Lowes Organizational Analysis

Lowes Organizational Analysis Lowes CompaniesInc. Was established in 1952 in Northern Wilkesboro, North Carolina which is close to where their new headquarters is located at Mooresville, North Carolina. The company started out as a local hardware store whose main customer base was independent and professional contractors. Lowe's began building their modern stores in 1994 and it quickly expanded into a home improvement retail store currently having over 1385 stores up and running. Lowe's sells various products including special order items through stores and over the internet.

It is the world's second largest retailer in home improvement. Currently it has a network of over 1,750 retail outlets all over the U.S., Mexico and Canada. Some of the products that Lowes deals in include paint, lumber, building materials, flooring, lawn and landscape products, seasonal living, nursery, lighting, hardware, tools, home organization, home fashion and rough electrical. Lowe's stocks popular national brands as well as exclusive private brands across different categories.

The line of services Lowe provides are structured around installed sales such as millwork and cabinets, flooring and countertops, repair and protection services and credit financing through Lowe's Project Card and Lowes Visa card. Their appliances form the majority of their sales at 11%, which is followed by lumber and paint which is 75 of the sales and finally, building materials, millwork, lawn and landscape products, rough plumbing and flooring each with 6%.

The firm has been able to achieve sales of $48.82 million within the year 2010 and it is seen to be registering a year over year increase of about 1.3% (GuruFocus.com, 2011). Lowe companies Inc., a Fortune 50 company has ben a dominant player when it comes to the home improvement segment. It has an efficient supply chain management, cost-reduction strategies, economies of scale, branding as well as its integration of the latest technologies into its supply chain network has enabled Lowes to secure a durable competitive advantage.

Lowe distribution center strategy Lowe's decided to implement the hub and spoke distribution model in order for it to encourage growth so as to gain market share and achieve wider profit margins. This strategy has enabled Lowe's to gain a large share of the home improvement market. According to analysts, the Lowe's distribution strategy has made it possible for the company to gain a competitive advantage. Lowes's set up a network comprising of nine distribution centers for the 850 stores it currently has.

Each of these distribution centers is designed in such a way that it serves between 100 and 125 stores. The organization plans to open close to 100 stores every year over a period of next several years. A typical Lowe's distribution center is made up of more than one million square feet, contains more than eight miles of conveyer belts as well as storage shelves that are more than 30 feet high. The distribution centers receive large truckloads of the products from their suppliers.

These products are then scanned by barcode and then they are placed into different locations within the warehouse. When the shipping of these products is ready, the conveyer belt and barcode system directs them to the trucks automatically. There are over 100 outgoing truck docks in every distribution center. Each of the stores served by the distributioncenters receives between two and eight truckloads of the product each week (Hudson, 2003). Having a strong and efficient distribution system is something that Lowe's boasts about.

It current has 14 regional distribution system having 15 flatbed distribution centers for building materials, lumber and other long-term items enhances this strength. This makes it possible for the company to efficiently distribute close to 75% of its merchandise to its various stores hence making it possible to buy large scale orders at a discount and hence the savings are passed on to the customers. The cost of putting up each of these distribution centers for Lowe's is between $45 million and $75 million.

These high upfront costs lead to lower costs that are charged by vendors and lead to an inventory control that is tight. Furthermore, Lowes receives savings of between 55 and 10% for each of the products. As a result this hub and spoke model distribution is only 3% of the inventory cost of the.