Office Depot 2007 Annual Report Download - page 5

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centers in the United States and in several European and Asian countries. In 2004, we began to combine the Office
Depot and Viking business and, effective in 2006, we stopped marketing the Viking brand in the United States. We
currently co-brand the Viking brand with Office Depot for direct marketing to customers in our International
Division and may migrate to the Office Depot brand in Europe over a multi-year period.
In 2006, we acquired Allied Office Products, an independent dealer of office products and services. This acquisition
strengthened our position in the Northeastern part of the United States while bringing us expertise and relationships
in the important vertical markets of healthcare and legal. Integration of this acquisition was completed early in 2007.
Additionally, in 2007, we acquired Axidata Inc., a Canada-based office products delivery company.
Our North American Business Solutions Division sells branded and private brand products and services by means of
a dedicated sales force, through catalogs and electronically through our internet sites. We strive to ensure that our
customers’ needs are satisfied through various channel offerings, and we continue to develop the people, systems
and processes to enable us to meet those needs efficiently and effectively. Our direct business is tailored to serve
small- to medium-sized customers. Our direct customers can order products from our catalogs, by phone or through
our public web sites (www.officedepot.com), including our public web site devoted to technology products
(www.techdepot.com).
Our contract business employs a dedicated sales force that services the office supply needs of predominantly
medium-sized to Fortune 100 customers. We believe sales representatives increase revenues by building
relationships with customers and providing information, business tools and problem-solving services to them. We
offer contract customers the convenience of shopping on dedicated web sites and in our retail locations, while
honoring their contract pricing. We also use telephone account management for outbound sales contacts with our
customers. Sales made at retail locations to our contract customers are included in the results of our North American
Retail Division.
Contract and direct customers’ orders are filled primarily through our Distribution Centers (“DCs”) located across
the United States and Canada. Some DCs and some retail locations also house sales offices and administrative
offices. We have outsourced our inbound call center activities; however, in-house staff manages what we consider to
be the most critical points of customer interaction. During 2008, we will continue to identify ways to service our
customers with greater efficiency and effectiveness.
We also enter into government contracts through a multi-state contract available to local and state government
agencies, school districts (K-12), higher education and non-profits nationwide. We were awarded this contract on
January 2, 2006, and the contract expires on January 1, 2010. Multi-state contracts enable individual states or
municipalities to utilize the buying power of multiple states, which results in lower costs based on volume
purchasing. These contracts have a fixed price; however, governments typically negotiate a lower price for large
quantity or high value orders. In addition, these contracts include an administrative fee calculated on the product
price.
Inventory is held in our DCs at levels we believe sufficient to meet current and anticipated customer needs. We
utilize processes to evaluate the appropriate timing and quantity of reordering with the objective of controlling our
investment in inventory, while at the same time ensuring customer satisfaction. Certain purchases may be sent
directly from the manufacturer to our customers.
Over the past several years, we have implemented advanced technologies to assist with reordering, stocking, the
pick-and-pack process and delivery operations. We have also increased our use of third party delivery services and
reduced our own fleet of vehicles where cost reductions could be achieved without compromising customer service
levels. We operated 21 DCs at the end of 2007. We intend to continue to focus on our supply chain operations to
better serve our customers and reduce costs where possible. Additionally, we are likely to modify our supply chain
to include combination facilities that will service both North American Retail and North American Business
Solutions Divisions.
Because sales and marketing efforts and catalog production have similarities between the North American Business
Solutions Division and the International Division, those topics are addressed separately after the three segment
discussions, though they are integral to understanding the processes and management of these Divisions.