American Eagle Outfitters Tackles Omnichannel Distribution Demands

By Jamie Grill-Goodman — August 23, 2016
To support its growing e-commerce business, American Eagle Outfitters, Inc.’s (AEO) distribution center in Hazleton, PA, went live last year as an all-waveless omnichannel fulfillment center. While the facility has the capability of servicing all the stores in the chain, the distribution center primarily services 416 stores. The center also continues to fill all direct-to-customer (DTC) e-commerce orders for the eastern half of the United States, serving as a model for synchronized omnichannel fulfillment for AEO.

The fulfillment center is designed to provide a parallel workflow so that workers can simultaneously pull customer and store-replenishment orders (put-to-store). Employees aren’t even aware if they’re picking for a DTC order or for store replenishment.

“Eighty percent of our DTC customers receive their order in 1-3 business days,” noted Christine Miller, director of operations, AEO, who leads the distribution center. “The Hazleton distribution center not only provides a need for increased capacity for our DTC business, but it also gives us an opportunity to get closer to the majority of our DTC customers.”

The power behind the omnichannel fulfillment center is VARGO’s continuous order fulfillment engine (COFE) warehouse execution system. As soon as the inventory is inside of the distribution center, COFE knows where that inventory is located. It knows where the workers are within the building and makes real-time decisions to move people and drive processes.
“The system extends functionality beyond traditional warehouse execution systems,” explained Miller. “COFE is also our warehouse control system and provides us with a demand based distribution model. Our put away process allows us to eliminate forklifts, while our single case location model allows COFE to move a pick to another location with the same SKU to keep the order fulfillment moving. We also have eliminated all reserve pallet locations and the need to slow down the picking process by waiting for the pallet to be moved to a pick location.”

COFE’s flexibility allows the distribution system to easily handle consumer requests, 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.

“We have been able to turn orders faster by changing the physical design and software,” commented Miller. “We were already using the software in our current DTC facility, so it was a natural fit for us to continue to work with Vargo to develop our capability needs over time.”

Before American Eagle opened the facility in Hazleton, all of its store replenishment orders from the eastern half of the country were filled from a distribution center in Warrendale, PA, while a separate facility in Kansas handled all store orders from the west.

“The [Hazleton] building was designed to be an omnichannel facility from the beginning,” said Miller. “We have worked with VARGO consistently in our other facilities and implemented design and process improvements based on the need to improve turn time for DTC orders. We also wanted to realize the benefits of consolidating our workforce under one roof with a smaller footprint that would have the capacity that we needed for a planned increase in our DTC business.

“My advice to others would be to think of your business model now and growth opportunities in the future and don’t be afraid to invest in the technology that will get you there. Build a team that is focused on collaboration and results.” RIS