HILLIARD, Ohio—The supply chain engineering power of VARGO® made history when American Eagle Outfitter Inc.’s distribution center in Pennsylvania went live on June 15 as the only all-waveless omnichannel fulfillment center in the world.
“While the facility will have the capability of servicing all the stores in the chain, the Hazle Township, Pa., distribution center will primarily service 416 stores, approximately 50 percent of the retail inventory,” said Christine Miller, director of operations at the distribution center. The center also will continue to fill all direct-to-customer e-commerce orders for the eastern half of the United States.
The power behind the omnichannel fulfillment center is VARGO®’s Continuous Order Fulfillment Engine (COFE®) warehouse execution system.
“VARGO®I is excited to be an integral part of American Eagle’s growing e-commerce business and proud that COFE® can help the retailer fulfill its goal of meeting or exceeding its customers’ expectations,” said Michael Vargo, president of VARGO®. “What’s most impressive is that the fulfillment center in Hazle Township is capable of reaching 90 percent of American Eagle Outfitters’ retail customers in two days or less.”
When American Eagle built the facility in Hazle Township, Pa., it had plans all along for the omnichannel solution. The system is designed to provide a parallel workflow so that workers can simultaneously pull orders for both customer (or e-commerce) online orders and the store-replenishment orders (called put-to-store).
“What is really different here is that the people doing the picking do not know whether each pick is for a direct-to-consumer order or for store replenishment,” said Carlos Ysasi, vice president of integrated systems for VARGO. “In this distribution center, there is no difference, just one inventory with a seamless transition.”
COFE®’s intelligent warehouse management system provides for true lean distribution.
“As soon as the inventory is inside of the distribution center, COFE® knows where that inventory is located,” Ysasi said. “It knows where the workers are within the building, and it is making real-time decisions to move people and drive the processes.”
The ever-growing e-commerce business drove American Eagle to this point. The 2014 holiday season saw Americans spending $100 billion shopping online, and nearly $300 billion for all of 2014, according to the U.S. e-commerce forecast by Forrester Research.
“We needed the infrastructure to support that growth,” David Repp, vice president of North American distribution at American Eagle told DC Velocity magazine in January.
American Eagle also knew it needed a pioneering material handling system that could simultaneously
handle all of those orders while still maintaining a fairly quick order turnaround. As it has done in the past,
American Eagle contracted with VARGO® to provide the COFE® system in the Hazle Township facility.
COFE®’s customized technology is scalable with growth. The real-time warehouse execution system can manage material handling equipment as well as devices, people and processes. In American Eagle’s case, COFE®’s flexibility allows the distribution system to easily handle consumer orders, which typically involve a large number of orders with smaller quantities alongside the put-to-store orders, which typically involve fewer orders but larger quantities.
VARGO® has spent the past few months updating the system so that it could begin to handle orders to restock store inventory as well as customer’s online orders.
“This is the only all-waveless omnichannel fulfillment operation in the world that I’m aware of,” said Art Eldred, a client executive for systems engineering at VARGO®. “We’re excited to bring the same direct-to-consumer efficiency gains and dynamic work flow management achieved last year to AEO’s retail flow. This has become a model for their network, and we’re looking forward to retrofitting the remainder of AEO’s distribution network.”
The change definitely will add to the work flow in Pennsylvania, Eldred said. In 2014, the facility could handle a peak of 216,000 units a day for direct-to-customer orders, a 50-percent increase above their original goal for the first year. For 2015, VARGO® and American Eagle expect that peak to stretch to almost 450,000 units a day for direct-to-customer orders and a peak of almost 245,000 units a day on the retail replenishment side.
“Once we go live, we anticipate adding about 125 additional hourly positions through the end of the year,” said Miller.
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Before American Eagle opened the facility in Hazle Township, all of its store replenishment orders from the eastern half of the country were filled from a distribution center in Warrendale, Pa. A separate facility in Kansas handled all store orders from the west.