Home Depot's Ellison: Keeping it simple

As the executive responsible for sales and services in all 1,976 Home Depot stores in the United States, Marvin Ellison has a lot on his plate. It's no surprise, then, that simplification of process ranks high on his list of initiatives.

Ellison, EVP U.S. stores for Atlanta-based Home Depot, spoke to investors recently at the Jefferies Global Consumer Conference. Process simplification played a key part in his presentation.

"The goal is simple," he said. "Through process simplification, we want to make sure we are driving improvements that our customers can see and feel."

The three main initiatives to this approach are supply train transformation, merchandise transformation and improved customer service.

The first initiative involves expansion of Rapid Deployment Centers -- or RDCs -- to improve the flow of merchandise. So far, 14 RDCs are up running today. Currently, the RDCs serve about 70% of the company's stores, but by the end of the year, they will serve 100% of the stores, he said.

"The facilities are totally mechanized, and we truly believe that we are going to go from being a very primitive supply chain environment to a best-in-class environment," Ellison said.

In the area of merchandise transformation, Ellison pointed to new tools that allow for more accurate forecasts of demand and better insights of geographical differences in assortment.

He pointed to a very simple example: grills. Large assortments of large grills perform well in the South, smaller in the Northeast where patio and balcony grilling are more common. In this and many other categories, he said, the new merchandising tools allow for a "focus on customer demographics. We can look at a defined sales history over a period of time, and we can find the most effective way to manage inventory."

Simplification is also a factor in customer service, he explained. Tow years ago, Ellison's team was chasing numerous in-store performance metrics. But after finding it difficult to focus or drive the business through them, the group put a focus on accomplishing three things: "to make sure that we are in stock, that our stores are clean and shoppable, and that we provide outstanding customer service, which is the foundation of everything that we do."

Ellison said there remains a lot of work today for the world's largest home improvement retailer.

So far, 2010 has proven transitional. The company's comps increased 4.8%, the best comps performance since the fourth quarter of 2005.  Also in the first quarter, the company reported a 4.2% year-over-year increase in transactions, and its positive inventory turnover, he said.

"At the end of the day, we were pleased with our Q1 financial results," he said.