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How REI's Green Obsession Sparked D.C. Innovations

Companies seek to burnish their brands in a variety of creative ways. In the case of Recreational Equipment, Inc. (REI), that desire extends deep into the supply chain.

REI sells outdoor and recreational equipment. So it only makes sense that it would want to be viewed by the public as environmentally responsible. And it helps to explain why the company would go to the trouble of constructing what it claims is the world’s first LEED Platinum, energy-net-neutral distribution center.

LEED, which stands for Leadership in Energy and Environmental Design, is a set of strict standards for the construction and operation of “green” buildings. Projects earn points for enhancing sustainability in a variety of ways. Based on that system, LEED certification comes in four rating levels: Certified, Silver, Gold and Platinum.

REI went further than that, designing and building a new D.C. that operates with “Net 0” energy consumption. What’s more, it approached the project in a highly unconventional way.

The company already had two D.C.s in place, in Sumner, Wash. and Bedford, Penn. To support sales growth and speed up the movement of product to its stores, REI set out to create a third distribution facility in the southern region of the country. It ended up selecting Goodyear, Ariz. as the site for the new D.C.

REI wanted the structure to reflect the company’s outdoors identity and corporate culture, said Rick Bingle, vice president of supply chain. Sustainability had to be central to the project.

REI didn’t possess the internal expertise to create such an innovative structure from the ground up. It needed to bring in a developer, builder, material-handling vendor and sustainability adviser into the loop. Tapping suitable experts in each of those areas, it gathered them together in a charrette — an intense, accelerated period of collaborative design and planning. By the end of the third day, they had collectively designed the warehouse.

Setting a high bar for sustainability from the start, REI was determined to create a facility that was either LEED Gold or Platinum. Whether it would achieve the highest designation depended on a number of factors, some ostensibly minor. For example, designing a building that could run entirely on solar energy was relatively easy, given its location in sunny Arizona. Other features that chalk up LEED points, such as a bus stop on site, were less feasible.

The company spent $3.7m on a solar array that covered the D.C.’s roof. It got back 30 percent of that investment in the form of a federal tax rebate. The solar panels were expected to pay for themselves within five years, yet are rated for 25 years of operation. Today, the facility generates 125 percent of the energy it needs, allowing the company to sell energy back into the grid. “Someone is actually paying me to have energy for 20 years,” Bingle said in a presentation about the project at SCOPE Fall in Los Angeles in late August.

Extending sustainable design into the building’s interior was just as challenging. Skylights are considered to be an energy-saving feature of many warehouses, given that they reduce the need for artificial lighting. But they would have shrunk the amount of roof space available for the solar panels, so they had to go. In fact, said Bingle, it turned out to be more efficient to install interior LED lighting beneath the panels.

Also banished from the rooftop were space-hogging air-conditioning units. The Goodyear D.C. employs a closed-loop water system, which cost $1m more than standard air conditioning, yet uses dramatically less energy than the traditional setup. Meanwhile, a sporting goods D.C. next store with regular air conditioning units uses more than a million gallons of water a year, Bingle says.

Keeping cool wasn’t a problem. Amidst Arizona’s desert climate, the D.C. began operations with an internal temperature of 71 degrees F. It was turned up to 74 degrees when employees complained about being too cold.

The design of the building’s material-handling equipment was equally innovative. Bingle says REI set out to install a “one-touch” production environment for omnichannel operations. There wouldn’t be separate conveyors and packing stations for product moving through e-commerce and brick and mortar channels.

At the time, the concept was nothing more than a theory, but it was successfully realized in Goodyear with the help of material-handling integrator DMW&H, Bingle says. Gone were the mezzanines that often segregate different types of fulfillment within a single facility. Instead, REI opted for an order storage and retrieval system that entailed the use of some 120,000 totes, goods-to-person stations and a pocket sortation system. Workers can split units for retail or direct-to-consumer orders at the same station. Said Bingle: “It’s one station, one person, with no additional touches.”

The design, which he said is unprecedented in distribution facilities, has helped to speed up operations considerably. New orders can be produced and packed within about 20 minutes, he said. During REI’s Labor Day sale, Goodyear operated at 37 percent above plan without a glitch. The company’s two other D.C.s, by contrast, experienced substantial delays.

Bingle said REI intends to incorporate some of Goodyear’s innovative goods-to-person handling technology into its other facilities, beginning with the Bedford D.C. By removing a mezzanine and pick-to-light system, it expects to gain 170,000 square feet of space, along with realizing productivity gains. “Technology,” he says, “delivers payback that’s off the charts.” While brightening REI’s green image.

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