HD Supply Facilities Maintenance Uses Diluted Discounts to Optimize Purchasing Opportunities

Jude Buquid (), David Gibson () and Paul Huppert ()
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Jude Buquid: HD Supply Facilities Maintenance, San Diego, California 92131
David Gibson: HD Supply Facilities Maintenance, San Diego, California 92131
Paul Huppert: HD Supply Facilities Maintenance, San Diego, California 92131

Interfaces, 2011, vol. 41, issue 2, 135-148

Abstract: At HD Supply Facilities Maintenance, as in many organizations, internal departments often have goals and incentives that seem diametrically opposed to those of other departments or, at the very least, in conflict. Many companies use this approach to balance overall goals, such as sales growth versus profitability. However, a conflict can arise when a decision, on which stakeholders hold differing viewpoints, must be made. In this paper, we discuss a situation in which a supplier has offered to sell HD Supply Facilities Maintenance a product at a discount. Accepting this offer can create a potential overstock situation. Merchandising, whose incentives include growth in gross profit margin dollars, is eager to buy and hold discounted inventory, because it will eventually sell the product at a greater profit level than it could otherwise. Inventory management seeks to keep a minimal amount of inventory on hand to maximize inventory turnover, thus reducing the working capital required to maintain operations. The solution that we developed to maximize value for the enterprise uses a diluted discount approach to assign merit to a forward buy-in deal. Our solution led to a period of debate and education across stakeholder departments and the eventual adoption of an automated, self-service tool that all practitioners can use.

Keywords: behavior; decision making; motivation/incentives; investment criteria; working capital (search for similar items in EconPapers)
Date: 2011
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