September 3, 1999
Behind Doors of a Warehouse:
Heavy Lifting of E-Commerce
By REBECCA QUICK
Staff Reporter of THE WALL STREET JOURNAL
ST. CLOUD, Minn. -- Here in a sprawling warehouse, ringed by soybean
fields and dairy farms, lies one of the invisible nerve centers of the
Web-retailing revolution.
Hundreds of employees whiz through the warehouse aisles on forklifts and
cargo haulers, filling orders for the Web sites of Wal-Mart, eToys, Fingerhut,
and other online retailers. The workers snatch goods off thousands of shelves
and deliver them to an army of packers, who box the orders and drop them on
conveyor belts.
Every item has a special code to speed up the packing. A 27-inch television
takes an X1, indicating the item is heavy and must be shipped by itself.
Lighter-weight valuable items, like VCRs, take a 200 code. That means it
requires an additional layer of wrapping paper to help disguise it on a
customer's doorstep.
Red lasers scan each package as it zips by on the conveyor belt. If the weight
of the box doesn't match the specifications on the label, the package is
automatically shunted aside so a human inspector can make sure items weren't
incorrectly added or omitted.
The result: a high-tech, militarized operation that has become one of the
Internet's biggest and most admired distribution centers. Vernon Nies, who
runs the warehouse for Fingerhut Cos., boasts that his crew can process as
many as 30,000 items an hour.
Fingerhut's warehouse illustrates a fact of life on the Internet: While anyone
with a computer and an Internet connection can open up a "store" in
cyberspace, delivering the goods to consumers has proven to be a much more
complicated task. Major retailers, from traditional brick-and-mortar chains
such as Macy's to Web powerhouse Amazon.com Inc., learned that lesson the
hard way last Christmas, when an unexpected surge of online orders left
thousands of irritated customers who didn't get their gifts in time for the
holidays.
Retailers have all had to rethink their packing and delivery strategies for the
coming holiday season. Delivery companies from FDX Corp.'s Federal
Express to United Parcel Service of America Inc. to Hanover Direct Inc. are
vying for that business, but Fingerhut's expertise has helped it score some of
the biggest coups.
So far this year it has signed up about a dozen retailers, including deals to ship
all the online orders for mammoth Wal-Mart Stores Inc. and eToys Inc.,
along with Fingerhut's own vast mail-order and online operations.
Federated Department Stores Inc. gave an even bigger vote of confidence
earlier this year by spending $1.7 billion to buy Fingerhut, which now is
handling orders for Macy's, Bloomingdale's and Federated's other chains.
As a catalog company, Fingerhut had a head start on many of its competitors
in figuring out how to get customer orders to their doorstep. Bad luck also
had part in helping Fingerhut get a jump on the e-commerce boom: In the
early 1990s, anticipating a surge in home shopping via the television, the
company built another huge distribution center in Piney Flats, Tenn. With less
business than expected from TV sales, much of that capacity remained unused,
until e-commerce hit the scene and Fingerhut began offering its services to
Web retailers.
Fingerhut has learned a lot along the way. One floor manager, for instance,
noticed that employees who pick goods off the shelf would be more efficient if
they didn't have to travel from one end of the warehouse to the other to fill an
order. Fingerhut wrote a computer program to group customer orders for
similar products, so that whenever possible, one employee could fill a bundle
of orders without leaving a particular aisle.
The St. Cloud center is computerized down to the minutest detail. As many as
100 trailer loads of goods arrive each day at the facility.
Every item's location in the warehouse is precisely charted. Green and white
checkered pillow shams, for instance, recently occupied bin YH959 on the
second shelf of aisle 52 in building 23A. Customer orders -- which come in
either via the phone, mail or Internet -- pour into Fingerhut's big mainframe
computer in Plymouth, Minn. It sorts them into groups ordering similar
goods and sends them electronically to a printing center 50 miles away in St.
Cloud. From there, they arrive by the truckload 1.5 miles down the road to
the warehouse.
Computers scan each customer's order, checking the dimensions of every item
on the list to calculate the smallest possible box that can be used for shipping.
"If Vern can reduce air space in each box so he can get 1,500 packages on a
truck instead of 1,000, in a year's time he reduced our transportation cost by
50%," says Mike Murray, vice president of distribution at Fingerhut. "It ends
up to be worth significant amounts of money."
Packages that pass inspection are then routed to one of 38 bays at the shipping
dock, where trucks await to haul the goods away for mailing points all over
America. A dedicated fleet of trucks departs daily to local post offices in
points as far away as Seattle or Jacksonville, Fla. By paying local postage fees,
Fingerhut saves a bundle on shipping costs. |
