DSW sorts it all out

You’ve heard the old saying: The only constant is change. Few industries have experienced as much change in recent years as retail, especially fashion retail. The best retailers have reinvented their business models to keep up with changing tastes and new consumer expectations. For many, that strategy has led to reinventing the way they replenish their stores and fill customer orders.

DSW Inc., one of the country’s best known retailers of shoes, footwear and accessories, is a case in point. The acronym stands for Designer Shoe Warehouse, but over the last decade, the Columbus, Ohio-based company has transformed itself from a closeout retailer selling last year’s styles at bargain prices to a specialty fashion retailer carrying this season’s styles. Today, only about 10% of the inventory is overstock merchandise. Product categories have expanded to include socks, hosiery, handbags, scarves and jewelry.

This evolution in the store demanded a new approach to distribution. “When we were an opportunistic close-out business, the range of sizes in the store wasn’t important because we didn’t know what we were going to get from a vendor,” says Jeff Girard, vice president of distribution and fulfillment operations. “As we began buying more direct, in-season merchandise from our vendors, we realized we could order the sizes we wanted and replenish the stores with the sizes and styles that were selling.”

To replenish by size, DSW implemented a broken-case picking and packing solution in its 700,000-square-foot Columbus distribution center. The facility is used for store replenishment; a separate facility in Columbus manages e-commerce sales.

The solution features a cross-belt sorter (Beumer Corp., beumergroup.com/en) installed on a 140,000-square-foot mezzanine that had once been used for value-added services. The sorter feeds 500 packing chutes—enough to dynamically serve DSW’s 394 stores and 356 leased stores located in department stores operated by regional chains such as Stein Mart and Gordmans. DSW’s capacity to replenish at the size level increased six-fold, and more importantly, productivity for that process doubled.

“The sorter will play a big role in our future growth,” says Girard. “As we embrace an omni-channel view of retailing, it gives us more options.”  

From Designer Shoe Warehouse to DSW

While the company’s roots were established in the 1960s, the first Designer Shoe Warehouse store was opened in Dublin, Ohio, in 1991. Targeting women with an interest in fashion and an eye on their checkbooks, the company was a closeout, opportunistic retailer: At the end of the season, it would buy up the excess inventory from designer shoe companies and hold it until the next year, when customers could buy last year’s hot styles at discounted prices.

Over the next 10 years, distribution expanded across facilities to support the company’s growth. By 2001, Designer Shoe Warehouse was operating out of five small warehouses in one industrial park. Four were dedicated to storage and shipping took place out of the fifth. Information was manually keyed into a homegrown warehouse management system (WMS). “When we wanted to ship, we trucked everything over to the shipping facility then reloaded it onto outbound trucks to ship to the stores,” says Girard.

That year, the company launched an upgrade of its distribution capabilities, which has been ongoing. The first step was to consolidate activities into the Columbus distribution center and to implement a best-of-breed WMS, bar code scanning, conveyor, automated print-and-apply system for shipping labels and a shipping sorter. At that stage in development, pallets were removed from storage, cases were placed on a conveyor and then sorted to the shipping dock.

By 2004, Designer Shoe Warehouse was receiving advanced ship notices from vendors and cross-docking pre-allocated merchandise from a new conveyor in the receiving area that tied into the shipping sorter. “We had reached a point where a significant portion of inbound merchandise cross-docked through the facility in about 10 minutes,” Girard says.

At that point, allocating by shoe size wasn’t a priority because the warehouse didn’t know what its vendors might have left over at the end of the season. “We tracked sizes, but we didn’t use the information,” says Girard. “If the vendor sent a full case with the same style, color and multiple sizes, we could send that directly to the stores. If we received deliveries with just one size in the cartons, we’d break them down and build a case of mixed sizes.”

Over time, however, the business model evolved. As the volume of in-season merchandise grew, so did the importance of having the right sizes in the store. For instance, if a store sold out of men’s sizes 8, 9 and 10 in a style and the warehouse simply sent another full case, the store would now have too many larger shoes. “Before long, a store would have five size 11 shoes on the floor that had to be discounted,” says Girard. “We realized that if we could replenish at the size level that was selling, we could eliminate the unproductive inventory and reduce markdowns.”

In 2010, following a successful pilot test of the concept in a small number of stores, Girard’s team invested capital to convert some racking into a put-to-store process. “It was completely manual,” he says. “We picked merchandise to a cart, walked to a store location and filled the shipping container.” However once it went live, the program proved so popular with the stores and buyers that DSW was on track to do five times the original target. “We couldn’t handle the volume,” Girard says.

In 2011, the warehouse team began looking for a more automated process to increase the volume. “We looked at Kiva and a more automated put-to-light concept,” Girard says. “At the end of the day, we decided that a cross-belt sortation system was the best fit for our building.”

The goal for the project was to lay the foundation for growth. In addition to 394 DSW stores, for instance, the company is managing the shoe departments for other retailers in 356 leased stores with plans to grow that part of the business. “With this system, we increased our capacity at the size level six-fold,” Girard says.

The implementation of the sorter began in late 2011. At the same time, some of the pallet storage and the picking area was converted to case storage. Ultimately, about 30% of the building was reconfigured for unit-level replenishment, all while continuing to support the business. The sorter went live in December 2012. By March 1, 2013, it was operating at full service.

Sorting it out
For DSW, cross-belt sortation had a number of advantages over alternative technologies. For one, the system fit on a 140,000-square-foot mezzanine that had once been used for value-added services but was now largely dormant. “It gave us the largest increase in capacity and improvement in productivity in the smallest footprint,” Girard says. “This allowed us to increase the utilization of the building.”

Another important advantage was that cross-belt sortation could accommodate a variety of shoebox sizes and styles without scuffing the boxes, which are on display in the stores. To that end, a lot of time was devoted to getting the right chute size and angle so that shoes and accessories would both glide down to the packing area.

Several months was also spent working with the warehouse control system (WCS) provider to design the best way to stage cartons to keep the sorter full when running a wave. In addition, processes were developed so that new associates could quickly learn their tasks and become productive. As an example, the case pick staging area is enabled with lights; when the sorter is ready for a wave of product, lights turn on to indicate which product needs to be inducted onto the conveyor.

In addition, an overhead scanner was installed just before the divert that sends a carton up to the mezzanine level for processing. “Since the same staging module feeds the shipping sorter, the WCS determines whether the carton goes up to the mezzanine or is diverted to the shipping sorter under the mezzanine,” Girard says. “If the associate picks the wrong carton, the system diverts it to another area where it’s palletized and put back into storage.”

When a wave begins, the WCS dynamically assigns packing chutes to stores. A big store, for instance, may be assigned three or four chutes for that wave. On the next wave, those chutes may be assigned to another store. Lights also enable this area. If no light is on, the packer knows there’s no merchandise in the chute. A blue light indicates that product is present, but not enough to fill a shipping container. A green light indicates there is enough product to fill a shipping container, but the chute isn’t yet full. A flashing red light indicates that the chute is full and won’t accept any more merchandise until its emptied by the packer.

The replenishment process itself is straight forward. Waves are run based on product categories, such as men’s casual shoes. To prepare for the wave, order selectors are directed by the WMS to pick cases to a pallet in a case storage area. Those cases are then delivered to a four-level case pick module for staging until they’re ready to go through the sorter. Once the sorter is ready to accept the wave, lights identify which cases are to be placed on the conveyor.

There are four case break workstations on the mezzanine, with two associates at each workstation. When a case arrives, an associate inducts all shoes onto the cross-belt sorter. Once on the sorter, the shoes are diverted to the right packing chute by store. After an order is packed, a conveyor delivers cartons to the shipping sorter where they are sorted and conveyed into a trailer.

In addition to the productivity gains, Girard says the sorter has delivered more sales to the top line and set the stage for DSW’s future changes. “The in-stock position in our stores has increased significantly,” he says. More importantly, “it enables us to replenish in a way that we couldn’t in the past. That might be attractive to other retailers that want to do business with us as a leased business.” After all, in retail, as we know, whatever you’re doing today is likely to change tomorrow.

System suppliers
Cross-belt sortation: Beumer Corp., beumergroup.com/en
Project management: Sedlak Management Consultants, jasedlak.com
Conveyor: Intelligrated, intelligrated.com
Shipping sorter and conveyor: Dematic, dematic.com
Warehouse management system: Manhattan Associates, manh.com
Warehouse control system and print and apply: Pyramid Controls, pyramidcontrols.com
Lift trucks: Crown, crown.com
Pallet racking: Speedrack Midwest, speedrackmidwest.com