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LOGISTICS & DISTRIBUTION
From Site Selection magazine, September 2017
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Phoenix-Area DC LEEDs the Way

Insights from REI’s supply chain VP show where goods movement is moving next.

LOGISTICS & DISTRIBUTION
REI’s new LEED-Platinum distribution center in Goodyear, Arizona, reflects the company’s love of the outdoors and regard for its employees.
Photo courtesy of REI

by ADAM BRUNS
UPS and Sealed Air Corp. in May announced the opening of a Packaging Innovation Center at the UPS Supply Chain Solutions campus near the UPS Worldport facility in Louisville to help solve the packaging and shipping challenges of e-commerce retailers, among others.<br />Photo courtesy of UPS
UPS and Sealed Air Corp. in May announced the opening of a Packaging Innovation Center at the UPS Supply Chain Solutions campus near the UPS Worldport facility in Louisville to help solve the packaging and shipping challenges of e-commerce retailers, among others.
Photo courtesy of UPS
Photo courtesy of UPS

Since January 2015, Site Selection’s proprietary Conway Projects Database has tracked two dozen major corporate investments in logistics facilities in the Greater Phoenix region. Four of the top five by capital investment — from UPS ($180 million), Luxair ($10 million), Huhtamaki ($100 million) and REI ($73 million) — have landed in Goodyear.

The UPS project, announced in June, stands out in terms of jobs (1,500). But the 400,000-sq.-ft. (37,160-sq.-m.), 100-job REI project stands out in another sense: It’s the first distribution center in the United States to earn LEED-Platinum certification from the U.S. Green Building Council and achieve Net Zero energy status. The site represents a new standard for sustainable logistics operations, and thus serves as a model attracting worldwide interest.

Asked to describe the original site selection process, Rick Bingle, REI’s vice president of supply chain, says, “As with all retailers, our objectives were to address growth, improve service timing to our stores and direct customers, reduce total operating cost and decrease our carbon footprint.” REI’s team determined by the end of 2014 that “we could achieve these objectives by placing a new distribution center somewhere along the Interstate 10 corridor from southern California to Phoenix, Arizona.”

The Goodyear facility complements REI’s existing distribution centers in Sumner, Washington and Bedford, Pennsylvania. Bingle is effusive in his praise for area leaders as REI took on a challenge with the same gusto its active customers demonstrate in taking on mountains, rivers and trails.

“We had some high ambitions for this facility, including making it LEED Platinum and Net Zero,” he says in an email. “Building a 400,000-sq.-ft. automated distribution facility with those standards is a team event, all the way from design to build to the agencies involved and dedicated to the project. I cannot offer enough positive praise to the City of Goodyear executive and operational teams. From the beginning of the project, led my Mayor Georgia Lord, the city worked hard to learn about REI, engage our vision, and support our building objectives. Working for Mayor Lord, City Manager Brian Dalke ensured an almost daily review as to the project status, open issues and collaborative resolution of challenges, including recommendations to improve the outcome.

“Additionally, I must call out the Goodyear Economic Development board,” writes Bingle, singling out Michelle Lawrie (director) and Harry Paxton (manager), who assisted in identifying grant opportunities that REI was able to use during the build process.

“We also developed this site as a Foreign Trade Zone (FTZ), which required considerable system changes, governmental reporting and new processes,” Bingle says. “David Hansen, the commercial officer from the Maricopa County Assessor’s office, was instrumental in assisting us throughout the tax policy impacts. Finally, the entire staff and board of Leadership in Energy and Environmental Design (LEED) was incredibly supportive and helped guide our efforts to achieve LEED Platinum.”

CBRE’s Amber Stuart helped shepherd that LEED application. But the LEED interaction was not one-way. REI’s goals were so high they’re helping change how LEED measures things.

“We asked why the LEED process did not include water conservation certificates, since we were investing in the local Bonneville Water Project as a part of our community welcoming,” reports Bingle. “Through that dialogue, LEED amended their scoring system, adding a new process to gain one certification point through water conservation certificates.”

The Goodyear facility was developed with a budget from $72 million to $75 million to deliver total ROI in nine years, while also delivering results in key areas such as culture, brand, technology and sustainability. Now one full year into operation, Bingle says the project “far exceeded original expectations, including meeting our budget and operational date, which will eventually lead to our expected ROI.”

More Than Customers: Humans Also Valued Employees and Influencers

Everywhere we look there are warnings about automation and robotics decimating distribution jobs. Asked to describe his own experience of how the number, type and quality of jobs have evolved over the course of his career and REI’s growth, Bingle says, “At REI, it is our objective to be an employer of choice in all positions — in retail stores, our headquarters and our distribution centers. We strive to create environments such as our purposefully built DC in Phoenix that our employees are proud to call their facility.

“Yes, automation is changing how we work,” he says, “but at REI the employee is still at the center of our culture and more importantly the center of how we differentiate in the retail landscape. The Goodyear facility employees between 180 and 250 employees throughout the year even though it has a highly automatic production environment. We created new specialized jobs like the six highly trained mechanic positions required to maintain our systems. Additionally, many of our processes do not lend themselves to automation, and people will continue to do a lot of this work. When REI entered that Goodyear area, we immediately impacted the community with higher wages, improved total benefits and over 200 new local positions.”

“We’ve already had an impact on projects — both future and ones now underway — throughout Europe and the US for companies focused on sustainability and ROI.”  

— Rick Bingle, Vice President, Supply Chain, REI

When the facility opened in December, Bingle said, “To create an impact that extends far beyond the co-op, we chose to open the design of the facility and our doors to the industry, not only to make it easier for other companies to build this technology into their operations, but to actively encourage them to do so.”

Asked about the follow-on from that pledge, he says, “As part of REI’s sustainability journey we strive to open doors, create new conversations and introduce thought leaders to share their experiences with others. It is only natural to our ethos to invite others into the facility so that they may offer their insight while also learning from our journey. The industry as a whole has overwhelmingly engaged in this offer with over 1,000 people completing tours to date. While I do not have permission to release names, we have been happy to welcome CEOs, CFOs and executive leaders from the supply chain divisions of many of the retailers and manufacturers that we all use every day. We’ve already had an impact on projects — both future and ones now underway — throughout Europe and the US for companies focused on sustainability and ROI.” 

Big Dots On the Map

Highlights and insights from a sector on the move include:

  • UPS announced in May the opening of a new 100-employee, 11,000-sq.-m. (118,407-sq.-ft.) package facility in Myslowice, Poland, that replaces a facility a third of that size in Katowice. “Poland is an important market for UPS and in the first quarter of this year we grew our export volume by more than 20 percent,” said Pavel Adamovsky, country manager, UPS Poland.
  • In a July report, CBRE analyzed the location of last-mile distribution facilities opened within just the past two years in the 15 largest US population centers, finding that they are positioned, on average, between six and nine miles from the centerpoint of the largest population areas they serve. “Development of last-mile strategies still is in the early stages, so the average distances in many metros is likely to shrink a bit more in the coming years,” said CBRE Global Head of Industrial & Logistics Research David Egan. “We’re also likely to see many different types of real estate considered for last-mile centers.”
  • HSA Commercial Real Estate signed Kuehne + Nagel to a long-term 55,000-sq.-ft. (5,110-sq.-m.) lease in July at the just-completed fifth and final building at the Gateway Business park in Plainfield, Indiana, the southwestern Indianapolis suburb known for its logistics cluster. The news came just a month after UPS revealed plans for a new $260-million, 575-job package processing facility in Plainfield.
  • DHL eCommerce in July launched its nationwide domestic delivery operations in Vietnam. “The Vietnamese e-commerce market represents a huge and relatively untapped potential for local retailers, e-tailers and marketplaces,” said Charles Brewer, CEO, DHL eCommerce. “In 2016, total e-commerce spending hit US$1 billion despite barely over 50 percent of the population being online.” 
  • Online global fashion and beauty retailer ASOS announced in August it would establish an East Coast e-commerce fulfillment center in Union City, Georgia, just south of Atlanta, creating more than 1,600 jobs and investing more than $40 million in Fulton County over the next five years. At nearly the same time, after leasing 1 million sq. ft. (92,900 sq. m.) at its Lambert Farms Logistics Park in Henry County, also south of Atlanta, to an unnamed international consumer brand, Panattoni announced it’s started construction on another 1.55 million sq. ft. (144,000 sq. m.) there. In 2016, retailer Tory Burch leased a 753,000-sq.-ft. (69.955-sq.-m.) distribution center at the site, and expects to create more than 150 new jobs.
  • Amazon in July signed a lease for two warehouse buildings in the Hazelwood Logistics Center in Greater St. Louis, Missouri, the company’s first location in the state. The company plans to hire just 34 full-time employees, and 350 part-time employees.
  • Walmart Stores announced in July plans to build a $133-million, 460-job distribution facility and refrigerated warehouse at the Port Canaveral Logistics Park in Cocoa, Florida, located in Brevard County in the state’s Space Coast region.
  • McKesson will open a new 166-job distribution center in Roseville, in Greater Sacramento, consolidating from two smaller facilities. A JV between Tejon Ranch and Majestic Realty will construct a 480,000-sq.-ft. (44,592-sq.-m.) cross-dock facility at Tejon Ranch Commerce Center (pictured), the 1,450-acre (587-hectare) industrial/commercial complex located at the juncture of Interstate 5 and Highway 99 near Bakersfield.
Photo courtesy of Tejon Ranch

Adam Bruns
Managing Editor of Site Selection magazine

Adam Bruns

Adam Bruns has served as managing editor of Site Selection magazine since February 2002. In the course of reporting hundreds of stories for Site Selection, Adam has visited companies and communities around the globe. A St. Louis native who grew up in the Kansas City suburbs, Adam is a 1986 alumnus of Knox College, and resided in Chicago; Midcoast Maine; Savannah, Georgia; and Lexington, Kentucky, before settling in the Greater Atlanta community of Peachtree Corners, where he lives with his wife and daughter.

   



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