Office Depot 2008 Annual Report Download - page 4

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North American Business Solutions Division
Our North American Business Solutions Division sells nationally branded and private brand office supplies,
technology products, furniture 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. 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 impact 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 charging their
contract pricing in lieu of retail pricing. During 2008, we implemented a contact strategy that allows us to continue
to aggressively pursue customers using the tools and processes of this initiative. 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.
We also entered 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 include an administrative fee payable to a third party administrator. As part of a normal
process of doing business with local and state governmental agencies, we are subject to audits and reviews of these
government contracts. See “Part I — Item 3 — Legal Proceedings” for additional discussion.
Contract and direct customers’ orders are filled primarily through deliveries from 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.
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 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 20 DCs at the end of 2008. During 2009, we will consolidate certain of our supply chain facilities,
which will result in the closure of four of these distribution centers as well as one distribution center that had ceased
operations as of the end of 2008. Additionally, we are likely to modify our supply chain operations to include
combination facilities that will service both our 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.
International Division
As of December 27, 2008, we sold to customers in 48 countries throughout North America, Europe, Asia and
Central America either through wholly-owned entities, majority-owned entities or other ventures covering 38
countries, and through alliances in an additional ten countries. Our International Division sells office products and
services through direct mail catalogs, contract sales forces, internet sites and retail stores, using a mix of company-