Advance Auto Parts 2010 Annual Report Download - page 22

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7
decreased third party freight and billing service costs, (v) decreased distribution center to store freight costs and (vi)
higher store in-stock position. We utilize two reputable dedicated carriers to ship product from our distribution
centers to our stores.
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 inventory 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, radio
frequency technology, voice technology and automated sorting systems. We have ongoing supply chain initiatives in
our distribution centers to further increase the efficient utilization of our distribution capacity. We believe our
current supply chain network, including a new distribution center projected to open in Indiana in late 2011, provides
ample capacity for our projected growth in the foreseeable future.
Store inventories are replenished from our eight distribution centers. We currently offer approximately 59,000
SKUs to support all of our retail stores via our 22 stand-alone PDQ® warehouses and/or our eight distribution
centers (all of which stock PDQ® items). Stores have system visibility to inventory in their respective PDQ
warehouses and distribution centers 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. Supplementing the
inventory on-hand at our stores, our HUB stores stock an additional 12,000 less common SKUs which are available
to our stores within the HUB stores’ respective service area on a same day or next day basis. In addition, we operate
a Master PDQ® warehouse that stocks approximately 29,000 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.
Marketing & Advertising. We have a marketing and advertising program designed to drive awareness and
consideration of the Advance Auto Parts brand by positioning AAP as the service leader in the aftermarket auto
parts category. We strive to exceed consumers’ expectations through our free and value-added services, extensive
parts assortment and quality merchandise offerings. We market our brand through a mix of media including
television, direct mail, promotional event signage, outdoor billboards, online advertising, social media and
AdvanceAutoParts.com.
In early 2011, we launched our ‘Service is our best partSM’ campaign. The campaign was developed based on
extensive research with our customers and Team Members and brings to life a new brand promise for Advance.
This campaign was successfully tested in certain markets during 2010 before being rolled out nationwide in 2011.
The campaign targets core DIY and Commercial customers and emphasizes our commitment to provide market-
leading service to our customers.
Our multi-channel marketing communication plan is built around television, direct marketing, online, radio, and
local marketing. The plan is supported by public relations, in-store and event signage as well as mobile and social
media through Facebook. The television advertising is a combination of national and regional media in sports,
entertainment and DIY-themed programming. Radio advertising airs primarily during peak drive times and on
weekends. We also use Spanish-language television, radio and outdoor advertising to reach our Hispanic customers.
A final and key component of our advertising is our local marketing program highlighted by our title
sponsorship of the Advance Auto Parts Monster Jam, a live family-oriented monster truck event tour and television
show. Our brand is affixed to the show, is present throughout each host arena and comes alive through the Advance
Auto Parts Grinder monster trucks. We are able to capitalize on the sponsorship at a store level through Grinder and
other monster truck appearances and through store-based customer events in conjunction with the show. In addition,
AAP also sponsors various other grass-root level events intended to positively impact the individual communities
we serve, including Hispanic and other ethnic communities, and to drive awareness and repeated store visits.