Lowe's 2004 Annual Report Download - page 13

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Lowe’s 2004 Annual Report Page 11
We will balance our expansion into metro
markets with the opportunities presented by smaller
markets, addressable with our 94K prototype store.
Our 94K store has a lower average investment and a
lower operating expense structure than our 116K
format, helping these stores generate an appropriate
return despite lower sales volumes. We’re confident
there are hundreds of smaller, single-store markets
Lowe’s is uniquely positioned to enter, thanks in
large part to our world-class centralized distribution
infrastructure.
Lowe’s embraced a centralized distribution
strategy even before beginning our national
expansion. Our regional distribution centers (RDC)
are designed to serve our current stores and future
expansion and meet the needs of each store’s
unique customer base. Each RDC is approximately
one million square feet, about the size of 28
football fields. These state-of-the-art facilities create
hundreds of jobs and are capable of serving 120 to
140 Lowe’s stores. In 2004, we opened a new RDC
in Poinciana, Florida, and opened our 11th RDC
in Plainfield, Connecticut, in early 2005. These
facilities will help support our growth in these two
important and fast-growing regions of the country.
In 2004, we continued to invest in our
distribution infrastructure through our Rapid
Response Replenishment, or R3, initiative, to better
leverage this infrastructure. R3 is a long-term
business process improvement initiative that will
improve in-stock levels in our stores, reduce the
amount of safety stock required at the store level,
minimize price markdowns by ensuring we have
the right product quantities going to each store,
and enhance our vision for profitable expansion
throughout our nation’s smaller markets.
Seize the Opportunity
Our centralized distribution
network is helping define the
future for Lowe’s. Today, our
R3 initiative is proceeding well
during the implementation
phase. By the end of fiscal 2005,
we expect to increase frequency
and reduce lead-time variability
of our store product deliveries
and improve in-stock levels,
ultimately helping us control
costs and continue to leverage
our inventory investment as
we grow.