Advance Auto Parts 2013 Annual Report Download - page 19

6
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 2013, we purchased merchandise from approximately 490 vendors, with no single vendor accounting for more
than 9% 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 where we manage the mix of our product offerings to meet customer
demand. 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 productivity.
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®, 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, HUBs 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.
We operate nine AAP distribution centers. All of these distribution centers are equipped with a warehouse management
system, or WMS, which provides real-time inventory tracking through the processes of receiving, picking, shipping and
replenishing inventory at our distribution centers. The WMS, integrated with material handling equipment, 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 opened our newest distribution center in Remington, Indiana
in late 2012. It incorporates our more advanced warehouse management system which has enabled us to roll out daily
replenishment to many of the stores serviced by Remington. We have ongoing supply chain initiatives to further increase the
efficient utilization of our distribution capacity including planning for the roll-out of the advanced technology used at the
Remington facility to other facilities in our supply chain network.
Store inventories are replenished from our nine distribution centers. We utilize reputable dedicated carriers to ship product
from our distribution centers to our stores. In addition to a store's normal inventory assortment, our stock PDQ® warehouses
(nine of which are included in our distribution centers) offer approximately 93,000 SKUs to support all of our retail stores.
Stores have visibility, through our EPC system, to inventory in their respective PDQ® warehouses and distribution centers as
well as facilities throughout the Company and can place orders to these facilities through an online ordering system. 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.
Marketing & Advertising. Our marketing and advertising program is designed to drive brand awareness and store traffic
by positioning the Advance Auto Parts brand as the service leader in the aftermarket auto parts category. We strive to exceed
our customers' expectations through our value-added services, extensive parts assortment and quality merchandise.