J.C. Penney Revamps Its Fulfillment Operation (672 words)

J.C. Penney has had a tangled fulfillment system for many years. The complexity of being a bricks and mortar and a catalog company created a fulfillment process enabling the company to provide exemplary product delivery, albeit through an elaborate system. But faced with multi-channel and multi-company sales expansion, even J.C. Penney recognized there had to be a better way.

J.C. Penney has six strategically placed fulfillment facilities across the United States that decrease shipping time to its stores and its customers. Every warehouse is 2 million square feet, which combined have more than 35,000 picking stations. Each one is configured to support the enormous product mix that J.C. Penney sells. In its years in the merchandising business, J.C. Penney has done some deep analysis that has allowed it to pigeonhole product fulfillment to the areas in which the merchandise sells best. For example, says Al Bell, director of fulfillment for J.C. Penney, women's dresses sell best in the Southeast, so dresses are fulfilled in J.C. Penney's Atlanta facility.

J.C. Penney relies heavily on its truck distribution network, which makes deliveries almost daily to every store in the country, and UPS to meet its 48- to 72-hour delivery standard. J.C. Penney has also operated an in-store pick-up model. This model allows catalog customers to collect their merchandise at the closest store, and store customers can order an out-of-stock item and then pick it up at the store. While the idea of shipping a catalog product to a store seems odd to many, it has been extremely successful for the company.

Enter the Internet

In 1994, J.C. Penney made a move to the Internet with an electronic version of its catalog where customers could view merchandise and then place orders through the 800 number. By 1998, the site was commerce enabled. And in 1999, J.C. Penney moved its other retail stores online, as well. The new sales channel has J.C. Penney selling products from its other companies: Eckerd, Flowers Direct, Levi's, Arizona Jean Co., Just 4 Me and soon a home furnishings company, Step Inside. However, the additional sales channel also added to J.C. Penney's fulfillment burden, forcing it to rethink its model and create JCP Logistics.

JCP Logistics is the entity now managing the fulfillment of all J.C. Penney's holdings. In 1999, it began using Smith-Gardner's WebOrder and MACS systems to apply a single order system to its multiple retail operations. Armed with more than 4,500 CSRs and 14 call centers, one of which is Web-enabled to handle e-mail and Web chat, it was off to a good start on the order taking end. Fulfillment was a whole other issue.

With six facilities available, J.C. Penney opted not to use its existing method. Instead, it decided to reconfigure two of its centers to meet the e-commerce fulfillment needs of its retailers. To handle the increase in product storage and shipping, J.C. Penney made its Alliance, TX, facility the import storage warehouse, and then transformed the Wawatosa, WI, facility into the fulfillment location for its other retail chain clients.

Now, housed in Wawatosa are five companies, all of which need their own product lines to be picked, packed, shipped and sometimes returned. Essentially, it looked like a recipe for disaster.

J.C. Penney wanted two things to happen at the Wawatosa location. It wanted a multi-company picking process, and it wanted the facility to handle its own returns.

To make the process run smoothly, J.C. Penney did several key things. First, it gave each client its own street address. This eased possible problems for package delivery and shipping and for the returns process.

Next, it devoted a single picking staff to each client but cross-trained them. Then, it developed a multi-company receipt process so that fulfillment-related costs could be paid and charged correctly. And, using Optum's Demand Center Management System, it created an order schedule.

Order scheduling allows one company's orders to have priority over another, which provides for a more efficient use of staff, as each company's peak times don't necessarily coincide.

—Melissa Sepos