ATC Logistics & Electronics

Builds upon High-Tech Skills and Refines its Business Model for Growth

Fort Worth, Texas USA
March 12, 2008

By

Evan Armstrong

Key Personnel:
Antony Francis – President

Art Smuck – VP & General Manager, Operations

Randy Engel – VP & General Manager, AT&T

Marc Sherman – VP, Information Technology

Ray Estep – VP, Finance

Kevin Giles – VP, Human Resources

Founded in 1996, ATC Logistics & Electronics (ATCLE) is rapidly building its third-party logistics (3PL) brand as a high-tech repair/refurbishment and high-volume order fulfillment specialist. ATCLE currently operates five ISO certified distribution centers (DC’s) with 1.1 million square feet and employees over 3,000 associates. In 2007, ATCLE generated revenues of $294 million (having grown 368% since 1998). Fueling its growth, ATCLE has expanded from its sole founding customer AT&T Wireless to 15 long-term contractual customers. Key customers include: AT&T Wireless, Ford Motor, General Motors (GM), Magellan, Palm, Sony Ericsson, T-Mobile, TomTom, and TiVo. Its three Fort Worth, Texas DC’s are closely situated in the Alliance Gateway foreign trade zone.

Operations Review, “New” Gateway Distribution Center

To handle its business growth, ATCLE expanded its footprint by leasing its 180,000 square foot Fort Worth “Gateway” multi-client distribution center in 2006. It houses operations for several leading original equipment manufacturers (OEM’s), Palm, and GM/On Star.

GM OnStar Kitting

Since 2003, ATCLE has been assisting GM with its conversion from analog to digital OnStar units for late model cars. ATCLE receives approximately 500-3,500 orders per day for upgraded OnStar units. Using a bill of materials, ATCLE builds new OnStar unit kits for over 40 specific vehicle models with each kit averaging 26 distinct part numbers. The kits are then shipped to GM dealers for final installation. ATCLE has been averaging a 24-hour order receipt to shipping cycle time.

“Reflashing”, Packaging and Order Fulfillment

A large OEM operation is currently the most extensive at the Gateway DC. There are three distinct operations being performed: 1. mobile phone handset “reflashing” (reprogramming), 2. mobile phone accessories packaging, and 3. direct fulfillment for accessory orders. ATCLE estimates that it will reprogram approximately 500,000 handsets and fulfill over 150,000 accessory orders this year.

In another part of the warehouse, ATCLE is working another OEM phone “flashing” (programming) project. When this global OEM releases a new phone model, they want it in inventory in the U.S. as soon as possible. To achieve this goal, they sent 85,000 un-programmed phones to ATCLE for programming for specific wireless carrier networks. ATCLE is also responsible for distributing the phones to the wireless carriers.

Operations Review, South Distribution Center

ATCLE’s 321,000 square foot Fort Worth South Distribution Center (DC) is currently undergoing expansion to handle a new large-scale packaging project for TomTom and expanding a key customer DSL modem business which is expected to distribute millions of units in its first year of operation. Once the expansion is complete in June, the South DC will total 406,000 square feet.

At this time, the majority of the South DC operations are focused on running the AT&T Wireless direct fulfillment and returns inspection operation. This operation utilizes 221,000 square feet and runs 24/7. Almost 1,000 stock keeping units (SKU’s) kept on hand include: mobile phones, components and accessories. Tens of thousands of Business-to-Consumer (B2C) orders and an even greater number of Business-to-Business units are filled each day from three main pick modules and bulk storage areas. RedPrairie provides the warehouse management system (WMS) backbone and its LENS “dashboard” web interface is used to provide visibility. Radio frequency (RF) devices are used to capture item information and to direct all tasks.

New product and repaired/refurbished phones are received through RedPrairie until midnight and are checked in against purchase orders. Heavy use of inbound advance ship notices (ASNs) has greatly improved receiving efficiency. Approximately 50% of ASNs come in via electronic data interchange (EDI) and the rest are primarily received through email. ASNs provide information on inbound product at the serial number, case and pallet level.

Inbound quality control checks are performed on all inbound phones each month to ensure that they meet AT&T’s requirements. Any failures can be reworked or sent back to the respective OEM for credit. The WMS directs putaway and provides for task interleaving.

There are three main pick modules in the South DC: two are for direct B2C order fulfillment and one is for fulfillment of B2C mobile phone exchange orders.

The first direct fulfillment pick module is used to process B2C mobile phone and accessory orders. Items are picked to carton and then move via an automated conveyer to a pack out line where dunnage is automatically placed in the carton and automatically taped.

The second direct fulfillment pick module we viewed is dedicated to fulfilling AT&T Wireless extended coverage B2C orders. Most of these orders do not require ATCLE to program and install SIMMs into phones processed. By segmenting these orders into a separate pick module, pickers can pick from storage bins to carton without any intermediate steps increasing productivity.

The final major high-volume pick module is dedicated to fulfilling exchange orders for individual mobile phones. The “XBM” line processes hundreds of thousands of orders per month, saving time and improving service to customers. Along with packing out the individual mobile phones, ATCLE inserts informational and marketing collateral as directed by AT&T.

In addition to the pick modules, the bulk storage area is used to pick large multiple line item orders destined for retail locations. Items are wave picked from racks and gravity racks and orders are manually packed out.

ATCLE has created a real time custom application at the interface level to provide for rate shopping between FedEx and UPS based on required service level. Because of ATCLE’s high shipping volumes, UPS, DHL and FedEx maintain onsite personnel for loading out shipping containers. ATCLE can ship up until 10 P.M. for next day delivery to most points in the U.S.

As a value-added service for AT&T Wireless, ATCLE processes warranty exchanges for mobile phones. ATCLE maintains an on site customer service call center operation to handle order entry, warranty exchanges, and returns authorization. The customer service center runs in two shifts with an approximate staff of 20 and is scaled as necessary.

Operations Review, North Distribution Center

The North Fort Worth D.C. has 375,000 square feet and houses the AT&T, TiVo, TomTom return and refurbishment operations along with the T-Mobile direct fulfillment, Magellan repair and LG packaging operations. There are very few warehouses where you will see so much activity in so little square footage.

AT&T Wireless Returns

Using smart labels customers mail returned phones to USPS mail centers. The parcels are picked up and consolidated into gaylord containers for truckload delivery into ATCLE’s North DC.

Thousands of mobile phone returns are processed each month via three receiving lines. Returned items are received and the product serial number is scanned to cross-reference the return material authorization number (RMA). Next the product is checked for the type of return.

To provide AT&T Wireless a greater return on investment, used product is reconditioned and sold as refurbished, or is liquidated if it cannot be refurbished.

Cell phone testing and reconditioning is handled by multiple lines of personnel on three shifts. Reconditioning can include reprogramming phones, replacing faceplates, and many other detailed enhancements to fully refurbish the phone. All refurbished phones are assigned a new customer specific serial number and re-boxed for distribution.

LG Packaging

As another value added service, ATCLE is performing packaging services for LG Electronics. The packaging includes LG private label packaging and packing of LG products for sale by Verizon Wireless.

Magellan Returns

ATCLE handles all North American returns for Magellan consumer and professional products. Magellan is best known as the maker of Magellan personal global positioning systems (GPS). In this reverse logistics operation, ATCLE is receiving returns, de-kitting them, and determining disposition. If any refurbishment or repair is needed to move units back into saleable inventory, ATCLE has the capabilities in-house to perform the repairs.

T-Mobile Direct Fulfillment

In a separate section of the North DC, ATCLE is performing direct fulfillment of T-Mobile phones and accessories. This operation is very similar to the AT&T Wireless direct fulfillment operation. Thousands of orders are picked, packed, and shipped each day. To ensure customers are satisfied with their orders, ATCLE has implemented an intensive quality control program.

TomTom Order Fulfillment, Returns and Repair

TomTom has been a recent account addition for ATCLE which is handling all U.S. and Canadian order fulfillment, refurbishment and repair work. TomTom manufactures personal GPS navigation units.

ATCLE has a three-tier operation for TomTom. The first is B2B order fulfillment to retailers such as Best Buy and Wal-Mart. This operation fulfilled over 700,000 orders for navigation units in December of 2007. The second operation is for testing and repair of nine different navigation models. The operation currently has a three-shift staff and processes approximately 1,200 units per day, including four re-boxing stations and quality assurance control. The third operation for packaging and shipping has been changed to a cell based configuration which increases capacity and typically improved productivity across the operation.

TiVo Order Fulfillment, Returns and Repair

ATCLE is performing the North American order fulfillment of TiVo box top units, returns processing, and repair and refurbishment work. ATCLE estimates that over 1.7 million units will be shipped in 2008.

Inbound returns are received from large electronics retailers such as Best Buy and directly from consumers. Every returned unit is checked for cosmetic issues requiring refurbishment and tested for functional problems that require repair. ATCLE has set up multiple workstations to handle repairs and configured two main cells to handle packaging and shipping out units.

Summary

ATC Logistics & Electronics has become a domestic leader in high-tech 3PL services. With a focus on complicated reverse logistics services, process reengineering, and high volume distribution, ATCLE has been able to grow by servicing customers demanding “six-sigma” standards. The operational processes it has developed continue to be the cornerstone to its rapid growth.