You’ve heard the old line “never let ‘em see you sweat,” right? Well, lululemon athletica, a company famous for its technical athletic apparel, including its signature yoga pants, has turned sweat into a business, according to Steve Berube, the company’s senior vice president of global distribution and logistics, and George Tsogas, vice president of international distribution and logistics.
The company manifesto, familiar to every employee, is a collection of ever-evolving statements and slogans intended to spark conversation, including: “Sweat Once A Day,” “Breathe Deeply,” and “Drink Fresh Water. And, as much water as you can.” “The company purpose,” says Berube, “is to elevate the world from mediocrity to greatness through a mission to have our products create transformational experiences for people to live happy, healthy, fun lives. As a company, we want to elevate the world by helping people set goals from a personal, career and health standpoint.” And, it starts with their own people.
Staff goals are posted for all to see in a new 310,000-square-foot distribution center near Columbus, Ohio, that went live last summer for e-commerce fulfillment. Store fulfillment and replenishment are scheduled to go live in 2015. Working with a systems integrator (SDI, sdigroupusa.com), the facility introduced supply chain technologies and materials handling automation to a company that had largely relied on conventional distribution in its other North American facility in the Pacific Northwest. The technologies include:
• A warehouse management system (WMS) and warehouse control system (WCS) create pick waves and orchestrate order fulfillment operations;
• RF, voice and put-to-light technologies direct putaway, picking and replenishment processes;
• Conveyor and sortation route orders through the facility; and
• Automatic weighing, labeling and bagging technologies streamline packing and shipping.
As with yoga, which is at the heart of the company, flexibility is also an important component of the design. “Rather than implement a high level of automation, we have a system and processes that allow us to bypass the automation all together if we get an urgent order for a store,” says Tsogas. He adds that the facility was designed to grow with the business, including the ability to expand from the current 7,000 stock keeping units (SKUs) to 20,000 SKUs.
A culture of sweating together
It’s difficult to write about lululemon without writing about a unique culture that values letting ‘em see you sweat. “Culture is the epicenter of who we are,” Berube explains. “And, one of the ways we build strong teams in our DCs is to sweat together.”
The company was founded in 1998 after Chip Wilson, a 20-year veteran of the surf, skate and snowboard business, took the first commercial yoga class offered in Vancouver, British Columbia. Exhilarated, Wilson was convinced that the time had come for yoga. He began to design technical and beautiful athletic fabrics that people could feel comfortable sweating in. That vision continues today. “One of the technologies we talk about is our anti-stink materials,” says Tsogas. “You can work out in one of our shirts today, and feel great wearing it again the next day.”
The first lululemon store opened in the Kitsilano beach area of Vancouver in 2000. The idea was to create more than just a store, but a community hub where people could learn and discuss the physical aspects of healthy living from yoga and nutrition to running and cycling. Nine years later, lululemon launched the iviva athletica line for young girls. As of the second quarter of 2014, the company was operating 270 stores and continues to be a growth company.
Despite its impressive growth, sweat remains at its core. For instance, the new distribution center features a fully equipped 3,000-square-foot gym and a 1,500-square-foot yoga space. Personal trainers offer classes to associates on a daily basis.
“It’s common to see a boot camp workout with 50 or 60 co-workers in the parking lot or on the DC floor,” says Berube. “On your first day, you have to get out in front of your teammates to introduce yourself, share a one-year goal and show off your favorite dance move. Our goal is to elevate the world by creating leaders and building authentic relationships inside and outside our business.”
That sense of mission extends to distribution and logistics. “We’re a global engine reinventing our industry by putting people first, having fun and delivering exceptional service,” Tsogas explains. “If we do that while elevating lives and setting up an inspirational culture, we will deliver the best service in our industry.”
Designing for service and growth
Industry-leading service was one of the tenants behind the design and location of lululemon’s Ohio facility, the company’s third DC in North America; the network already counted a facility in Vancouver that services Canada and a facility in Washington that previously served the United States.
The project was initiated in 2012 with a network analysis performed by FedEx. In recent years, the company had seen a significant growth in its e-commerce business as well as a growth of its customer base east of the Mississippi. In addition to the increased transportation costs associated with growth on the East Coast, service times were suboptimal, with an average transit time to stores and guests, as lululemon refers to its customers, of 3.72 days.
“By opening a second United States DC in Ohio, we’re a one-day drive from 65% of the U.S. population, and we can service 85% of our stores and guests within two days,” says Tsogas, who adds that stores are replenished five days a week. In fact, the new facility has reduced average transit times to 1.92 days.
In addition to service, at least four other factors came into play, including:
1. Business continuity and risk management: If the DC in Washington went down, the network would have been challenged to service U.S. stores and customers. Now, there is an alternative.
2. Capacity constraints: A two-facility model provides capacity for the next five years and the Columbus property has room to expand by 150,000 square feet.
3. Freight costs: Locating a distribution center in the Midwest reduces freight costs to stores and guests on the East Coast, Southeast and Midwest.
4. Laboratory for innovation: The Columbus DC serves as a lab, where innovation can be tested and then rolled out to other facilities, including third-party logistics (3PLs) providers in Hong Kong and Europe, and a DC in Australia.
When it came to designing the materials handling systems and processes, the final design was chosen from about 12 different layouts and configurations suggested by the system integrator. For every potential solution, the whole distribution team was involved in the evaluation. The project’s steering committee included the chief information officer, the head of e-commerce and representatives from planning, allocations and finance.
In the end, lululemon opted for flexible automation. Instead of an automated storage and retrieval system (AS/RS) and goods-to-person picking station, the facility relies on its WMS and mobile data collection technologies along with conveyor and sortation to tie together functional areas. The idea is to increase efficiency, drive throughput and lean out processes while maintaining the ability to flex up or down to meet demand, which can vary from 5,000 to more than 12,000 orders a day, or to fill a hot order for a store.
“In the future, guests may want premium packaging or something unique with a garment during seasonal periods,” says Berube. “We may need to isolate a store that is having exceptional sales, or rework a SKU with new pricing and hang tags. Those couldn’t be done as easily if we were using an AS/RS.”
The key technology is the WMS, which determines the most efficient way to batch single line orders—now 50% of order volume—to an autobagger, multi-line orders to manual pack stations, and store replenishment activities that are scheduled to come online soon to create a true multichannel environment. The WMS is complemented by three data collection technologies that are deployed to optimize various processes:
• RF, mobile computing and bar code scanning direct inbound receiving, putaway, full carton picks and replenishment of pick faces.
• Voice technology is used to direct e-commerce picking processes and the replenishment of existing SKUs at the stores. E-commerce orders are picked to totes that are conveyed to an autobagger or a manual pack station. Items for store replenishment are picked to carts that can manage up to 12 cartons/orders per pass through a pick zone. Those cartons are then inducted onto a conveyor and sorted to shipping.
• Put-to-light technology is used to pick and pack mixed cartons during the allocation of new SKUs to the stores. A shipping carton is automatically scanned when it enters a pick zone, and lights direct the order selector to the right bins to pick the right quantity of items to the carton. Once an order is complete, the carton is conveyed to shipping.
Since stores are receiving daily deliveries, all orders are relatively small and shipped with parcel carriers.
The new lululemon facility went live last August with e-commerce fulfillment. The idea was to train employees on software, systems and equipment that hadn’t been used before while gaining the benefit of lower transportation costs by being closer to the market. The company also committed to taking whatever time was required to get it right.
For instance, a team of 20 super users trained on the WMS system for five months, followed by three months of testing. When it came time to turn the switch, the team knew the system inside and out.
Although the whole facility won’t be operational until 2015, Tsogas and Berube are already seeing results, with a 20% to 30% improvement in the number of e-commerce orders processed per hour. “We will realize the real benefit when we put in retail replenishment, and have the ability to shift people back and forth between processes,” Tsogas says, adding that lululemon also expects to realize carbon emission reductions that are important to its sustainability plan.
Most importantly, both say that lululemon was able to get the culture right at the new facility. In large part, that’s because 50% of the management team in Columbus came from the Washington facility; they understood and taught the values, and they recruited local talent that perfectly complements the team.
“We’re proud of the team we have in place. How we coach and mentor our people is ingrained in who we are and what makes us unique,” says Berube. “We authentically care about the lives our people, and it’s paid back many times. That’s just who we are.”
System design, integration, warehouse control system, carton sortation, put-to-light system & pack stations: SDI, sdigroupusa.com
Carton conveyor: Intelligrated, intelligrated.com
MDR conveyor: Hilmot, hilmot.com
Belted curves: Transnorm, transnorm.com
Extendable conveyors: Best Conveyors, bestconv.com
WMS: Manhattan Associates, manh.com
Mobile computing and scanning: Motorola Solutions, motorolasolutions.com
Label printing: Zebra Technologies, zebra.com
Case scanners: SICK, sickusa.com
Mezzanine: Steele Solutions, steelesolutions.com
Voice recognition: Honeywell—Vocollect Voice Solutions, vocollect.com
Carton and pallet rack and shelving: Steel King Industries, steelking.com
Inline scale: OCS Technologies, ocscal.com
Dimensional cubing: CubiScan, cubiscan.com
E-commerce autobagger: Sharp Packaging Systems, sharppackaging.com
Lift trucks and order pickers: Raymond Corp., raymondcorp.com
Network design study: FedEx, fedex.com