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How Vera Bradley Planned & Created a Flexible, Scalable Approach to Facility Expansion Now the only thing rivaling the beauty of Vera Bradleys distinctive selection of cotton-quilted bags and accessories is the seamless performance of its distribution center.

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Vera Bradley Overview Founded in 1982 One of the fastest-growing brands in the retail industry Fashionable and colorful handbags, accessories, luggage, and paper & gift items Sold through 3,300 retail partners and 77 company-owned stores, and verabradley.com 2006-2007 FORTE planned, designed and implemented a highly automated, 200,000 sq ft distribution center with an integrated Warehouse Management System (WMS) and material handling automation utilizing FORTEs WCS 2.0 Smart Warehouse Suite

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Vera Bradley Overview (contd) Strategic plan for the distribution operation anticipated rapid growth and planned for a flexible, scalable approach to facility expansion over a multi-year period Successful initial public offering (IPO) in 2010 Facility expansion completed in late 2012

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Vera Bradley Overview (contd) 400,000 sq ft Distribution Center supports true multi-channel order fulfillment Four "core product line launches (Signature and Paper & Gifts) annually; typically each with 3 to 4 new patterns and some new styles, representing 500-600 new SKUs 11 to 12 limited collections product line launches annually representing 2,500-3,000 new SKUs (Beach, Eyewear, Travel, Luggage, Microfiber, Leather) E-Commerce Value-add for every e-commerce order - special shipping box, tissue, embossed logo sticker, invoice folio, gift card (if applicable) Personalization

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Vera Bradley Overview (contd) Key Accounts Dillard's, Von Maur, AAFES, NEXCOM, Zappos, QVC Value-add for key accounts Retail (Vera Bradley Owned) 20+ new store openings annually 77 retail stores (66 full price, 11 outlet) Specialty Retail 3,300 Specialty Retail accounts International Japan

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Growth 2007 to 2013 2007: Built 200,000 sq ft (150,000 allocated to distribution; 50,000 for domestic manufacturing) 3,300 Specialty Retail accounts 11 retail stores Web fulfilled by a 3rd party, limited number of SKUs 2012: 400,000 sq ft (all distribution) Revenue doubled as compared to 2007 99 retail stores by end of 2013 In all Dillard's stores In Japan E-commerce fulfilled in-house, 100% of SKUs 3,300 Specialty Retail accounts

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Before Expansion Details 200,000 square feet Very narrow aisle (VNA) storage Two(2) 3-level split-case pick modules, unit pick to carton or tote Zone-routed pick-and-pass conveyor for 3,150 SKUs, picking from pallet flow rail, carton flow rail and small items on shelves Pick direct to shipping carton other than e-commerce Batch pick e-commerce to tote Pick to cart using RF scanners for slow moving items

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Before Expansion Details (contd) RF pick from reserve using order picker trucks for very slow moving items Weight check Audit, Value Added Services (VAS), and Retail pack stations on mezzanine Taping on mezzanine E-commerce pack stations below mezzanine Shipping - Parcel, LTL and Pack & Hold

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The Challenge Servicing multiple sales channels under one roof 16 new product releases per year Explosive e-commerce growth Wholesale customers, independent and key accounts Retail -- VB full price and outlet stores; new store openings Distributing samples and visuals Picking systems and other equipment need to support multiple modes of operation to provide efficiency for all sales channels

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Pain Points Inbound receiving capacity Dock doors and staging space limited number of containers received/day at 6-8 Finished goods storage capacity 50% of inventory in off-site warehousing Pick location capacity Increase in SKUs results in a gradual decline in picking efficiency due to segmentation of pick areas and manual movement of cartons from one pick area to another Space constraints for value-add processes

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Pain Points (contd) Key Accounts Value Added Services - bagging, stuffing, ticketing, kitting Growth and associated customer requirements results in congestion and inefficiencies Shipping dock capacity Growth increases need for more efficient order consolidation and outbound staging space Service level degradation Growth across all sales channels funneling through one fulfillment "pipeline" results in gradual degradation

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Pain Points (contd) E-Commerce presents unique challenges Extends the life of a SKU, becoming the near term outlet channel Gift boxing, gift card Promotions, free shipping Declining packing efficiency Growth requires smarter pick/pack solutions

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The Solution 2010 network study indicated expand; not ready for 2nd DC 2012 a 200,000 sq. ft. facility expansion Intelligent conveyance for cases and totes utilizing FORTEs WCS 2.0 Smart Warehouse Suite Smart Warehouse Suite warehouse simulation accurately forecast system performance Product launch surges Mirrored pick modules E-commerce Batch Picking Single SKU-Single Unit orders Batch Picking and Packing Multi-SKU orders Cyber-week surges

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The Solution (contd) Smart Warehouse Suite warehouse simulation: Allowed WMS and WCS communications and capacities to be tested during development Allowed the WMS, WCS and PLC changes to be fully tested prior to the many cut over weekends

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Expanded System

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After Expansion Details (contd) 400,000 square feet Receiving Quadrupling of dock doors and staging space Storage Doubling of storage space leveraging existing VNA concept to reduce facility footprint VNA storage

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After Expansion Details (contd) Picking Original two(2) 3-level split-case pick modules for 3,150 SKUs, unit pick to carton or tote. New "walk-back" pick module consolidated pick areas outside of original modules, zone routed 6,500 SKUs Designed to leverage cube with adding 2 more levels above 1st level, future 13,000 pick locations Created foundation for stand-alone e-commerce pick module...future Pick direct to shipping carton other than e-commerce Batch pick e-commerce to tote, separating single unit orders from multi-line/unit orders Conveyor tie-in for transporting cartons from walk-back pick module to original modules

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3-Level Pick Module; Pallet Flow, Carton Flow, Shelf Zone-routed, pick-to-light Pickers work to individual containers or trains to complete picks, then push container back onto central conveyor

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Pick Module; Walk-back Zone-routed, RF picking

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Walk-back Module

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After Expansion Details (contd) 14,000 sq ft Mezzanine Audit Retail and Key Account Weight check and customer specific Personalization Taping Retail and Key Account VAS and Key Account Packing Added 18,000 sq ft mezzanine Created pick-line along edge of mezzanine for dynamic slotting of Key Account demand Picking occurs adjacent to VAS area Increases capacity in pick modules and enhances service levels for other sales channels

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Expanded Value Added Services and Taping Mezzanine

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Value Added Services Mezzanine

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After Expansion Details (contd) E-Commerce Packing Approximately 40% of e-commerce orders are single unit Segregated packing areas for single unit and multiple unit e-commerce packing UPC drives single unit process with enhanced Manhattans SCALE functionality UPC and Lightning Picks put-to-light technology drives multiple unit process Separate taping area for e-commerce on floor near the dock Carton erector for majority of box sizes

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Single Unit E-Commerce Packing and Personalization

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Multi-Line E-Commerce Processing, E-Commerce Taping and Shipping

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Multi-Unit E-Commerce Sort and Pack

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E-Commerce Taping and Shipping

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After Expansion Details (contd) Shipping Separate shipping sorter for e-commerce, increasing original shipping sorter capacity to accommodate growth of Indirect and Retail stores Implemented fluid loading for e-commerce with sortation to FedEx and Smart Post Shipping - Parcel, LTL and Pack & Hold Added order consolidation/pallet laydown for Key Accounts Added secondary sorter for pack & hold process WCS Enhancements Additional functionality to transport and segregate cartons based upon next activity (VAS, single vs. multi...etc.)

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Shipping with Pack and Hold Sorter

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The Results December 2012 vs. 2011: 20% more orders processed with a 43% increase in service level Picking accuracy improved from 89% to 99.5% Labor productivity increased by 25% Training for seasonal help dramatically reduced Peak order processing increased from 1,500 to 3,000 orders per day During peak launch periods, 200,000 items per day are picked and packed Web peak 5-6 days of 20,000 deliveries per day Visibility of in-process order status is available at the item level Received 180 containers in 7 days Labor costs reduced by 10%