RIS Article Covers AEO Distribution Center

art on August 31, 2016

Retail Info Systems News (RIS) published and article featuring American Eagle Outfitters Distrbution Center, which features VARGO®’s Omnichannel solutions. Read the full article:

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

Multichannel Merchant Features VARGO®

art on August 31, 2016

Multichennel Merchant recently published a story which featured VARGO®. Read the full article:

American Eagle Seeing Benefits with Omnichannel DC

A little over a year since going live with the nation’s first all-waveless picking omnichannel distribution center in Hazle Township, PA, American Eagle Outfitters is continuing to reap the benefits in terms of improved operational efficiency, turning around more orders faster and with reduced manpower.

The facility, designed from the ground up as an omnichannel operation, opened in 2014 but with only direct-to-customer orders processed in waveless fashion. In June of 2015, it switched to all-waveless picking for both channels, as retail operations were transferred from a distribution center outside Pittsburgh. In Hazle Township, a single pool of inventory is shared between channels, and orders are sent to the floor continuously as they arrive instead of being held until a “wave” of orders can be released.

“When we expanded our operations to the east coast 2014 to get closer to the majority of our DTC customers and high-volume retail stores, it made sense to commingle our inventory and make it available for all channels,” said Christine Miller, American Eagle’s director of operations. “That has given us great rewards as we’re no longer playing a guessing game in terms of locating inventory and in what configuration. With it all commingled it becomes a much more fluid process.”

Using Vargo’s Continuous Order Fulfillment Engine (COFE) warehouse execution system, American Eagle was able to achieve zero backlog on Cyber Monday in 2015. Also, during the first nine days of the holiday peak season, the company was able to divert 220,000 units of inventory slated for retail to DTC, based on a shift in demand; this represented roughly 15% of the 1.5 million DTC orders. The COFE system and its waveless process is what enabled the flexibility to divert a large chunk of inventory on a dime.

Holiday peak performance has also greatly improved. “In 2014, the first year (Hazle Township) was open and just servicing DTC customers, we processed 900,000 units in six days, as much as was processed in the prior three-months combined,” Miller said. “Last year, we processed 1.5 million units in nine days. The accuracy is very good, which has a lot has to do with our people, not necessarily the system. Generally we’re able to keep up with daily demand or backlog.”

The DC shipped 48 million units in 2015, when it was operating for six months as an omnichannel facility. This year, Miller expects to ship 73 million units.

COFE also gives American Eagle greater flexibility in process orders when there are exceptions or unit damage. At its other distribution center, a full-pallet facility in Ottawa, KS, this can cause a location to be “frozen” for up to an hour, creating an operational logjam. But in Hazle Township’s single-case setup, COFE automatically sends a pick to a different location with the same SKU in it.

This capability is enabled because COFE’s waveless processing makes the Hazle Township facility an “all active” operation, meaning product in every location in the building active for picking. In a traditional scenario, DCs have a reserve location with goods on pallets and a forward pick location that is replenished by the reserves.

“We’re able to turn orders faster with less manpower, all under one roof with a single software system,” Miller said. “We’re working on converting our Ottawa, KN campus into an omnichannel program where inventory is shared in the picking process as it is in Hazle Township.”