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Home Depot Is Bulking Up Its Supply Chain to Serve Contractors

Home Depot’s new supply-chain investments mark a bet on the construction and remodeling professionals that the home-improvement retailer sees as a strong growth market in an uncertain consumer economy.

The company plans to add four distribution centers this year to its network of 14 warehouses targeting professionals, with dedicated sites handling bulky construction materials—lumber, insulation and roofing shingles, for instance—that are particularly in demand among contractors.

Chip Devine, the company’s senior vice president of outside sales, said Atlanta-based Home Depot is grouping together similar products in its warehouses so it can handle them in bulk, which cuts costs and speeds up fulfillment.

Sales to the professional market account for about 48% of Home Depot’s overall sales. The company is looking to handle bulky items more efficiently so it can offer lower prices to its professional customers, Devine said.

Retailers typically look for ways to speed up delivery and cut costs by grouping similar products together within warehouses. Many merchants also run e-commerce fulfillment centers that operate separately from their store replenishment network, allowing employees to focus on either handling individual, small orders or large pallet-sized shipments.

“Anytime you can ship stuff in bulk rather than in smaller quantities, you get the efficiencies in material handling, you get freight efficiencies, you get order quantity reductions,” said Rob Handfield, a supply-chain management professor at North Carolina State University. “There’s multiple ways of saving.”

Home Depot estimates the market for bulky, big-ticket orders going to professionals is about $200 billion. To win more business from those customers, Home Depot is adding features such as the ability to reserve products, have products delivered to job sites and to pay when items are delivered rather than paying after each order like retail customers.

Its four new warehouses, planned for Detroit, San Antonio, Los Angeles and Toronto, will add to an existing network of 14 so-called flatbed distribution centers that the retailer uses to stow bulky merchandise. Home Depot also fulfills retail shoppers’ orders for those items from those warehouses.

For these flatbed distribution centers, Home Depot seeks bigger yards, compared with its standard distribution sites, that back up to railroad lines so the company can get building materials directly from suppliers.

The retailer used to fulfill orders for items such as trusses, drywall and shingles out of its stores, which clogged up aisles and tied up store associates who could otherwise be attending to retail shoppers. With the flatbed sites the company has been adding, Home Depot is putting “the focus on these core products that we never really could move very easily,” Devine said.

Home Depot has been grappling with falling sales over the past year as high interest rates and low housing turnover have weighed on demand for home-improvement projects.

The company’s comparable sales, those from stores and digital channels operating for at least 12 months, fell 3.5% for the quarter ended Jan. 28 compared with the previous year. The retailer said the change was roughly the same for professional customers and retail shoppers.

Home Depot has also made acquisitions with the goal of expanding its reach among professionals. The company said in November it would buy Construction Resources, which distributes surfaces, appliances and architectural specialty products. In 2020, it acquired HD Supply Holdings, which focuses on customers in maintenance, repair and operations, after selling the business in 2007.