In the freezer at VersaCold’s Milton, Ontario distribution centre, -25° Celsius on a sunny May afternoon is a shock for visitors but a sign of success for the cold storage 3PL. After starting the project in October 2016, the company opened phase one of the facility in January 2018. And now the full facility is open with 550,000 square feet of cold storage, 50,000 pallet positions and 150 full time staff.
The project is a joint venture between VersaCold and its 10-year-plus partner Nestlé Canada. The food manufacturer had conducted a business analysis, and felt their distribution operations needed an overhaul. “They identified the desire to have one single location for all Nestlé frozen categories so they could ship one order, on one truck, with one delivery. That really was the starting point of the discussion,” said Mark Dienesch, VersaCold’s chief commercial officer.
“Our frozen network was in three different warehouses, three different direct-to-market systems. As we are endeavoring to become a lean enterprise, taking as much waste out of the system as possible, it’s a lot of bulk and a lot of pallets and a lot of SKUs that need to be managed,” said Shelley Martin, Nestlé Canada president in an interview with Inside Logistics at the opening in 2018. Partnering with VersaCold on the new building “was how to we get everything – these three big businesses – into one…more efficient way that we can take some cost out and improve the service level to consumers, our customers.”
While VersaCold was Nestlé’s long-time supplier, the 3PL was competing with other cold storage providers for the new business, which was specified to be in the greater Toronto area. Dienesch said this prompted a very close look at capabilities and capacity, with the conclusion that an expansion was required.
Working with commercial realtor Colliers, VersaCold found the Milton site, a recently vacated Sobeys distribution centre. It was about 550,000 square feet and a mix of ambient and freezer space. “Originally we didn’t know if we were going to need the whole building or just a portion of the building,” Dienesch said.
“But when we really looked at the forecasted growth, and knowing it wouldn’t be a dedicated facility just for Nestlé, we opted for a long-term lease of the entire facility, but at the same knowing it would be a total retrofit from the inside out.”
Once the decision was made to take over the facility, work went quickly. From the project’s initial planning until the first product started moving in was only a matter of nine months and by December 2017 “we really started flowing product in,” Dienesch said.
The first phase of renovation was the pre-existing freezer area of the old facility. At about half the building’s area, it was the simplest to get up and running to VersaCold’s specifications, although it was not without challenges.
“We’re running at much lower temperatures than previously so we had to add additional insulation, and make sure the vapor barrier was done properly,” said VersaCold’s vice-president of engineering, Joe Sammon. As well, because they had to begin operations in phase one before the rest of the building was ready, they needed Canadian Food Inspection Agency (CFIA) approval to operate while construction was continuing elsewhere.
Now, the phase one freezer can be subdivided into different temperature zones thanks to the addition of doors between sections of the space. While we toured everything was about -25°C, but Sammon explained that if a new zone were required it would actually take about two weeks to change the temperature. “You change the temperature slowly so you don’t shock the building,” he said.
For phase two the challenges were larger, even if the space was smaller, at 250,000 sq.ft. The existing floor had to be removed, Sammon noted, which meant cutting it into manageable sections, carting it out, then excavating. Once that was done they installed an under-floor heating system with insulation and vapor barrier and re-poured the concrete floor. The new floor is seamless, which means no rough expansion joints for the material handling equipment to bump over.
A major part of the new design meant creating a box within a box, which required building a giant cooler inside the existing building. Engineering the new insulating walls has left some interesting quirks, like a narrow corridor dividing phase three into sections. It came about because of the expansion joints in the original building’s roof. “We didn’t want to cross over that expansion joint with the freezer – with the box in box – as it was likely to cause problems due to movement of the structure,” Sammon said.
The design and contracting work was carried out by Burlington, Ontario-based ColdBox Builders. “That was a really positive experience,” Sammon said.
Orders flow into the facility from customers’ systems. VersaCold operates 24/7 to fill them, working with each customer to ensure that replenishment keeps up with outbound orders. Inbound and outbound is all handled continuously, managed by VersaCold’s proprietary scheduling, WMS, and TMS software.
Up to 200 or 300 loads are handled each day, with a team of 150 that expands by 20 or 30 during the summer ice cream season, which is a key time for Nestlé. About 80 percent of inbound is full pallet, with the rest being hand palletized on arrival. Outbound, the ratio is about 70:30.
The facility exclusively employs Raymond equipment, provided by Johnston Equipment. It’s all battery powered, and designed for opportunity charging. The two connected charging rooms are centrally located between phase one and phase two so that workers can drop their equipment off for a top-up while they are on break.
Sammon pointed out a unique, low-tech feature of the charging room: “Rather than build stands or install a complicated charging infrastructure, we just poured a wide curb and placed the chargers on that. We then have twist-lock plugs. So if we want to re-configure where equipment is parked we don’t need to call in an electrician. We shut off the charger, unplug it and move it to a different location.”
Shifting to plug-in units also meant a huge space saving for VersaCold, allowing them to reclaim space that Sobeys had used for battery changing and turn it into a new compressor room.
The VersaCold building is draped with a huge banner proclaiming “We’re hiring!” As with every warehousing operation, the struggle to find staff is real. And although the Milton location is well situated from an inbound and outbound freight perspective, the lack of public transit in the area compounds the challenge. As well, not everyone can work in the cold.
VersaCold uses a four-part screening process, said Richard Kunow, the company’s general manager of warehousing solutions. Once people pass the external checks they are given a tour of the facility to almost literally freeze out those who find it too chilly.
But it’s actually the limitations of the human inner ear that end up eliminating quite a few candidates. “Many people are very good in a one-dimensional or a two-dimensional environment, but a third dimension, where you try to gauge depth, when you’re up in the air, and even though we have video cameras showing you where you are, for some people that can cause vertigo,” Kunow said.
Although the company tries to find a place for good candidates who may have vertigo, because the workforce needs to be flexible, everyone is eventually trained on all the equipment, working up from a walkie rider to a full stand-up to a deep-reach truck.
“The nature of the business is that demand signals can change from the customer, daily. You need to have employees trained on all types of equipment to be effective,” Kunow explained.
VersaCold is proud of the Milton facility’s BRC certification (a globally recognized food safety certification recognized by the GFSI), which makes it the 23rd of the company’s warehouses to achieve the designation. “Over 85 percent of our sites in Canada are BRC certified, and we’re the only provider in Canada in this space to do that,” said Dienesch. “And that isn’t because we had to, it’s because that’s been our commitment to our customers and to our employees. Our commitment to food safety is our priority.”
With phase three of the Milton facility filling up, and just a few final tweaks remaining on the engineering, the VersaCold team is focused on making sure everything is running optimally. “The biggest opportunity lies in really understanding, and getting better data around how customers shop to better manage demand planning overall. And demand planning is a huge component that is very underdeveloped in the industry,” Kunow said.
A lot of it can be traced to rapid consolidation in the cold storage industry, and companies not understanding the demand profile for the products they’ve just acquired. “There’s a lot of work going on to understand it. Some of the big players are now looking at AI as a way to get better at forecasting. You’re talking very expensive plants to make product, and if they’re not running at an optimal rate, you’re going to lose money. On the flip side, if you don’t build them at the right scale you’re going to lose money as well because you’re going to be out of stock,” he explained.
Dienesch agrees: “Now more than ever, the collaboration with customer and accuracy of forecasting is critical. Historically we would receive the customer forecast and essentially cross our fingers and hope. You can’t do that anymore. We get that you may not be fully accurate three to four weeks out, but we can’t see 30, or 40, or 50 percent swings in the daily forecast from one date to the next.”
For Dienesch, continuous improvement means keeping an eye on current trends in the marketplace. Some customers need the space to be able to increase production and fill bigger orders, while others are looking for smaller, more frequent orders. This means assessing locations, looking at automation and considering what skills will be needed to manage demand in the future, he said. “The landscape is changing very quickly.”