Guest Commentary: How Flexible Distribution Has Supported Overstock.com’s Rapid Growth

I think one of the toughest tests for a WMS implementation team is supporting a high growth retail customer through its busy season, which is what we did with Overstock.com during the December busy season in 2002 and 2003. In 2002 Overstock.com had annual revenues of $92 million. By 2010 the company had grown to $1.1 billion. Although Overstock.com’s growth has dramatically changed its product mix and distribution processes, it is still running the same WMS as in 2002.

Overstock.com, Inc. is a leading online retailer offering brand-name merchandise at discount prices. The company offers its customers an opportunity to shop for bargains conveniently, while offering its suppliers an alternative inventory distribution channel. Company departments include home furnishings, jewelry, electronics, apparel, sporting goods, and furniture.

In addition to providing high quality products, the online retailer is deeply committed to customer service. In fact, Overstock.com has received industry awards recognizing it as a customer service leader. In 2008, for example, Overstock.com was rated second among all U.S. retailers in the NRF Foundation/American Express Customer Service Survey.

Overstock.com operates two distribution centers in Utah. Here are few metrics on the DC’s:

• Small parcel has 354,255 square feet
• LTL/Ship alone has 686,865 square feet
• Peak SKU count of 80,000
• Peak outbound package volume of 23,000 per day
• Average 105 picks per hour

Over the years, Overstock.com has added several products lines, including footwear, apparel and media. Additionally, the company has added two conveyors, packing machines, a mezzanine and pre-manifest processes to accommodate growing volumes. The company also began receiving partner returns, which presented new logistical challenges. Having a configurable and adaptable WMS enabled Overstock.com to react quickly to these business changes.

“Over the years, the solution’s scalability, innovation and enterprise-readiness has been proven time and again,” said Carter Lee, Overstock.com VP of IT. “The underlying adaptability of the solution’s architecture helps us meet our own very specific needs.”

The WMS has helped Overstock.com provide award-winning customer service through an increased order fulfillment rate and near-perfect accuracy. “We’re extremely proud of our recent customer service awards, and we believe our supply chain plays a huge role in providing the best possible service to our customers,” said Steve Tyron, Overstock.com Senior Vice President of Logistics and Talent Management.

Benefits of WMS Implementation

What I really like about the Overstock.com story is that it shows the value of having an adaptable WMS. The operating environment and requirements of a distribution center during the initial implementation of a WMS will change over time, sometimes dramatically, and if your WMS cannot adapt to these changes quickly and efficiently, then you’re at a competitive disadvantage. The Overstock.com distribution center now operates in a much different manner than during the busy seasons of 2002 and 2003. Yet Overstock is still running the same core WMS, which has been upgraded to stay on current technology, and the company continues to leverage the configuration tools to ensure the system can support its changing business practices.

Chuck Fuerst is the Director of Product Strategy at HighJump Software. He has more than 12 years of experience in the technology market, working for supply chain and ERP software companies to deliver innovative solutions. Chuck is responsible for monitoring supply chain industry and technology trends and identifying ways to enhance the value of products for HighJump’s customers. He holds a Bachelor degree in Marketing Management and Innovation from Concordia University.