2015 INVESTOR AND
ANALYST CONFERENCE
Supply Chain
Optimization
Mark Holifield
Executive Vice President
Supply Chain & Product Development
2015 INVESTOR AND ANALYST CONFERENCE
Enable Direct Fulfillment & Delivery
Connecting Store to Website and Website to Store
Supply Chain Synchronization
Connecting Merchandise From Supplier to Shelf
to Customer
Connecting Activities to Cost Efficiency
Supply Chain Transformation Continues
2
2015 INVESTOR AND ANALYST CONFERENCE
3
Connecting Network Infrastructure
- Bulk Distribution Centers
- Stocking Distribution Centers
- Rapid Deployment Centers
- Interline Distribution Centers
- Stores
- Direct Fulfillment Centers
2015 INVESTOR AND ANALYST CONFERENCE
Calgary RDC & SDC On Track For 2016 Opening
Canada Distribution Network
Vaughan, Ontario
RDC/SDC
Calgary, AB
RDC – January ’16 Go Live
SDC – March ’16 Go Live
Vaughan, ON
RDC – Live
SDC – December ’15 Go Live
Calgary, Alberta
RDC/SDC
RDC = Rapid Deployment Center SDC = Stocking Distribution Center
4
2015 INVESTOR AND ANALYST CONFERENCE
Strengthening Our Interconnected Capabilities
5
THD Stores Vendors
Direct
Fulfillment Centers
Pro Delivery
Big & Bulky Delivery
Parcel Delivery Vendor Delivery
Flat Bed Delivery
Global View of
Inventory & Fulfillment Channels
Global View of
Transportation Assets
2015 INVESTOR AND ANALYST CONFERENCE
Buy Online Ship to Store (BOSS) via RDC
6
Shipping Cost
Direct to
Customer
$$$$$
BOSS via RDC
$
Direct to Store
$$$
DFC
RDC
Store
2015 INVESTOR AND ANALYST CONFERENCE
Direct-to-Customer Volume Continues to Grow With Our Expanded Capabilities
Growth of Delivery
7
2014A 2015F 2016T 2017T
Total Interline Delivery
Store Delivery
Appliance Delivery
Online Delivery
Number of Deliveries
2015 INVESTOR AND ANALYST CONFERENCE
Enhanced Delivery Capabilities
8
2 Hour
Window
Available
Improved Scheduling Store SimplificationBODFS Enablement
Customers know when
they’ll get their order
Enables a new way to
buy bulky products
Easier for THD associates
to schedule deliveries
2015 INVESTOR AND ANALYST CONFERENCE
New Direct Fulfillment Centers
Troy Township:
Q3 2015
New Mechanized DFCs
Perris:
Q3 2014
Locust Grove:
Q1 2014
Speed To Customer
Enable Sales Growth
9
2015 INVESTOR AND ANALYST CONFERENCE
Enable Direct Fulfillment & Delivery
Connecting Store to Website and Website to Store
Supply Chain Synchronization
Connecting Merchandise From Supplier to Shelf
to Customer
Connecting Activities to Cost Efficiency
Supply Chain Transformation Continues
10
2015 INVESTOR AND ANALYST CONFERENCE
Our Supply Chain Evolution
11
Supplier Supplier
RDC
SYNC
1979-2008 2008-2014 2015+
“Infrastructure” Phase “Optimization” Phase
2015 INVESTOR AND ANALYST CONFERENCE
Total Lead Time - 11 Days
Synchronize Flow From Supplier to Shelf
“Infrastructure” Phase
Inbound Transportation
Manufacturing Plant
Supplier DC
Store
Rapid
Deployment
Center
Partially Full
Truck
Ship
2-10 Days
Transport
1-5 Days
Received
1-4 Days
12
2015 INVESTOR AND ANALYST CONFERENCE
Total Lead Time - 5 days
Synchronize Flow From Supplier to Shelf
13
“Optimization” Phase
Inbound Transportation
Full Truck
Ship
Same Day
Next Day
Load
Stack Pallets
Transport
Actual Transit
Time
Load
Full Trucks
Multi-stop
Received
Same Day
Ship
Direct Opportunities
Manufacturing Plant
Supplier DC
Store
Rapid
Deployment
Center
2015 INVESTOR AND ANALYST CONFERENCE
Engineered Flow Shortens and Stabilizes Lead Time
How We Are Doing It
14
“Engineered Flow Schedule”
THD
Order
Day
Mon
SUPPLIER
Supplier
Ship Hours
Ship
Day
Ship
Time
7am – 9pm Tue 3pm
CARRIER
Transit
Time Days
Arrival
Day
Arrival
Time
0.7 Wed 7am
RDC LT
Work
Day
Shift
Hours
IB LT
Days
Wed
5am
–
3:30pm
2.3
Supplier Ships Next Day
Volatile, 6-12 days
Stable 3 days
Lead Time (days)
Fiscal Week
2015 INVESTOR AND ANALYST CONFERENCE
Connecting End to End
15
Sync Engine Optimizes:
Supplier
Balanced shipping labor
Inventory from closest
shipping location
Inbound
Transport
Rapid Deployment
Center
Outbound
Transport
Store
Lowest rate
Full truckloads
Multi-stop pick-up
Balanced lane capacity
Optimize inbound with
outbound
Balanced labor capacity
Balanced conveyor &
equipment capacity
Lowest rate
Full truckloads
Balanced lane capacity
Optimize outbound with
inbound
Minimize pack up / pack
down
Minimize inventory
touches & footsteps
Planned freight flow
2015 INVESTOR AND ANALYST CONFERENCE
Cube Utilization of Inbound Trailers Cube Utilization of Outbound TrailersCartons Per Labor Hour (RDCs)
Reduce Logistics Cost Through Productivity
16
Outbound ProductivityInbound Productivity Labor Productivity
2013A 2015F 2018T
2013A 2015F 2018T
2013A 2015F 2018T
2015 INVESTOR AND ANALYST CONFERENCE
Deliverables of a Best in Class Supply Chain
Supply Chain Competitive Advantage
Inventory
Productivity
Logistics
Cost
Service
to Stores &
Customers
In-Stock
17