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February 2003

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Whether the customer drives up in a Lexus or a Kia, Pep Boys wants to be ready with the right parts. A revamped DC network helps make that happen.

AS SURE AS POTHOLES WILL APPEAR IN THE ROADWAYS, AUTOmobiles will break down this year. Tires will pop, axles will break, timing belts will wear out, batteries will die. And frustrated drivers will want new parts at a moment’s notice.

Whether those parts are for a ’79 Mazda, an ’86 Ford or an ’01 BMW, the cars’ owners will want them now. Any auto parts store or garage worth its road salt had better be ready and able to deliver.

Therein lies the challenge for Pep Boys, one of the nation’s largest automotive parts dealers. In business since 1921,the company sells parts, accessories, tires and batteries and provides auto repair and maintenance services through 629 stores in 36 states. Its customers arrive at the stores in every sort of car and light truck imaginable, which guarantees an ongoing demand for tens of thousands of different parts.

Taking stock
Market analysis has given Pep Boys a pretty good idea exactly what parts should be in stock at each store. “We know that the sweet spot for us is cars between four and seven years old,” explains David Schneider, the company’s director of industrial engineering. Those tend to be cars that are no longer covered by manufacturers’ warranties, but are still seen by their owners as worth investing in for repairs and maintenance.

In fact, cars in general tend to stay on the road much longer these days than their predecessors did. As a result, the company now carries an unprecedented number of stock-keeping units (SKUs) within its distribution network —more than 40,000 at last count. Some are high-volume items like oil filters or containers of motor oil and windshield washer fluid, with many units sold each day. Others—like fuel pumps and parts for cars of a specific model and year—move across the counter far less frequently. Some are bulky and heavy, some are bulky and light,others are quite small but valuable.

Despite the proliferation of SKUs in recent years, the company is committed to keeping inventory at the store level to a minimum—24,000 to 26,000 SKUs. That means it must depend heavily on a high-performing distribution network for support. That network today consists of five high-through put distribution centers, all approximately 400,000 to 500,000 square feet in size, located in Indianapolis; Chester, N.Y.; Atlanta; Dallas; and Los Angeles.

A few years back, the company launched a pilot program to revamp its DC operations to keep up with the growing demands. Starting with the Indianapolis DC, it began testing initiatives designed to accelerate the picking process, improve put away, enhance asset utilization and boost picking accuracy. Based on what it learned in Indianapolis, it went forward with implementing the design in Chester, N.Y.

Today, the Pep Boys facilities in Georgia and Texas are undergoing retrofitting to take advantage of what the engineers learned at the two test sites.The company, however, is not doing much right now with the remaining DC in Los Angeles. The oldest o f the five DCs, the Los Angeles center is one the company would prefer to replace, says Schneider, but replacement would be hard to cost justify given that the center is fully paid for and depreciated.

Although some capital investment was obviously necessary to revamp the DCs, the company focused on smart design, with special attention to where goods are placed within the facilities and how they are packed for shipment to the stores. In fact, its primary goal in redesigning its distribution logistics system was to enable the stores to put away shipments arriving from the DCs more efficiently.

“One of the biggest expenses in the supply chain process is stocking store shelves,” Schneider says. “Before the redesign, SKU growth had gotten to the point that we had product in pick packs, in totes and on pallets. It took a lot of handling at the store.” In order to simplify putaway, Pep Boys researched stocking patterns at the stores.“We worked from the peg hook backwards,” Schneider says, “so that we could figure out how to pack shipments in such a way that goods bound for one area of the store would arrive in the same tote.”

Next the Pep Boys design team turned its attention to the parts themselves. “We classified merchandise into categories that are always grouped together,” Schneider says, “and then we identified six key areas found in each store. For convenience’ sake, we divided the 200-plus products into family stocking groups. We knew that these three or four [groups] were always in this part of the store, these 12 were always behind the parts counter.” Shipments into each store are color-coded by the store section, enabling store managers to send them to the right area without opening the totes or cartons.

Path of least distance
Working backwards, the next step was to determine where goods should be housed at the DC to make it easy for workers to pick by family group. But the designers had to take much more into account than simply where in the store each item would end up. Because different SKUs sell at different rates and have different handling char acteristics, the optimal pick system would have to take into consideration the item’s cube, frequency and number of units picked. “When we talk about velocity,” says Schneider, “we talk about cubic and unit velocity and pick frequency. There’s some product we’re picking every single order, but the daily movement is only half a cubic foot. Another might average a half a cubic foot a day, but we’re only picking it once a week. Others are very large.”

The Pep Boys engineers decided that a traditional facility design—with slow-moving parts placed in a shelving module, fast-moving but small parts in a carton flow system, fast-moving and conveyable in a pallet flow module, and most other goods in pallet racks—would not meet their needs. Better suited to a warehouse than a high-throughput DC, a traditional design would have created a lot of wasted cube in totes, leaving the company with partially full totes from different parts of the DC each bound for the same destination.

“We decided we didn’t need pallet flow except for motor oil,” Schneider reports. “We decided to mix carton flow and shelving in the same pick module.” But that created the problem of how much of each type of item to stock. “What became obvious is that average pick quantities were one to two units,” Schneider says.“I could be picking that per pick and that’s fine. But out of that each-pick, I have products that move at super-high frequency and products that move at very low frequency. How can I shorten the pick path? The slowest-moving items are shelf items. I don’t want order pickers to have to walk by aisles and aisles every time.”

The solution was to design pick modules that organized inventory so that fast-moving items were close to the carton flow area, while other goods were shelved in aisles perpendicular to the carton flow aisle. The less frequently a product was picked, the deeper in the aisle it would be shelved. The goods moving in the highest frequency would be on end caps at the end of each aisle. “The goal was to walk by as few locations as possible as you picked an order,” Schneider explains. “As you’re going down the main aisles, two-thirds of the picks don’t hit a walk-back aisle at all. If you have to hit one, you may only have to go four feet back in the aisle.”

Although the Pep Boys engineers did use Manhattan Associates’ facility optimization software, SlotInfo, to help determine the best location for products within the DC, there was a great deal of manual analysis involved as well. “We wanted heavy items in the right place, bulk items in the right place,” Schneider says.

“We were packing to family groups, but now we’ve gone a step further than that,” he adds. “The family groups are separated by vendor.” That level of separation makes inbound receiving and putaway more efficient. Schneider explains that the company may receive as many as 400 SKUs from a single vendor. Traditionally, inbound loads might be broken up and reconsolidated. But with the current system, a pallet can be placed in a pick module, with goods positioned to require the least amount of distance for the putaway.

Systems upgrades
After thoroughly vetting the new DC design at the Indianapolis facility, which operates on a paper pick system, the team went ahead and introduced it in the Chester, N.Y., facility, which operates with a pick-tolight system. That pick-to-light system has a beacon at every pick location, which directs workers to the right area, the shelf, and finally the precise location with the right quantity to pick. The system, which is designed so that DC workers can adjust the number of SKUs on a shelf if needed, will be able to support up to 50,000 items without needing further changes to the physical layout.

	PEP BOYS’ CHESTER, N.Y., DC TOTES UP SAVINGS BY USING RETURNABLE RUGGED PLASTIC CONTAINERS.

In contrast to the Indianapolis site, where picks go into carts, the Chester facility uses totes and gravity conveyors. That DC is equipped with 45,000 plastic totes for shipping goods to the retail stores. Called the IPL Flap-Nest series, the nestable 16- by 24-inch plastic containers come in depths of either 9.6 or 14 inches to accommodate products of varying densities. Small but heavy items such as spark plugs go into the smaller totes. Less-dense items such as air filters go into the larger. The result is better utilization of the totes’ capacity without making them too heavy.

Once a tote is packed,the order picker applies a label that is color-coded for the product family group and displays the store number. Finished totes are placed on a dolly for transport to a powered takeaway conveyor that runs down the pick module’s spine.

Inbound products run down the same spine but are stocked from the back side of the walk-back aisles so goods can be stocked at the same time they are being picked. Schneider says that 80 percent of the replenishment is done without use of power equipment. Instead, workers with an RF gun and goods on a dolly or pushcart handle the putaway without interfering with the picking activities.

Small cap
The redesign has made the Pep Boys facilities far more efficient than they’ve ever been,and at relatively small capital investment. Schneider says that he benchmarked his operations against those of a highly mechanized auto parts supplier in Europe, Auto-Teile-Unger. “Utilizing the technology ATU had, we would have reduced headcount by about 14 people on a base of 230 people,” he admits.“But we spent $7 million on logistics equipment and systems; ATU spent $26 million. That’s how I measure our productivity.”

Peter Bradley, Chief Editor

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