Report: Home Depot to undertake billion dollar supply chain revamp
Home Depot is embarking on an ambitious and costly supply chain upgrade as it looks to speed up the delivery of goods to consumers.
The home improvement giant plans to spend $1.2 billion during the next five years on supply chain initiatives, including adding 170 distribution facilities, reported The Wall Street Journal. The facilities will include dozens of direct fulfillment centers for next-day or same-day deliveries, according to the report.
Mark Holifield, Home Depot’s executive VP of supply chain and product development, told a logistics industry conference that the retailer is realigning its supply chain to a changing retail landscape, the Journal reported.
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Hurricane Season Forecast Stirs Planning for Retailers
Retailers know that weather can have a negative impact on in-store sales. In 2017 devastating floods in Texas not only damaged some H-E-B stores, but led to significant financial loss caused by delayed shipments after the storm had passed. More recently, in March 2018, London suffered an unusually big snow storm that hit quarterly sales for Ocado stores hard, losing tens of thousands of orders.
Luckily, tragic disruptions to business are not the full story. Although extreme weather events get the headlines, everyday weather fluctuations must be taken into account by retailers looking to optimize operations because current and anticipated weather can be used to forecast shopping behavior with incredible accuracy. The key to planning around consumer sentiment impacted by the weather is to understand weather in local context. What feels cold in Phoenix, will be different than what feels cold in Juno, Alaska. Similarly, how consumers react to a hurricane warning will be different in the interior cities of Florida, than it will be on the island of Puerto Rico which is still recovering from 2017 storms.
The weather impacts just about every aspect of our lives. It impacts what we buy, where we go, and even how we feel. In fact, research shows that 30% of consumer-buying patterns are influenced by weather conditions. Smart retailers build a weather strategy that leverages the prediction power forecasts have on shopping.
Hurricane season which runs June 1 – Nov. 30 is the perfect opportunity to explore weather strategy in action. The 2017 Atlantic hurricane season was historic in its widespread devastation and might have retailers ready to battle damaging winds once again. Due to cooler tropical Atlantic temperatures and a trend away from La Nina conditions, retailers and consumers alike, will be relieved to know that early predictions from The Weather Company, an IBM Business, expect 2018 to reflect a more average hurricane season.
Yet, even a normal season will have a big impact on business. With 13 named storms, six hurricanes and two major hurricanes expected, retailers are smart to up their weather game. And there is no time to waste. We’ve already seen the first named storm of the season with Subtropical Storm Alberto hitting the mainland U.S. over Memorial Day Weekend.
Retailers who understand and tap into the enormity of weather influence during hurricane season will drive higher campaign conversion rates, improve customer satisfaction and grow revenue by using hyper-local short term (one to three day), weekly and seasonal forecasts across the following four key areas of the business:
1. Use contextual messaging to drive purchases
By understanding the forecast at each location, retailers can maximize store traffic during good weather bursts, and decrease the negative impact of bad weather by redirecting activity online. Keep in mind that during extreme weather events consumers are focused on safety and comfort. They are less likely to respond to promotional messages that require them to think outside of their immediate need. As such, temporarily replacing local advertising messages, mobile app notifications and email touches with messages and images that help shoppers address their top of mind need, the pending extreme weather event.
2. Stock inventory to maximize sales
Modern hurricane forecasts are remarkably accurate and with widespread distribution of alerts, stores can anticipate when they will be flooded with shoppers looking to prepare. Retailers should be prepared to stock up on certain obvious storm essentials that are likely to sell out – bottled water, batteries, and flashlights.
However, the most effective retailers go beyond the obvious and use analytics to evaluate sales trends from previous hurricanes and find correlations between weather products at specific locations. For one retailer, they uncovered that strawberry Pop Tarts are a huge pre-storm seller. Armed with this knowledge stores can better anticipate customer demands and coordinate with suppliers and other store locations to ensure sufficient inventory.
3. Optimize staff levels
Like inventory management, setting staff levels correctly is a tricky balance. Overstaffing wastes resources, understaffing leads to subpar customer experiences and lost sales. In some cases, big losses. In 2014, Walmart reported $3 billion in losses due to understocked shelves. Lucky for store managers, the local weather forecast is a good predictor of foot traffic and can be used to find just the right balance.
4. Create a consistent customer experience
The weather impacts how a shopper is feeling and what they purchase at a given moment, but it also impacts their loyalty over time as they evaluate a stores effectiveness at adjusting to weather fluctuations. The key is to ensure quality engagements with every forecast. For example, make it easy to find top of mind items, and have a proactive communications plan in the event of staff or inventory disruptions.
While we explored hurricanes in this article it’s important to recognize that weather fluctuations of all kinds can be leveraged to reach peak efficiency – snow, heavy rain, even unusually hot days will impact consumer behavior. Is your store ready?
Beth Padera, retail offering manager for The Weather Company, an IBM Business.
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