diff --git a/Dockerfile b/Dockerfile
index 5f06fe0..934888c 100644
--- a/Dockerfile
+++ b/Dockerfile
@@ -19,8 +19,8 @@ COPY --from=builder /install /usr/local
 # Copy application code
 COPY --chown=appuser:appgroup . .
 
-# Directories that will be mounted as volumes
-RUN mkdir -p uploads vectordb .cache && chown -R appuser:appgroup uploads vectordb .cache
+# Directories that will be mounted as volumes (data = SQLite default location)
+RUN mkdir -p uploads vectordb data && chown -R appuser:appgroup uploads vectordb data
 
 USER appuser
 
@@ -31,14 +31,13 @@ ENV SECRET_KEY=$SECRET_KEY
 ENV AI_PROVIDER=$AI_PROVIDER
 ENV LM_STUDIO_URL=$LM_STUDIO_URL
 ENV LM_STUDIO_MODEL=$LM_STUDIO_MODEL
+ENV LM_STUDIO_EMBEDDING_MODEL=$LM_STUDIO_EMBEDDING_MODEL
 ENV OPENAI_API_KEY=$OPENAI_API_KEY
 ENV OPENAI_MODEL=$OPENAI_MODEL
 ENV DATABASE_URI=$DATABASE_URI
 ENV RAG_TOP_K=$RAG_TOP_K
 ENV RAG_CHUNK_SIZE=$RAG_CHUNK_SIZE
 ENV RAG_CHUNK_OVERLAP=$RAG_CHUNK_OVERLAP
-ENV TRANSFORMERS_CACHE=/app/.cache
-ENV HF_HOME=/app/.cache
 
 EXPOSE 5000
 
diff --git a/config.py b/config.py
index 7f3f129..0237ca6 100644
--- a/config.py
+++ b/config.py
@@ -9,7 +9,7 @@ BASE_DIR = os.path.abspath(os.path.dirname(__file__))
 class Config:
     SECRET_KEY = os.environ.get("SECRET_KEY", "change-me-in-production")
     _db_uri = os.environ.get("DATABASE_URI", "")
-    _default_uri = f"sqlite:///{os.path.join(BASE_DIR, 'app.db')}"
+    _default_uri = f"sqlite:///{os.path.join(BASE_DIR, 'data', 'app.db')}"
     # Fall back to SQLite if DATABASE_URI is empty or not a valid SQLAlchemy URL
     SQLALCHEMY_DATABASE_URI = (
         _db_uri if _db_uri and "://" in _db_uri else _default_uri
diff --git a/docker-compose.yml b/docker-compose.yml
index 8b99dd3..0e4a405 100644
--- a/docker-compose.yml
+++ b/docker-compose.yml
@@ -9,6 +9,7 @@ services:
     volumes:
       - uploads:/app/uploads
       - vectordb:/app/vectordb
+      - data:/app/data
     healthcheck:
       test: ["CMD", "python", "-c",
              "import urllib.request; urllib.request.urlopen('http://localhost:5000/auth/login')"]
@@ -20,3 +21,4 @@ services:
 volumes:
   uploads:
   vectordb:
+  data: