procurement. He has led strategic initiatives at several Fortune 500 companies, improving financial and operational performance.

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