Is Your Warehouse Ready to Handle the Hectic Holidays?

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Is Your Warehouse Ready to Handle the Hectic Holidays?

By J. Michael Vargo, President, CEO VARGO® - 11/07/2016
E-commerce has drastically changed the retail world, creating a multichannel shopping experience where customers are able to shop in the store or online and expect to have goods and services delivered to their homes or a store nearby. This major shift in shopping trends has forced some retailers to evolve their distribution centers into omnichannel fulfillment centers to deliver orders faster and improve warehouse efficiency.

Although reconfiguring a warehouse for omnichannel operations can be stressful and capital-intensive, evidence shows that the benefits are worth it. If done correctly, omnichannel distribution centers allow retailers to fulfill online orders and replenish in-store stock from one distribution center instead of multiple sites. This means customers can receive their goods and services faster because the distribution center is working more efficiently.

The best omnichannel operations have flexible fulfillment centers where inventory is pulled from various channels to meet customer demands.

E-commerce has become a large part of the overall inventory, so it’s imperative to position goods in the right place to meet demand and satisfy sometimes unforgiving e-commerce customers.

American Eagle Outfitters, Inc., realized the benefits and built an all-new distribution center designed for omnichannel operations in Hazelton, Pa., in 2015. The retailer used a Warehouse Execution System (WES) software that controls all work resources and organizes, optimizes, sequences and synchronizes the work effort.

Christine Miller, director of operations for American Eagle Outfitters, said omnichannel operations helped the company to achieve record numbers during its nine-day peak of online shopping after Thanksgiving Day 2015. The company had originally set aside close to 220,000 units of inventory for retail stores. However, when online orders flooded in during those nine days of peak processing, the retailer was able to use those units to fill direct-to-consumer orders, based on demand. 

Without an omnichannel fulfillment center, American Eagle Outfitters would not have been able to meet its customers’ demands so efficiently during that peak time of online holiday shopping. Since all retail and e-commerce inventory is stored in the omnichannel fulfillment center, the company easily was able to deliver orders on time. What’s more, the company is able to fill a majority of its direct-to-consumer orders within one to three days.

Pulling inventory into a single bucket has great value on margins because inventory can be matched to the most economically viable channel (demand). The same workforce — trained to handle both channels — can transition from peak retail into peak e-commerce periods.

This philosophy greatly simplifies the order fulfillment process and helps organize warehouse operations, thus better serving customers.

WES software makes omnichannel fulfillment so efficient because it can manage everything and it operates with one inventory and one fulfillment engine. These fulfillment centers are managed with the workforce philosophy that there needs to be one fulfillment center for all channels and inventory that is managed by one labor force.

Another way to optimize omnichannel operations is through pull-based methods. Industry standard push-based methods struggle with gating, metering and releasing work. Unlike push-based methods — where cycle times can take hours or days — omnichannel WES will have lower order cycle times and will have greater flexibility for expediting orders, thus increasing efficiency and order fulfillment.

Omnichannel operations help increase efficiency and boost order fulfillment, both of which are vital to maintaining customers and keeping them happy. If implemented correctly, omnichannel operations can have numerous benefits and can help retailers keep up with the ever-changing demands of customers. While creating omnichannel operations can be challenging, the benefits greatly outweigh the hassle.


J. Michael Vargo is the president and CEO of VARGO®, a Columbus, Ohio-based company. VARGO® is a team of fulfillment and distribution center specialists with expertise in systems integration, distribution center process improvement and specialized material handling equipment. VARGO® works with retailers, manufacturers, wholesale and direct-to-consumer distributors to improve material handling operations. VARGO® uses its proven, pull-based methodologies to create intelligent solutions for fulfillment centers. VARGO® developed COFE® (Continuous Order Fulfillment Enterprise), the tool that does for fulfillment what lean did for manufacturing.