Home Depot 2006 Annual Report Download - page 15

Customers. We distribute products and offer services primarily to builders, contractors, government
entities, industrial businesses and maintenance professionals. Our customers typically select their
vendors primarily on the basis of product availability, relationships with and expertise of sales
personnel, price and the quality and scope of services offered. Additionally, professional customers
generally purchase large volumes, are repeat buyers because of their involvement in longer-term
projects and require specialized services. We complement our product offering with customer-driven,
value-added services, such as integrated supply, design assistance, kitting, assembly and fabrication
services.
Products and Services. Our products and services are focused around the following four major
categories that are related to different phases of a building project:
• Infrastructure: This category covers the products and services to construct and support the public
works systems for residential and commercial projects.
• Construction: This category covers the interior and exterior structural building components for
residential and commercial projects.
• Maintenance: This category covers products and services for the routine maintenance, repair and
operations needs of multifamily housing, hospitality, healthcare, government and industrial
facilities.
• Repair and Remodel: This category covers home improvement products and building materials,
serving the consumer, professional handyman and light remodeler markets.
Inventories. We maintain extensive inventories to meet the rapid delivery requirements of our
customers. Our inventories are based on the needs, delivery schedules and lead times of our customers.
We focus on distributing products that leverage our strengths in inventory management, purchasing,
specialized sales force, distribution and logistics, credit management and information technology.
Credit Services. Over 90% of our sales volume is facilitated through the extension of credit to our
customers. Our businesses offer credit to customers, either through unsecured credit that is based solely
upon the creditworthiness of the customer, or secured credit for materials sold for a specific job where
the security lies in lien rights associated with the material going into the job. The type of credit offered
depends both on the financial strength of the customer and the nature of the business in which the
customer is involved. End users, resellers and other non-contractor customers generally purchase more
on unsecured credit than secured credit. These lines of credit are granted only after a sufficient review
of the creditworthiness of the customer. In addition, on a regular basis, large unsecured credit lines are
reviewed to ensure they are still financially sound.
Logistics. Our distribution network consists of over 1,000 combined branches and central distribution
centers in the United States. The efficient operation of our distribution network is critical in providing
quality service to our customer base. Our central distribution centers and branches use warehouse
management technology to optimize receiving, inventory control and picking, packing and shipping
functions. In addition, we leverage several of our larger branches as distribution points for certain
product lines.
The majority of customer orders are shipped from inventory at our branches. In order to maintain
complete control of the delivery process, we use over 4,000 vehicles from our total vehicle fleet to
deliver products to our customers. We also accommodate special orders from our customers and
facilitate the shipment of certain large volume orders directly from the manufacturer to the customer.
Orders for larger construction projects normally require long-term delivery schedules throughout the
period of construction, which in some cases may continue for several years.
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