Dive Brief:
- Home Depot has kicked off a $1.2 billion program to improve its outbound delivery system in an effort to become the "best delivery agent in home improvement," as the company said at a recent conference.
- Now in its pilot phase, the program intends to bring next-day deliveries to all U.S. customers by 2022, DC Velocity reports. The company plans to build 25 new local direct fulfillment centers, 40 direct fulfillment centers for flatbed truck deliveries, and seven "parcel plus" direct fulfillment centers.
- The company also plans to reduce "last-mile" costs by continuing to use buy online, pick up in store (BOPIS) methods.
Dive Insight:
Joining a growing number of companies quickening the pace of consumer deliveries, Home Depot is striving to "create the fastest, most efficient delivery in home improvement," according to materials from a December presentation by Mark Holifield, Home Depot's executive vice president of supply chain.
The company has been investing in direct-to-consumer networks and e-commerce for years, "so this latest move isn't a surprise," wrote Haley O'Donnell, logistics technology researcher at Armstrong & Associates, in an email to Supply Chain Dive.
Two-day delivery is old hat now, and "the model of having a handful of DCs across the country won’t cut it," O'Donnell said. "We estimate next-day requires at least 40 locations, while same-day requires 80-plus."
Home Depot, as well as other retailers, are moving to second-tier cities, O'Donnell pointed out: "Retailers want to provide quick delivery nationwide, not just to major metros."
The company also plans to continue making use of BOPIS, reducing last-mile costs by allowing the consumer to make the trip to a local store. However, the company does plan to start using vans and cars, besides flatbeds and box trucks, to make smaller local home deliveries.
The move is part of a direct-to-consumer push that companies besides Amazon are starting to champion, O'Donnell said. Besides providing quick delivery of smaller goods, companies are also increasing heavy-goods last-mile delivery, she said.
"Consumers are becoming more comfortable making online purchases of everything from furniture to appliances to building materials and equipment," she said.
