May 1, 2012, 12:00 AM

Lowes crafts a flexible fulfillment plan that delivers web sales faster and cuts costs

Lowes crafts a flexible fulfillment plan that delivers web sales faster and cuts costs.

Mark Brohan

Research Director

Lead Photo

Home improvement chain retailer Lowe's Cos. Inc. credits a big improvement in fulfillment flexibility with helping it grow web sales by 70% in 2011.

Last summer Lowe's rolled out a new online distribution program the retailer calls "flexible fulfillment" to expedite order processing and shipping. Previously all Lowes.com orders were shipped only from the chain's network of distribution centers. If the item was unavailable at a distribution center, customers had to wait until the inventory there was replenished.

With flexible fulfillment, orders placed online are now shipped one of three ways: from the warehouse, from the closest Lowe's store with the available inventory or directly from a supplier's regional distribution center. Since the service went live, more than 275,000 orders have been picked, packed and shipped through the flexible fulfillment option, says Lowe's vice president of e-commerce Gihad Jawhar.

With more fulfillment options, Lowe's, which grew e-commerce sales to an Internet Retailer-estimated $510 million in 2011 from $300 million in 2010, also is able to reduce the number of days its takes to ship an order. "Most items can be ordered and delivered within two days and, due to the geographical distribution of the locations, we can reach approximately 96% of the population in one day," Lowe's executive vice president of merchandising Bob Gfeller told attendees at the chain's investor's day conference in December.

With more options to ship items directly from multiple sources and not just from a series of central warehouses Lowe's says it's now making more than $1 billion worth of new inventory available to online shoppers. Without providing details, Lowes also says more flexible fulfillment will help the company save big money on its inventory and distribution costs over time. "We expect our line design improvements supported by flexible fulfillment to drive sales while saving on distribution costs and allowing us to decrease inventory by nearly 15% to $7.3 billion over the next four years," Gfeller said.

mark@verticalwebmedia.com

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