Tommy Hilfiger Fashions a Streamlined Distribution Center
Consolidating operations at a single facility with innovative sortation systems introduced new efficiencies for the fast-growing apparel and home-furnishings company.
By Maida Napolitano, Contributing Editor -- Logistics Management, 2/1/2007
Tommy Hilfiger has become more than just a name. Over the past two decades, the multibillion-dollar company has evolved into one of the world’s most widely recognized brands. From an initial line of menswear launched in 1985, Tommy Hilfiger U.S.A. Inc. (TH USA) has expanded to include jeans, women’s and children’s clothing, accessories, fragrances, and home furnishings. TH USA has also gone global, selling its products on every continent.
To keep pace with this expansion, TH USA’s distribution operations have undergone significant transformations. By 2004, distribution had grown from its humble beginnings—purportedly from the trunk of Mr. Hilfiger’s car—to three distribution centers (DCs) totaling almost one million square feet of space. One facility supported the Retail business unit, which includes the company’s own stores. The other two served the Wholesale business unit, whose customers are mostly department-store and specialty-store chains.
But it wasn’t long before Vice President of Information Technology Systems Bob Silverman and John Gotthardt, president of third-party logistics (3PL) provider Ridge Services, began to realize that bigger was not necessarily better. Initially hired as a logistics consultant, Silverman had overseen many operational improvements. Gotthardt, whose company manages TH USA’s DCs, was well aware of the growing challenges involved in running multiple facilities.
With three buildings located within a three-mile radius in the towns of Dayton and Cranbury, N.J., problems began to crop up. Functions were being duplicated, and inefficiencies were growing more evident. “We were double-handling packed orders between buildings to create full truckloads to our Wholesale customers,” Silverman recalls.
The Retail and Wholesale DCs were not only physically separate, but they also had separate Warehouse Management Systems (WMS). In addition, the fact that there was little room for expansion in the Retail DC to accommodate the robust sales growth of the retail stores led key personnel in operations, facilities, IT, and logistics to rethink the existing distribution plan. “The previous system of manually picking individual pieces to store cartons may have worked fine for many years, but we knew it wouldn’t be able to keep up with future growth,” explains Gotthardt.
After considering the options, one made the most sense: Consolidating the three facilities into one state-of-the-art distribution center. Financially, the savings were clear. “The investment needed to upgrade the consolidated facility’s handling technology could be readily justified by the space and productivity savings from closing the other two facilities,” says Silverman. Operationally, having all merchandise and resources in one facility would allow the shipper and 3PL to better plan capacity and schedule resources.
Three Into One
The decision was made to consolidate in Cranbury’s “C1” facility, the largest and most advanced building in terms of materials handling equipment. C1 also had 
the most truck doors, the highest clear height, and column spacing that could support a flexible layout.
The first step was to redesign C1 to absorb the storage requirements and operations of the other facilities. The to-do list was daunting: To increase capacity, storage aisles would need to be reduced from 132 inches to 72 inches in a Very Narrow Aisle configuration using wire-guided turret trucks. Multilevel racks for picking Wholesale orders to carts had to be installed, and packing stations had to be relocated from other buildings. The resulting layout was dense yet efficient (see Figure 1).
The team also reviewed C1’s existing sortation systems. Sortation systems automatically route items to their next destination through a conveyor network, with little or no human intervention. C1 already had three of them:
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A combined receiving/shipping system to receive, sort, and palletize inbound cartons while simultaneously sorting and loading outbound orders;
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A picking sortation system to route replenishment totes through pick zones in multilevel pick modules linked to a network of packing stations; and
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A shipping-carton sortation system supported by a two-level-high, pallet flow-rack pick module to process and sort Wholesale shipments.
To make the most of equipment already on hand, a complete sortation system from another building would be relocated and connected to C1’s original receiving/shipping sorter using a pair of cross-building conveyors.
An automated unit sorter would be installed to address the need for more Retail picking capacity. Steve Haskell, vice president of SDI Industries, which supplied the sorter, explains how it works: First, TH USA’s host computer communicates the quantity of each stock-keeping unit (SKU) required for each store to the unit sorter’s control system. Meanwhile, the WMS directs cartons with the required items to the sorter’s induction station. There, an inductor scans the cartons’ bar codes and places individual items on passing trays perforated with tiny holes.
Next, photo eyes look down through the holes at reflectors. If any reflectors are not seen (because something is covering the holes), the system knows that it has detected an item. Based on the scan at the induction station, it also knows what is on the tray and assigns it for delivery to the appropriate store’s drop station (see Figure 2).
With its projected capacity of 10,000-plus units per hour and an average of just 12 workers required to induct and pack orders, the unit sorter was a perfect fit for a high-throughput operation confined to a limited space. “The space footprint required was 60 percent less than the existing manual picking system,” says Gotthardt. “This made it possible to fit all three buildings together.”
Challenges and Rewards
With the design completed, experts, vendors, and contractors were added to the project team. Jonathan Rudnick, Tommy Hilfiger U.S.A. Inc.’s Director of Supply Chain Projects, managed and coordinated the entire implementation. Gross & Associates, the consulting firm Silverman helmed before moving to TH USA, aided in the redesign, project planning, scheduling, and coordination. Vendors and contractors were selected to supply materials handling systems and to relocate equipment. (For a list of those vendors and contractors, go to www.logisticsmgmt.com/vendors).
Coordinating multiple contractors who were installing separate sortation systems was a challenge. “The footprint was finite, with little tolerance for inaccuracy,” Gotthardt says. “But all the contractors did a great job collaborating, so everything fits to the nearest inch.”
An aggressive schedule kept the team on its toes. Everything from design, vendor selection, and permit application to installation and testing had to be completed within 10 months, and construction could not be allowed to impede existing operations. “With no flexibility in the end date, weekly progress meetings were critical so that each aspect of the project stayed on track,” Rudnick says. That strategy—and a lot of hard work—paid off: “Because of the dedicated efforts of the team, they were able to finish the project a month ahead of schedule,” he adds.
The project is now close to completion, and things are already looking up. “We’ve taken advantage of better labor utilization with everything under one roof,” reports Gotthardt.
The new DC design is expected to provide many benefits. C1’s carton-sortation equipment should cut labor costs by as much as 30 percent, says Paul Grodeck, project manager for equipment provider S&S Systems. SDI’s Haskell says the unit sorter could boost picking productivity by up to 300 percent.
More developments are in the works. Although Retail and Wholesale operations are now located in one facility, they are still systemically separate. Wholesale, for example, cannot use Retail’s unit sorter, nor can Retail use Wholesale’s multilevel pick modules. Silverman says this will soon change.
“We’re in the midst of a worldwide SAP rollout,” he says. “This will provide a single system that interfaces all of the orders to the various WCS (warehouse control systems) and enable us to leverage all the warehouse technology for any product, be it Wholesale or Retail. With one system, we will also be able to cross dock more effectively, increase throughput, and reduce the cost per unit.”
C1’s considerable clear height, moreover, allowed SDI Industries to design another sortation level that could be added in the future. “This vertical expansion essentially would double the number of stores the system can sort to,” notes Silverman.
For now, though, plans are to stand down. “We want to digest what we just completed,” says Gotthardt. But given the changeable nature of the fashion industry, chances are this duo won’t be laying low for long. Gotthardt promises: “We must remain aggressive to stay ahead of the curve.”
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