Advance Auto Parts 2014 Annual Report Download - page 13

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Store Technology
Each of our store names utilizes a unique store operating system comprised of an integrated POS and EPC, which enables
our store Team Members to assist our customers in their parts selection and ordering based on the year, make, model and
engine type of their vehicles. In conjunction with our integration of the Advance Auto Parts and Carquest stores, we plan to
eventually utilize one POS system and EPC in the longer-term and leverage the benefits of each system.
Currently, information maintained by our Advance Auto Parts store operating system is used to formulate pricing,
marketing and merchandising strategies and to replenish inventory accurately and rapidly. It also provides real-time inventory
tracking at the store level allowing store Team Members to 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. If a hard-to-find part or accessory is not available at one of our Advance Auto
Parts stores, the store system can determine whether the part is carried and in-stock through our HUB network, can be cross-
sourced enterprise wide or can be ordered directly from one of our vendors. Available parts and accessories are then ordered
electronically with immediate confirmation of price, availability and estimated delivery time.
The Worldpac speedDIAL® parts catalog and fulfillment ordering system provides expanded capabilities to Worldpac's
Commercial customers and other stores throughout our enterprise. This tool allows customers to check real-time parts
availability on over 100,000 parts, view images on over 90,000 parts, check prices, place orders, view invoices and self-service
returns.
Store Support Centers
We are headquartered in Roanoke, VA and serve our Advance Auto Parts and Carquest stores primarily from our store
support centers in Roanoke, VA and Raleigh, NC. We also maintain a store support center in Newark, CA to support our
Worldpac and e-commerce operations and in Norton, MA to support our Autopart International stores.
Merchandising. In 2014, we purchased merchandise from over 500 vendors, with no single vendor accounting for more
than 6% 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.
Our merchandising teams have 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. Since our
acquisition of GPI, we have rolled out cross-sourcing capabilities to the majority of our stores and more recently we have
begun integrating our product offerings in our Advance Auto Parts and Carquest stores. Some of our brands include Bosch®,
Castrol®, Dayco®, Denso®, Gates®, Moog®, Monroe®, NGK®, 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®, Autopart International®, Driveworks®, Tough One® and Wearever®as well as the Carquest® brand
acquired from GPI.
Supply Chain. Our supply chain consists of a network of distribution centers, HUBs, stores and branches which enable us
to provide same-day or next-day availability to our customers. Our inventory management teams utilize replenishment systems
to monitor inventory levels across the network and order additional product when appropriate while streamlining handling
costs. Our replenishment systems utilize the most up-to-date information from our POS systems as well as inventory movement
forecasting based upon sales history, sales trends by SKU, seasonality (and weather patterns) and demographic shifts in
demand. These factors are combined 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.
The acquisition of GPI significantly increased the number of distribution centers that we operate. As of January 3, 2015,
we operated fifty distribution centers compared to twelve distribution centers as of December 28, 2013. The thirty-four
distribution centers serving Carquest stores are significantly smaller at an average of 125,000 square feet than our existing
Advance Auto Parts distribution centers which average approximately 500,000 square feet. One of our integration priorities in