O'Reilly Auto Parts 2013 Annual Report Download - page 16

FORM 10-K
10
the typical DIY customer often seeks assistance from a Professional Parts Person, particularly when purchasing hard parts. The ability
of our Professional Parts People to provide such assistance to the DIY customer creates a favorable impression and is a significant factor
in generating repeat DIY business.
We screen prospective Team Members to identify highly motivated individuals who either have experience with automotive parts or
repairs, or automotive aptitude. New store Team Members go through a comprehensive orientation focused on the culture of our Company
as well as the requirements for their specific job position. Additionally, during their first year of employment, our parts specialists go
through extensive automotive systems and product knowledge training to ensure they are able to provide the highest level of service to
our customers. Once all of the required training has been satisfied, our parts specialists become eligible to take the O’Reilly Certified
Parts Professional test. Passing the O’Reilly test helps prepare them to become certified by the National Institute for Automotive Service
Excellence (ASE).
All of our stores have the ability to service professional service provider customers. For this reason, select Team Members in each store
complete extensive sales call training with a regional field sales manager. Afterward, these Team Members spend at least one day per
week calling on existing and potential professional service provider customers. Additionally, each Team Member engaged in such sales
activities participates in quarterly advanced training programs for sales and business development.
Distribution Systems
We believe that our tiered distribution model provides industry-leading parts availability and store in-stock positions, while lowering our
inventory carrying costs and controlling inventory. Moreover, we believe the ongoing, significant capital investments made in our DC
network allows us to efficiently service new stores that are planned to open in contiguous market areas as well as servicing our existing
store network. Our distribution expansion strategy complements our new store opening strategy by supporting newly established clusters
of stores and additional penetration into existing markets in the regions surrounding each DC. As of December 31, 2013, we had a total
growth capacity of over 225 stores in our distribution center network, which increased by 300 stores with the completion of our Lakeland,
Florida DC in January of 2014, and will increase by 250 stores with the completion of our Chicago, Illinois, DC in the second half of
2014 and 210 net stores with the relocation of our existing Lewiston, Maine, DC to a facility in Devens, Massachusetts, in the second
half of 2014. Including this planned growth, we expect to end the year in 2014 with a total growth capacity in our distribution system
of over 750 stores.
Distribution Centers:
As of December 31, 2013, we operated 24 DCs comprised of approximately 8.6 million operating square feet (see the "Properties" table
in Item 2 of this Form 10-K for a detailed listing of DC operating square footages). Our DCs electronically receive orders from computers
located in each of our stores. Our DCs stock an average of 147,000 SKUs and most DCs are linked to and have the ability to access
multiple other regional DCs’ on-hand inventory. Our DCs provide five-night-a-week delivery, primarily via a Company-owned fleet, to
all of our stores in the continental United States. In addition, stores within an individual DC's metropolitan area receive multiple daily
deliveries from the DC's “city counter”, most of which receive this service seven days per week. Our DCs also provide weekend service
not only to stores they service via their city counters, but also to strategic Hub locations, which redistribute to surrounding stores. Our
national Hub store network provides additional service throughout the week, and on weekends, to surrounding stores. With our planned
DC expansion during 2014, we expect to end the year in 2014 operating 26 DCs comprised of approximately 9.9 million operating square
feet.
As part of our continuing efforts to enhance our distribution network in 2014, we plan to:
 continue to implement voice picking technology in additional DCs;
 continue to implement our warehouse management system in additional DCs;
 continue to implement enhanced routing software to further enhance logistics efficiencies;
 continue to implement labor management software to improve DC productivity and overall operating efficiency;
 develop further automated paperless picking processes;
 improve proof of delivery systems to further increase the accuracy of product movement to our stores;
 continue to define and implement best practices in all DCs;
 make proven, return-on-investment based capital enhancements to material handling equipment in DCs including conveyor systems,
picking modules and lift equipment; and
 expand our distribution network by adding two additional new DCs to our network and relocating one DC to a larger, state-of-the
art facility.
Hub stores:
We currently operate 266 strategically located Hub stores. In addition to serving DIY and professional service provider customers in
their markets, Hub stores also provide delivery service to our other stores within the surrounding area and access to an expanded selection
of SKUs on a same-day basis. Our Hub stores average approximately 10,000 square feet and carry an average of 43,000 SKUs.