Office Depot 2009 Annual Report Download - page 4

We currently plan to add approximately 20 new retail stores in North America in 2010. Also, we will continue to
review locations as leases become due and will close or relocate stores when appropriate.
During 2009, most store replenishment was handled through our crossdock flow-through distribution facilities
where bulk merchandise is sorted for distribution and shipped to the requesting stores about three times per week.
During 2009, we closed six crossdock facilities and transitioned the operations to existing distribution centers.
These multi-purpose facilities, which share real estate, technology, warehouse management systems and
inventory, satisfy the needs of both retail stores and delivery customers. Benefits of this consolidation include
improved inventory management as well as improved service resulting from our ability to replenish stores five
days per week. We plan to continue our supply chain consolidation efforts during 2010, resulting in an increase
in the number of these combination facilities and additional crossdock closures. Additional information on our
North American supply chain network is provided in the discussion of the North American Business Solutions
Division below. Crossdock facility opening and closing activity for the last three years has been as follows:
Open at
Beginning
of Period Opened Closed
Open at
End
of Period
2007 ............................................ 10 2 — 12
2008 ............................................ 12 — — 12
2009 ............................................ 12 — 6 6
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. 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 large customers. We believe sales representatives contribute to customer loyalty by building
relationships with customers and providing information, business tools and problem-solving solutions to them.
We offer contract customers the convenience of shopping on dedicated web sites and in our retail locations,
while honoring their contract pricing in lieu of retail 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.
We also entered into government contracts in response to requests for proposals and through a third-party, multi-
state contract available to local and state government agencies, school districts (K-12), higher education and
non-profit organizations nationwide. We were awarded this contract on January 2, 2006 with an initial expiration
date of January 1, 2010. We renewed the contract for an additional year, and the contract now expires on
January 1, 2011. Multi-state contracts enable individual states, municipalities or agencies to utilize the buying
power of multiple entities, which results in lower costs to these customers. These contracts include an
administrative fee payable to a third-party administrator. We also have some direct contracts with certain states
and federal agencies. As part of the 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.
During 2009, contract and direct customers’ orders were filled primarily through deliveries from our distribution
centers (“DCs”) located across the United States. We closed four DCs during the first half of 2009. Additionally,
during 2009, we disposed of our DC in Canada in conjunction with the sale of a small business in that country.
We also closed six crossdock facilities and transitioned the operations to existing DCs during 2009. These
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