A razor-sharp strategy for distribution

Dollar Shave Club, a company specializing in grooming and personal care products, was built on this principle. Its founders saw a wide-open market opportunity in giving consumers an alternative to buying high-priced shaving products in stores. In 2011, it launched a direct-to-consumer subscription razor blades service, shipping high-quality products at low prices—just a few bucks a month—right to the customer's door. Subscribers receive monthly deliveries of shaving supplies, including razors, creams, and lotions, with the option of canceling at any time. In order to retain these customers, the company must deliver high-quality products on time and with 100-percent order accuracy.

Like many e-commerce startups, Venice, Calif.-based Dollar Shave Club initially contracted with a third party to handle its order fulfillment. That worked well enough for a time. But as business took off, the company grew increasingly dissatisfied with the arrangement. Eventually, it became clear that the retailer had outgrown its third-party provider, says Lori Jackson, Dollar Shave's director of operations and fulfillment.

More importantly, the company felt the arrangement did not guarantee the kind of service it felt it needed to provide. (Dollar Shave Club's objective is to ship every order within 24 hours of receipt.) After giving the matter due consideration, the company decided that the best way to gain the flexibility—as well as the level of inventory control, speed, and accuracy—it sought was to cut the third party loose and bring distribution in house.

Today, Dollar Shave Club has full control of its own distribution destiny, handling all of its order fulfillment out of two company-run DCs. It opened its first distribution center, a 110,000-square-foot operation in nearby Torrance, Calif., in December 2015. That was quickly followed by the opening of a second facility, a 280,000-square-foot building in Grove City, Ohio, near Columbus, this past July.

As for what tipped the hand in favor of the Columbus area for its second facility, Jackson says Dollar Shave Club weighed a number of factors in choosing the site. "We looked at our customer base, distribution shipping costs, and the ability to service our customers, as well as for an area with a good labor pool," she recalls.

Jackson says the search covered a territory bounded by Indiana to the west, Pittsburgh on the east, Michigan to the north, and Kentucky on the south before settling on the site near Columbus. Among the factors that worked in Ohio's favor were good highway access, proximity to major carrier hubs, and 11 area colleges that could feed a steady stream of graduates to the region's already diverse labor pool. (Currently, about 110 employees work in the Ohio facility.) It also helps that 75 percent of the U.S. population can be easily reached within three to four days from the Buckeye State.

Distribution territory is roughly split at the Rocky Mountains. Torrance serves customers west of the range plus Texas, which accounts for about 30 percent of total volume. The larger Ohio facility handles the remaining 70 percent. Both facilities process only direct-to-consumer orders.

"We distribute and fulfill the same products from both facilities," says Jackson. "Both are highly automated, though Ohio has higher capacities and can handle a little more scale."

Even though the Torrance facility had opened just a year earlier, the company incorporated some design improvements into the plans for its new Columbus DC, according to Jackson. Many of those changes were made to accommodate the operation's scale. Because it would be processing higher volumes than its counterpart in California does, the Ohio facility would require automated systems with higher throughput and speed to ensure that it could turn orders around in the desired timeframe.

Bastian Solutions served as the designer and integration partner in both operations. It also provided some of the equipment, integrating its own conveyors and pick-to-light systems with systems from other manufacturers.

Finding the right integration partner was key to Dollar Shave Club's ability to bring distribution in house. "As a startup company, it was important to find partners who can flex with us. It's how we chose all vendors," Jackson says. "We don't have the standard distribution model. We need the ability to change what we do easily. That is huge and has been a big part of our success. We don't want to be locked in."

It's important to note that when it comes to fulfillment, Dollar Shave Club enjoys one huge advantage over most e-tailers in that it handles only a small number of SKUs (stock-keeping units). This was a strategic decision arrived at early on. While many online companies compete by offering a vast selection of products, Dollar Shave Club has chosen a different route: selling a limited number of quality products. It currently offers a menu of about 30 items, including three types of razors; blades; shaving, cleaning, and styling products; and skin care lotions, lip balms, and wipes. Some of these goods are also bundled with other items for sale in packages—for example, a pack that combines a washcloth with body and face cleansers.

Among other advantages, the low SKU count—coupled with high demand density—has simplified order fulfillment and minimized the need for rack storage. Most inventory is stored as cases in forward locations.

Daily operations at the Ohio fulfillment center are directed by a HighJump warehouse management system (WMS). Early on in the process, the software determines where the various orders will be filled. Orders that have a similar profile and contain the same SKUs are directed to batch pick stations. (These orders are batched into waves based on which SKU they contain.)

For these orders, the fulfillment process starts with the pre-labeling of shipping cartons and envelopes using print-and-apply machines. After labeling, the cartons and envelopes are sent to 36 packing stations. Meanwhile, cases of SKUs needed for batches are selected from the forward rack locations according to directions transmitted by radio-frequency (RF) devices. The cases are then sent to the packing stations, with each station receiving only the products needed for a single batch.

At the pack station, a worker removes the product (or products) from the case and places them into the prelabeled cartons and envelopes. All of the orders being processed at a pack station at any one time contain the same items in the same quantity to expedite the packing process and minimize the chance of errors. "It's easily controllable," notes Jackson. Completed orders are then placed onto takeaway conveyors for transport to sorting.

Orders that don't fit the profile of the batch orders being processed at that time—either because they contain different products or because they include multiple SKUs—are processed in a pick-to-light area that includes about 100 locations in flow racks. Lights illuminate in the pick-to-light area to direct the picking of orders into totes, which are then taken to 28 dedicated pack stations. This pack area can scale to 34 stations to allow for growth.

At the pack stations, shipping cartons are labeled using Zebra label printers and the orders are packed. After the finished cartons are weighed on Mettler Toledo scales, they're placed onto a takeaway conveyor that feeds a vertical lifting conveyor supplied by Qimarox. The lift is used to raise the cartons to an overhead conveyor line that's high enough to allow lift trucks to transport products needed to replenish the pick-to-light flow racks below. In Ohio, Crown lift trucks are used, while Toyota forklifts are deployed in the California DC.

Completed cartons and envelopes from both the main packing area and the pick-to-light packing stations are transported via roller conveyors to a sliding shoe sorter supplied by Hytrol. The cartons are sorted to 36 destination bins based on ZIP code. (The company also employs routing software from Creative Logistics Solutions.)

Bastian used a similar sorting layout in the California facility, with one difference. At the Torrance building, it installed a Bastian ZiPline high-speed cross-belt sorter, rather than the sliding shoe model. (The sliding shoe sorter, which has a high capacity, was chosen for Ohio to accommodate the higher volumes processed at that facility.)

As for how it has all worked out, Dollar Shave Club says it has been very pleased with the productivity and flexibility it gained by opening its own distribution facilities. The company is meeting its goal of shipping orders within 24 hours of receipt, and it views both operations as a step up from the days when the e-tailer relied on a third party for fulfillment.

"It's all about the member experience. When they place an order, we can ship it as quickly and efficiently as possible," says Jackson. "We are able to now offer the same high level of service to all of our members across the country."