American Eagle Outfitters has deployed a software system and optimization engine (called warehouse execution system, or WES) that it uses in its two main distribution centers in the US.\u00a0 At the receiving area of the warehouse, incoming packs of merchandise are immediately scanned and put on an 850-foot conveyor system, and the WES makes a real-time decision about how the product should be routed through the distribution center [3].\u00a0 The WES decides where the product is most urgently needed, based on the pending pool of orders across retail replenishment requests and direct-to-consumer orders.\u00a0 There\u2019s no needless division of storage along product, retail brand (American Eagle and aerie), or sales channel lines, and as a result, the optimization engine has reduced labor costs because less picking is needed [4].<\/p>\n
Given the visibility into inventory across distribution centers and in retail stores, customers are now provided with more selection when viewing AEO\u2019s apparel online.\u00a0 Batches of customers’ online orders are processed approximately every 8 minutes within AEO\u2019s distributed order management system, and automated decisions are made about how and from where a customer\u2019s order will be fulfilled.\u00a0 A customer\u2019s online order can be fulfilled from a distribution center, via \u201cship from store,\u201d or, in the case of multi-item orders, using a combination of fulfillment methods [4].\u00a0 As a result, AEO has managed to improve delivery times on customer orders, and more than 90% of customer orders have delivery times of two business days or less, which is a two- to four-day improvement over the previous system [4, 5].<\/p>\n AEO has also rolled out shopping alternatives to better serve their customers like the \u201cReserve, Try, Buy\u201d program, in which mobile app customers request that up to 5 pieces of clothing are held for them at a nearby retail store [6].\u00a0 The Reserve, Try, Buy and ship-from-store options maximize each retail store\u2019s inventory exposure to customers who are shopping online, which helps with shedding products that are about to go out-of-season [6].\u00a0 Although the process is seamless from the customer point-of-view, the Reserve, Try, Buy process could still become more automated, as the employee at the store must physically set aside the items and kick off an email process to let the customer know the items have been successfully reserved.<\/p>\n What\u2019s next?<\/strong><\/p>\n At the distribution centers, AEO has a short-term goal to better automate equipment maintenance.\u00a0 Currently, there is some limited digitization in place to track performed maintenance, as technicians scan a bar code with their iPads to feed into a computerized maintenance management system (CMMS) each time they work on a piece of equipment.\u00a0 However, technicians still roam the 1.6-million-square-foot distribution center in Pennsylvania looking for the \u201ctell tale squeaks, noises, [and] leaks\u201d of the equipment [7], instead of using more automated and predictive maintenance technology.\u00a0 Given that AEO\u2019s business is highly seasonal around back-to-school and year-end holiday periods [8], even a small breakdown during a peak time could jeopardize their ability to meet strict customer service-level agreements [7].<\/p>\n While AEO is ahead of some of its direct apparel competitors, there\u2019s still much opportunity for digitization, from predictive shipping to 3D printing of replacement parts for its distribution center conveyor systems.\u00a0 How might AEO improve its responsiveness to customer demands?\u00a0 Could AEO surge ahead to become a fast-fashion brand by leveraging its digitized distribution network, i.e. by holding less inventory and adapting quickly to changing fashion preferences among its teenager target demographic?<\/p>\n (793 words)<\/p>\n <\/p>\n Citations<\/strong><\/p>\n [1] \u201cAmerican Eagle Outfitters: Who We Are,\u201d American Eagle Outfitters, https:\/\/aeo.jobs\/info\/page1<\/a>, accessed November 2017.<\/p>\n [2] American Eagle Outfitters, 2016 Annual Report, p. 6, http:\/\/s1.q4cdn.com\/457120574\/files\/doc_financials\/2017\/Annual\/Annual-Report-2016.pdf<\/a>, accessed November 2017.<\/p>\n [3] Bob Trebilcock, \u201cTransforming into a true omni-channel retailer,\u201d Logistics Management, September 1, 2016, http:\/\/www.logisticsmgmt.com\/article\/transforming_into_a_true_omni_channel_retailer<\/a>, accessed November 2017.<\/p>\n [4] Bob Trebilcock, \u201cAmerican Eagle Outfitters\u2019 omni-channel journey,\u201d Supply Chain 24\/7, September 1, 2016, http:\/\/www.supplychain247.com\/article\/american_eagle_outfitters_omni_channel_journey\/vargo<\/a>, accessed November 2017.<\/p>\n [5] Trefis Team, \u201cAmerican Eagle Outfitters Is Getting Back On Track,\u201d Forbes, December 4, 2015, https:\/\/www.forbes.com\/sites\/greatspeculations\/2015\/12\/04\/american-eagle-outfitters-is-getting-back-on-track\/#744c8aec50bb<\/a>, accessed November 2017.<\/p>\n [6] Natasha D. Smith, \u201cOmnichannel Marketing Innovation: American Eagle Outfitters,\u201d Direct Marketing News, March 10, 2016, http:\/\/www.dmnews.com\/marketing-strategy\/omnichannel-marketing-innovation-american-eagle-outfitters\/article\/481864<\/a>, accessed November 2017.<\/p>\n [7] Bob Trebilcock, \u201cMaintenance at American Eagle Outfitters,\u201d Supply Chain Management Review, December 15, 2016, http:\/\/www.scmr.com\/article\/maintenance_at_american_eagle_outfitters<\/a>, accessed November 2017.<\/p>\n [8] American Eagle Outfitters, 2016 Annual Report, p. 9, http:\/\/s1.q4cdn.com\/457120574\/files\/doc_financials\/2017\/Annual\/Annual-Report-2016.pdf<\/a>, accessed November 2017.<\/p>\n [9]\u00a0BeaconStac, \u201c5 Best Beacon Projects and What They Could Have Done Better,\u201d\u00a0https:\/\/blog.beaconstac.com\/2015\/10\/5-best-beacon-projects-and-what-they-could-have-done-better<\/a>, accessed November 2017.<\/p>\n [10] Matt McFarland, \u201cAmerican Eagle Outfitters lures customers into fitting rooms with help of beacons,\u201d The Washington Post, October 15, 2014, https:\/\/www.washingtonpost.com\/news\/innovations\/wp\/2014\/10\/15\/american-eagle-outfitters-lures-customers-into-fitting-rooms-with-help-of-beacons<\/a>, accessed November 2017.<\/p>\n![\"\"](\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/AEO-distribution-center-layout.png\")
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