Case 10.2

Business Case: Lowe's Fresh Approach to Supply Chain Management

Lowe's Inc. is a retail company based out of Mooresville, NC, specializing in the sale of hardware, home appliances, and building materials. With over 285,000 employees, the company can serve nearly 15 million customers each week from over 1,800 stores in the United States, Canada, and Mexico. Lowe's provides both products and services to their customers, using the input-transformation-output (ITO) model. The ITO model is the center function of the supply chain that successful companies, such as Lowe's, use. With over 7,500 suppliers, Lowe's is able to decrease reliance on vendors and focus on providing its own method of customer and product relationship management.

Commitment to Customers

A large aspect of Lowe's supply chain is its commitment to ensuring that relationships with customers are maintained throughout the life cycles of the products the customers purchase. The two ways Lowe's upholds the commitment are "installed sales" and the "extended protection plans and repair services." Providing service for purchased products over the lifetime of the product is called "product lifecycle management" or PLM. PLM has become important from a supply chain standpoint as warranties and guarantees are becoming more popular. Lowe's gives extended warranties and allows customers to request repairs and replacements along with installation of the products.

A New Approach to Retailing

In addition to meeting customer needs in the store and through the installation services it offers, Lowe's has employed a method of reaching the mobile and online customer called Omni-Channel retailing: creating a consistent experience for customers on mobile apps, websites, and in the stores, since online retailing is becoming more effective because so many consumers "window shop" online. Omni- Channel retailing makes every method of purchasing universal. This is where Lowe's sets itself apart in the hardware market with its ability to engage technology and the internet of things in its operations. A significant contributor to the success of this model is that Lowe's controls 80% of its products in its own distribution channel. When coupled with Omni-Channel, Lowe's provides its customers products and services at the lowest cost and the highest convenience. Customers are able to order directly from Lowe's distribution centers, effectively eliminating the middle man, and to order products and services from the app, website, or physical store.

Enhancing the Customer Experience

In effort to beat out its competitors, Lowe's rolled out Holoroom, its virtual reality system that allows customers to visualize potential home improvement projects in the kitchen and bathroom. Customers of 19 U.S. stores, mainly in the Bay Area, were able to move products around in virtual rooms and see how they interact together. Customers wear a virtual reality headset and select items from a library of Lowe's products and place them in the virtual environment to determine if they are desirable to place in one's house. Beyond visualizing product placement in one's house, the customers are able to employ different design patterns and paint colors. To make the system personalized, customers first enter the dimensions of their rooms into Lowe's website or mobile app using the MyLowes feature. Using the dimensions as a template, Lowe's gives potential project and product recommendations to customers using the feature. This feature has proved to be extremely successful in attracting more customers to Lowes.

Questions

1. How does Lowe's provide quality products and services through its supply chain system?

2. What is Lowe's approach to product lifecycle management?

3. Why does Lowe's focus so strongly on CRM?

4. What is Lowe's view on technology in its processes?

5. How does Omni-Channel retailing further connect Lowe's to the customer?