Serge Carestia and his team at The Home Depot Canada have built an award-winning supply chain through best in class customer experience.
For Serge Carestia and his team at Home Depot Canada it’s all about the flow; not a great head of hair—stock and flow, the supply chain model implemented by the company under the guidance of its vice president, supply chain, and the 2018 recipient of the Freight Management Association of Canada’s Supply Chain Executive of the Year award.
Prior to Carestia joining The Home Depot seven years ago, the company’s supply chain model had stores ordering product directly from vendors. Now, under the stock and flow model, orders are centralized at the company’s two stock and flow campuses (SFCs) located in Vaughan, Ont., and Calgary, Alta., with all the stores east and west served under one purchase order per SFC, respectively.
According to Carestia, who in his 25-year supply chain career has worked for the Hudson’s Bay Company, Mark’s Work Wearhouse and Canadian Tire, over 65 per cent of The Home Depot’s products go through the SFCs before reaching the stores.
These facilities enable the company’s distribution network to leverage trains as both SFCs are strategically positioned near rail lines. This has enabled the reduction of CO2 emissions through consolidated shipments from vendors and intermodal transportation while improving the accuracy and efficiency of its store shipments, helping the company to meet customer demands.
“From those two sites we can hit about 92 per cent of our customers within two days, whether it’s a store or direct to customer,” says Carestia.
Utilizing its forecast and replenishment team to keep stores fully stocked and ensure vendors have stock for online orders, he says, allows “allocation to be delayed up to the very last possible minute,” which allows for reduced lead time.
“For example, if a store quantity shifts on us because of events such as the recent tornados in the Ottawa area, and products are being sold more quickly, that allocation will actually change and dynamically give more product on the fly to those stores as required, with new purchase orders being adjusted.”
With some stores getting up to 20 trailers of product a week, lead time becomes critical and by being able to meet changed demand with allocation, what Carestia calls, “the effective lead time” shrinks dramatically and “the stores see that.”
The supply chain model The Home Depot Canada employs was adapted from its U.S. parent’s rapid deployment centre, which “really is not stocking product, but rather flowing product as it is required from the vendor anywhere in the world through to the store and possibly—as an extension—to the customer,” explains Carestia.
“We took that design and we adapted it to Canada. What we adopted was the flow part of it, not necessarily the actual configuration of the buildings.”
The U.S. stock and flow sides are two separate buildings in most cases, “but here in Canada we joined those buildings together so that we get synergies of placing both stock and any flow product on the same truck to the store.”
The supply chain pyramid
During Canadian Shipper’s conversation with Carestia at the company’s SFC in Vaughan, one theme is dominant throughout: teamwork.
He constantly deflects any credit for what the supply chain group has accomplished during the past seven years.
“I’m very proud of our team and what we’ve built,” he says simply. “We’ve built a supply chain that is really focused on the customer and is built off our values and the way we do business here at The Home Depot.”
An inverted pyramid—with the customer on top and the company president on the bottom—is how he describes the company’s leadership model.
“The higher level of accountability you have, the lower you are on the pyramid and you bear the weight of the organization.”
How that weight is distributed explains why support for Carestia’s nomination came not just from within his own team, but others he has come into contact with at The Home Depot.
“What united all of us in the nomination process was Serge’s inspirational leadership style,” says Victoria Toll, director of transportation at The Home Depot Canada. “He is very focused on delivering excellent customer service and he does it in a way that is collaborative, very cross-functional and he is flexible and open to change.
“Any associate feels that they have the opportunity to contribute, to provide good ideas, to create shareholder value in concert with the rest of the team.”
Taking care of associates—as all Home Depot employees are referred to—is important to Carestia and it shows in the way he’s always looking to invest in associates in the right way, whether it be training or exposure to other senior leaders or taking on challenging projects, says Toll.
“Recently I had an associate come to me and say, ‘Victoria, I never would have applied for that job had I not heard Serge speak about the importance of taking on cross-functional collaborative assignments and I wouldn’t have aspired to do more had it not been for him.’”
Another example of Carestia’s beloved leadership style shone through during the opening of the stocking distribution centre (SDC) portion of the Vaughan facility.
“Serge’s vision for the building came through loud and clear as to what we needed to do collectively and collaboratively to make sure that customers needs were met.”
Carestia’s approach is not a top-down one, adds Toll. He doesn’t pretend to have all the answers, instead challenging the team collectively to find the right one.
“He often says, ‘We’re not trying to build the best supply chain, we’re trying to build the best supply chain for Home Depot.’”
Constructing that supply chain is still a work in progress, says Carestia. And that’s because of the customer.
“The customer is ever-changing,” he says. “And we’ve built a model that can get product from anywhere in our network to the customer, whether they want to buy the product in-store or online.
“Every retailer is facing the same challenges and expectations from customers. Our focus is on giving the customer the same level of service in home delivery that they have come to expect in-store.”
The supply chain at the home improvement retailer revolves around delivering the best possible customer experience, he says and is based on three simple questions:
How do we build that customer-facing network?
How do we get close to the customer? And;
How do we flow product fast and efficiently to the customer?
“And we do all that in what I would call the Home Depot way, which is based on our values and culture,” says Carestia.
While The Home Deport stores still offer customers convenience, Carestia says the second phase of the company’s supply chain transformation entails building that same level of service customers expect when their goods are delivered to their home or job site.
“And we’re well on our way with that transformation,” he says “We do more deliveries direct to home and job site than any other home improvement retailer in Canada.”
As the No. 1 appliance retailer in the country, many of The Home Depot’s deliveries are what the industry refers to as “white glove,” and Carestia says they want to make those experiences seamless for customers.
“It’s not just dropping it off,” says Carestia. “We come in your house, we put it in place, we take the old unit back and then we install, which a lot of companies don’t do. Our service extends well beyond delivering to the front door.”
For online orders The Home Depot has two direct fulfillment facilities that receive shipments from both vendors and the SFCs before going to a last-mile agent. Special order products are also delivered from a SFC to the store to be picked up by the customer, explains Carestia.
“Eventually, we will have the opportunity to flow product either from our SFCs directly to the customer or continue to use direct fulfillment centres or cross-stock hubs across the country to get it on that last-mile truck.”
Their vision is to create an adaptable network, so that customers will be able to get products wherever and whenever they want, and for most items that means same day or next day delivery.
“We need to be flexible and we need to evolve as customer demands change so that we’re relevant and we’re best in class.”