As reported in the cover story of the February 2015 issue of DC Velocity, American Eagle Outfitters has opened a new distribution center in Hazle Township, Pa., which is located in the eastern end of the Keystone State. The facility introduced a new concept for the company, as it serves both store and Web orders from the one building and the same pool of inventory.
When it first opened (and at the time we wrote our story), the facility was only handling the e-commerce side of the business, as the process of transferring retail distribution from the previous DC near Pittsburgh had not yet occurred. But since that time, retail distribution has been added to the mix. We thought it would be interesting to check in with the company to see how operations at Hazle have been going since the changeover.
The first store shipments actually began last June from Hazle. Currently, some 416 stores are being served from there, with the remaining stores handled by AE's other main distribution center in Ottawa, Kan. Typically, Hazle handles store fulfillment east of the Mississippi, while Ottawa serves stores in the West. However, either distribution center can fill orders to any store as needed, which allows flexibility in the network.
A unique feature in Hazle is that products are not stored, but are immediately sent upon receipt to six fulfillment modules, where they are available for filling either store or Internet orders. The modules hold 250,000 cases of shared inventory. Vargo's COFE warehouse execution system directs picking wavelessly. Two different types of totes are used, depending on whether the orders are for retail replenishment or Internet orders. Full cases are also picked for stores. The cases and totes ride on Dematic conveyors that wind through the middle of the pick areas. The items are later sorted using put-to-light systems from Dematic. (For a full description of the process, see the original article, "Fashion forward.")
This past holiday season was the first in which the facility handled both the retail and e-commerce channels under one roof. During that season, AE experienced a high level of sales, including higher-than-expected e-commerce sales. "It was a good year to be omnichannel," says Christine Miller, director of operations. "We ended up using about 220,000 units of inventory that we had originally set aside for our stores for direct-to-consumer fulfillment." She adds that since the inventory is shared, the division of original assignments really just exists on paper.
That ability to share resources, though, proves the value of the concept from AE's perspective. "It increases our flexibility to service the customers wherever they are at," says Miller.
Gartner, Inc.