Finding the comfort zone

By David Maloney, Associate Editor -- Modern Materials Handling, 10/1/2000

American Eagle Outfitters sells comfort. From the viewpoint of this casual apparel retailer, there is nothing better after a long day of work or school than slipping into comfortable clothing and enjoying the company of good friends.

Operating out of 510 stores, Pittsburgh-based AE is one of the nation's leading retail chains geared to the active young adult, aged 16-34, who enjoys the outdoors and a fun-filled lifestyle.

Keeping up with the distribution demands of this growing retailer requires a similar level of comfort with its materials handling systems. They must fit as perfectly as a pair of AE jeans.

AE operates from a single distribution facility in Warrendale, PA. The company recently expanded the building, originally built in 1977, and upgraded its order processing systems.

"We had the flow-through capacity to handle up to 650 stores in the facility, but we felt that we needed a little more reserve storage space for our store replenishment activities," explains Michael Fostyk, vice president of distribution.

To meet its objectives, AE added a 40,000 sq. ft. high-bay storage area to the DC, and the receiving dock was expanded and linked to materials handling systems.

In addition, both a new warehouse management system or

WMS (Manhattan Associates, www.manh.com ) and a planning and allocation system were introduced.

"In the old system, we were relying on a packing slip," says Fostyk. "We would almost have to unload the trailer, re-count everything to see what was there, and then tell our allocation department. Now we know all that ahead of time. We are able to plan our next day's work at the DC in advance."

Additionally, the upgrade has brought paperless processing, doubled the facility's receiving capabilities, increased the amount of product crossdocked, decreased the use of corrugated materials and plastic totes, and added the flexibility required to handle priority shipments.

Over 50 million units/year pass through the DC, all flowing directly to company stores. Prior to the upgrade, most merchandise spent 2-3 days in the facility before being shipped. This compares to only 12-24 hours under the new system. Cross-docked items are processed within 1 hour.

"We set a record for shipping after the first full week of implementation," says Fostyk.

He adds that to justify the return on investment, the facility needed to show a 10% increase in overall productivity.

"We've significantly exceeded that already after only a few months," he adds. "Plus we are much more flexible and now able to react more quickly to various situations than we have been in the past. We can get much more accurate projections, and that is a tremendous benefit."

Pre-dock assignments

American Eagle's allocation department is sent advance ship notices off all receipts. These are used in determining store allocations.

"Every case has a destination assigned to it by the time the trailer pulls up at the dock," explains Steve Lyman, director of distribution. "The WMS then matches every case to the most efficient path through the facility."

Six receiving lanes handle 90% of receipts. Three additional doors handle non-conveyables and other items that bypass the normal processes. Extendible conveyors reach into the trucks on the receiving lanes to assist unloading of cartons, which are then conveyed to an upper-level receiving sorter. A fixed scanner here reads the bar code applied by the manufacturer. The WMS then directs a sliding shoe sorter to divert the incoming cartons to one of five destinations-to packing modules, the break case area, the pallet-build area for items going to reserve storage, a test and extraction area, or crossdocked to shipping.

"We worked with our vendors a year in advance in creating the discipline to put the right bar codes on their cartons," says Fostyk.

In addition to bar code integrity, AE also requires vendors to provide cartons that fall within a conveyable size range. Readable bar codes and conveyable sizes are especially important for full efficiencies to be realized through the automation.

About 10-15% of receipts are immediately crossdocked. This amount often reaches as much as 25% seasonally, as it did during the recent back-to-school shipments. AE strives to crossdock as many items as possible to reduce handling.

After moving through the receiving sorter, crossdocked items pass directly through a print-and-apply label machine before being conveyed to shipping.

A small portion of receipts diverts to a test and extraction area. This zone handles items that are sent only to select stores to test customer reactions. Radio frequency (RF) units direct picking and packing by hand here. Once a carton is filled, it is placed on a pallet and eventually taken by lift truck to shipping.

Push and pull

American Eagle Outfitters' distribution center is both a push and a pull facility. The push portion is found in the immediate allocation of incoming merchandise. The pull comes from replenishment of stock sold by the stores. About 30-40% of every incoming order is held for store replenishment. These items reside in pallet storage or the active pick modules for 1-4 weeks.

Before arriving at the storage area, cases are sent from receiving to a pallet build area for palletizing by hand with one stock keeping unit (SKU) per pallet. Lift trucks then transport the loads to rack ends of the adjacent high bay area where each is picked up by a high reach truck. A scanner attached to the truck reads a case bar code label on the pallet and signals the WMS to make a putaway assignment via an on-board RF terminal to one of 6,000 pallet rack locations. The man-up reach truck is driven to the putaway location, engages the in-floor electronic wire-guide as it enters the narrow aisle, and finds the pallet location. As the pallet is deposited, the on-board scanner scans the location number to confirm proper putaway.

A portion of the reserve area is also used to hold stock for new stores that are about to open and also for seasonal products that are accumulated for quick processing, such as holiday merchandise.

The allocation team determines replenishment for the stores based on daily sales. Most product is pulled from the reserve high bay storage and sent by lift truck to the active pick modules. There are five pick-to-belt modules in the facility, four of which are three-tiered and feature pallet rack storage.

As items are allocated, the WMS directs RF batch picking from the modules. Hand-held terminals display locations and amounts needed of each SKU. Picks are made by hand into totes, one SKU per tote. The worker scans the SKU and the tote to marry the two together. The totes then route through the module on a belt conveyor as they make their way to the packing area.

Put-to-light packing

Products destined for AE stores, with the exception of crossdocked cases, pass through the packing area. There are three primary sources for these items - totes from the pick modules, full cases from receiving (about 45% of all receipts), and totes from a break case area.

Within the break case area, as the name implies, full case assortments are broken into individual totes according to SKU. This allows for easier distribution once the merchandise arrives at the packing modules. The receiving sorter first sends the assortments to the break case area by conveyor. Upon arrival, the cases gently drop to gravity feed lanes. A worker then pulls down a hanging tote travelling on an overhead tote conveyor, opens a case, and begins removing items from it. RF terminals/scanners worn on the hand and wrist are used here to scan each item, along with the bar code on the tote. The WMS marries them together and directs how many units are to be put into the tote. The tote is then pushed off onto a takeaway conveyor.

Cases and totes next arrive at the two redundant packing modules and are diverted down the 14 rows within each system. Single-size cartons are staged within the 680 put locations found in each module. Every location and carton represents a single store.

"The redundant systems give us a tremendous amount of flexibility," says Fostyk. "Sometimes we use one strictly for store replenishment. Any receipt can be directed to one or the other depending on the work load and the building balance."

Hand scanners are used to scan the bar code on the incoming tote or carton to notify the WMS of the arrival of that product. The system then directs lights and quantity displays to illuminate next to each location requiring that SKU. The worker simply picks units out of the carton or tote and drops the needed number into each store carton. Once a carton is full, the packer pushes it off onto a takeaway conveyor, pulls a new store carton down from an overhead carton conveyor, attaches a store shipping label to it, and places it in the vacant put location.

Crossdocked cases and store cartons from the packing modules meet in the shipping area. As packages arrive, a pop-up wheel sorter diverts the cartons down 13 shipping lanes. As with receiving, these lanes feature fluid loading with extendible conveyors that reach into outbound trucks. A combination of freight, parcel, and less-than-trailer-load vehicles are used to transport the outbound cartons to AE stores.

A second pallet-build area is adjacent to the shipping lanes. This pack and hold area is often used to stage product for new stores.

Good planning makes all the difference

American Eagle Outfitters took more than a year to prepare for its facility upgrade, and attributes its distribution success to good planning and communication between facility workers, information systems personnel, vendors, and members of the allocation team.

"We had heard horror story after horror story of people doing upgrades with WMS systems," recalls Fostyk. "So, planning was the key for us. There was a lot of behind-the-scenes work."

Lyman also stresses how important employee support, training, and hands-on testing was to the process.

"The associates who went through this change management process were vital to our success. Without the people, the system doesn't run," he says.

AE will use the lessons learned in the Pennsylvania facility when it breaks ground soon on a new distribution center in Kansas. The company says that the new DC will help serve customers in western states as the chain projects growth to 1,100 stores within the next few years. AE expects to open another 40 stores this year alone.

Upgrade at a glance

System Snapshot