A&A ATCLE Site Visit 1-2004

ATC Logistics & Electronics Drives Growth through Leading Edge Value-Added Services and Rigorous Process Control

Key Personnel:
Bill Conley – President
Jim Crawford – Vice President of Finance
Randy Engel – Director of Operations
Marc Sherman – Director of Information Technology

Three years ago it was hard to distinguish Aftermarket Technologies 3PL operation from their only customer AT&T Wireless. Today with new leadership and a reengineered business model, ATC Logistics & Electronics (ATCLE) is rapidly building business by exploiting the leading-edge capabilities it has developed to meet the needs of demanding electronics customers and the automotive customers of its parent company Aftermarket Technology Corp. (NASDAQ: ATAC). ATCLE now operates five ISO certified warehouses, yielded stand-alone net revenues of $114 million in 2002 (up 185% since 1998), and has over 650 employees. ATCLE core strengths are in high volume fulfillment and reverse logistics.

ATCLE’s main outbound distribution center (“NDC”) in Fort Worth has 224,000 sq. feet and is highly automated. The majority of the operation is dedicated to fulfilling new and replacement wireless phone orders for two of its major telecommunications customers: AT&T Wireless and Cingular. RedPrairie provides the WMS backbone and it’s LENS “dashboard” web interface is used to provide visibility. RF devices are used to capture item information and to direct all NDC tasks. Approximately 30,000 phone orders are shipped each day.

In NDC receiving, ATCLE uses Radio Frequency devices to capture product serial numbers.

Upon receipt of product from OEMs an inbound scan of product serial numbers is made. Inbound information is used to assign putaway. The WMS provides complete product visibility while in the D.C. The inventory information captured is also used to drive vendor managed inventory (VMI) programs and provide customers with FIFO accounting information.

The NDC uses an order cutoff time of 5 P.M. in each respective time zone. The large shipment volume and onsite FedEx and UPS personnel allow ATCLE to ship up till 10 P.M. for next day delivery to the West Coast. The first major pick module we viewed was set up to pick wireless phones, insert memory chips into phones, and pick accessories and literature to cartons. These cartons are then packed out and sent via conveyor to shipping. (Each ATCLE telecommunications customer has asked to have their product handled separately in the operation.)

One of the NDC's two main pick modules.

In this first pick module, ATCLE inserts SIMM memory chips in each wireless phone as a value-added service. Pickers work defined zones and using a pick-to-carton-to-belt work flow, approximately 2,000 orders per day are processed.

The second major pick module we viewed is dedicated to fulfilling similar orders; however, ATCLE does is not required to install SIMMs. This allows pickers to pick-to-carton without any intermediate steps and facilitates the processing of 16,000 average daily orders.

In addition to the pick modules, the NDC has a bulk fulfillment area for processing full case quantities of telecommunications equipment destined to major retailers, mall kiosks, and customers’ stand-alone stores. Items are picked from racks and gravity racks.

ATCLE processes warranty exchanges for cellular phones in the final warehouse location. To meet its telecommunications customers’ needs, ATCLE ships replacement phones prior to receipt of the returned phone. Through its process reengineering, the number of phones replaced under warranty and not returned to ATCLE has been reduced to 2%.

ATCLE's onsite call center operations handle order entry, warranty exchanges, and returns authorization.

Additional work is performed by ATCLE’s onsite call center. This includes order entry, warranty exchanges, and returns authorization.

The next site we visited was ATCLE’s reverse logistics center (“APRC”). With 107,000 sq. feet, the APRC utilizes approximately 200 personnel to process 200,000 to 300,000 returns per month. 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, cell phones are “powered up” to check their status, and a deposition code is assigned in the WMS for the returned product.

An ATCLE's wireless phone test cell station

Refurbished phones are assigned new serial numbers and reboxed.

To provide customers a greater return on investment, used product is reconditioned and sold as refurbished, or is liquidated if it cannot be refurbished. Failed phones are returned to OEMs for credit.

Cell phone testing and reconditioning is handled by 158 personnel on three shifts. This 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 reboxed.

The final site we visited was ATCLE’s aftermarket automotive electronics remanufacturing operation in Dallas. This facility has 80 employees and approximately 40 are directly involved in the remanufacture of car radios, CD-players, “OnStar” systems, and dashboard displays for car dealers as part of their warranty coverage.

ATCLE's remanufacturing operation performs diagnostic testing and intricate refurbishment services.

Remanufacturing service stations provide tools for rebuilding and refurbishing auto electronics systems.

The process starts in ATCLE’s onsite remanufacturing call center. A request is received from a car dealer for a part. This triggers the warehouse staff to locate and pick the item. On-hand inventory is used to fulfill the order for next day delivery.

Once the replaced product is received from the dealer at ATCLE it is scanned and matched to the original RMA. It then goes into testing. Multiple diagnostics are performed using a myriad of specialized testing equipment. Based upon the test results the equipment can be refurbished, remanufactured, or salvaged. Remanufacturing can include replacing a whole cassette drive to soldering replacement resistors onto a circuit board.

Approximately 500 units are processed each day. To meet its customers’ next day delivery requirements the remanufacturing operation ships all products by 7 P.M. each night.

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 will be the cornerstone to its continued growth.