Executive Briefings

Q&A: Supply Chain Strategies and Challenges at True Value

Every retail company has to cope with the changes mandated by operating in an omnichannel world, and seasonality confronts every one of them with pressures they don't see the rest of the year. But for companies in the retail hardware space, e-commerce and seasonal business peaks carry their own special challenges.

Q&A: Supply Chain Strategies and Challenges at True Value

Paul Farber, division vice president of supply chain operations at True Value Company, knows that well. SupplyChainBrain editors spoke with him at the annual WERC conference, this year in Fort Worth. He discussed those challenges and the competition True Value’s coop members feel from the big-box companies, like Lowe’s and Home Depot.

SCB: As I understand it, your key role is to help manage the 13 True Value distribution centers across the country. What’s your main goal there?

Farber: Our key goal is to make sure we service our stores. To do that, we have goals such as a 48-hour order-to-delivery cycle. That is an imperative, that we get product to the store when they need it.

SCB: Well, let’s speak a bit more about the hardware world in which you work. It’s highly competitive, and yet it is a low-margin market. So, how do you survive, and even thrive?

Farber: There are a couple of things, and one is as you said, it’s a very competitive market. The big boxes have moved into the business and really shrunk our ability to grow.

SCB: How do you combat that?

Farber: We, as a coop, offer a lot of services to our stores, things like True Value rewards, which are designed to bring customers in and create loyalty among the customers. But the thing that we do the best is to ensure that our stores can remain independent. We have 4,500 stores, owned and operated by the individual owners. We provide the services they need, but they are the ones at the end of the day who are accountable for running their business while we provide those services. We don’t expect them to follow all of the guidelines of True Value; they still have that independence, because they know their region and what works best for them so that they can run their store.

SCB: Is that independence that you mentioned in any way a challenge to you or do you find that it works well with the supply chain goals of the company?

Farber: It’s actually our biggest challenge. We have 4,500 stores, and they all want to do their own thing. That means they need different products and they service different customers, so trying to buy inventory in this type of model is very tough. Trying to service stores in the Northeast is very different than servicing stores in Florida, for instance. So we try to keep our product line profitable, but at same time servicing all the stores.

SCB: Perhaps it’s not quite like herding cats, but dealing with any number of people with their very different approaches to supply chain — that has to be somewhat of a challenge for you.

Farber: Absolutely. We deal with small, mom-and-pop stores that sell hundreds of thousands of dollars’ worth of items a year all the way to those stores that do a $100m in business a year. Again, the services they need from us, their expectations, are different. So, while for one store the main thing is just getting the right product in their stores, for others, the big challenge for us is getting the product to them when they need it. Some of them are so big they need deliveries every day. And some of the stores are going more and more into the omnichannel business. Trying to support them becomes a different challenge. And then there’s seasonality.

SCB: Well, let’s run through those two items, seasonality and omnichannel. What are the challenges they bring?

Farber: Seasonality is big. We’re different from a lot of retailers because their biggest time is around Christmas. Ours is the spring. We actually call spring business our Christmas, especially in the northern DCs. There’s really about a 40- to 50-percent difference in business between the low months to the high months. Two examples of things we’re concerned with: hiring people and transportation. Having the right workforce on site, having the right transportation resources in place, those are always challenges during those business peaks.

SCB: So how is True Value meeting the challenges posed by e-commerce? One of the things we’re seeing in retail is a move toward fulfilling orders from the store. What are you finding in your particular part of retail as you confront the expectation of the e-commerce customer?

Farber: As we got more and more into e-commerce business, we opened truevalue.com. One of the things we saw was that more of our business was actually ship-to-store. Almost 80 percent of our truevalue.com orders are ship-to-store. For us, it’s been profitable because our average line value is about $24 a line, but with ship-to-store, it’s about $85. They’re ordering big sheds, big lawn mowers, things like that. Having the customer ordering online and picking up at the store is profitable for us.

SCB: I imagine there is a challenge in ship-to-store, no matter the size of the store you’re shipping to. Behind the scenes, what is the technology you’re using to fulfill those orders?

Farber: We have a WMS in place that allows us to batch orders and fill them. Then we have packing stations at our shipping docks. We’ve adapted. We’ve actually looked at some 3PLs, but we don’t’ have the volume to use them. We’re not there at this point.

SCB: Is it fair to say that the SKUs may change somewhat, given the difference in locales around the country? How do you manage that mix?

Farber: You know, about 90 percent of the items are the same. The remaining 10 percent or so is different. They’re regional items. In Florida, for instance, they may need orange pickers, whereas in California their crop mix is different than in the South.

Resource Link:
True Value

Paul Farber, division vice president of supply chain operations at True Value Company, knows that well. SupplyChainBrain editors spoke with him at the annual WERC conference, this year in Fort Worth. He discussed those challenges and the competition True Value’s coop members feel from the big-box companies, like Lowe’s and Home Depot.

SCB: As I understand it, your key role is to help manage the 13 True Value distribution centers across the country. What’s your main goal there?

Farber: Our key goal is to make sure we service our stores. To do that, we have goals such as a 48-hour order-to-delivery cycle. That is an imperative, that we get product to the store when they need it.

SCB: Well, let’s speak a bit more about the hardware world in which you work. It’s highly competitive, and yet it is a low-margin market. So, how do you survive, and even thrive?

Farber: There are a couple of things, and one is as you said, it’s a very competitive market. The big boxes have moved into the business and really shrunk our ability to grow.

SCB: How do you combat that?

Farber: We, as a coop, offer a lot of services to our stores, things like True Value rewards, which are designed to bring customers in and create loyalty among the customers. But the thing that we do the best is to ensure that our stores can remain independent. We have 4,500 stores, owned and operated by the individual owners. We provide the services they need, but they are the ones at the end of the day who are accountable for running their business while we provide those services. We don’t expect them to follow all of the guidelines of True Value; they still have that independence, because they know their region and what works best for them so that they can run their store.

SCB: Is that independence that you mentioned in any way a challenge to you or do you find that it works well with the supply chain goals of the company?

Farber: It’s actually our biggest challenge. We have 4,500 stores, and they all want to do their own thing. That means they need different products and they service different customers, so trying to buy inventory in this type of model is very tough. Trying to service stores in the Northeast is very different than servicing stores in Florida, for instance. So we try to keep our product line profitable, but at same time servicing all the stores.

SCB: Perhaps it’s not quite like herding cats, but dealing with any number of people with their very different approaches to supply chain — that has to be somewhat of a challenge for you.

Farber: Absolutely. We deal with small, mom-and-pop stores that sell hundreds of thousands of dollars’ worth of items a year all the way to those stores that do a $100m in business a year. Again, the services they need from us, their expectations, are different. So, while for one store the main thing is just getting the right product in their stores, for others, the big challenge for us is getting the product to them when they need it. Some of them are so big they need deliveries every day. And some of the stores are going more and more into the omnichannel business. Trying to support them becomes a different challenge. And then there’s seasonality.

SCB: Well, let’s run through those two items, seasonality and omnichannel. What are the challenges they bring?

Farber: Seasonality is big. We’re different from a lot of retailers because their biggest time is around Christmas. Ours is the spring. We actually call spring business our Christmas, especially in the northern DCs. There’s really about a 40- to 50-percent difference in business between the low months to the high months. Two examples of things we’re concerned with: hiring people and transportation. Having the right workforce on site, having the right transportation resources in place, those are always challenges during those business peaks.

SCB: So how is True Value meeting the challenges posed by e-commerce? One of the things we’re seeing in retail is a move toward fulfilling orders from the store. What are you finding in your particular part of retail as you confront the expectation of the e-commerce customer?

Farber: As we got more and more into e-commerce business, we opened truevalue.com. One of the things we saw was that more of our business was actually ship-to-store. Almost 80 percent of our truevalue.com orders are ship-to-store. For us, it’s been profitable because our average line value is about $24 a line, but with ship-to-store, it’s about $85. They’re ordering big sheds, big lawn mowers, things like that. Having the customer ordering online and picking up at the store is profitable for us.

SCB: I imagine there is a challenge in ship-to-store, no matter the size of the store you’re shipping to. Behind the scenes, what is the technology you’re using to fulfill those orders?

Farber: We have a WMS in place that allows us to batch orders and fill them. Then we have packing stations at our shipping docks. We’ve adapted. We’ve actually looked at some 3PLs, but we don’t’ have the volume to use them. We’re not there at this point.

SCB: Is it fair to say that the SKUs may change somewhat, given the difference in locales around the country? How do you manage that mix?

Farber: You know, about 90 percent of the items are the same. The remaining 10 percent or so is different. They’re regional items. In Florida, for instance, they may need orange pickers, whereas in California their crop mix is different than in the South.

Resource Link:
True Value

Q&A: Supply Chain Strategies and Challenges at True Value