How American Eagle Outfitters Set Up Its New Fulfillment Center

Gen Y apparel retailer American Eagle Outfitters doesn’t bulk-mail catalogs, but it does operate a thriving direct-to-consumer business from Web sales and orders placed in its stores. Like many other retailers that historically only dabbled in direct sales, American Eagle farmed out its fulfillment to a third-party firm. But as Web orders continued to increase, the company realized the need for its own fulfillment center. So one was built last year in Ottawa, Kan.

The facility has a unique fulfillment operation that adapts to changing work volume requirements and available labor resources, said Steve Lyman, the retailer’s vice president of distribution, during a session at last week’s National Conference on Operations & Fulfillment in Orlando, Fla.

To ensure maximum efficiency, the company used a system installed by VARGO Adaptive Software that enables it to maximize the resources of a mix of its own warehouse employees and temps brought in from an outside company. American Eagle maximizes efficiencies in the following ways:
* workers operate in production lines;
* many workers contribute to make each package, and many packages are being made concurrently; and
* it automates workflow.

“When we talk about automation of workflow,” Lyman said, “there aren’t a lot of consistencies. We wanted to build a flexibility to respond quickly to unpredicted work requirements. We also effectively use temporary labor to meet fulfillment demands; provide a consistent, predictable delivery operation; and make efficient use of our workforce through automated labor management.”

American Eagle takes 1,100 to 1,200 orders per hour and about 10,000 to 20,000 orders per day. “There are seasonal variations, naturally,” Lyman said. “We want to take it to 20,000 to 40,000 orders per day, depending on the season.”

To handle order swings, American Eagle works with companies that provide temporary workers to work with the retailer’s full-time warehouse workforce. The temps come in fairly regularly. “They’re in your shop to begin with,” Lyman said. “You have an integrated relationship with them. But the key is you only use them when you need them and let them go when you don’t.”

The challenges involved in juggling its workforce with a temporary one include the following:
• seasonality in volume requirements;
• predictability in daily workloads;
• flexibility in delivery requirements;
• availability of temporary labor;
• adding shifts and required supervisors;
• categories of work suitable for temporary labor;
• training requirements of temporary workers;
• direction, supervision and synchronization of work efforts of all workers, permanent and temps; and
• the monitoring of progress and adjusting objectives.

What’s more, American Eagle juggles its own workers with temps with regard to prioritizing orders based on timeliness, express delivery and the like. Orders are pooled so less timely ones are automatically pushed down in the pool, said VARGO Systems Engineer Dan Perry during the session.

VARGO’s system can automatically identify what different workers’ capabilities are and direct work to them and other kinds of work to others. “If gift boxing is required with orders, that requires special skills,” Perry said. “The system knows how to direct these kinds of things to manage and balance that kind of work between those workers.”