Inventory Control the Home Depot Inventory Control

Inventory Control

The Home Depot Inventory Control

Every company that keeps a certain amount of product or raw material on hand needs a method for controlling the inventory of that good. In a retail setting, it is even more critical than it would be in a manufacturing one because of the small margins under which most retailers work. Because the inventory in a retail store is the lifeblood of the operation there needs to be a concerted effort to manage what the company has on hand and what they will need for the future. One of the largest retailers in the world, The Home Depot, has developed a system that allows them to operate at small margins while maintaining a profit. This essay will discuss the type of system that is used and how it is effective for the giant retailer.

According to Supply Chain Digest (2007), The Home Depot realizes that because people are decreasing the number of home starts and relying more on renovations since the economic downturn, the company will have to revitalize its inventory methods. Previously, the company was more focused on having a large amount of supply at regional distribution centers and concentrated less on the amount of stock available and the diversity of that stock. However, their business model has had to change because they buying public has changed. The inventory control system has thus changed to one in which the company relies more on having items in stock for the small customer and relies less on the large contractors that were such a large part of its business previously.

These facts have changed the way that the company deals with stock outs and safety stock. In the past four years the company has completely updated its systems to give a more direct line between associates (who know the level of stock in their areas) and the home office in Atlanta. A company such as Home Depot needs to have items customers are looking for in stock because they rely heavily on return traffic to remain profitable. With the constant threat of companies such as Lowe's they have tried to tie inventory control more to the customer. This is why there is a greater importance put on associate input than in the past.

To increase its ability to maintain customer loyalty through fewer stock outs, The Home Depot has designed an integrated inventory system that is heavily reliant on data inputs from employees (Data Direct, 2010). This system uses sales employees, inventory specialists and managers to coordinate the type and amount of stock that is needed. By controlling inventory on the floor (so to speak) Home Depot is trying to determine what trends are developing and stay ahead of them.