Ace plans to spend $800 million on the supply chain in the next 5 years, here’s how.
Ace will expand its number of distribution centers under a five year supply chain spending plan.
Lori Bossmann, chief supply chain officer at Oak Brook, Ill.-based Ace Hardware Corp., told Ace dealers at the recent Fall Conference, “Ace will invest $800 million in the supply chain over the next five years.”
Three investment areas were identified: Spaces, technology and people. For spaces, Ace will open more Retail Support Centers (RSCs); it will train more people; and launch a new technology platform.
In a one-on-one interview, this HBSDealer editor asked Bossmann to explain in detail all of Ace’s plans. Here is the Q and A with the chief supply chain officer.
Can you tell us more about the RSCs? How many are planned, and a little more about the process of finding locations and developing them?
Bossmann: “We plan on opening four new RSCs in the next five years. Two of these RSCs, in Jackson County, Georgia and Visalia, California, are currently under construction.
“We will begin shipping from the Jackson County, Georgia RSC in February 2023, and from the Visalia, California RSC in April 2023.
“With the opening of Visalia, we will be able to reach most of our Southern California retailers and consumers within one day, which is key to our digital strategy. The next two RSCs that we open will fill in next-day gaps in the Midwest and West markets and allow us to get closer to our stores and the consumers.
Lori Bossmann, chief supply chain officer at Ace.
“When all four new RSCs are completed, we will be able to reach 92% of our retailers and consumers within one day.
“When choosing new sites, we want to be within one day of as many stores as possible to take advantage of next day delivery. We use an outside company to run transportation models and give us optimum locations. Then, we physically visit the sites and run labor models to make sure we have a strong labor pool in the area we choose.”
What types of technology investments will Ace be making in the coming years?
Bossmann: “In February of this year, we implemented a new warehouse management system from Manhattan at the La Crosse, Wisconsin RSC. These are big projects that take a lot of investment and come with some risk. I’m proud to say that we implemented the new system and were able to receive product and ship on the first day without interruption to retailer orders.
“We spent the last several months fine tuning the system to get to the productivity levels we need to handle the volume at larger RSCs. Later this year, we will implement this system in Colorado and then four RSCs in 2023, and the remaining RSCs in 2024 and 2025.
“In the Dallas, RSC, we implemented an automated storage and retrieval system to fill orders for break case product. This automation is helping us to fill orders 60% faster than the manual method. In addition, the work is simpler and easier to train, improving the quality of shipments. We will be implementing automated storage and retrieval systems in all new Ace RSCs.”
Can you take us a little deeper into what specific ‘people’ investments Ace will make?
Bossmann: “To attract more employees, we centralized all recruiting and invested in digital marketing to attract the best employees. Once hired, we invested in a new warehouse specialist training program and have dedicated trainers at each RSC. Lastly, we are investing in leadership training for all RSC management and have just partnered with Georgia Tech on Lean Six Sigma training for all RSC management.”
An Ace Retail Support Center (RSC) in Prescott, Arizona.
What challenges and positives do you expect along the way as you implement these investments?
Bossmann: “Opening new RSCs and implementing technology and automation always come with some risk. We plan these projects to the most minuscular detail and have contingency plans for each of these initiatives.
“We recognize the magnitude of the change, train employees extensively, and even move volume, where possible, to give employees and management sufficient time to learn new technologies and processes.”
Will the amount of investment be split across the three segments evenly, or do you expect more in, say, RSCs? How does that get shaped and decided?
Bossmann: “The majority of Ace’s supply chain investment will be in new RSCs and the automation to run these RSCs.
“We plan capacity in five-year increments, identify where our space constraints may be, and review our investment requirements with executive management and the board of directors on an annual basis.”
Can you pass along any tips to readers who are maybe deciding to plan supply chain investments?
Bossmann: “First, any supply chain investment requires a deep understanding of the business and where growth is projected to materialize.
“Second, capital investments should be made for long term, sustainable growth. Any short term or seasonal growth should be matched with short term strategies and investments.
“Third, technology investments are an enabler and not the sole driver of quality, safety or productivity improvements. It takes strong leadership and change management to implement new technologies and to gain the benefits that are promised when a technology decision is being made.”
Anything else you'd like to add about Ace supply chain investments in the coming five years?
Bossmann: “Ace will invest over $800 million in the next five years to make sure we can serve our retailers and consumers with higher fill rates, more deliveries and improved accuracy. These investments are key to our digital strategy and our ability to compete and deliver on changing consumer expectations.”