Atlanta, GA, May 20--Home Depot's sweeping effort to cut costs has spread to its relationships with independent contractors who stock and maintain merchandise in stores, and some of them aren't happy about it, according to the Atlanta Journal Constitution.
The company is reducing the number of contractors, so that it can save on commissions. The contractors work on behalf of vendors such as John Deere, Ryobi Tools and faucet maker Moen.
Home Depot pays a commission to the representatives, who usually service several stores in an area at varying intervals.
The company would not say how much it expects to save this year.
The cost-cutting program, known inside Home Depot as "Project Roadrunner," has met resistance from vendor representatives, some of whom are said to be considering legal action to force Home Depot to stop or amend it. The representatives claim Home Depot's policy amounts to a restraint of trade.
"The 'Roadrunner' program ... is designed to evaluate how best to work with vendors and their numerous representatives that help to stock and display merchandise in our stores," the company said. "It is a work in progress, and we continue to review its effectiveness."
Home Depot's main competitor, Lowe's, started a similar vendor service consolidation program about a year ago.
Under the Lowe's program, the number of vendor service groups and the number of stores each representative serviced has been reduced. It allows representatives to spend more time in stores and less on the road, the company said.
"This realignment in strategy is a win-win for us and our vendors," Lowe's President Robert Niblock said Monday during Lowe's first-quarter earnings conference call. "Our vendors like getting more coverage, our customers enjoy easy-to-shop, well-maintained merchandising sets ... and employee time is better utilized to serve customers."
At Home Depot, the Roadrunner project is part of an ongoing centralization process, the company said.
"Following the successful centralization of our merchandising function in 2001, Home Depot has continued to look for ways to gain efficiency, improve store-level execution and ultimately improve the shopping experience for our customers," the company said.
Bob Nardelli, chief executive, chairman and president of Home Depot, has implemented several cost-cutting measures since he arrived in December 2000. The company re-evaluated its product assortment and eliminated 19,000 stock-keeping units, or separate items, while adding other new ones. The company also centralized its merchandising practices to build relationships with loyal vendors.
