HERI Committee Report

APPENDIX I

SITE VISIT REPORT

Location:

Pegasus Wholesale Inc.
100 Alfred Kuehne Boulevard
Brampton, Ontario, L6T 4K4

Guides:

Dennis Zook, CEO
Michael Harkins, Senior Vice-President, Operations
Nigel Berrisford, Senior Vice-President, Purchasing
Peter Strachan, Vice-President and General Manager
William Hanchar, Vice-President, Finance and Chief Financial Officer

Guests:

David Black, Consultant
Kevin Burns, Consultant

On 8 May 2000, the Committee's research consultants visited Pegasus Wholesale Inc.'s warehouse facilities in Brampton, Ontario. What follows is an account of their tour.

Pegasus Wholesale Inc. is a giant operation. The building is more than 308,000 square feet and includes a mezzanine of an additional 150,000 square feet. The design allows for a further expansion of two additional floors within the existing warehouse shell. The steel shelves are stacked high with wooden pallets containing some 500,000 different titles. At any given time the warehouse contains about six million volumes. During the Christmas period this climbs to 10 million items. When the operation is working at full capacity, Pegasus can receive and ship one million books in every 24-hour period.

There are approximately 500 full-time equivalent staff members and there are about 150 working at any given time. This increases during the book industry's busiest season around Christmas. The warehouse operates around the clock. The operating style is to process deliveries of books within 24 hours of receiving them. This means that all deliveries from publishers are scheduled according to a pre-arranged timetable. Large trucks roll up to one of the 16 docking bays. As they leave the truck, each box of books is scanned. A sample copy of each book is measured and weighed before the box is moved into the highly automated system by a forklift truck.¹ The machines that do the boxing have to know the dimensions of a book in order to create the correct size and shape of box or padded envelope.

Each individual book is given a price sticker, if it does not already have one, before it is sent to a predetermined location in the warehouse. This is where the book will be stored until it is needed for an order and this is when a complex system of loading, sorting, boxing and delivery begins. The warehouse is not like a library with books on a certain topic in a certain area. The layout is designed to create efficient access for the most popular titles.

Pegasus is fully automated. All the bar code readers are on a radio frequency. This means that the information they read from each box or book is updated in real time in a central computer. Each day, Pegasus staff process the orders that have been received by the computerized ordering system. This is a first-come, first serve system. Since all the information is in bar code format, none of the operators, pickers, stackers, or loaders knows if the order is destined for a Chapters store or for any other client.

Orders are assembled to make for the most efficient loading and packing. A giant series of conveyor belts keep two sets of boxes in constant motion on each belt. One set of boxes is the original packing cases from the publisher and these come is all sizes. The other is a single size Pegasus order box that will eventually be filled by hand by a picker. The picker scans the label on the empty Pegasus box and then scans the label on one of the books in the publisher's box. A screen lights up above each box indicating the number of copies of the book that the picker must put into the box.

As each box winds its way around the conveyor belt, and this is a very long journey, it is loaded by pickers who follow the packing information encoded on the label and as indicated by the lights above each box. The system has an automatic mechanism for checking for errors. Each book is weighed as it enters the warehouse enabling the ordering system to calculate not only the titles and the number of copies that should be included in each box, but also the exact total weight the box should be when it is filled. As it nears the end of its journey on the conveyor belt the box is finally scanned and weighed. If the actual weight of the box does not match the estimated weight on the packing slip it is diverted for a manual check. The error rate is less than 2% with this system, although dramatic changes in humidity or temperature, or publishers who reprint books on a different thickness of stock can create enough of a weight difference for the box to be diverted for a manual check.

Once the order is complete and found to be accurate, the boxes are put on a pallet by the loading dock for delivery by Canada Post. The objective is to have the orders completed within a 24-hour period. Each Chapters store receives two or three deliveries a week, depending on the season. From order to delivery takes between 3 to 5 days for those stores at the eastern and western end of the country. Pegasus plans to open a western hub for its operations in Manitoba west to further reduce delivery times.

Chapters.ca orders are processed every four hours by staff working at terminals in another section of the warehouse. These orders are filled in a more conventional manner since most are for one or two volumes. Pickers walk the aisles pulling off each title and packing them by hand, and even gift-wrapping them if this is part of the order.

Pegasus is a huge, highly automated operation. The systems that have been developed are built on the most efficient use of time and fast stock turnaround. One of the goals of the company is to set the standard for automation and reliability in Canadian warehousing systems. Books are the core business, but DVD, videos and sound recordings are beginning to account for more business. The long-term plan is to add even more lines of products as Chapters.ca expands the kinds of products it sells on-line.

Chapters and Chapters.ca remain the company's principal clients. Pegasus is actively marketing itself to attract other bookstores as well as library and institutional clients.

¹ Knowing the weight is important in this process because it is one of the fail-safe methods for catching errors later down the line.