PEAPOD UPS VOLUME WITH DEDICATED CHICAGO DC

SKOKIE, Ill. -- Peapod, the Internet grocery retailer based here, has opened its second dedicated fulfillment center in two months, reinforcing its stated intention to move away from a store-based order-picking model.The new "consumer-direct center," located in Chicago, measures 70,000 square feet, and will be used to consolidate distribution operations from 12 other picking locations in the Chicago

SKOKIE, Ill. -- Peapod, the Internet grocery retailer based here, has opened its second dedicated fulfillment center in two months, reinforcing its stated intention to move away from a store-based order-picking model.

The new "consumer-direct center," located in Chicago, measures 70,000 square feet, and will be used to consolidate distribution operations from 12 other picking locations in the Chicago metropolitan area.

According to John Walden, chief operating officer for Peapod, the consolidation process should be complete within the next two months. At that time, the new consumer-direct center will service about 30,000 customers and represent about $30 million dollars in annual income for the Internet grocery retailer, he said.

"The biggest difference [with the new facilities] is the ability to do volume," said Walden. Prior to acquiring the new facilities, Peapod picked customer orders from its retailing partners' store shelves. The goal for the new distribution centers is to demonstrate that this fulfillment model can be scaled economically, said Walden.

Jewel/Osco, Melrose Park, Ill., a subsidiary of American Stores Co., Salt Lake City, Peapod's Chicago-area retail partner, will provide Peapod with products for the center. The Chicago DC is more than four times the size of its 15,000-square-foot East Coast counterpart, which opened Dec. 7, 1998 on Long Island, in New Hyde Park, N.Y. The opening of a third distribution center will be announced in about one month, said Walden. Earlier reports in SN indicated this facility will be located in the San Francisco area.

"Our plan is to make the warehouse model work," Walden told SN.

New technology at the Chicago DC includes handheld "pick-to-location" scanners, which make locating and picking product more efficient and can provide warehouse workers with in-stock information, allowing items to be restocked on a just-in-time basis. The handheld scanners are also used at the New York facility.

The New York fulfillment center holds about 9,000 items, compared with Chicago's 12,000 items. Categories in Chicago include dry grocery, frozen and dairy products, as well as produce, meat and prepared foods, said Walden. If the company's projected growth continues, Peapod will be "popping out" of the New Hyde Park facility in the near future, he added.

Walden told SN that with the introduction of the new distribution centers, Peapod has been able to reduce the number of stockkeeping units it inventories. The Internet grocer utilized its customer database to help choose what items the retailer would stock, he explained, noting that the SKUs available at the distribution centers represent 90% to 95% of the items Peapod's customers want.

Prior to the inventory reduction, Peapod offered 20,000 to 30,000 SKUs, which it accessed from retailer partners' shelves.

The Chicago warehouse has also increased its box-truck fleet, which delivers orders daily from 9 a.m. to 9 p.m. Each truck can carry about 20 to 25 orders, and a new routing system allows drivers to input a customer's address and receive an optimum delivery route.