Lowe’s ‘Perpetual Productivity Improvement’ Initiative To Result in End-to-End Transformation
Lowe’s may be suffering from the “home improvement blues,” per Neil Saunders, managing director of GlobalData, but the company is making strides in innovating across the enterprise with its “perpetual productivity improvement” initiative, or PPI.
The company’s latest earnings report shows the home improvement retailer — a Top 100 Retailer for 2023 — saw total sales decline by 5.5%, but what started as solely a store operations shift is now touching every area of the business to drive increased productivity across merchandising, supply chain, corporate support functions, and more.
Marvin Ellison, president and CEO of Lowe’s, shared details of this strategic approach during the company’s recent call with investors.
Simplifying the Customer and Associate Journey
“As an example, we're replacing our 30-year-old operating system with a modern omnichannel architecture that will enable a seamless, intuitive customer experience while removing complexity for associates,” said Ellison. “This project has been underway for four years, and we are pleased that we are on track to retire all legacy green screens by the end of this year.”
What does the company hope to accomplish with these changes? A new modern operating system should lead to increased labor productivity, said Ellison, along with new capabilities, more seamless omnichannel selling, and the opportunity to drive sustained profit growth while lowering operational costs (particularly within the rural segment).
- Lowe’s Zones in on Rural Efforts
Lowe’s has launched a pilot to localize its rural and urban store frameworks, scaling its rural efforts to as many as 300 additional stores by the end of the year. These locations will offer more farm, ranch, and outdoor products, along with new Carhartt apparel “to meet the unique needs and preferences of rural homeowners who work and play outdoors.”
“Given our rural store footprint and long-standing relationships in these communities, we see this as a natural opportunity for our business and one that will simplify the shopping experience for these very valuable customers.” — Bill Boltz, EVP of Merchandising, Lowe’s.
Other areas impacting associate productivity include investments in new dedicated smartphones for its merchandising service teams (MST), powered by Zebra. The mobile devices provide automatic pricing updates, prioritizes planogram changes, and helps associates by organizing their most high-value tasks.
“It also gives associates step-by-step instructions to maximize productivity and minimize the learning curve for new associates,” said Boltz.
The MST app integrates with Lowe’s other mobile apps, so when an MST associate resets a bay, the product location automatically updates the associate product app and customer mobile app.
Transformational Changes for the Pros Segment
One of the company’s largest profit centers, Pro has seen significant improvements. The company has invested in inventory depth and omnichannel capabilities, along with strengthening its rewards program and CRM tool.
According to Joe McFarland, EVP of stores at Lowe’s, the company recently launched new Pro online business tools that allow its Pro customers to cut down time on building quotes and checking order statutes.
“We launched a suite of tools on Lowes.com and our mobile app that make it easy for pros to manage their orders from anywhere, whether that's on the job site, at home, or out of town,” said McFarland. “Rather than having to drive to our stores to get a quote, pros can now build and update online quotes in minutes.”
The tech automatically applies volume savings pricing and discounts and easily builds PDF quotes. Users can also track orders throughout the fulfillment process.
A Supply Chain Revamp
Lowe’s is also making significant changes across its supply chain, with plans to roll out a market delivery model across 12 geographic locations in the U.S. that will support more than 1,100 stores.
“We're pleased that this more efficient model of delivering big and bulky products is already enabling us to accelerate our market share gains in appliances and will enable future growth in other big and bulky product categories,” said Ellison, adding that the company plans to have this initiative rolled out by the end of 2023.
Boltz said it’s impacting merchandising and inventory as well. Modernized cost optimization tools are helping Lowe’s negotiate costs with its vendors as the company becomes more strategic about inventory planning.
“We’re focusing on more high-velocity core inventory items with low markdown risk like Pro replenishment and fewer slow-velocity SKUs,” said Boltz.
Fulfillment and front of house upgrades are also changing the face of value chain reinvention. Boltz said Lowe’s has improved its online experience, implementing changes across scheduling and order tracking. And in stores, Lowe’s is replacing legacy self-checkout systems with proprietary self-checkout registers.
“We've also matured our new store inventory management system, or SIMs, which continues to improve our inventory visibility and operational efficiency,” said McFarland.
These upgrades all reduce the time it takes for associates and consumers to search for a product, elevating fulfillment and driving a 400-basis-point increase in pickup-in-store customer satisfaction scores in the first quarter, according to McFarland.
So while sales numbers have dipped per recent earnings reports, Saunders expects this “period of modest rest” will prevent numbers from tumbling further as Lowe’s focuses on being a store for all aspects of home.
Did You Know?
RIS has a brand-new value-chain focused event coming your way! This spring, RIS News and Retail Leader are joining forces to debut Value Chain Tech, a unique new annual event focused on the technologies that power the key pillars of value chain success: Agility. Resiliency. Collaboration. Sustainability.