The Blue Horseshoe Blog

How hair salon chain Regis Corporation averted a DC space crunch

Posted by Blue Horseshoe on Nov 28, 2010 11:11:30 AM

Adding a little to the top

It’s not often that a hair-care professional proposes to add a little to the top. But for hair salon chain Regis Corporation, that’s precisely what it took to avert a DC space crunch.

Original post by By David Maloney at DC Velocity

It calls itself the beauty industry’s global leader in hair-care salon operations and education, but Regis Corporation nonetheless found itself in need of a little professional attention a while back. The problem had nothing to do with flyaway hair or the frizzies, however. It was about finding ways to accommodate runaway growth.

The world’s largest owner, operator and franchiser of hair-care salons, Regis has been expanding at a rate of about 1,000 salons, schools and hair restoration centers annually. (It currently boasts more than 11,500 outlets worldwide.) During a routine business review, the company discovered that its rapid expansion could soon overwhelm its North American distribution capabilities. “Every two or three years we do a formal five-year capacity analysis,” explains Bruce McMahon, the company’s vice president of logistics. “In 2001, we realized we would run out of capacity by 2005.” In short, the $2.4 billion a year Minneapolis-based company faced a looming DC space crunch. And this wasn’t one of those problems that could be cured by a little volumizer.

Though it owns or franchises nearly 10,000 salon stores in North America, Regis has not set up a vast DC network on this continent. It serves all of its outlets from just two DCs: one in Chattanooga, Tenn., that supplies stores east of the Mississippi, and one in Salt Lake City, Utah, that keeps stores west of the big river stocked with hair gel, shampoo, conditioner, brushes, combs and more.

As they weighed possible solutions, McMahon, his staff, and consultants from TransTech Consulting briefly considered building a third distribution center somewhere in the Northeast. Once they got a look at the cost projections (approximately $20 million for construction and $3 million in annual operating expenses), however, they decided against it and turned their sights to expanding the Chattanooga facility.

But expanding the Chattanooga center outward would not be possible: There simply was no place to go. “We have a 14-acre site here, but we are landlocked. Our building maxed out at 250,000 square feet,”McMahon says. In fact, Regis had already begun leasing 100,000 square feet in another building across the parking lot, which it uses for bulk storage.

That left just one option: building up. The main building has a 32-foot clearance, and much of that space was going unused. In the end, the company decided to build a mezzanine— a new 20,000-square-foot deck that would provide additional space for picking operations.

Regis at a glance

With $2.4 billion in annual revenues, Regis Corporation is the world’s largest owner, operator and franchiser of hair-care salons, with more than 11,500 outlets in North America and Europe. The Minneapolis-based company owns Hair Club for Men and Hair Club for Women, runs more than 50 beauty schools, and operates or franchises nearly 10,000 salon stores in North America alone. These include Regis Salons, Supercuts, Cost Cutters, MasterCuts, Trade Secret and SmartStyle in the United States and First Choice Haircutters and Magicuts in Canada. It also has nearly 2,000 stores in Europe. Stores carry both their own brands and other product lines like Paul Mitchell and Redken.

Room at the top

Building mezzanines is nothing new for Regis. At the time of the expansion project, the Chattanooga DC already boasted a 30,000-square-foot mezzanine that had been built in 2000 when the facility was only two years old. Used to house pick-to-light operations, that mezzanine is supported with beams between the building columns. Because the mezzanine is literally supported by the building itself, its designers were able to work without the usual weight restrictions. Regis was even able to pour a concrete floor for the mezzanine.

The company had also erected a mezzanine in the Salt Lake City facility when it was built in 2001. That mezzanine is rack supported, meaning that the upper level actually rests upon the rack structure beneath it. Like its counterpart in Chattanooga, this mezzanine is used for picking operations.

As they began planning for the new mezzanine, however, the designers realized they would have to find a different support option. Neither a building-supported nor a racksupported design would work. The Chattanooga facility’s building columns, which were already supporting one mezzanine, couldn’t take on the added weight of a second deck. Likewise, the racking that was in place wasn’t strong enough to support a mezzanine, and the company rejected the idea of replacing its racks as too costly.

Instead, Regis chose a design that uses 52 support columns that run down between the existing racking below to the main floor. The new mezzanine, which features a wood and plastic resin deck, would be built to the same height as the original mezzanine—18 feet—which would allow their conveyor systems to be connected.

Construction of the new mezzanine was completed in the summer of 2005. Then the company installed new equipment: new conveyors and a sliding shoe sorter. The new equipment went into operation last year. The total cost of the project was about $4 million—a fraction of the projected $20 million cost of building a new DC.

Seamlessly interwoven operations

Though the mezzanine has been fully operational for just a few months, the center is already making full use of the space. But before incoming items can be ushered into the mezzanine area, they first make an interim stop at the leased building across the street.

Almost all merchandise arriving by truck at the Chattanooga DC complex is received at the leased bulk storage building, where items are stored until needed to replenish the picking areas of the main building. When notified that replenishments are needed, workers load cases of goods onto carts, which they then wheel onto semi-trailers for the short trip across the parking lot. “We treat the second building as if it is just one long aisle of our main building,” says McMahon.

When the cases arrive at the DC, they’re offloaded onto conveyors that whisk them to one of the two mezzanines. There, workers load them into the backs of flow racks and shelving.

Everything’s in order

All the while, other associates are busy filling orders for the 15,000 or so active SKUs handled at the complex. The order profiles of Regis’s stores vary greatly from brand to brand as well as from store to store. Some, like the company’s Trade Secret stores, receive shipments every week, while most other North American stores get deliveries every other week.

About 15 percent of items ordered are selected as full cases. If an order calls for full cases,workers simply affix new labels to the cases as they’re pulled from racks and placed onto conveyors.

The remaining 85 percent of orders require split-case picking. Piece picking is done in batches coordinated by the warehouse management system—a process that allows a single worker to fill up to six orders at a time. If the items needed are stored in the flow racks, workers receive their picking directions from a pick-to-light system. If the items are stored on shelving, however, workers get their instructions via handheld radio-frequency (RF) devices. (The company assigns its slower-moving items—about 15 percent of the splitcase volume—to shelves.) Wet and dry goods are picked separately, so that bottles of liquids can be loaded into reinforced corrugated cartons with plastic liner bags in case of spills.

The Chattanooga facility contains two bi-directional sliding shoe sorters, both installed on the mezzanine levels (the second sorter, which works in conjunction with the older sorter, was installed as part of the recent mezzanine construction project). The sorters first discharge order cartons to one side, directing them to various picking lanes for order filling. Once they’ve finished picking items from a particular zone, workers place the carton back onto the sorter, which diverts it to additional lanes and zones until all picks are made.

When picking is completed, workers deposit the cartons back onto the sorters, which then direct them to the packing and shipping areas. “A typical carton sorts about four times—three times for picking and packing and then once more to shipping,” explains McMahon.

Vendor File
Here’s a look at who supplied what at Regis’s Chattanooga DC:

Over and out

As the filled cartons come through on the conveyor, they’re weighed by an inmotion scale that compares actual weight to expected weight. If the scale detects a discrepancy of more than 4 ounces, the carton will be diverted to a quality control station for inspection. Replenishment cases and items picked by the case also pass over the scale before they enter the sorter to verify that the correct case was selected.

After clearing the scale and quality control stations, most cartons are diverted to pack stations, where they’re filled with expanding foam or loose fill foam peanuts and sealed. The last carton of each order, however, is sent by the sorter to a Last Parcel Station, where workers insert packing lists and pricing stickers (which will be applied to individual items at the stores) into the boxes before they’re sealed. Once the cartons are ready for shipment, workers place them onto the bi-directional sorters one last time so they can be diverted to their assigned shipping lanes.

In total, the Chattanooga facility processes 80,000 lines each day with a fill rate of 99.5 percent. McMahon says the company sets great stock in maintaining that high fill rate. Regis never forgets who its customers are, he says, and it goes to great lengths to design its fulfillment processes around their needs. “We are not delivering our products to a typical retailer but to someone who went to school to learn how to style hair,” he points out. “The easier we can make it for them, the better.”

Tags: Strategy

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