Mastering the top 4 supply chain challenges in DIY retail

Feb 21, 2022 4 min

Today’s retail landscape is more challenging than ever—from an acceleration toward omnichannel sales and fulfillment models to sourcing and supply chain disruptions. The DIY sector has felt these challenges acutely, while already grappling with an incredibly complex assortment and supply chain. Luckily, the right combination of technology and approach can help home improvement retailers address these challenges effectively.

Let’s look briefly at four of the most important challenges facing DIY retailers today.

1. Improving Low Margins in DIY Retail

Since the onset of the COVID-19 pandemic in 2020, consumers have found themselves spending more time at home and more money on home improvement projects. While that’s good news for DIY retailers, they still face fierce competition for sales and intense pressure to improve margins.

Greater consumer focus on home improvement and a dramatic shift toward online retail have combined to improve sales numbers in the DIY sector. However, high competition, a lack of omnichannel maturity, and rising procurement costs have placed a great deal of pressure on efficiency and margins. DIY retailers need a combination of flexible, AI-driven technology that can match continuously evolving demand as well as best practices that will raise margins and unlock omnichannel profitability.

There’s also significant headway to made toward reducing the costs associated with DIY-specific challenges such as moving large, heavy inventory through a long, international supply chain—especially as supply chain delays and import and logistics costs have spiked throughout the last year. Seasonal products—which have varying seasonal start dates in different regions with multiple delivery waves—demand meticulous planning. Efficiency and optimization remain the key to profitability in DIY retail.

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2. Managing Scale and Complexity in DIY Assortments

Compared to many other sectors, home improvement retailers manage a larger, more complex supply chain, with 20,000–80,000 products per store and up to a million SKUs online. This includes a large proportion of slow movers and other items that present intensive inventory challenges.

For example, shoppers often enter a home improvement store with a shopping list for a full project. If just one required product is out of stock, you could quite feasibly lose the entire sale to a competitor who can provide all required products in a single trip. That’s a larger loss than grocers risk if, for example, they ran out of a certain cereal. Think also of items like table legs, which shoppers often purchase in bundles of four, but sometimes purchase individually.

Forecasting and replenishing items with this level of demand complexity can be challenging or even infeasible without support from the right technology. However, an AI-driven demand planning solution provides the data-processing power necessary to manage the scale and complexity of the DIY assortment with high levels of both accuracy and efficiency.

3. Automating to Efficiently Manage Variety in DIY Store Formats and Assortments

Even within the same company, DIY stores often vary significantly in store and assortment size. A neighborhood hardware store may take up 30,000 square feet and offer a limited assortment of tools and products for everyday fixes around the house. That same retailer may operate a 100,000 square foot location in the same city offering a lumber yard, a garden center, ceiling fans, refrigerators, tool sheds, and more.

With this amount of variation in store format and assortment size, retailers can’t manage supply chain planning without the aid of an AI-driven planning tool. With machine learning algorithms in place, planners no longer have to manually account for the significant inventory and space differences between their stores.

They can instead trust their planning system to generate store-level forecasts that automatically drive accurate replenishment orders throughout their network. A space-aware, unified system can even take store-specific planograms into consideration to reduce operational costs through direct-to-shelf replenishment at each individual store.

4. Capturing the Impact of Seasonality and Weather on DIY Retail Demand

DIY demand is heavily impacted by seasonality and seasonal weather trends—think lawn and garden equipment as the weather warms up versus snow and winterizing equipment as winter sets in. DIY retailers tend to make a large share of their annual sales during the high-volume spring season, when demand for home improvement products is highest, so a good sales day in spring can have a larger impact on the supply chain than your best sales day in winter.

Without an advanced forecasting and replenishment solution, managing a highly seasonal inventory presents a wide array of challenges. However, granular analysis ensures DIY retailers can order even challenging long lead-time inventory in a timely manner and accurately allocate it to stores according to demand. The right system can also ramp down inventory at season’s end, identify which stores have excess inventory that needs to be marked down, and then optimize those markdowns to maximize margin while effectively clearing inventory before it falls out of season.

While DIY retailers face a lot of complex problems, they can address a wide range of challenges effectively and efficiently simply by having the right supply chain planning solution in place.

Written by

Sebastian Nowitzky

Senior Retail Expert and DIY Practitioner