Hibbett Sports: Faster, Flexible and Efficient

Walk into the receiving area of Hibbett Sports’ 420,000-square-foot distribution center in Alabaster, Ala., and the first thing you see is a high-speed conveyor and sortation system that ties together all of the functional areas of the facility and can cross dock a carton from the furthest reaches of receiving to the furthest dock door in shipping in 12 minutes.

The conveyor system features 29 diverts and a saw tooth merge that combines four conveyor lanes into one to service more than 1,000 stores in 31 states. An estimated 80% of incoming merchandise flows through the facility without ever going into reserve storage; the majority of that is allocated to some 800 regional stores that receive deliveries once a week by a private fleet while the remainder is cross docked directly into the back of trailers destined to strategically located pool points, where product is broken down by last mile shipment to some 200 stores outside the DC’s shipping radius. The remaining 20% of incoming merchandise is diverted to are serve storage area or to a put-to-light picking mezzanine for replenishment.

We don’t hear as much about crossdocking today, as many retailers are focusing their efforts on shuttles and waveless picking in omni-channel facilities. But, Hibbett’s crossdocking strategy is a reminder that there are no cookie cutter solutions; there are plenty of fast growing, brick-and-mortar retailers like Hibbett Sports that are creating tremendous value by crossdocking from one centrally located distribution center to fill their store shelves. Combined with anew put-to-light strategy to replenish at the item level, Hibbett is more targeted than ever about the merchandise it sends to its stores.

“In our old facility, we cross docked about 96% of the merchandise, which meant we replenished at the full case level,” says Tony Lago, the vice president of distribution who was brought in to run the new facility. “By replenishing based on what’s selling, less merchandise has to be discounted.”

Hibbett Sports developed the facility in conjunction with a systems integrator envista that also performed an extensive network design and transportation analysis before designing the solution. The result is a highly flexible distribution center that is significantly more efficient than the one it replaced. The old facility processed 12,000 cases per shift and operated two shifts a day to get everything out the door. The new facility is handling 30,000 cases in one shift, Lago explains. “We increased our head count by 15%, but we more than doubled our throughput and reduced overtime,” he says.

Just as important, the facility was designed to support Hibbett’s rapid growth as it continues to add stores and expand its brick-and-mortar presence. “At some point in the future, we may have to add a second DC,” Lago says. “Until then, we can add a second shift and more deliveries if we want to increase our service levels or add more stores.”

70 years of growth
The retailer’s origins date back to 1945, when Rufus Hibbett, a high school teacher and athletic coach, founded the Dixie Supply Company to sell athletic, marine and aviation equipment. By 1965, when Hibbett opened his second location, the store was focused strictly on sporting goods—today, there is a strong emphasis on athletic apparel and shoes. The company went public on the NASDAQ in 1996. Hibbett Sports reports revenues of near $1 billion and operates more than 1,000 stores in 32 states. Its continued growth comes by opening stores in small- to mid-sized markets with 25,000 to 75,000 residents—communities that are often over-looked by other retailers. A typical Hibbett Sports store is about 5,000 square feet and located in a strip plaza near a Walmart.

Solid growth led the company to re-assess its supply chain in 2012. At the time, it was operating one 250,000-square-foot distribution center near Birmingham with limited automation, low ceiling heights and limited space. Space was at a premium inside the facility and outside in the yard, which could no longer turn the volume of trailers in a timely fashion. “We don’t use trailers as portable warehouses, so our rule is that we turn them in 48 hours and that was becoming a problem,” says Lago.

The company knew it had to expand its distribution capabilities. The first question was: Does it make sense to build one larger facility or to develop a network strategy with a second facility in another location? Then, they asked themselves if they were still going to operate one facility, should it also be built outside of Birmingham or should operations move to another geographic location?

The starting point for the project, before the facility design, was a network and retail flow analysis that looked at inbound transportation flows, outbound flows to the stores, the types of cases being handled and the impacts of various strategies on inventory levels.

The outcome of that analysis was two-fold. The first was that Hibbett could still effectively serve its stores from one location in Birmingham by tweaking the delivery strategy.

The second was that the company needed to rethink its crossdocking strategy. While crossdocking 96% of the inventory coming into the facility was extremely efficient from a distribution standpoint, it also meant the stores were always receiving full cases of merchandise, even if a store didn’t need the entire contents of a case for replenishment.

New design, new strategy
The new facility builds on what worked well in the old model, with some tweaks to processes, while incorporating new approaches to automation and distribution.

For one, Birmingham still made sense as a central location for the company if it was only going to operate one DC. That’s because about 800 of the chain’s 1,000 stores are regional stores located within 500 miles of the DC in Alabama, Georgia, Texas and other southeastern states. Regional stores receive one shipment of inventory a week.

The remaining 200 stores are located outside of that radius and are served by four pull points located strategically around the country. These are consolidation centers that receive three to four truckload shipments a week. Inventory is deconsolidated and then allocated to individual stores for twice-weekly last mile deliveries.

That strategy was already in place, but was tweaked to optimize space inside the new facility. “When your typical store is 5,000 square feet, you’re limited by how many times you can go there, so we try to identify groups of stores that can be serviced by a specific mode,” Lago says. “For the new building, we increased the number of pull points we were working with and the number of stores serviced by a pull point.”

The impact was not just better service to the stores, but it also freed up space inside the new DC. “We cross dock directly into the trailers going to the pull points,” Lago says. “It’s not only faster, but because the inventory never goes into a hold area, we need fewer pallet positions in the DC. That frees up space for growth down the road.”

The new facility employs a higher level of automation than at the old facility. For instance, cartons flowing through the building are only touched twice—once when they’re loaded onto the conveyor in receiving and once when they’re loaded into a trailer in shipping. “In the old system, we manually received and labeled cartons,” Lago says. “Now, we’ve automated the weighing, cubing and print-and-apply processes.”

Inventory going to the pull points is cross docked, but Hibbett employs a flow-through strategy for inventory going to the regional stores; while these cases never go into the reserve storage area, they are allocated to individual stores and then sorted to one of 29 store hold lanes near shipping. Each lane can hold merchandise for as little as a few hours to as long as a week before releasing it to the stores. Each lane handles 44 stores. When a trailer is ready to be loaded, the warehouse management system (WMS) releases the cartons from the hold area; they are then conveyed to the saw tooth merge that combines four conveyors into one before delivering them to the right shipping lane.

The last tweak was to reduce the amount of inventory being cross docked from 96% to about 80%, with the remainder going into a reserve storage and hold area or to a put-to light picking mezzanine, where items are picked at the SKU level. “Rather than sending everything to the stores as its received, we can now wait one to two weeks to see which markets are doing better than others and replenish those,” says Lago.

Beyond that, the addition of a put-to-light system allows Hibbett to replenish in less-than-caseload quantities when it makes sense. “Rather than send everything as a pre-pack assembled by the buyers, we send the items that stores sell year round based on the need in the store,” Lago says. “That allows us to be more targeted about what’s going into the stores, even on prepacks, and ship the right items to the right market. We couldn’t do that in the old distribution center.”

Finally, the facility includes a hold and processing area for new stores that are about to open. Merchandise that will be needed soon is stored in that area until the store is ready to open. It’s then inducted into the conveyor system and sorted to the right outbound trailer.

As the company continues to grow, it will eventually have to look at a second facility, perhaps on the West coast. “As we expand our geographic reach, we’re going to want to avoid shipping merchandise from the West Coast to the East Coast only to ship it back west,” says Lago. “But for now, we have the flexibility to get product into our stores faster than ever. If we want to increase our service levels, we can add a second shift and increase the number of deliveries and pull points.”