As director of distribution, Ken McKinney is responsible for all distribution, fulfillment, and transportation functions for Philadelphia-based Urban Outfitters, the publicly traded parent company of the Anthropologie, Free People, and Urban Outfitters brands.
The company opened its first store in 1970 and started a direct business in 1999. Retail still accounts for more than 80% of net sales.
Urban Outfitters has three U.S. distribution centers that are channel-specific as opposed to brand-specific. The company’s distribution centers in Gap, PA, and Reno, NV, handle the merchandise going to the Urban Outfitters and Anthropologie apparel and home decor stores and to the Free People clothing boutiques, while the Trenton, SC-based fulfillment center handles all direct-to-customer orders as well as its wholesale business. In addition, the company contracts with a third-party distribution center in the U.K. to service nine Urban Outfitters stores in the U.K. and the rest of Europe.
What’s the biggest challenge of direct-to-customer fulfillment and how does it differ from retail fulfillment?
A direct-to-customer operation is much more labor-intensive than one servicing retail stores and requires a higher sensitivity to customer service. In the fast-paced packing environment for our retail stores, our packers average 1,200 units per man-hour. Conversely, packers in our direct operation — where the average customer order is just over two units — only process on average 70-80 units per hour. With direct, we do not have the store as the buffer between the DC and the customer. The packer is the last “touch” before the customer receives their product.
In addition to accuracy and timeliness, we have to consider the presentation of the package that the customer receives. Each of our direct brands has its own unique packaging requirements, consistent with the brand’s identity and target customer.
What is the refurbishment process at Urban Outfitters — how do you make the returns resalable?
Apparel items that our returns processors designate as candidates for refurbishment are sent to a local dry cleaner. We categorize the item as either “wrinkled” or “stained” — makeup or lipstick smears, etc. Under the agreement we have with the cleaner, we only pay them for what can be returned to first-quality inventory. In the case of hard goods or furniture, we do simple repair work inhouse.
Can you describe your “welcome to operations” moment?
The one that stands out happened as we were starting up our direct-to-consumer operation. We contracted the services of F. Curtis Barry & Co. to advise us on fulfillment matters, and I asked one of their folks what a reasonable expectation for orders processed per man-hour would be, taking into account our eclectic product mix. He answered with a number in the single digits. Given that we were performing in the triple digits in units per man-hour with our retail operation, I was amused by his answer and thought that attaining the number he presented would be a slam-dunk. After seven years, we have yet to consistently hit his number.
Because of the disparate merchandise sold, storage media must be a nightmare in the DC. How are the big furniture items shipped?
Our large furniture items are sourced both domestically and internationally. We use a combination of van lines and home delivery companies to move the pieces. The providers we use are chosen by our transportation department and handle shipments originating at our domestic vendors as well as our distribution centers. In the case of the former, I suppose it technically can be considered a drop shipment, although we specify the carrier to the customer.
What’s the most interesting thing in your office?
I have a small metal, manually operated inner core of a music box that plays John Lennon’s “Imagine” when you turn the crank. It is a curiosity piece for visitors and a source of momentary tranquility for me during frenetic times.