Advance Auto Parts 2007 Annual Report Download - page 29

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combines these factors with service level goals, vendor lead times and cost of inventory assumptions to determine
the timing and size of purchase orders. A significant portion of our purchase orders are sent via electronic data
interchange, with the remainder being sent by computer generated e-mail or facsimile.
Our transportation team utilizes a transportation management system for efficiently managing incoming
shipments to the distribution centers and stores. Benefits from this system include reduced vendor to distribution
center freight costs, visibility of purchase orders and shipments for the entire supply chain, a reduction in
distribution center inventory, or safety stock, due to consistent transit times, decreased third party freight and billing
service costs, decreased distribution center to store freight costs and higher store in-stock position.
We currently operate eight distribution centers. All of these distribution centers are equipped with our
distribution center management system, or DCMS. Our DCMS provides real-time inventory tracking through the
processes of receiving, picking, shipping and replenishing at our distribution centers. The DCMS, integrated with
technologically advanced material handling equipment, significantly reduces warehouse and distribution costs, while
improving efficiency. This equipment includes carousels, “pick-to light” systems, robotic picking, radio frequency
technology, voice technology and automated sorting systems. Through the continued implementation of our supply
chain initiatives we expect to further increase the efficient utilization of our distribution capacity. We believe our
current capacity will allow us to support in excess of 3,400 stores. During 2007, we announced our plan to build a
new distribution center in Indiana now scheduled to open in early-2010.
We currently offer approximately 58,000 SKUs to substantially support all of our retail stores via our 13 stand-
alone PDQ® warehouses and/or our eight distribution centers (all of which stock PDQ® items). Stores have visibility
to inventory in their respective facilities and can place orders to these facilities, or as an alternative, through an
online ordering system to virtually any of the other facilities. Ordered parts are delivered to substantially all stores
on a same day or next day basis through our dedicated PDQ® trucking fleet and third party carriers. Store inventories
are replenished from our eight distribution centers. In addition, we operate a Master PDQ® warehouse that stocks
45,000 incremental SKUs of harder-to-find automotive parts and accessories and utilizes our existing PDQ®
distribution infrastructure and/or third party arrangements to provide next day service to substantially all of our
stores.
Advertising. We have an extensive advertising program designed to communicate our merchandise offerings,
parts assortment and availability, competitive prices, free services and commitment to customer service. The
program is focused on establishing Advance Auto Parts as the resource for a customer's automotive needs. We use a
mix of media that reinforces our brand image, including television, radio, promotional signage, outdoor media, print
and our Internet site.
Our advertising plan is a brand-building program built around television and radio advertising. The plan is
supported by in-store signage, online advertising and print. Our television advertising is a combination of national
and regional media in both sports and entertainment programming. Radio advertising generally airs during peak
drive times. We use Spanish-language radio and television advertising to market to our Hispanic customers. Our
advertising program is also supported through sponsorships of sporting events, racing teams and other events at all
levels in a grass-roots effort to positively impact individual communities, including Hispanic and other ethnic
communities, to create awareness and drive traffic for our stores. Since 2004, we have used an integrated consumer
education program to build our image as not only the source for parts, but also the best resource for vehicle
information. Our goal with this initiative is to continue our long-term brand building success, increase customer
loyalty and expand our customer base.
In February 2008, we launched a new branding campaign, “Keep the Wheels Turning.” This campaign was
developed based on a strategic review of our business as well as extensive research conducted with our customers
and team members. We believe this campaign, which targets both DIY and DIFM customers will differentiate
Advance Auto Parts in our industry by positioning us as the source for brand name parts and products and as the
resource for expert advice and knowledge to help customers keep their vehicles running. The campaign includes
creative and compelling television and radio commercials designed to drive sales and build an enduring, positive
image of Advance Auto Parts.
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