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HomeDepotOperationalStrategy.docxRunning head: HOME DEPOT OPERATIONAL STRATEGY 1
HOME DEPOT OPERATIONAL STRATEGY 10
Vice President of Operations, Part 2
Bradford Gonzalez
BUS 515: Operations Management
Instructor: Phyllis Parise
November 12, 2017
Home Depot Operational Strategy
Weaknesses in Product Lifecycle
The product lifecycle is the process that a product undergoes from its inception in the market until the point that its demand gradually drops to zero. The stages involved in the product lifecycle are introduction, growth, maturity, and finally decline. The products of Home Depot are no exception as they also undergo the same stages. However, they also have some limitations that do hinder their lifecycle. One such limitation is their lifespan and distribution during their lifecycle. It is apparent that Home Depot manufactures its products typically to fit the American population and as a result, the products fail to attain their maximum potential during their lifecycle (Lombardo, 2017). From their introduction to their decline stage, the Home Depot products are subject to limited distribution as well as exposure, which eventually makes them have a shorter time span than expected. For instance, when the organization concentrates on introducing its products to the American market and fails to pay attention to other global markets, it limits the lifecycle of the product, as it will not have a global impact that it should have. In addition, other stages that include maturity and growth are cut short since once the organization manages to exhaust the American market demand, it is unable to penetrate the other markets effectively and hence it speeds up the decline stage of the product.
Another weakness that is apparent in the lifecycle of Home Depot products is the distribution of substandard products. Consumers are usually very keen on how they spend their financial resources especially when one considers the current tough economic times. This means that they are willing to either embrace a product or refuse it on many bases (Kems Jr, 2015). Regrettably, between 2012 and 2015, Home Depot managed to sabotage the lifecycle of some of their products by distributing and reselling already recalled merchandise. This was a big blow to the organization as it compromised the confidence that the consumers had in them. The faulty items included washing machines as well as fire extinguishers. As a result, Home Depot shortened the lifecycle of their products as the majority of their customers opted to get their merchandise from other distributors like Lowe or Nitori holdings who are peers as well as great competitors of Home Depot.
Recommendations
To counter these problems, Home Depot should first consider coming up with a product that will appeal to the global market. It should take the approach of multinationals such as Samsung, Sony, or LG that have created a global market for their products. Increasing the market share of the organization to international levels will enable Home Depot’s products to have a longer life cycle. For example, the American economy is the greatest determining factor for Home Depot's products lifecycle. This means that in case the American economy collapses, their products will ultimately lack demand and their lifecycle will be shorter than expected.
This organization should penetrate evolving markets in Asia and Africa. Such places have a lot of untapped market potential and Home Depot can use this opportunity to showcase its products. In addition, both continents have available markets as well as labor that will be beneficial to Home Depot. In regards to the distribution of faulty or recalled products, Home Depot should come up with a compliance program that will take all its products through rigorous sampling prior to presenting them to the market. Since faulty products are bound to enter the market occasionally, the compliance program should make sure that sell recalled products to unsuspecting clients since they have adverse effects on the organization (Kems Jr, 2015).
Supply Chain Management
Home Depot is among the largest retailers that deal in home construction and improvement services and products. With more than 2,000 stores and over 300,000 employees across the United States, China, Mexico, and Canada, the organization has a complex supply and logistics chain that it manages to operate effectively given its overall success The Home Depot, 2016). The major components of Home Depot’s supply management include demand management, integration, and communication.
Demand Management
Burnson (2014) suggests that demand management is a very critical component in Home Depot’s supply management chain as it allows the company to focus on how it will meet the demands of its customers. Through the management of demands, the Home Depot markets its products to the customers who are usually certain that the organization will meet their demands. To address this aspect of its supply chain, Home Depot makes its distributors and other partners aware of the needs of its customers hence prompting them to maximize the quality of supply and ass value to the finished products of the organization. Through raising awareness of the customers’ needs and increasing collaboration between the suppliers, Home Depot enhances the competitiveness of the entire supply chain and increases business opportunities.
Communication
To make sure that it meets the demands of the consumers, Home Depot has ensured that there exists effective communication between all its stakeholders. The effective communication in the whole supply chain of the organization helps to enhance productivity and efficiency of its logistical operations by allowing all the members to share the same operational and demand information. Through effective communication, all stakeholders in the supply chain are informed of the developments in their contribution to the department thus allowing them the ability of promptly adjust their operations to be in line with any changing conditions in the existing demands. In addition, the communication channels in Home Depot enable them to respond rapidly to novel business opportunities that assist them in getting new products and services to the market quickly or increase the levels of supplies after a successful market campaign.
Integration
To enhance its supply chain, Home Depot has integrated the procurement processes in order to reduce its inventory costs. To make sure that the integration works, Home Depot has created a system where suppliers share up to date information concerning demand to route their products to their warehouses for onward shipment to stores and other delivery points with the least time in inventory. Consequently, this cuts down Home Depot’s costs significantly thus enabling them to offer their customers goods at competitive prices. To achieve this level of integration, Home Depot has developed a single information network that enables its suppliers and distributors to access and share demand and supply information more securely (Burnson, 2014).
Challenges and Solutions in the Supply Chain
Access to Latest Technology
It is quite evident that one of the biggest challenges that Home Depot can face in its supply chain is the access to the latest technology. In the current world, organizations are keen on upgrading their technology to ensure that they offer the best to their clients (Stefansson, 2012). However, in the case where Home Depot fails to access the best and latest technology, it can run the risk of losing some of its market share to its competition. To solve this issue, the organization should outsource technology-related issues to organizations specialized in such matters. This will allow Home Depot to concentrate on its core business of home improvement and construction.
Safety and Quality Products
Home Depot has imminent pressure from the consumers to produce high-quality products. An increase in the recalling of products can damage the reputation of the organization, which can be a very expensive matter. To avoid such instances, Home Depot should ensure that it thoroughly tests all its products to make sure that they meet the minimum required standards.
Rapid Changing Markets
Psychological, economic, social, as well as cultural factors have a way of influencing the behaviors of customers and hence the demand for goods or services. Home Depot runs the risk of having consumers perceive their products as obsolete (Stefansson, 2012). To address this issue, Home Depot’s supply chain should be vigilant in following the market trends. They should be active on social media platforms and make any necessary adjustments to their business model.
Quality Management Tool
The Cause and effect or Fishbone Diagram
This is a very effective quality management tool as it allows organizations to simulate different circumstances and be able to know the effects of implementing certain strategies. It is a significant tool as organizations can use it in structuring brainstorming sessions and sort out ideas into useful categories thereafter. In this instance, Home Depot should use this tool in sorting out its challenges in the methods it uses, machinery, personnel, materials, and the market environment. Integrating all these factors while making a decision based on the organization will enable Home Depot to come up with a working formula that will improve its quality (Ilie & Ciocoiu, 2010).
Just in Time Philosophy
Organizations use this inventory strategy to increase efficiency and reduce waste through the receipt of products strictly when needed in production. As a result, the organizations reduce the inventory costs. However, to employ this approach, the organization has to be very accurate in forecasting.
Advantages
Compared to the conventional approaches, this method has three main advantages. First, organizations spend relatively less finances on raw materials as they purchase just enough to produce the finished products. Secondly, organizations are able to save on their operational costs since they do not need plenty of warehousing space. Lastly, the production runs are not long meaning that the manufacturers can move from production of one product to another easily thus making their products appeal to the demand.
How Just in Time Philosophy Impacts Quality Assurance
It is first prudent to note that this approach only advocates for production of goods needed at a particular time. As a result, organizations do not end up storing the finished products that may depreciate with time hence compromising their quality. Secondly, the approach promotes flexibility in the production line of a company hence fostering invention and innovation that eventually leads to the production of high-quality products. Lastly, this philosophy enhances the quality of customer service as the organizations that employ this approach have better relationships with their clients because they always meet their demands (Reid, 2013).
Qualitative and Quantitative Forecasting Methods
Qualitative forecasting methods are based on the judgmental or intuitive evaluation. Organizations typically use such approaches when there is scarcity of data. The common qualitative methods include market research, Delphi method, personal insight, panel consensus and sales force estimates. Quantitative methods, on the other hand, rely on historical demand data. They entail the use of time series and associative models. In this instance, the use of Delphi method and time series can be effective in explaining the qualitative as well as quantitative approaches (Dubrin, 2011).
|
Delphi Methods |
Time Series Approach |
|
The supply chain relies on existing market information to predict demand and supply |
Supply chain relies on past trends to determine demand or supply |
|
Applicable when there is a sudden shift in the demand for products |
Applicable when suppliers and distributors anticipate a repeat in demand for certain products. For example, they anticipate certain products to be on demand during the Christmas festive season. |
Delphi Method Advantages and Disadvantages
The main advantage of the Delphi approach is that it relies on the feedback of market experts. Such individuals have a higher probability of giving the correct forecast related to the demand and supply forces of the market. However, the main challenge with this process is that it is complicated and that the questionnaires may limit the responses of the experts hence limiting their insight (Dubrin, 2011).
Time Series Approach Advantages and Disadvantages
It is evident that humans are creatures of habit and that they are most likely to repeat their behaviors. Therefore, the use of time series analysis can be beneficial as it will enable organizations to forecast when certain products or demands may be back in demand. However, the main weakness that lies in the use of time series is that the historical data may be obsolete and that the consumers may have changed their tastes and preferences towards certain products or services completely. If that is the case, the use of time series analysis can be disadvantageous to an organization (Dubrin, 2011).
References
Burnson, P. (2014, June 10). Omni-channel retailing creates new challenges for supply chain managers. Retrieved from Logistics Management: http://www.logisticsmgmt.com/article/omni_channel_retailing_creates_new_challenges_for_supply_chain_managers
DuBrin, A. (2011). Essentials of management. Nelson Education.
Ilie, G., & Ciocoiu, C. N. (2010). Application of fishbone diagram to determine the risk of an event with multiple causes. Management Research and Practice, 2(1), 1-20.
Kerns Jr, R. W. (2015). The Counterfeit Good Crisis in China: A Systemic Problem and Possible Solutions. NCJ Int'l L., 41, 573
Lombardo, J. (2017). Home Depot’s Operations Management, 10 Decisions, Productivity - Panmore Institute. Panmore Institute. Retrieved 21 October 2017, from http://panmore.com/home-depot-operations-management-10-decisions-areas-productivity
Reid, R. D. (2013). Operations Management - 5th Edition. Hobken, NJ: John Wiley and Sons.
Stefansson, G. (2012). Supply Chain Innovation for Competing in Highly Dynamic Markets: Challenges and Solutions.
