Overcoming IS Challenges of The Home Depot - Report Example

Running Head: The Home Depot: Overcoming IS Challenges The Home Depot: Overcoming IS Challenges Yuliya Your Academic Organization Executive Summary Since the companys inception in 1978, The Home Depot has grown significantly in terms of store growth, maintaining a competitive edge, and redesigning its utilization of information technologies to streamline organizational efficiency. However, despite the firms continuous progress, the existing levels of effectiveness associated with the companys information systems infrastructure are significantly lacking. This report will identify the current weaknesses with the companys information systems and propose solutions for the IS challenges. Names of all interviewees have been changed to protect anonymity. REPORT TO: Chief Executive Officer, Home Depot COMPILED BY: Yuliya RE: Assessment & Analysis of Current IS Capacity at HD Introduction The mission of the Home Depot is not only a focus involving the achievement of superior levels of customer service, it is also about creating value for the firms shareholders (Home Depot.com, 2007). This value comes in the form of competent investments into our business, including methods to streamline our complicated inventory system as well as implementing applications which will enhance the way we do business. From virtually any perspective, the only way to successfully accomplish our goals is to identify methods available to improve our information technologies. Brief interviews with two members of the middle management staff at HD will serve to confirm my upcoming assessment of our current IS capabilities. Creating Competitive Advantage Regarding the creation of shareholder value, note the method by which World Trade Journal (2007) describes the chasm between successful IT support and the business, "Disconnects between IT and business processes (at HD) are responsible for poor returns on investment". What does this suggest? This commentary, in support of my assessment of HDs current IS capabilities, implies that the business has been investing far too many of its operating dollars on investments which are not providing long-term growth for the investors. The company is currently promoting its attempts to build competitive advantage by locating low-cost, overseas product suppliers, however little attention is being given to internal systems; those designed to measure adequate inventory levels, offer real-time consumer trend information, or even measure a more effective method by which to schedule hourly associates. Without an appropriate system designed to facilitate the transfer of inventory-related information between stores, and subsequently pass this information to customers, the business is creating no substantial value. Creating competitive advantage is more than simply outmaneuvering the competition through cost-saving initiatives, it involves out-performing the competition on internal processes and the efficient storage/access of information. This is missing from the Home Depot element. According to Marvin Klein, in-store operations manager, the most significant problem involves the problems created by having minimal (if any) access to marketing and inventory-related data. As the senior-level management team is likely quite aware, all of the support for integrated IT systems are controlled and supported by data management experts in Atlanta, Georgia (Personal Communication, 6/23/07). This creates a situation in which in-store managers are not given appropriate access to consumer-related trends, such as peak times or periods in which business is slowest to aid in reducing labor-related costs. Marvin Klein suggests that inter-connection of the existing per-sale register receipt summaries in conjunction with customer data in Atlanta would be a key step in creating shareholder value. Why? Per-store sales in this particular district, according to Bill Jenson, merchandising manager, have plummeted in the last six months. The largest frustration in this particular district is an inability, caused by disconnects in available data, to provide a competent marketing plan geared toward the local community. Data on consumer behavior in the local vicinity is completely unavailable to the in-store marketing staff, as this database is controlled by Atlanta and no system exists by which to filter this information to store management. These divisions are receiving significant pressure from corporate leadership to boost sales, however the establishment of a workable marketing policy based on local consumer trends is virtually impossible with the current structure of Home Depot IS. External Perceptions External analysts have marked Home Depots largest challenge, to date, as having a poor applications infrastructure, suggesting that existing systems are currently facing data overload (Griffin, 2005). This is supported further by Marvin Klein, who suggested that routine system crashes due to fragmented data are causing significant disruptions to the automated functions of the business, including register shutdown and interrupted call centers. This creates the perception of incompetence in the minds of our consumers (those who serve to bring the highest level of shareholder value) thus the business can no longer sustain these continuing interruptions due to data overload and lack of storage capacity. Positive Capabilities Home Depot has recently implemented a wireless technology application which equips select workers with wireless devices designed to receive and send information (DSN Retailing Today, 2006). Supported by a vast network of databases, this wireless device has saved the company approximately 24 million dollars in recovered labor costs (Personal Communication, 6/24/2007). The wireless devices will measure inventory levels in real- time, providing instantaneous access of in-store quantities by volume. However, despite its recent successes, the wireless device has yet to be incorporated into the sales website, which potentially costs the business significant revenue daily as online customers are not given access to in-store availability. A Proposal for Action – There IS a Solution! Working with a virtually unlimited budget, based on Home Depots current cash position, the following proposals are suggested to streamline internal communications and to appease the external customer demand for real-time inventory levels: Implementation of Global SAP (Systems, Applications, and Products in Data Processing) – SAP is a complex system designed to integrate all of a business entire worldwide processes into a single application, including inventory and related supply chain devices. SAP would bring real-time data back into the outlet stores, providing management staff with real-time inventory levels as well as using in-store sales statistics to create local marketing efforts. Cost of implementation varies by customer, however total implementation costs usually cost about $4000 per user (TheSpot4SAP.com), or approximately $25 million to our business. The sales generated by increased customer service, leading to higher shareholder value, will recoup these costs in the first year. Implementation of Geographic Information System (GIS) – GIS is a sophisticated mapping application which will indicate high consumer density in the pursuit of building new stores, as well as indicate areas in which marketing efforts are most successful. These can be customized for virtually any need. In-store marketing efforts, without the constant reliance on return feedback from Atlanta, would benefit dramatically from GIS. An appropriate timeline for completion is as follows: SAP – 12 Months – Allows for project team development, problem identification, program writing, testing, and ultimate implementation. GIS – 12 Weeks– The GIS system will require incorporation into various in-store databases, customized for each district. Conclusion Despite the many gains of Home Depot, there is clearly a broad discrepancy between how the corporate Headquarters in Atlanta utilizes in-store information and how this data is filtered for use by local management staff members. Integrating the companys existing IT functions into a singular program, as part of its long-term objectives for growth, would enhance the overall efficiency of marketing, supply chain, and inventory control on a worldwide scale. The costs associated with the implementation and launch of these applications will result in sustained competitive advantage as well as providing the excellence in value to our shareholders most closely associated with the Home Depot name. It is strongly urged to consider this proposal for the sake of building a quality future for HD. References DSN Retailing Today. (2006). How the Home Depot Does IT". New York: 21. Dutton, Gail. (2006). Transforming Supply Chain IT into Business Technology. World Trade. 20(1): 30. Griffin, Ron. (2005). Creating a New Business Vision with Technology. Chain Store Age. New York: pp.40A-41A. HomeDepot.com. (2007). Investor Facts. Retrieved on 6/22/07 from http://ir.homedepot.com/faq.cfm?FAQPage=FAQ#4. Personal Communication. (June 23, 2007). Home Depot Operations Manager. Personal Communication. (June 23, 2007). Home Depot Merchandising Manager. TheSpot4SAP.com. (2006). SAP – The Basics Series. Retrieved on 6/23/07 from http://www.thespot4sap.com/Articles/TheBasics_3.asp Read More