Home Depot builds information efficiency

If I had a hammer ... I wouldn’t wonder why you charged me for it

For constructing a more productive accounting department (by renovating its document handling), dismantling an antiquated microfilm structure and building efficiency into its invoice framework, KMWorld awards The Home Depot (www.homedepot.com) the August Best Practice Award for achievement in productivity and efficiency.

With annual sales exceeding $30 billion and 165,000 employees at 800 stores, Home Depot is North America’s largest home improvement retailer. The company expects to operate more than 1,100 stores by the end of 2000. However, that growth has come at a cost.

Adam Klein, IS manager with Home Depot, said, "As we’ve grown, 21% to 23% per year, we’ve been drowning in paper. We needed a document imaging system to easily capture that paper in a digital medium."

According to Klein, with as many as 17 microfilm cameras handling a quarter million invoices, freight bills and packing slips, the existing filming operation was becoming unmanageable. Document imaging and document management tools from Input Software (www.inputsw.com) and Optika (www.optika.com) were chosen to address the need.

The pilot for the project has been the company’s Merchandise Accounting Department, which needed to control the 200,000 sheets of paper the unit receives daily. Klein explained, "We needed a document imaging system to help get a handle on the paper. Our ability to respond to internal requests and vendor requests in a timely manner was limited by our microfilm processing lead time."

"We rely on strong relationships with thousands of vendors," said Kerrie Flanagan, VP of the Merchandise Accounting Department. "By accelerating our processing, we expect to be able to deliver better value to our suppliers and customers by cutting our transaction cycles."

Hardware deployed includes Kodak’s (www. kodak.com) Imagelink 923 high-speed scanners and Fujitsu’s (www.fcpa.com) 3099 for rescanning. Documents are shipped nightly from individual stores to the company’s headquarters in Atlanta where the processing takes place.

Staggering volumes

"Fifty million objects are all (stored) at the home office," said Klein. "They are accessed through the Optika production client (TCP/IP-based)." Home Depot manages the file with an Informix (www.informix.com) database running on a Hewlett-Packard (www.hp.com) 9000 server.

"In the past, employees had to talk to vendors over and over again. For example, there might be a situation where we ordered 10 hammers, received eight, and we were billed for 12," explained Klein. "Because the information was not readily available, the employee could not immediately solve this issue. It had to be set aside until all backup material had been retrieved. This process could take 10 days if the original documents were stuck in the backlog channel. Home Depot realized it was a business-critical issue to be able to access this information more quickly."

With the document imaging system in place, that same data is available within seconds. InputAccel allows the information to be captured and indexed in an electronic format, while Optika EMedia automatically processes different types of accounting reports and allows users to access their transaction data through a single point of access.

"Home Depot had the foresight to recognize that it takes three things to go forward with this kind of solution," said Stetak. "Number one: It’s got to match business drivers--reduce cost or improve customer service. Number two: It’s got to be economically feasible--it’s got to save them money. And number three: It has to be business process redefining--allow them to do things they never did before. Home Depot was a pioneer in taking on all three of those objectives and they were successful."

Home Depot as software development sub-contractor

According to Klein, when Home Depot first addressed the need for an electronic document system, it couldn’t find a solution that handled documents from multiple sources, while presenting them in a consistent way to novice PC users. However, Optika was in the process of developing such a system (EMedia). After some discussion, Home Depot agreed to become not only a beta site, but a development partner in creating the new product.

"When you’re coming out with a new product like that, it benefits both parties; you need this sort of market validation," said Steve Maegdlin, VP of product marketing with Optika.

Calling the relationship with Home Depot more than beta testing, he said, "It’s more than feedback, you get testing and validation."

"For people who never had a PC before, it was kind of crazy--especially handling a scanned document or EDI (electronic data interchange)," Klein said. "One of the strengths of Optika (EMedia) is that documents from multiple sources--scanned or COLD--can be presented in a single way."

"Home Depot is a great example of how the new generation of integrated document management products will be leveraged in supply chains," said Andy Worzecha, an analyst with Meta Group (www.metagroup.com). "Indeed, we expect the use of traditional document supply chain technologies (imaging, workflow, document management, COLD/ERM) to become a requirement among leading supply chains by 2002."

"This moves them into the elite echelon of vendors that will compete for the document supply chain components of organizations racing to deploy robust electronic commerce architectures," Worzecha said.

Klein reported that the company has not yet extended the information sharing system elsewhere in the organization. "But we definitely intend to do so," he added. "Other departments want the benefit of having information scanned and available for retrieval."

However, as Home Depot extends the imaging program beyond its 550 current users and into other departments, Klein will head the newly created Imaging Services Group.

"I think the biggest challenge is to figure out the next best place to go with technology," Klein said. "We are currently analyzing and prioritizing other areas that need document imaging."

"There might be a department that has a million documents to be scanned, but only two people looking at them," explained Klein. "But there might be a department that has 10,000 documents to be scanned, and 10,000 people looking at them. These are the issues we are looking at to determine the best path for Home Depot."

Exception processing (specifically as it applies to reconciling discrepancies on invoices) is a key target.

"The workflow processes we are currently working on are designed specifically for exception processing," Klein said.

Optika’s Maegdlin also commented on the importance of exception processing to a business. "Each transaction has a cost," he said. "But if a transaction is out of tolerance, the cost can be five to 10 times that amount."

Both Input Software and Optika expect to have greater involvement as the electronic system expands.

Maegdlin suggested that additional technologies will benefit organizations facing similar transaction volumes. "EDI and XML forms are just two of the tools that they can deploy for sharing, gathering and accessing knowledge to people inside and outside the organization," he said. "This is long-term thing."

While the company does not expressly consider its imaging effort a knowledge management system, Klein described the system as a "report mine" because it allows Home Depot to use its current information more effectively. "We save time that was previously spent rekeying reports into spreadsheets," he said. "We also save time by not producing similar reports with different sorting or totaling requirements."

Klein dismissed the need to convert its vast microfilm storehouse. "We will keep the microfilm until its retention period and then destroy it," he said. "We have way too much legacy film to undergo a conversion effort. There is a cutoff date of when you look at the new system for information and when you still need to request film."

"It’s like building a house," said Klein. "You know things are wrong along the way, but when you’re done, you forget you meant to put a window somewhere else."

Updated document processing--

What’s in Home Depot’s tool belt?

The Home Depot document capture system uses InputAccel, running on two servers, for the following process:

• scan--Kodak 923 duplex scanners scan the documents (packing slips, invoices and freight bills), which can be on three different sizes of paper. Those pages are mostly scanned in landscape mode to allow the scanner to run at rated speed.
• image rotate utility--Since most of the documents are scanned in landscape format, this allows the pages to be automatically rotated to portrait format.
• image enhancement--All pages are sent to this module for noise removal and deskew, and checked for Home Depot barcodes. Those barcodes determine what kind of document is being processed.
• multi utility--It inserts levels in the document set based on separator pages or barcodes.
• quality assurance--Rather than have QA operators look at every page, images are spot checked for bent corners and lines based on document type.
• manual indexing--If documents do not have a barcode on them, a manual index barcode is placed on the page. A PCF script has been written to detect that special barcode and route the document to a manual indexing operator for keyed entry.
• rescan--A Fujitsu 3099 is used to rescan unclear images or when the quality assurance operator rejects the page.
• export--The data is exported to Optika EMedia.
• reporting function--Information is collected so that the system administrator can analyze the productivity and throughput of the scanning system.