WOW! Material Handling Gives Retailer the Edge

Dec. 1, 2007
High-speed material handling system helps Internet shoe and apparel retailer offer customers fast shipping and a superior online shopping experience.

Nick Swinmurn was walking around a mall in San Francisco in 1999, looking for a pair of shoes. After an hour going from store to store, he finally went home empty-handed and frustrated.

Eight years and more than a billion dollars in sales later, Swinmurn’s online retailer (Henderson, Nev., boasts the largest selection of shoes anywhere—online or off line. And Zappos is not stopping there. The self-proclaimed “service company that just happens to sell shoes” has expanded to bags, apparel, and accessories, and has plans to eventually sell “anything and everything.”

Zappos operates on the principle that if you focus on providing a great shopping experience instead of maximizing profits, sales growth will follow. And it’s paying off, with the Sequoia Capital-supported company recording $597 million in gross merchandise sales in 2006.

The company’s “wow” philosophy of service and selection includes 365-day free returns, 24/7 customer service, 110% price protection, and unheard-of free overnight shipping on every order. The Zappos shopping experience also features extensive Web site search options, clear views of every product from every angle, and “live” inventory where nothing is ever out of stock. And they don’t skimp on selection either, with more than 1,000 brands and almost three million products available to ship immediately.

Blame it on Material Handling
“The ‘wow’ factor is very important to us and to the success of our business,” says Craig Adkins, vice president of fulfillment operations. “We are not competing with other Internet companies; we are competing with the store experience. Offering the best service and selection while getting our goods to the consumer as quickly as possible is the only way to compete in this market.”

Getting an order processed, packaged, shipped and onto your doorstep in less than 24 hours is not an easy task. It takes the right people, careful planning, and a fast, optimized order fulfillment system like the one material handling integrator FKI Logistex (St. Louis, and London-based design and business consulting firm Arup ( provided for the Zappos facility in Shepherdsville, Ky.

In the summer of 2005, exploding sales on Zappos. com were pushing the limits of the company’s outdated, largely manual order fulfillment center. Zappos’ management knew that it had outgrown simple conveyors and paper pick lists. It leased an 800,000- square-foot building across the street to house a brandnew automated fulfillment system that would serve as the company’s primary warehouse and distribution facility.

The proposed facility promised Zappos increased throughput to handle larger shipment volumes and reduced order cycle times to get orders to customers faster than ever before. To get the project off the ground, Zappos’ managers formed the Warehouse Automation Team, made up of senior leadership in the company With only one distribution center and little experience in automation, the team needed someone with a few large-scale material handling projects under his belt to bring a new attitude and perspective to its fulfillment operations team.

Enter Craig Adkins, a technologist whose impressive resume includes 20 years in the military, Total Quality Management (TQM) training at the world-renowned W. Edwards Deming Institute, and process improvement for one of the more successful directto- customer on-line retailers in the world.

Adkins says the automated fulfillment center was a paradigm shift for the company. “When I first came to Zappos, the concept of ‘flow’ was difficult for people to grasp,” he says. “It was still a very manual environment, with workers still picking from paper lists and very little automation.”

However, that was all about to change. In a year the new system would be up and running for the 2006-2007 holiday season, shipping twice as many packages as the old building ever had, and achieving the lowest order cycle times in Zappos’ history.

With an empty 800,000-squarefoot building and a blank sheet of paper, Zappos’ management turned to the Arup logistics team to create a design concept for the new fulfillment system. Although Adkins was initially skeptical about hiring an engineering consultant, he was pleasantly surprised with the way Arup worked to develop a customized system.

“Our goal was to make the design process interactive to create a concept specific to Zappos’ needs,” says Charlotte Dangerfield, senior logistics consultant, Arup. “We held workshops and worked closely with the whole team to give it the ability to enhance the service features that it built its business on.”

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