EconomyFinancialThe Home Depot secret: How the 129 stores in...

The Home Depot secret: How the 129 stores in Mexico improved their processes

Francelia Brito does not hesitate. Each phrase he shares is loaded with a security gained over the 18 years he has worked for The Home Depot Mexico , the last five as district manager of Distribution Center Operations. Witness the evolution of the home improvement retail company in its little more than 20 years in the country. The American firm arrived in Mexico in 2001 after acquiring the four Total Home stores, until then, held by Grupo Alfa.

The business consisted of three stores in Nuevo León and one in Mexico City, in addition to 300 employees; nothing compared to the 129 units and the more than 19,000 current employees. Just over 600 work at the distribution center in the municipality of Ciénega de Flores, one of the two that the company has in the country and that Brito saw born even before the formal start in 2009.

“I have been since the start of The Home Depot in Mexico, in the area of Distribution Centers. We started with a concept called cross dock (without storing the merchandise) and supplying five stores through a third party, in 2003”, he shares while outlining the usual smile of someone who has spent a large part of his life in a company and knows that The only constant is change.

The most recent is the machining system that processes low-volume products that will be shipped to stores. The use of these conveyor belts replaces the manual process with which the employee would pull a pallet and supply items to others according to the dispatch order, says Édgar Villarreal, manager of the MDC (Monterrey Distribution Center).

Thanks to this system, it is possible to process between 12,000 and 14,000 boxes in each of the three shifts that the CeDis has, twice as much as before. The implementation took place in March 2021, a year after it was launched in Atitalaquia, Hidalgo, in the other distribution center of The Home Depot in the country. “It was a project conceived before the pandemic and it gave us the skills to respond more quickly to changes in demand and problems in the supply chain,” says José Antonio Del Ángel, senior director of Supply Chain Operations.

Not all companies had the same luck. The pandemic showed that many companies with digital sales were disconnected from their supply chain, which caused problems when making deliveries. “That’s where we were able to make that business connection through automation,” said Felipe Resendiz, Country Manager of Dematic Mexico, in an interview at the end of 2021 in which he admitted that this situation increased the demand for his services as a provider of solutions in the supply chain.

In the case of The Home Depot Mexico, the pandemic has been a difficult but not impossible test to overcome, in part because the US firm reinforced its omnichannel strategy, called ‘interconnected retail’ , more than four years ago.

interconnected business

At the start of the pandemic, online orders for the chain multiplied by five, which triggered operational and delivery pressure for customers; however, it was a challenge that was overcome due to the fact that the company was already going through a route towards omnichannel.

It is a strategy with a view to facilitating interaction between stores and the digital world. It includes investments of 1,000 million pesos, aimed at improving the online platform and store processes, as well as strengthening customer delivery capacity, according to José Rodríguez, president and general director of the company in the country.

The amount is derived from the expenditure scheduled for this year, of 3,620 million pesos, 10% higher than the previous year. Just over a third of the total is to advance the goal of expanding stores, to 150 in the next five years, and a similar fraction is for the improvement and maintenance of the existing infrastructure.

“During these two years we expanded our distribution centers to weigh the volume we had during this time,” says Rodríguez. “Online visits doubled and the number of orders we serve in a week, we now serve daily.”

delivery cells

Atitalaquia and Ciénega de Flores supply the 129 stores of The Home Depot Mexico. They do this with different products that vary depending on their location and that of their suppliers. Northern CeDis receives items from the border region, the United States, and Canada; while those manufactured in the region of the Valley of Mexico arrive in Hidalgo, in addition to what comes from Asia to the ports of Lázaro Cárdenas and Manzanillo.

Through these transits 90% of the merchandise of the points of sale, “the rest are local suppliers of construction materials that arrive directly at the stores,” says Del Ángel. The percentage, however, could change with the regional logistics nodes launched in 2020.

It is a complementary distribution network that is in line with the ‘interconnected retail’ strategy. It was designed to take care of the storage and dispatch to stores and customers of an important part of the white line items that they will receive from the CeDis, and of heavy products, such as ceramic flooring and adhesives, which will be sent directly by the manufacturers. “The nodes are removing volume and weight from the center, which translates into more space in the trucks and, eventually, lower freight costs,” says Brito.

Until mid-May, The Home Depot Mexico had seven logistics nodes located in Culiacán, Guadalajara, Puebla, Puerto Morelos (Quintana Roo), Querétaro and Tijuana, in addition to Escobedo. The one in Nuevo León is the largest due to the number of stores under its responsibility: 18. Among them are those in Ciudad Victoria, Nuevo Laredo, Monclova, Saltillo or those in the metropolitan area of Monterrey, where it will also deliver orders that are made by e-commerce .

The company plans to close the year with two more, one of them in Tlalnepantla, State of Mexico, which in addition to being the largest (it will supply 30 stores) will have an area destined for deliveries, nationwide, of small packages purchased online . . “Some call it a dark store,” says Rodríguez. The other will be in an area to be defined, in Tabasco or in Coatzacoalcos, Veracruz.

These openings are part of the resources programmed this year and Rodríguez expects that, in 2023, the investment will be, “in the worst case”, at the same level. “With the number of stores that we are seeing and the capacity, I think it will go up. (…) The challenge that we now see is that the inflationary component begins to hit. There is a slowdown due to the level of inflation and because the priorities of consumer spending have changed.

The Mexican brand that 'did everything backwards' and succeeded

Ellaz emerged on Instagram, without stores and without advertising with influencers. Today it has a growth rate of 20% and an average ticket of 50 dollars.

Inflation? Amazon managed to sell 100,000 items per minute on Prime Day and launches...

The new season will seek to capture the eyes before Black Friday and Christmas sales, as it will take place on October 11 and 12.

Online yoga classes and Spanish courses, this is sold from Mexico

According to a PayPal study, these two countries are the main consumers of national articles and services, especially digital Spanish classes.

Transform or die, companies digitize to operate

These companies faced different challenges both to digitize their business models and to accelerate their transformation. At Expansión Summit 2022 they told us about this path.

Personalization: What customers are looking for in conversational commerce

Marcos Oliveira, head of LATAM Partnerships, Business Messaging in Meta, and Barbara Gurjão, commercial director at Sinch, spoke about customer preferences when interacting with brands.