“A problem is a chance for you to do your best.”
This simple yet powerful line from Jazz musician Duke Ellington sums up Lowe’s response to the current crisis. A sense of duty towards the community it serves, caring for the well-being of its associates and yet fulfilling its operational responsibility as an essential retailer, is how we have viewed this situation. With shelter-in-place rules enforced through most of US and Canada markets where Lowe’s serves, it needed a gargantuan effort on the part of one of the world’s largest home improvement retailers to continue to meet our customers’ expectations during these distressing times. This challenge unsurprisingly spewed its impact on our supply chain operations.
One of the first casualties of this crisis was the demand forecasting for many of our assortments no longer reflected reality, we had to closely monitor our retail trading and recalibrate our expected sales by either fine-tuning forecasting algorithms or put in place temporary reporting mechanisms to track the dynamic situation.
The challenge of managing the demand is a battle with at least two new fronts. One is the increase in the COVID-19 related purchases like refrigerators and freezers not to talk about disinfectants and cleaning products to keep the homes safe. The second challenge was that many of our vendor partners had their own supply related impediments due to disruption to their operations either due to close-downs or partial operations of their units. We had to address these exigencies by a combination of flexing our receiving schedules and rejigging our transportation timetables to support these production variations. Onboarding new partners in a matter of days were the other dimension to our approach in supporting some of the unique supply-side challenges.
There were several changes that our distribution centers had to adopt during this period. The first and foremost action was to ensure the safety of our associates. We made sure that adherence and compliance to every guideline and direction issued by Government agencies received primacy. Safety and Support first followed by Supply is our mantra.
It is important to state that given the range of products we sell from nails to lumber, from heavy appliances to flowering plants our DC facilities and operations reflect the heterogeneity of our products. While we have specialized DCs based on the nature of products and channels, our operations had to be flexed to meet the needs of changing consumer behavior. The prime example of this was how many of our DCs that typically cater to our stores started bolstering our online operations. Our Order Management Systems in a matter of days was reconfigured to add new fulfillment nodes and reroute products based on this new reality.
A simplified way of ascertaining the objective and success of supply chain operations is how it ensures inventory availability at the right time and place. For decades enterprises across various industries have used the speed of replenishments as a primary goal to pursue, the current calamity has also brought into attention the need to look at the reliability, resilience and consistency of such operations. Today’s world has become more dynamic, unpredictable and some would say capricious. Factors like trade relations between countries, government regulations and natural disasters have resulted in companies having to review how they would ensure stability in their functioning in such a hazy environment. Inventory visibility through the supply chain and ability to dynamically source to fulfill customer needs will become a competitive advantage, this change will have a significant bearing on both the planning and execution of supply chain operations.
During the last few months, final mile delivery operations were one of the areas that had to undergo a pronounced and remarkable level of changes. The best metric that quantifies this change is increase in our online sales by 80% during the first financial quarter. The implications of this was to expand our fleet both through our existing and new partners within a short span. This was possible only through ingenuity and collaboration across supply chain, store operations and technology. The other aspect of final mile delivery that had to be dealt with was evolving customer and regulatory norms of how our interactions and delivery happened at the customer premises. Detailed operating instructions were developed on how we or our installation partners will conduct themselves when interfacing with our customers.
When organizations effectively respond to a crisis, we customarily find that they have strong systems and processes in place. They act as a foundation based on whose strengths context-specific decisions can be taken. One such organizational capability we relied on during this adversity is our Crisis Command Center. This 24/7 platform acted as a mechanism for our associates to voice their challenges with alacrity be it inventory shortages, evolving government guidelines, a particular site having staffing challenges or any of the multitude of operational impediments. Decisions are always taken expeditiously in this forum; this is enabled by representation from all the teams including a significant presence from our executive leadership. The workings of this Command Center has been refined over several years, with our experience acting as emergency responders to multiple natural disasters, including floods, tornadoes, and earthquakes.
The last few months have been unprecedented for all industries. Depending on the nature of the business, each of us has had to face up to very different operating environments. Given two-thirds of what Lowe’s merchandise is considered essential, we had the responsibility to keep our stores open. Customers trusted us to support them when most of the nation was in lockdown, and being at home had a whole new meaning. Within the Supply chain team, we had the onus of ensuring the flow of products from the factory to the shopping floor face the least disruptions. Our ability to effectively fulfill this responsibility is based on being nimble as an organization. It is also about strengthening and digitizing our processes to create institutional ability to have visibility of strengths and bottlenecks and then execute decisions at speed.
While we are pleased about how we have managed our operations during these tough times, what makes us the proudest is our conscientious approach towards our associates and communities while continuing to serve our customers. Lowe’s has committed more than $200 million by means of increased wages and profit sharing for our hourly associates. We also earmarked $50 million for charitable contributions, to support our communities in their pandemic response, which includes a $10 million donation in essential protective products for medical workers. We have also announced a $25 million grant for small businesses to restart as the economy reopens. Our approach towards how we run the company is best summed by our CEO, Marvin Ellison – “…we just want to continue to not only run a good business but also be a great corporate citizen in all of the communities that we operate in.” Our concern is not limited to delivering value to shareholders but also includes taking our duties to our wider stakeholders earnestly.