Advance Auto Parts 2010 Annual Report Download - page 21

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With the store-level system, store Team Members can check the quantity of on-hand inventory for any SKU, adjust
stock levels for select items for store specific events, automatically process returns and defective merchandise,
designate SKUs for cycle counts and track merchandise transfers. Our stores use radio frequency hand-held devices
to help ensure the accuracy of our inventory. Our standard operating procedure, or SOP, system is a web-based,
electronic data management system that provides our Team Members with instant access to any of our standard
operating procedures through a comprehensive on-line search function. All of these systems are tightly integrated
and provide real-time, comprehensive information to store personnel, resulting in improved customer service levels,
Team Member productivity and in-stock availability.
Store Support Center
Merchandising. Purchasing for virtually all of the merchandise for our stores is handled by our merchandise
teams located in three primary locations:
• Store support center in Roanoke, Virginia,
• Regional office in Minneapolis, Minnesota; and
• Global sourcing office in Taipei, Taiwan.
Our Roanoke team is primarily responsible for the parts categories and our Minnesota team is primarily
responsible for accessories, oil and chemicals. Our global sourcing team works closely with both teams.
In Fiscal 2010, we purchased merchandise from approximately 450 vendors, with no single vendor accounting
for more than 8% of purchases. Our purchasing strategy involves negotiating agreements with most of our vendors
to purchase merchandise over a specified period of time along with other terms, including pricing, payment terms
and volume.
The merchandising team has developed strong vendor relationships in the industry and, in a collaborative effort
with our vendor partners, utilizes a category management process. The merchandising team continues to refine its
category management process, including the ongoing multi-phase implementation of a best-in-class category
management system. We believe this process, which develops a customer-focused business plan for each
merchandise category, and our global sourcing operation are critical to improving comparable store sales, gross
margin and inventory turns.
Our merchandising strategy is to carry a broad selection of high quality and reputable brand name automotive
parts and accessories which we believe will generate DIY customer traffic and also appeal to our Commercial
customers. Some of these brands include Bosch®, Castrol®, Dayco®, Federal-Mogul Moog®, or Moog®, Monroe®,
Prestone®, Purolator®, Trico® and Wagner®. In addition to these branded products, we stock a wide selection of high
quality private label products that appeal to value-conscious customers. These lines of merchandise include
chemicals, interior automotive accessories, batteries and parts under various private label names such as Autocraft®,
Driveworks®, Tough One® and Wearever®.
Supply Chain. Our supply chain consists of centralized inventory management and transportation functions
which support a supply chain network of distribution centers, PDQ® warehouses, HUB’s and stores. Our inventory
management team utilizes a replenishment system to monitor the distribution center, PDQ® warehouse, HUB and
store inventory levels and orders additional product when appropriate while streamlining handling costs. Our
replenishment system utilizes the most up-to-date information from our POS system as well as inventory movement
forecasting based upon sales history, sales trends by SKU, seasonality (and weather patterns) and demographic shifts
in demand. Our replenishment system combines these factors with service level goals, vendor lead times and cost of
inventory assumptions to determine the timing and size of purchase orders. The vast majority of our purchase orders
are sent to our merchandise vendors via electronic data interchange.
Our transportation team utilizes a transportation management system to efficiently manage incoming shipments
to our distribution centers and from our distribution centers to our stores. Benefits from this system include (i)
reduced vendor to distribution center freight costs, (ii) visibility of purchase orders and shipments for the entire
supply chain, (iii) a reduction in distribution center inventory, or safety stock, due to consistent transit times, (iv)