In a departure from traditional practice, American Eagle Outfitters designed its new automated fulfillment center to handle both store replenishment and direct-to-consumer orders from the same inventory.
David Maloney has been a journalist for more than 35 years and is currently the group editorial director for DC Velocity and Supply Chain Quarterly magazines. In this role, he is responsible for the editorial content of both brands of Agile Business Media. Dave joined DC Velocity in April of 2004. Prior to that, he was a senior editor for Modern Materials Handling magazine. Dave also has extensive experience as a broadcast journalist. Before writing for supply chain publications, he was a journalist, television producer and director in Pittsburgh. Dave combines a background of reporting on logistics with his video production experience to bring new opportunities to DC Velocity readers, including web videos highlighting top distribution and logistics facilities, webcasts and other cross-media projects. He continues to live and work in the Pittsburgh area.
E-commerce is here to stay. If there were any doubt about that, the more than $100 billion spent online this past holiday season should be proof that consumers like the convenience of shopping anytime and from anywhere.
No retailer wants to be left out of the digital marketplace, so most have been steadily increasing investments in their online presence. And as more volume shifts to e-commerce orders, these retailers are adjusting their supply chains accordingly. Such is the case with American Eagle Outfitters (AE). AE is one of the nation's leading apparel retailers, offering trendy merchandise through more than 1,000 stores with its American Eagle and Aerie brands. It also operates a thriving e-commerce business. It filled its first direct-to-consumer orders in 1998 through ae.com and today, serves customers in more than 80 countries.
To keep up with steady growth and to adjust to changing retail dynamics, American Eagle is in the process of revamping its U.S. distribution network. Traditionally, it has served stores in the eastern portion of the country from a DC in Warrendale, Pa. (near company headquarters in Pittsburgh), while supplying stores in the west from a facility in Ottawa, Kan. For online orders, the company used a separate fulfillment facility in Kansas.
But that's all changing. AE recently opened a new distribution center in Hazle Township, Pa., that's designed to support both stores and online orders. The Hazle facility, which offers easy access to major interstate highways, has already taken over the fulfillment of e-commerce orders; the facility expects to begin shipping store replenishment orders in the eastern U.S. within the next few months. Once the Hazle Township building is fully functional, the Warrendale site will be shuttered.
David Repp, vice president of North American distribution at AE, says the driving force behind building the new facility was business growth, especially with increasing volumes in its e-commerce channels. "We needed the infrastructure to support that growth," he says. "We also wanted to get closer to our customers, and it allows us to co-locate our inventory and better optimize that inventory."
The decision to combine retail store and online fulfillment into one building has its advantages for a fashion merchandiser like AE. For one thing, the company no longer has to maintain duplicate inventories for its brick-and-mortar and e-commerce operations, which holds down carrying costs. But the strategy also presents some challenges. Store orders typically consist of case or split-case quantities, while direct-to-consumer orders usually contain one or two individual items. Because the two types of fulfillment operations require completely different material handling equipment and processes, many retailers elect to separate the operations.
In order for its "hybrid" fulfillment strategy to work, the Hazle facility would need automated material handling systems with the flexibility to handle a wide range of orders simultaneously, while at the same time, keeping goods moving swiftly through the facility. To design the new operation, AE turned to Vargo Material Handling Solutions, the same firm that had designed the Ottawa facility. The result was a process that treats the inventory as fully available to both channels at all times. The fulfillment process only diverges at the point of packout and shipping.
STORE NO MORE
A key part of AE's fulfillment strategy in Hazle Township has been the elimination of bulk storage. That's a highly unusual move for a retailer, but it was a change that has made inventory more readily available for both distribution channels. In the Warrendale and Ottawa facilities, AE receives trucks of floor-loaded products that it then palletizes for placement into storage racks. At the Hazle Township site, it has dispensed with that process. "Specialized apparel is not a pallet-driven business," explains Repp. "Before, we had to build and then later break up the pallet. But that process is not a value-add to what we do."
Instead of being palletized for storage, cartons arriving at Hazle Township are sent directly to the pick modules. For that, the operation relies on a vast network of conveyors (from TGW) and several sortation systems that move cases and totes throughout the 1,000,000-square-foot facility. Without pallet racks, there is no longer a need for lift trucks—in fact, the facility has no powered mobile equipment of any kind.
The conveyors take over as soon as goods arrive at receiving. Suppliers provide all shipments floor-loaded within their trailers or containers. Extendable conveyors reach into those trailers to offload the cases for transport to a slat shoe magnetic-driven inbound sorter (supplied by Dematic). The sorter diverts the cartons to conveyor lanes bound for six fulfillment modules. Another divert sends select product to a value-added processing area, where items can be adjusted or re-ticketed as needed.
As for the placement of incoming items, the facility's warehouse execution system (Vargo's Continuous Order Fulfillment Enterprise, or COFE, solution) dynamically assigns products to one of the six fulfillment modules as well as a level within that module. The dynamic assignment helps optimize inventory placement and ensures ready access to all items needed for orders.
Each of the fulfillment modules consists of four levels containing static shelving arrayed along both sides of a belt conveyor. Riding on the transport conveyors, products first enter their assigned module at the top floor and then descend to lower levels as needed in a "waterfall delivery" method using vertical reciprocating conveyors.
Once the cases reach the assigned level, they are diverted to conveyor spurs that run behind the shelving. The spurs each offer 50 feet of accumulation buffer to temporarily hold products for replenishing the shelves.
A worker next removes about a dozen cases from the conveyor and places them onto a cart for transport to an area with open slots in the shelving. The worker chooses a "home" for each case, scanning the case as he or she places it into the back of the shelf location and also scanning the slot's ID to notify the COFE system that the stock-keeping unit (SKU) now resides there. Only one case occupies each slot. "Once it is assigned to a location, the product is available to pick and to be sold online," says Repp.
All together, the shelving holds 250,000 cases across the six modules. Theoretically, the facility could accommodate the same number of SKUs, since each slot location could hold a different product. As a practical matter, the building typically houses about 50,000 different SKUs.
NO WAITING FOR "WAVES"
The fulfillment process is designed so that items can be selected for e-commerce and store orders simultaneously. Based on its success using the COFE system at its Kansas DC, AE chose to implement it in the Hazle picking operation as well. AE uses a waveless process, meaning that orders are not grouped into waves as is common in pick operations. Instead, customer orders are entered into worker pick lists on the fly as they are received at the facility—a capability that promotes both fulfillment flexibility and processing speed.
Picking at the Hazle facility is directed by radio frequency (RF). To begin the process, a worker scans the bar code on a tote that will be used to gather items. (A number of orders will be picked together into the tote, then sorted later for individual customer orders.) Once the worker scans the tote, his or her handheld device displays the location of the first pick in the sequence, based on an optimized travel path. Upon arrival, the worker selects the item and scans it to confirm the pick has been made. Additional picks are carried out the same way.
COFE knows at all times where workers are in their pick sequences. When an order arrives at the facility that requires an item that's in line with the pick path of a current sequence, COFE will automatically assign it to the worker's pick list. The picking process continues until the tote is full or the associate reaches the end of the shelving on that level. The tote is then "closed out" on the RF device and pushed off onto a takeaway conveyor that runs through the middle of the module.
When the pick sequence is complete or the tote is full, a spiral conveyor lowers the completed tote to floor level, where it is manually inducted into a crossbelt sorter (supplied by Beumer). The crossbelt sorts 48 customer orders at a time to bins adjacent to Vargo Speedpack put-wall workstations. The stations feature rows of cubbyholes wired with put-to-light technology to collect products for the 48 orders. The facility currently has 30 such stations, but that can easily be doubled to 60 in the future. American Eagle went with this put system to minimize the amount of time products tie up a sorter bin. "The dwell time with a [traditional] chute system reduces the overall capacity of the sorter," explains Repp. "The cubby system allows us to quickly move the items from the sorter to free it up for more orders."
To divvy up products among orders, a worker scans the first sorted item. This causes a light in one of the put wall's cubbyholes to illuminate, indicating that the item should be placed in that cubby. The worker continues to scan selections until all of the items for an order have been gathered in the cubby, at which time the light will remain illuminated to show that the order is complete. The associate then removes the items and places them into a tote on a wheeled cart. The cart is ferried to one of the three adjacent pack stations that service each put wall.
At the pack station, a worker removes each item from the tote, scans it, and determines whether to pack the order in a box or a bag. The container is sealed and a shipping label applied. Completed parcels are then placed onto a takeaway conveyor for transport to another crossbelt sorter that feeds shipping docks by carrier type and transit mode, such as air, next day, ground, and so forth.
KEEPING THE STORES STOCKED
Later this year, retail store fulfillment will transition from Warrendale to the Hazle DC. The process for filling store orders is similar to the e-commerce fulfillment process, with slight differences. Both types of orders are filled within the modules. For store orders requiring full cases (such as orders associated with store openings or new product introductions), RF coordinates the picking of cases from the shelf directly to the conveyor in the module. As a case is selected, a shipping label is applied.
Store replenishment uses the same open case inventory that's used to fill e-commerce orders. Again, the picking process is directed by RF, but different totes are used for gathering the retail stores' orders. Like e-commerce orders, these are picked on a waveless basis.
Completed totes are pushed off onto a takeaway conveyor. However, the store totes are then diverted to a separate put-to-light area instead of being sorted with the crossbelt unit. The put-to-light system (supplied by Dematic) has space to stage 3,500 cartons used for gathering store orders. Each carton will ship to only one store. Once the totes arrive in this area, a worker at the station removes each item and scans it. This causes a light adjacent to the put carton to illuminate, indicating that the product is needed by the store associated with that carton. The worker places the item in the carton and hits a button to confirm the action. This continues until either the order is complete or the carton is full.
The carton is then sealed, labeled, and pushed off onto a takeaway conveyor. The conveyor feeds a small sliding shoe sorter that diverts products to linehaul carrier lanes for store delivery. When fully operational, the Hazle DC will service between 450 and 500 stores.
LEAN AND GREEN
American Eagle Outfitters expects that the new shared-inventory system will shave operating costs by 10 to 15 percent. The facility will save further on energy use though the implementation of low-power conveyors that shut off when product is not present, as well as efficient lighting that reduces electricity use. The facility is in the process of obtaining a LEED (Leadership in Energy & Environmental Design) certification from the U.S. Green Building Council.
The Hazle Township facility is space-efficient as well. While the DC is expected to handle the same volumes as its sister operation in Ottawa, it won't require as much square footage to do so. The Vargo-designed system has allowed it to fit into 20 percent less space than that occupied by the Kansas building, which provided significant savings.
Once fully operational, the new facility should see even greater efficiencies of scale. The automated system assures that it can easily handle the fluctuating volumes associated with a seasonal business such as apparel. And just as fashions change, so do order patterns; no one knows for sure how volumes will grow for each channel. But now, AE is prepared with the distribution flexibility it needs to remain a force in the fashion market.
Nearly one-third of American consumers have increased their secondhand purchases in the past year, revealing a jump in “recommerce” according to a buyer survey from ShipStation, a provider of web-based shipping and order fulfillment solutions.
The number comes from a survey of 500 U.S. consumers showing that nearly one in four (23%) Americans lack confidence in making purchases over $200 in the next six months. Due to economic uncertainty, savvy shoppers are looking for ways to save money without sacrificing quality or style, the research found.
Younger shoppers are leading the charge in that trend, with 59% of Gen Z and 48% of Millennials buying pre-owned items weekly or monthly. That rate makes Gen Z nearly twice as likely to buy second hand compared to older generations.
The primary reason that shoppers say they have increased their recommerce habits is lower prices (74%), followed by the thrill of finding unique or rare items (38%) and getting higher quality for a lower price (28%). Only 14% of Americans cite environmental concerns as a primary reason they shop second-hand.
Despite the challenge of adjusting to the new pattern, recommerce represents a strategic opportunity for businesses to capture today’s budget-minded shoppers and foster long-term loyalty, Austin, Texas-based ShipStation said.
For example, retailers don’t have to sell used goods to capitalize on the secondhand boom. Instead, they can offer trade-in programs swapping discounts or store credit for shoppers’ old items. And they can improve product discoverability to help customers—particularly older generations—find what they’re looking for.
Other ways for retailers to connect with recommerce shoppers are to improve shipping practices. According to ShipStation:
70% of shoppers won’t return to a brand if shipping is too expensive.
51% of consumers are turned off by late deliveries
40% of shoppers won’t return to a retailer again if the packaging is bad.
The “CMA CGM Startup Awards”—created in collaboration with BFM Business and La Tribune—will identify the best innovations to accelerate its transformation, the French company said.
Specifically, the company will select the best startup among the applicants, with clear industry transformation objectives focused on environmental performance, competitiveness, and quality of life at work in each of the three areas:
Shipping: Enabling safer, more efficient, and sustainable navigation through innovative technological solutions.
Logistics: Reinventing the global supply chain with smart and sustainable logistics solutions.
Media: Transform content creation, and customer engagement with innovative media technologies and strategies.
Three winners will be selected during a final event organized on November 15 at the Orange Vélodrome Stadium in Marseille, during the 2nd Artificial Intelligence Marseille (AIM) forum organized by La Tribune and BFM Business. The selection will be made by a jury chaired by Rodolphe Saadé, Chairman and CEO of the Group, and including members of the executive committee representing the various sectors of CMA CGM.
The global air cargo market’s hot summer of double-digit demand growth continued in August with average spot rates showing their largest year-on-year jump with a 24% increase, according to the latest weekly analysis by Xeneta.
Xeneta cited two reasons to explain the increase. First, Global average air cargo spot rates reached $2.68 per kg in August due to continuing supply and demand imbalance. That came as August's global cargo supply grew at its slowest ratio in 2024 to-date at 2% year-on-year, while global cargo demand continued its double-digit growth, rising +11%.
The second reason for higher rates was an ocean-to-air shift in freight volumes due to Red Sea disruptions and e-commerce demand.
Those factors could soon be amplified as e-commerce shows continued strong growth approaching the hotly anticipated winter peak season. E-commerce and low-value goods exports from China in the first seven months of 2024 increased 30% year-on-year, including shipments to Europe and the US rising 38% and 30% growth respectively, Xeneta said.
“Typically, air cargo market performance in August tends to follow the July trend. But another month of double-digit demand growth and the strongest rate growths of the year means there was definitely no summer slack season in 2024,” Niall van de Wouw, Xeneta’s chief airfreight officer, said in a release.
“Rates we saw bottoming out in late July started picking up again in mid-August. This is too short a period to call a season. This has been a busy summer, and now we’re at the threshold of Q4, it will be interesting to see what will happen and if all the anticipation of a red-hot peak season materializes,” van de Wouw said.
The report cites data showing that there are approximately 1.7 million workers missing from the post-pandemic workforce and that 38% of small firms are unable to fill open positions. At the same time, the “skills gap” in the workforce is accelerating as automation and AI create significant shifts in how work is performed.
That information comes from the “2024 Labor Day Report” released by Littler’s Workplace Policy Institute (WPI), the firm’s government relations and public policy arm.
“We continue to see a labor shortage and an urgent need to upskill the current workforce to adapt to the new world of work,” said Michael Lotito, Littler shareholder and co-chair of WPI. “As corporate executives and business leaders look to the future, they are focused on realizing the many benefits of AI to streamline operations and guide strategic decision-making, while cultivating a talent pipeline that can support this growth.”
But while the need is clear, solutions may be complicated by public policy changes such as the upcoming U.S. general election and the proliferation of employment-related legislation at the state and local levels amid Congressional gridlock.
“We are heading into a contentious election that has already proven to be unpredictable and is poised to create even more uncertainty for employers, no matter the outcome,” Shannon Meade, WPI’s executive director, said in a release. “At the same time, the growing patchwork of state and local requirements across the U.S. is exacerbating compliance challenges for companies. That, coupled with looming changes following several Supreme Court decisions that have the potential to upend rulemaking, gives C-suite executives much to contend with in planning their workforce-related strategies.”
Stax Engineering, the venture-backed startup that provides smokestack emissions reduction services for maritime ships, will service all vessels from Toyota Motor North America Inc. visiting the Toyota Berth at the Port of Long Beach, according to a new five-year deal announced today.
Beginning in 2025 to coincide with new California Air Resources Board (CARB) standards, STAX will become the first and only emissions control provider to service roll-on/roll-off (ro-ros) vessels in the state of California, the company said.
Stax has rapidly grown since its launch in the first quarter of this year, supported in part by a $40 million funding round from investors, announced in July. It now holds exclusive service agreements at California ports including Los Angeles, Long Beach, Hueneme, Benicia, Richmond, and Oakland. The firm has also partnered with individual companies like NYK Line, Hyundai GLOVIS, Equilon Enterprises LLC d/b/a Shell Oil Products US (Shell), and now Toyota.
Stax says it offers an alternative to shore power with land- and barge-based, mobile emissions capture and control technology for shipping terminal and fleet operators without the need for retrofits.
In the case of this latest deal, the Toyota Long Beach Vehicle Distribution Center imports about 200,000 vehicles each year on ro-ro vessels. Stax will keep those ships green with its flexible exhaust capture system, which attaches to all vessel classes without modification to remove 99% of emitted particulate matter (PM) and 95% of emitted oxides of nitrogen (NOx). Over the lifetime of this new agreement with Toyota, Stax estimated the service will account for approximately 3,700 hours and more than 47 tons of emissions controlled.
“We set out to provide an emissions capture and control solution that was reliable, easily accessible, and cost-effective. As we begin to service Toyota, we’re confident that we can meet the needs of the full breadth of the maritime industry, furthering our impact on the local air quality, public health, and environment,” Mike Walker, CEO of Stax, said in a release. “Continuing to establish strong partnerships will help build momentum for and trust in our technology as we expand beyond the state of California.”