A need for speed

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by Emily Atkins

When your customers all drive fast cars, your parts DC needs to keep up. At the new Porsche Cars Canada parts distribution centre (PDC) in the Heartland area of Mississauga, Ontario, the staff are driven to ensure parts ordered by dealers across the country are delivered no later than the next day.

But it’s about more than keeping the German car maker’s iconic 911 sports cars in perfect condition; Porsche is keenly aware that it is selling more SUVs these days, and they are people’s daily drivers.

“When you go into the shop and you need a repair, if somebody tells you it’s going to take three or four days, that’s unacceptable,” says George Fremis, the company’s manager, parts operations and logistics. “That’s one of the biggest reasons why we built a PDC in Canada – to help reduce that time, so we can fix our customers’ cars faster.”

The Canadian PDC, which started operation on October 1, 2019, replaces deliveries from the U.S., which means Canadian dealerships across the country can place an order by 5 p.m. their local time and receive the part the next day. Previously, Fremis says, it could have taken two to three days. “Being able to take that two to three days and cut it down to an overnight process, gives the dealers a very big market advantage,” he adds.

Built for speed

George Fremis, Porsche Cars Canada’s manager, parts operations and logistics.

Not only is the DC designed to move parts fast, it was also built quickly. Work to set up the empty building began in the third week of April 2019, and load-in started on September 1. Between then and the October 1 opening date, 66 shipping containers of parts were moved in and organized.

The DC has numerous different storage zones – bulk, large parts, medium parts, small parts and a special area for lithium-ion batteries for the company’s new Taycan electric car. The 22 dock doors are bookended by the battery storage area on one side and a section of racking for crossdocking at the other.

“We originally thought our initial year-one footprint was going to be about 62,000 square feet, and over five years it would go up to 100,000 square feet,” Fremis says. “And this is 140,000. So we said, ‘Okay, well now that we have this space, how do we leverage it?’”

After talking to racking vendors they realized that with economies of scale it was cheaper to start big than to build a small footprint and have to grow later. Now the building is fully racked and labeled, ready for use. What’s not needed now is blocked off, and “as we need it, we open the spaces up and then we start putting parts there”, Fremis says.

The design process was facilitated with input from the parent company, with the teams working from past experience to envision how much product would be needed and fast it would move. But they also had to take country-specific parameters into account. According to Fremis, Canada is known as “the rubber carpet capital of the world” at Porsche AG in Germany. “We sell more winter mats for our cars than anybody else in the entire world for Porsche,” he laughs.

But it was actually winter wheels that prompted a preliminary design change. “I think we are the second or third largest market when it comes to winter wheel sets,” he recounts. “We sell anywhere between 1,200 and 1,400 winter wheel sets a year. And they take up a lot of space. So you have to accommodate the bulk when the first shipment comes in.”

The first iteration of the racking design had failed to take that into account, Fremis notes, and when they actually crunched the numbers it was obvious that a lot of bulk storage space would be needed to accommodate the wheel sets, which arrive in large corrugated boxes. “I felt like I had got my crayons out, and a blank piece of paper and started drawing,” he says. Ultimately the team finally settled on about the 14th iteration of the plan.

Commanding the centre of the DC, with frontage towards the docks is a two-storey mezzanine, 10,000 square feet on each level. Inside are shelves for small parts bins, along with a secure area for Porsche branded clothing and watches, but at the moment the second level is practically empty, ready for growth. According to Fremis, 70 percent of orders are fulfilled from this area, which is why it’s located close to the docks.

Manual processes

The racking in not full, leaving room for expansion down the road.

Automation was considered when the DC was being planned – it’s used in Germany for both small and medium parts storage and retrieval – but it turned out to be too expensive. “When we looked at it, the cost was literally twice as much as doing this, and we just thought maybe this isn’t the right time,” Fremis recounts.

What they do have, however, is a sophisticated warehouse management system, POLARIS (Porsche Logistics International Supply Automated Replenishment). It is linked to all the Porsche parts DCs, and the main PDC in Sachsenheim, Germany.

As the Canadian PDC processes orders the WMS is learning in the background, observing what is consumed and how quickly. “As we’re consuming, it’s automatically reordering for us, so we don’t have to place the orders,” Fremis explains. “The system automatically looks at inventory and says, okay, what are you missing? How fast are you consuming this? Then it tries to figure out what’s the sweet spot to keep sending you containers.”

Right now, the PDC is scheduled to have one to two sea containers, and four to five air shipments every week for replenishment. The airfreight fills in the parts that are being consumed faster than the WMS expects.

Tuning the engine

The inbound docks are quiet as staff pick the last orders of the night.

Every order is picked by one of the DC’s 25 full-time staff, using barcode readers to confirm locations, and picking carts for the smaller items. With 3PL Schenker managing the operation, it can move people around from other distribution centres and with a minimum of training have them up and running to fill in if there is a staff shortage.

Because the DC is nowhere near capacity, at the moment the racking is set up so that all the picking can be done from the lowest locations, with replenishment items up high. But Fremis notes that they are trying to “tighten it up, so that we’re closer to the inbound and outbound.”

Dealers cannot see the inventory in the system until it’s been put away, so the pressure is on to get the inbound product on the shelf as fast as possible. “The faster I put it to shelf, the faster he can see it in his system, the faster he can reorder it. Then, the closer it is to the outbound, the faster I can get it out,” Fremis says.

Porsche’s PDC Specs

Total footprint: 176,000 square feet; warehouse 140,000 square feet

12,000 SKUs (as of November 2019)

Serves 19 Porsche dealerships

Same day or overnight delivery

25 staff, working two shifts , 7am to 11pm

Inbound: One to two sea containers/week + four to five air shipments

Outbound: Capacity 1,500 orders/day; currently averaging 1,150

DC operated by Schenker

Outbound air by Cargojet

Outbound road by Cardinal and Wesbell Logistics

Planes, trucks and automobiles

Porsche Canada is working with three outbound transportation suppliers, Cargojet for airfreight and Cardinal and Wesbell for ground deliveries. Cardinal does the Ontario and Quebec deliveries, reaching from London to Quebec City overnight by road. Cargojet and Wesbell cover the rest of the country.

Porsche chose Cargojet partly because as a dedicated national cargo airline it flies overnight, and also because with car parts there are some items – like lithium-ion batteries – that cannot fly as belly cargo in a passenger plane. With its base at the Hamilton, Ontario airport, it’s only 55 minutes away by road. Another factor was the car parts business cycle, which slows down in Q4 and Q1 when other retail businesses get busy. “They liked the fact that when they get slow with those businesses in the summertime, our business picks up. It’s a nice fit,” Fremis says.

Looking down the road

Porsche has built this PDC to last until 2029, Fremis says. The larger-than-anticipated footprint allows room for expansion and was practical from a long-term lease perspective as well. “Especially in the GTA market, real estate is becoming a challenge,” Fremis says, “so people are looking for a longer vision. That’s one of the reasons why we chose this place. We said, “Okay, how do we stretch this, and make sure that we’re here for a longer period of time?”

There’s room for expansion in the racking utilization, the mezzanine was built to readily accommodate a third level, and of the 22 dock doors, Fremis notes that in a normal week only three inbound and five or six outbound are being used on a regular basis. A training centre is also being built on the office side of the building helping Porsche utilize the full 176,000 square feet they’ve leased.

It’s early days still and Fremis has his eyes open looking for improvements. Preparing orders for dealer pick-up are on the radar, for example. “That’s one of our future growth opportunities,” Fremis says, along with possibly twice-daily deliveries within the GTA.

“If you can fix the customer’s car and get it back on the road, why wouldn’t you?” he asks. “But right now, because we’re so new we want to get our processes in place first before we start adding too many cooks into the kitchen…We want to keep it smooth, so we have everything locked down, from a process point of view, and then we’ll see what we can do in the future.”