In our last post we discussed the recent snafu made by Home Depot during a recent upgrade to its online website on February 1^st where some incomplete planning and testing “Left Home Depot Customers Running in Circles” (which is terrible as there was no danger and there should have been no doubt^*). Home Depot likely made the right business decision (despite the protests of some E-commerce folk) when it decided to start an upgrade at noon on a Wednesday, did the right thing when it put up a “Pardon Our Dust” notification page, but screwed up when it directed visitors to its blog that was filled with links back to the Home Depot e-Commerce site, which was offline and which resulted in users seeing a “Moved Permanently” page which redirected to the “Pardon Our Dust” page which, of course, redirected to the blog … in an endless circle of redirects. This was bad, but as explained in our last post, definitely not the end of Home Depot (online). In fact, it’s likely that it won’t even make a blip on their bottom line when all is said and done.

But this isn’t to say it has problems. In this blogger’s view, it has big problems, and they could be getting bigger by the day — and Home Depot probably isn’t even aware of them. What are these problems? Unsatisfied Customers! That’s right, every day it’s unsatisfied customer count is likely increasing, and it probably doesn’t even know it. How do I know? the doctor has been unsatisfied in his past 5 (five) visits and has been told each time, by at least one associate, including the manager, in the store, that they’ve been having this problem regularly lately and that there’s nothing they can do about it unless they send half a dozen e-mails and go through eight levels of approval. (Probably an exaggeration, but I’m sure the effort to try and fix the problem, which can only be done on a piecemeal basis, is not worth their pay-check or sanity.)

So why did I leave as an unsatisfied customer 5 (five) visits in a row and why am I sure that I am not alone? And why do I suspect it’s happening to thousands, if not tens of thousands (or more), of other customers across North America? Because of the (ultimate) source of the problem — a source that, I am told, is universal across every Home Depot location in North America. What is that source? It’s the supply management evil called ARS, and more specifically, it’s SARS. An unfortunate, but accurate, acronym.

So what does ARS stand for? Automated Replenishment System. And is it evil? Only when misapplied. And the mis-application in particular is Storefront Automated Replenishment System — SARS for short. And it is evil. Unchecked it is more devastating to your supply chain than a tsunami, earthquake, or other natural disaster that wipes out your primary supplier’s central manufacturing facility. There isn’t a single supply management solution that will create more of a disaster if misused than SARS. Every supply management solution from RFx through e-Auction to Decision Optimization, from e-Requisition to P2P, and inventory / warehouse management to distribution management can be misapplied and cost an organization millions of dollars in the wrong, untrained hands, but SARS doesn’t even need any hands at all to bring an organization to financial ruin! It does that all on its own. How?

First of all, we need to step back and define what ARS, or an Automated Replenishment System, is and why one has to be wary of such a technology. An automated order replenishment system is a system that tracks inventory levels in near-real time and automatically re-orders stock when a minimum threshold is reached or when, in a more advanced system, it detects that certain inventory is moving faster than expected. Based on the idea that one of the most costly events under a retailer’s control is a stock-out, which happens, on average, in 8% of products for a retailer without an ARS, the system attempts to prevent such stock-outs by detecting when a product is too low or moving too fast. It ties into the POS system and receiving system, downloads data at least daily, and calculates current inventory levels based on the last known amount, the amount received, and the amount sold, and if the inventory hit a threshold or dropped too fast, automatically sends a purchase order for more inventory to the supplier with a target delivery date. Now, a retailer, who carries thousands of products and who can’t keep an eye on every one in real time (without investing a lot of money in manpower who can make mistakes) will typically think this is the greatest thing since sliced bread the first time he hears of it, but what he doesn’t understand is that this system only works in a perfect world model, and there ain’t no livin’ in a perfect world. He can keep on dreamin’ that there is, but there ain’t. Why?

^*Don’t get it? Too bad … but on the bright side, you feel just like a Home Depot customer who visited the site after 11:59 am on February 1^st or how the doctor felt each of the last five times he visited his local Home Depot store!

As chronicled in a recent issue of StoreFront BackTalk, a recent try at not shutting down completely “Left Home Depot Customers Running in Circles” (which is terrible as there was no danger and there should have been no doubt^*). Basically, what happened was that on Wednesday, February 1^st, Home Depot took its web site offline to upgrade IBM Websphere from v. 6 to v. 7 (in a blatant display that it doesn’t understand e-Commerce very well, but that won’t be the end of Home Depot either, so that’s ok). This wasn’t the problem — the problem was that, in an effort to ensure that visitors still had something to look at, the “Pardon Our Dust” page that informed customers the site was temporarily down included a link to the company blog (still up) that had a new post for Do-It-Yourselfers at the top of the page. What’s wrong with that? Well, the post linked back to the product on the Home Depot site which was, naturally, redirected to the “Pardon Our Dust” page. Most of the other links went to a “Moved Permanently” Page which, in turn, linked either to another “Moved Permanently” page or the “Pardon Our Dust” page. The customer was left chasing his own tail. It was bad, and, as StoreFront BackTalk suggested, they should have just closed the e-Store for the day.

But it won’t be the end of Home Depot by any stretch of the imagination, even though e-Commerce folk still grumble that sites today — with mirroring and cloud options — shouldn’t have to shut down at all for simple scheduled software upgrades, as pointed out in StoreFront BackTalk’s follow-up on how Home-Depot’s WeekDay Noon Shutdown “Made Perfect Clock Sense”. After all, the retailer does most of its online business on weekends and mornings, and with an 18 hour upgrade, that left noon on a weekday — so it either had to pony up the $$$’s to replicate it’s site during the outage or take the small revenue loss from being down for the 18 hours that were projected to be the least revenue producing. (And sometimes it can be more distracting, and thus more costly, to aim for 100% uptime because if something doesn’t re-route properly, a poorly working site can do more reputation damage than a site that’s taken down completely and replaced with a pleasant notification. After all, Apple takes their online store down all the time and they still make a fortune as their customers know their will be new and better products to buy when it comes back up.)

And then there’s the customer reality to consider.

• Customers Understand All Sites Need to Go Down For Maintenance
  They just want to be notified — and not run in circles if the site is down. And if Home Depot apologizes for this oversight in its maintenance, they’ll forgive it.
• Most of Home Depot’s Business Is In Store
  I don’t know the stats, but I know the reality. (1) Before an average consumer buys something for her home — which is going to cost quite a few shiny nickels — she wants to see it. Most people use the on-line site for research. When they purchase, it’s typically because they’ve already seen the product in the store and are ordering it online because they want it delivered. (2) Most of their big dollar transactions are from contractors. And contractors are buying in the store, not online. That’s why they have contractor sections in the store.
• Only a very small percentage of (potential) customers would have visited the site in that 18 hour window and noticed the problem.
  Again, most customers are using it primarily for research for DIY products, which is happening mainly on the weekend, or to order something they researched and found in-store on the weekend or the night before, which is happening mainly in the morning.
• No animals were harmed by the downtime and no child labour was sweating in a factory to bring the site back up.
  e-commerce snafus don’t bring down a 68 Billion dollar plus home improvement chain. A one-day snafu won’t even make a noticeable change to its bottom line. Let’s face it — a small corporate social responsibility slip-up such as forgetting to audit a supplier’s supplier who uses child labour will do much more damage to its brand and bottom line than any website snafu ever will.

To make a long story short, it had a snafu, but it has nothing to worry about as a result. However, this doesn’t mean it has nothing to worry about. It has a lot to worry about. In fact, it’s entire business could be at stake as you read this. And the sad thing is, Home Depot might not even know it!

^*Don’t get it? Too bad … but on the bright side, you feel just like a Home Depot customer who visited the site after 11:59 am on February 1^st!