3PL Powerhouse

Ingram Micro Logistics works behind the scenes as the distribution backroom for the fast-paced computer industry.

By David Maloney, Associate Editor -- Modern Materials Handling, 9/1/2000

Most technophiles are well acquainted with the leading brands of computers and software. However, it is doubtful that many know about the distribution giant that actually puts this cutting-edge technology into their hands.

Ingram Micro Logistics is the distribution arm of Ingram Micro, the world's largest wholesaler of technology products and services. For several years now, the company's seven U.S. distribution centers have additionally served as the distribution portals for leading computer-related firms, such as Microsoft, 3-Com, Comp-USA, Buy.com and Egghead.com. This third-party-provider logistics (3PL) approach has been so successful that IM's logistics division has become a force of its own, with IM's own wholesale business considered its largest client.

The dismal performance of many dot-com companies in the fourth quarter of last year has prompted IM Logistics to expand its offerings to Web-based vendors.

'What has developed with the Internet is a new business that was not there before,' says Terry Tysseland, senior vice-president of U.S. operations for IM Logistics. 'We have virtual companies using us now for their complete backroom. What we do well is take in full cases of product and ship out very small orders to end users in our customers' names.'

Small orders crippled dot-com DCs last Christmas, according to Tysseland. Most of these facilities had experience with case distribution, but not with the ones and twos that are the bread and butter of Web businesses.

Several years ago that was also the situation with IM Logistics. Over 80% of products then shipped in cases to wholesalers and resellers. Now it is the reverse, as 83% of outgoing parcels are sent directly to end-users.

To better prepare to meet this challenge, IM Logistics built a state-of-the-art distribution center in Jonestown, Pa. that replaced an aging warehouse. The facility serves the Northeast, the company's busiest region.

Six miles of conveyors and five sliding shoe sorters (Rapistan Systems, www.rapistan.com ) help the facility to process over 30,000 cartons each day. The square building design was also a departure from the other IM Logistics distribution centers, most of which are long, narrow facilities.

'We have taken what we have learned from our other centers, and built upon that. Every system has improved,' says Tysseland. 'But the main improvement in this facility is the centralized design. It is almost a square building with the automation running down the center.'

The facility consists of four adjoining buildings with firewalls in between. Together, the buildings form a centralized structure that brings product closer to the automation, saving time and improving efficiencies. While the facility has been open only since April, it has already become the most efficient IM Logistics DC, with room yet to grow.

The Jonestown facility processes 14,000 orders each day with a capacity for 50,000. The building is designed to add pick modules and to expand the exterior walls as growth demands.

'We are absolutely pleased with this system and this center,' says Tysseland.

The integrated facility (Rapistan Systems ) is also meeting its goal of same day delivery, with an impressive 99.9% on-time shipping performance. Tysseland adds that such numbers take a culture of people unwilling to accept anything less than high accuracy and on-time service.

Technology for the masses

Receipts arrive there on advanced ship notices. Docks in Building 3 are assigned according to product type and proximity to eventual storage locations. Just as the industry breaks product into hardware and software, so does IM Logistics. Software is received at docks on the west side of the building, while hardware items arrive at east-side docks. Receiving on both sides of the building allows for improved space utilization.

The west side of Building 2 also contains a receiving area for small parcels. Extendible conveyors ease trailer unloading. Fixed conveyors then deliver these parcels to the repack area in Building 1, where the cases will be broken open and their contents placed on shelving.

Upon arrival, the UPC code on each item is hand scanned and a license plate bar code is printed displaying the quantity and storage location assigned by the warehouse management system (WMS). The paper license plate is applied to the outside of each pallet load or individual case if less than a full pallet. The license plate includes putaway instructions for the lift truck drivers, either to a forward picking location or reserve storage.

Most full cases go to the pick-to-belt area in Building 2 where they are stored on pallet racks. Some cases are also sent to the three-level pick module in Building 4. The remainder, especially full pallet loads, head to pallet flow rack storage in Building 3.

Replenishment of the pick modules takes place during the overnight shift as items are pulled from pallet storage areas and delivered to Building 4 and the open case repack area in Building 1.

Same day fulfillment

Any order received at IM Logistics by 5:00 p.m. ships that day. That can be a tall order for any distribution center, requiring a scheduling system very aware of carrier cut-off times. IM actually assigns which of its seven DCs will process an order based on carriers. For example, certain late orders may be filled at the Tennessee DC, which is near Fed Ex's major hub.

IM prides itself on its ability to reach its customers quickly.

'That's the magic to the IM system,' says Tysseland. 'We can cover 100% of the U.S. with second-day ground service and 69% with one-day ground service. Everyone is trying to take cost out of business. I think the last cost to take out is the transportation piece.'

Most of the order filling in Jonestown takes place between 2:00 p.m. and midnight. Picking is done in about 100 daily batches, each scheduled to ensure that all orders are complete before hitting the cutoff for the carrier that will transport that batch.

Man-up order pickers pull slower-moving full cases from the pallet racks in Building 2. Drivers receive a stack of labels, one for each case, which displays their storage locations. Cases are pulled and the labels attached and loaded onto the order picker. Once a full load has been accumulated, the driver takes them to a conveyor belt running though the middle of the building.

'Technology has a shelf life of only about 90 days,' comments Tysselant. 'We are constantly refreshing the pick-to-belt area.'

The hottest products come from the three-level pick module in Building 4. Just as the west and east sides of Building 3 are split for receiving, so the west module here holds software while the east houses hardware and systems.

As in the pick-to-belt area, workers receive tickets/labels to direct their picking. Workers pull cases, apply the shipping labels, and send them off onto a conveyor that runs through the middle of the module, starting at the bottom level and spiraling up through the other two layers. The top level holds the hottest of the hot, as this level will have less distance to travel to shipping.

Orders requiring less than full cases are selected in the repack picking modules of Building 1. IM Logistics uses a centralized assignment area located within the facility control room to print out pick tickets for use here.

By centralizing the printing in one place, IM is certain that tickets print properly and that printers do not run out of supplies as they might if scattered around the DC floor. Such occurrences could cause delays and a failure to meet carrier cut-offs on missed orders.

Workers in the control room pull the tickets, which contain both a label and picking instructions, from the printers. They then utilize a creative solution of pneumatic tubes, similar to air-driven systems used for drive-in banking, to deliver the tickets within 12 seconds to 7 tube receiving stations located within the modules.

A nearby carton erector produces five standard sizes of cartons, that are distributed and staged throughout the pick zones. The WMS lists the size of carton required for each order on the pick label, based on known attributes of the items it will contain such as weight and cubed volume.

Each of the three levels of the module contains four zones, with a 13th zone reserved for hot-pick items, such as new releases of operating systems or income tax software programs.

A picker in the module pulls the tickets/labels from the pneumatic receiving station adjacent to the zone and begins picking items from the shelving into the appropriate carton. The worker then pulls the label portion off the ticket and applies it to the outside carton. Once all picks have been made from the zone, the rest of the ticket is placed inside the carton and it is pushed off onto a takeaway conveyor. The carton passes a fixed scanner that reads the label and directs the pick-and-pass conveyor to divert it to other zones containing needed items until all picks are completed.

The conveyor then transports items over an in-line weighing scale and through three sliding shoe sorters that direct the cartons to the proper portion of the manifest area on the upper level of Building 1. There are 65 stations here, 37 of which are used to package items pulled from the open-stock repack area. Workers scan each item of the order along with the label on the carton to verify proper picking.

Cartons next go to a void-fill station where peanut foam chips are added and the carton is sealed before being sent by conveyor to shipping.

Full cases from the pick module and the pick-to-belt areas in Buildings 4 and 2 head to the remaining 28 billing stations where workers scan the label to verify the pick, check the shipping label, and attach a packing slip to the last carton of the order.

The shipping labels contain bar codes, UPS tracking symbols, and the delivery address. The logo of the distribution client is also displayed, so that it appears to the customer as if the client is sending the parcel directly to them.

From the manifest area, the completed cartons and cases pass through another sliding shoe sorter. The shoes direct the packages either to 11 outbound carrier lanes that handle small parcels or to 20 lanes that service freight carriers.

Cartons going to the freight carrier lanes, known as 'less than truckload,' are palletized and shrink-wrapped to provide stability before being loaded onto outbound trucks. Non-conveyable items pulled from adjacent pallet racks also join outbound boxes here.

In all, there are 30 outbound docks at the facility.

Winning the gamble

Tysseland says that much of the center's success is due to experience gained with other DCs and the facility's unique design. Several of the other facilities began as spec buildings and the materials handling system had to be adapted to the building's footprint. Erecting this facility from the ground up allowed the company to build to its new business model, while the square design has also brought the desired performances.

'We continue to be efficient because our distances run are very short,' says Tysseland.

He admits that the design was a risk, as the square shape makes it very difficult to subdivide at a later time if the need arises.

'We gambled a bit with it,' Tysseland says, 'but everything we have done with this center has been very good. This one is a thoroughbred.'

Benefits at a glance

System Snapshot