FabFitFun is an interesting retailer with a complex supply chain. They have assembled a set of hardware and software solutions to enable huge surges in shipping. They have been successful enough with their fulfillment capabilities that they are no longer just a direct-to-consumer retailer; they are also a third-party logistics provider.
Forbes.com had a well-written story about them a couple of years ago. “Four times a year, Valerie McKellar waits near her front door, peeking through the blinds and double-checking the FedEx mobile app for status updates on the delivery of her FabFitFun subscription box. When it’s finally dropped off on her porch, she heads to her living room table, one big enough to host each of the products she carefully opens one at a time: A Vera Bradley Compact Organizer. An Alice + Olivia duffle bag. A Short Stories LED indoor planter. ‘It’s just so exciting,” McKellar says. “A lot of people relate it to Christmas and that’s very much true. It feels like it’s this great gift that I’ve given myself.’”
The FabFitFun box includes a selection of full-size products across beauty, fashion, fitness, wellness, home, and tech—delivered each season. FabFitFun members can customize the box based on their preferences, or accept the product selections curated by the company. Members can subscribe annually for $219.99 or seasonally for $69.99/box. The company touts savings of up to 70% per product.
This is an interesting retail niche, but it comes with a supply chain that has huge surges in shipping. Julian Van Erlach, the senior vice president of supply chain management at the company, said the firm’s revenues are “well north of $100 million.” But whereas a traditional retailer might have few large selling seasons that last from one to three months – at FabFitFun they are shipping million’s of boxes per year, with 11 pickable items per box to which members often add an additional 2 to 3 items. And the goods all ship within five to fifteen days depending on the sale event. “We have the same volume during seasonal peaks as Amazon’s largest West Coast facility.” Mr. Van Erlach explained.
To support these surges, the direct-to-consumer retailer built a 600,000-square-foot warehouse in Chino, California, in 2018. The warehouse operates using advanced software: a warehouse management system from Körber Supply Chain Software, a warehouse execution system from Bastian Solutions, and cartonization and shipping software from EasyPost.
Because the other solutions must integrate to the WMS, the WMS is, perhaps, the key piece of software. A warehouse management system supports warehouse processes such as receiving, put-away, picking, value added services (VAS), and shipping. To do this the system must manage fulfillment orders, warehouse tasks, inventory locations, the status of work, and resources that include both humans and machines.
Why did this subscription retailer select Körber? There were a few reasons. One is that the solution scales. Mark Gavin, the senior director of global IT at FabFitFun, said the solution can handle millions of orders dropped into the WMS all at once that then get processed over a few hours. Körber was able to ingest orders in hours while “the competitors were quoting days.”
Secondly, the Körber solution was very flexible. The system let them conduct business the way they wanted to, Mr. Gavin said. Körber allowed them to mold the “software around our business instead of the other way around.”
Körber was also able to develop a piece of custom code to support a complex kitting process. When products are packed into a box to support a customer’s order, those customers have choices. Customers are asked, “do you want this product or do you want to substitute one of these other products?” It is not the same items going into every box. If there were just a few options, a few different bills of materials could be created that direct packers which box to select and which items go in that box. But because of the plethora of choices, there were actually over 35 million possible kitting configurations this season, the bill of material methodology was just not feasible. FabFitFun and Körber developed special functionality that allowed the retailer to handle all the kitting complexity.
With their WMS, they have visibility of the flow of work between and across assets. Their waving strategy assigns orders to the available assets, allowing them to increase output by creating a very smooth flow of work across the entire building. Otherwise, a work area could become “overwhelmed,” work areas dependent on that asset would end up waiting for work, and the output from the building would end up getting “choked.”
Mr. Van Erlach is also high on their cartonization and shipping software from EasyPost. The cartonization software, based on the dimensions and shape of the products going into a carton, shows workers just how the products need to be packed and ensures the products ship in the smallest possible carton. The MagicLogic solution “plays Tetris with all the items in the order, “Mr. Van Erlach explains. The result is FabFitFun can fit more items on a truck, save trees and lower costs.
The shipping software rate shops for carrier costs, which depend on the destination, dimensions and weight of the box. “Before we even make the box, we rate shop it across a number of different last-mile carriers against our contracts, and it’s against every node of that carrier,” Mr. Van Erlach explained. “So, let’s say FedEx may have five locations, and each one of them is returning a quote for the box. We pick the one that we want to use systemically. All that happens in fractions of a second.” The solution also allows for zone skipping, which can also save significant amounts of money. Zone skipping is the practice of delivering a large quantity of packages via truckload or less-than-truckload to a parcel carrier hub close to the package’s final destination. Zone-skipping makes for quicker delivery to customers and allows us to keep prices to members lower than otherwise.
The Chino warehouse employs 200 full-time employees. However, to handle the box event surges, it will hire up to 800 temps. Mr. Van Erlach said, “we’re known for our ability to ramp on a dime.” The distribution center can go from ship shipping out thousands of orders to two shifts later being able to ship out a hundred thousand plus orders in a day.
That is a surprisingly large employment ramp, but Mr. Erlach says they don’t really have problems getting the temp workers. “We pay very competitive wages. We give prizes during the seasons. We’re a fun place to work. The warehouse is very, very clean. It’s a very, very safe environment.”
Finally, picking orders can be exhausting in a manual warehouse. But this is a goods-to-person warehouse. In other words, workers are not pushing a cart over 10 miles a day. They are at a station, and the goods come to a pick-to-light station, where a light comes on, and a worker picks the product behind the lit-up slot and then puts it in a carton. The pick-to-light solution and the software that runs those stations come from Bastian Solutions.
All the hardware and software solutions were implemented and integrated in just nine months. That is very fast for a warehouse with this degree of complexity.
FabFitFun has had great results from this combination of solutions. “Our labor cost went up by 50% during COVID. But our cost per order dropped by two-thirds,” Mr Van Erlach enthused. In other words, their costs were dropping by more than 66% while their labor costs increased 50%. And their cartonization and shipping led to significant savings in transportation. “This all adds up to tens of millions a year in savings.”
Finally, the warehouse is not just a cost center, it is also a profit center. The company is not just a retailer, they are also a third-party logistics provider. Their capabilities in warehousing and shipping have led several other retailers to pay them to fulfill orders for them.
