Don't wait around

By Gary R. Forger -- Modern Materials Handling, 10/1/2000

During the past few months, I've been going around the country giving a talk about trends in materials handling. As you might expect, a good portion of it focuses on emerging e-fulfillment practices and how these are going to impact all distribution centers.

My point of view is quite simple. The difference between profit and loss for so many dot coms today is the ability (or inability) to fill orders efficiently. And once the leaders figure out how to pick, pack, and ship orders for profit, your operation had better be ready to match them order for order. Or you're dead. In fact, their performance level will likely be so high that it will become the new standard whether you take orders over the Internet or not. Furthermore, that's going to be the case in both the business-to-consumer and business-to-business arenas.

All of this is either fortunate or unfortunate, depending uponyourpoint of view. On the one hand, this could be just the kick in the shins your company needs to make some major improvements and add to the bottom line. On the other hand, these developments could be seen as little more than an early signal that the end for your company is near. It all depends on how you and others respond.

One company not waiting around for the dot coms to sneak up on them is American Eagle Outfitters, this month's cover story. In fact, there are several aspects of this upgraded retail store distribution operation that are particularly notable.

To begin, AE built on what it already had. It didn't rip out systems and put in new ones. Instead, it built links between materials handling and information systems that allow inventory to be handled faster and more efficiently than ever.

Now, AE was no laggard before the upgrade. Merchandise for its 650 stores used to sit in the DC for just 2 or 3 days. Not bad. But that's now been reduced to 12-24 hours. Unless of course the inventory is being crossdocked. That merchandise is on its way in about an hour. Overall, this DC is already far better than most dot com order fulfillment operations.

As cover man Michael Fostyk, vice president of AE distribution says, "We are much more flexible and able to react more quickly to various situations than in the past. We can get much more accurate projections, and that is a tremendous benefit." (He even talks like he's from a dot com.)

Put all of this in the context of handling 50 million items a year, and you gain a true appreciation for what AE does day in and day out. By the way, all of this is already doing something quite nice for AE's bottom line. To justify the investment, the DC needed to show a 10% productivity increase. "We've already significantly exceeded that after only a few months," says Fostyk.

So there you go, just another dot com fulfillment success story. Sorry, my mistake. AE isn't a dot com. It just knows how to beat them at their own game.