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Faced with growing transaction fees, this home improvement retailer renovated its supply-chain technology
Like most other home improvement retailers, HomeBase is steeped in the do-it-yourself ethic. But when the merchant discovered some cracks in the technology it used to communicate with its suppliers, the retailer went looking for help.
HomeBase traditionally relied primarily upon EDI to shuttle documents between itself and its suppliers. The technology worked well for the 83-store chain-the retailer issued 90% of its purchase orders and 70% of its invoices via EDI-but by late 1998, the flaws in the technology were becoming harder to ignore as HomeBase's business grew larger.
"We had looked for a way to get our ordering process automated and completely paperless. EDI had gone a long way toward helping us to achieve that, but we had reached the point of diminishing returns as we added more documents to the data flow," says Glen Hamilton, manager of quick response of HomeBase.
Among the most annoying problems HomeBase had to deal with were the transaction fees it split with its supplychain partners every time a document was transferred over the value-added network (VAN). The fee, Hamilton explains, was reaching into the multimillion-dollar range and rising as the traffic over the VAN increased. And the cost had implications beyond what HomeBase directly absorbed itself.
"We'd be foolish to think the transaction fees our vendors were paying to do business with us weren't coming back to us in the form of increased prices and logistics costs. It was clear we had to come up with a way to reduce the costs our suppliers incurred every time they traded with us."
Another problem HomeBase faced was the inability of many of its smaller suppliers to trade electronically. For about 300 of HomeBase's 1,500 vendors, the up-front investment required to obtain the capability to trade via EDI was too much to bear. These suppliers were stuck in a paper-based trading medium that...