HD Supply's 'diluted discount' let buying and inventory teams agree on one deal

HD Supply Facilities Maintenance, like many distributors, got an offer from a supplier: buy a product in volume at a discount. The catch was that buying meant holding stock, exactly what the inventory team was paid to avoid.

Merchandising, whose incentives ran on gross profit dollars, wanted to buy and hold, selling later at higher margin. Inventory management wanted minimal stock and maximum turnover. The stalemate was real because each side was optimizing a different number.

The solution was a 'diluted discount': spread the one-time discount over the units the forecast said would sell, giving a per-unit merit figure that both departments could evaluate on the same scale. After debate and education, the approach was adopted as an automated, self-service tool.