When Ulta Beauty began its current supply chain transformation journey in 2021, it wanted to do things differently than its competition.
Other retailers constantly build large facilities that can sit underutilized year-round, but Ulta made a deliberate decision to keep the space smaller, according to chief supply chain officer Erik Lopez in an interview with Supply Chain Dive.
“We took a differentiated approach to say, you know, we don’t want to just build a one-size-fits-all solution for the entire network because we know we have growth, but our growth is not just going to be vertical,” Lopez said. “We have a tiered approach and we wanted to have an MFC [market distribution center] model.”
When completed, the model will consist of four regional distribution centers, three market fulfillment centers and one “rapid” fulfillment center.
“The beauty of the MFC model is that it is faster to build, it is closer, it keeps all the inventory under one roof and we can do it at an easier pace than building larger buildings that involve a lot more capital,” Lopez said.
Regional distribution centers are being modernized
Ulta currently operates three regional distribution centers located in Fresno, California, Greenwood, Indiana, and Dallas. The company will also begin construction on a fourth location in Chambersburg, Pennsylvania, in 2026, Lopez said.
To better optimize its regional distribution network for an MFC model, the company plans to add new facilities to its network while also modernizing other locations with enhanced automation technology.
The company completed a technology upgrade at its Greenwood facility last year, adding automated receiving systems and waste shuttles, among other improvements. Next year, it plans to complete a modernization of its Dallas distribution center by adding similar automation technology as well as warehouse execution software, Lopez said. The company hopes to eventually optimize its operating model as it modernizes its other distribution centers.
Lopez said the warehouse execution software will act as “the brain of [Ulta’s] facilities and will control the flow of goods through their facilities,” Lopez said.
The decision to modernize the facility was not because the automation technology previously used was deficient, Lopez said. Instead, the company considered the needs of its employees to find ways to provide them with opportunities to improve their skills while making processes more efficient.
What Ulta has tried to do with the new automation is focus on reducing steps, reducing waste and being less labor intensive, according to Lopez.
Connecting Ulta’s ERP to the market’s logistics centers
In addition to its supply chain transformation, Ulta is also undertaking what it calls Project SOAR, which stands for Strengthen, Optimize, Accelerate and Renew. The project is a company-wide enterprise resource planning upgrade aimed at revamping and accelerating its core operations. While the supply chain is not the primary focus of the project, the company is still seeing benefits in that aspect of the business as a result of the upgrade, Lopez said.
More specifically, the upgrade has helped unlock the foundations of its market fulfillment centers, called cross-docking capabilities.
Cross docking allows for zero or minimal storage between loading and transporting an item. For example, products would be inventoried and shipped from an inbound source and loaded directly onto the outbound transport, Lopez said. This allows Ulta products to move from a regional facility to an MFC directly to stores.
“Without cross-dock functionality, we would not be able to open the market’s fulfillment centers and would be stuck with the one-size-fits-all distribution center model,” Lopez said.
Compared with its regional distribution centers, which average 650,000 square feet in size, Ulta Market’s fulfillment centers are smaller, measuring about 300,000 square feet on average, Lopez said.
The market distribution centers have the capacity to serve up to 120 stores and 25,000 e-commerce orders per day, Lopez said. They also have a limited assortment of products made up of what the company classifies as its fastest-moving inventory.
Ulta currently has two distribution centers located in Greer, South Carolina, and Bolingbrook, Illinois. In 2026, the company will begin construction on a similar facility in the Pacific Northwest that is expected to open in 2027, Lopez said.
