True Value

Headquartered in Chicago, True Value is one of the world’s largest member-owned cooperatives. With its global presence, True Value serves 58 countries from more than 4,400 locations, 13 regional distribution centers, a retail support center and approximately 2,500 True Value associates.

“The True Value co-op was founded as a buying consortium to pool resources and help independent hardware retailers compete with larger competitors,” Vice President of Supply Chain Operations Rob Saper says. “That mission hasn’t changed in more than 60 years.”

Strategy Development

In late 2014, True Value announced a new strategic plan focused on improving growth and financial performance. Merchandise and GNFR (goods not for resale) sourcing teams at True Value view its vendor base as key partners in achieving strategic goals.

“This translates to laser focus on growth levers such as increased consumer engagement, more relevant, productive assortments and improved supply chain performance,” Saper says. “We achieve many of these goals through vendor collaboration, which spans promotional efforts, cost reduction, collaborative forecasting and inventory productivity.”

By placing a strong emphasis on sourcing relevant product at a competitive landed cost, True Value can focus on product that performs well in its supply chain and with stores. Consumer engagement and assortment productivity are top priorities in driving growth.

“Ensuring our sourcing strategy and supply chain strategies and capabilities are aligned is where we can really create value,” Saper says. “Many of the goods we buy in our industry have lower sales dollars for the size and weight of the product. By aligning our vendor strategy to our supply chain strategy, we can drive a lower total cost for our members.”

For the past two years, vendor collaboration has been a top priority for True Value’s sourcing teams. In 2014, it held an inaugural vendor summit where leadership shared the co-op’s strategy and results while engaging suppliers to invest in mutually beneficial growth initiatives. The summit was expanded in 2015 to include a U.S. meeting as well as an international vendor summit in Shanghai. Collaboration has included supply chain projects to improve vendor fill rates, reduce lead-time variability and leverage True Value transportation partners.

Its indirect procurement team, led by Divisional Vice President of Strategic Sourcing Matt Sorenson, has introduced collaborative cost-reduction initiatives with strategic suppliers by incorporating design for cost, specification optimization, process improvement and demand management. True Value finds that the combination of collaborative supplier engagement in parallel with a competitive review most effectively taps into the end-to-end value of its supplier base. This approach is relevant in all indirect spend areas regardless of internal stakeholder dynamics or supply base constraints.

“Historically, indirect procurement was not centrally supported at True Value,” Sorenson says. “One of our strategic initiatives was to create a GNFR sourcing team to support strategic sourcing efforts across the co-op. This model has proven quite successful in marrying up the requirements of internal customers with a rigorous and analytics-driven sourcing methodology.”

True Value’s position is one where its customers are its owners. This helps it focus on optimization of issues such as delivery routes, supply chain costs and store operations because True Value uses a complete entity cost and value model and having members’ objectives serve as the driver.

“We listen to our members and ensure we keep what is important to our consumer and our member top of mind as we determine the offerings we will invest in,” Saper says. “Our team spends significant effort in benchmarking and industry participation to help keep us aware of current trends and cutting-edge practices.”

Moving Forward

Recently, True Value undertook an optimization exercise to look into the effectiveness and sustainability of a large investment in running its 300-unit private fleet. It moved to a dedicated, third-party solution. At 80 percent of the way through the conversion, it is seeing improved on-time delivery, and reining in of once-escalating costs. Also the use of state-of-the-art vehicles is yielding significantly improved fuel utilization and high customer acceptance.

True Value also uses what it calls a “zero-sum game” approach with partner vendors based on candor and clear communications regarding expectations. Wherever possible, it uses shared scorecards so everyone knows what is going well and what the opportunities for improvement are.

“We stay very focused on metrics, outcomes, accountability and process,” Saper says. “Collaboration identifies areas where we can work together and drive win-win opportunities.”

The company has also been working to improve inbound transportation results. It partners with a third party to help manage that transactional flow and has improved delivery time, reduced lead times and better managed costs. “The magnitude of the improvements are significant, and the results and positive impact to our fill rates are directly attributable to this collaborative approach,” Saper says.

True Value’s strategic journey is focused on the pillars of engagement, growth and efficiency. Many of its initiatives impact the supply chain directly or indirectly. The company believes it can alter its network strategy to take significant costs out while reducing inventory and improving service.

“The real investment is not in software; it is in people,” Saper says. “The team with the best strategy and the best people is going to win. Our COO is focused on hiring top-of-the-line talent and maintaining the best of the best from within the company.”

The omnichannel trend is one of the biggest trends facing the company. Its operations are set up to handle multi-pallet and full truckload store orders, and its fastest-growing area is delivered sales that start somewhere other than inside a store. This will drive service level requirements and technology investments, and True Value believes it has some creative answers that can limit investment, utilize current infrastructure and provide a unique business proposition for members and consumers.

“Although there is a lot of work to be done, we are completely aligned with our company’s strategic plan, and we know that we are an integral part in driving our story,” Saper explains. “We have an exceptional team who all contribute to this.

“Talent is our core, and we surround that core with a lean process-improvement culture and approach, which will lead us to the best-in-class answers.”