Last year, Ingram Micro Logistics, the distribution arm of computer and electronics supplier Ingram Micro, replaced its Harrisburg, Pa. distribution center with a state-of-the-art facility in nearby Jonestown (see Modern Materials Handling, September 2000). The move to the new DC was necessitated by Ingram Micro's growth in the electronics sector and the company's emergence as a third-party logistics provider.

Though planned long before the recent financial downturn, the approach that was taken with the old DC proved to be a wise use of resources in a tough economy. IM Logistics had considered several options for the building before choosing to breathe new life into it as a reverse logistics center.

"We already had a mechanized center there," explains Terry Tysseland, senior vice president for US Operations. "So we asked ourselves, 'can we turn it around by taking in individual units and then aggregate them?'"

After more than a year of design work, a highly automated returns facility reopened in April to serve East Coast customers. This building complements an existing manual returns center in California. Since customers pay for shipping on the returns, the re-engineered facility provides better access and less freight costs for IM's eastern clients.

"It was a decision driven by customer service," says Chuck Costanza, vice president of operations and distribution. "The return on investment calculations were very favorable for not only recycling the facility but also reusing the materials handling equipment, such as the racks and conveyors."

Some 90% of the 6-year-old conveyors were incorporated into the new design, representing about half of the nearly 5,700 linear feet of conveyor now in use in the building. Additionally, new storage areas consisting of carousels and flow racks were added to gather returns until ready for shipment.

Due to its high amount of automation, the new facility when fully staffed will save 36% over the cost of labor seen at the California returns center. With the use of carousels, the building also has provided 46% greater storage density and will provide faster turns on items. It is also scalable and can expand as needs arise.

Additionally, the center is designed to accommodate a number of value added services, including re-boxing, testing, and repair of damaged electronics. Items that have been returned to stock may also ship directly from the building if needed for immediate orders.

"Our goal is to try to cut one or two legs out of the supply chain," says Tysseland." These services can be done all at one time in one location while opening the box only once."

The process first starts with an IM Logistics service center issuing a return merchandise authorization (RMA) to the customer. The customer then typically ships the item via UPS or FedEx Ground to Harrisburg.

Upon arrival, flexible conveyors aid unloading cartons at the four docks that feed eight door logging stations. Here workers key in or scan the carrier's tracking number on each carton to verify receipt and to check that a proper RMA has been issued. Cartons less than 3 pounds are placed into totes to assure that they will properly ride the conveyors. The conveyors then transport the cartons and totes to eight returns processing stations located on an upper mezzanine.

Push diverters select the processing stations based on work balancing. Workers call up the RMA on their computer terminals, open the cartons, and remove the contents. Foam peanuts from the boxes are dumped into a recovery system where they are vacuumed to an overhead storage area. They will be used again as dunnage for outbound packages. A trash conveyor takes away the emptied cartons.

The UPC code for each item is next scanned, the worker enters the quantity returned, and credits are issued to the customer's account. With the exception of large cartoned items, products are placed into hinged-lid totes with one stock keeping unit (SKU) each. A bar code label is then generated at the station and placed on the tote's lid showing the SKU number and quantity enclosed.

The worker then makes a determination as to the product's disposition. Defective products will be gathered for disposal. Other items may be selected for liquidation. Most products, however, are returned to stock for resell. Some may require re-boxing. The stock-balance items then are conveyed to two possible product accumulation areas.

The Top 120 SKUs received enter semi-automatic flow racks. Lower velocity SKUs go to the extensive carousel systems. After departing the returns processing area, the tote's top bar code as well as a tote license plate on the side of the tote are scanned and the tote is diverted to the carousels or Top 120 racks.

The carousels consist of three tiers, nine pods, and 27 units. Most of the 33,000 storage locations are designed to hold totes, while a limited amount of space in the upper tier is allocated to cartons.

Indicators on the bar illuminate to show which tote (and SKU) is next to be processed. A light tree next to the pod also indicates the storage location and number of items to be added.

Storage is assigned dynamically with SKUs spread throughout the carousels. Items remain stored until enough have been accumulated to build a full pallet. The carousels have offered huge labor savings over the rack storage used in California. Only nine employees are needed to man the system.

Accumulation for the Top 120 works in similar fashion, except that flow racks are used for storage. Conveyors carry product to six receiving stations located at the back of the racks. Workers manually scan the tote IDs and put-lights indicate assigned flow lanes. The tote is held on a ledge at the top of the rack until enough items to completely fill it have been gathered. Then the worker places the tote into the semi-automatic racks, which use auto extractors when that product is later needed.

IM Logistics can change which SKUs are designated as Top 120 at any time. Usually an evaluation is done every few weeks and adjustments are made based on the amount of returns each SKU receives.

Once forty totes of a SKU have been gathered in either the carousels or Top 120 areas, a purge order is issued. The carousels spin to the locations where that SKU is stored. Workers pull the totes and place them onto an outbound belt that feeds a pop-up wheel sorter with four diverts. These drop to special processing and pallet build stations, where items are placed in cartons, if necessary, and manually palletized. A reach truck then gathers the load and places it into rack storage until it is readied for transport to the Jonestown distribution center, back to the supplier, or for filling new orders directly.

Similarly, once 40 totes have been accumulated within the Top 120 flow racks, an automatic extractor pulls the totes from the front of the rack and places them onto a take-away belt. This belt also enters the pop-up sorter and diverts product to the special handling and pallet build stations. Items are then transported to the pallet racks.

Reach trucks later pull pallets from the racks as needed. These are taken to the same dock doors used for receiving, where they are loaded onto outbound trucks. Since most receipts arrive in the morning hours, outbound is typically performed later in the day when the docks are available.

Most of the items processed in Harrisburg are conveyable, though some larger items such as servers and large monitors are not. These are received at the dock and either processed there and redirected to an outbound dock, or placed into rack storage until ready for shipment.

Unlike most reverse logistics centers, the Harrisburg facility is also designed for order-processing – using the returned products to fill any incoming orders that require that SKU. These orders are pulled directly at any time from accumulated items in the carousels, Top 120 area, or pallet racks. This provides great flexibility in the system.

"In the carousels, for instance, we can do cycle counts, putaway, and pull orders all at the same time," says Bill Wenger, operations manager. "It gives us three options where in California, we required three people to perform three different tasks."

SKUs pulled from the carousels and Top 120 are conveyed to a special processing area. Here they are cartoned and the recycled foam void and a packing slip are added. The carton is then labeled and sealed. They next are conveyed to the same sorter that first diverted the incoming cartons to the returns processing stations, except this time cartons are diverted to four outbound docks.

IM Logistics also plans to offer a range of value added services, such as testing, refurbishing, and re-boxing for its clients.

"At this point we are waiting for our customers to define what they want," says Costanza. "For example, we can offer diagnostics. If a test shows a new disk drive is needed, we can perform a replacement."

While it is still a bit early to see how effective the revised building will be, early indications are that the facility is more than meeting design specs.

"Our mechanism and design makes the difference between a system that works pretty well and one that excels," says Tysseland. "We will see a center here that sparkles."

"Returns is not something most companies do cost effectively," adds Costanza. "Now that we have figured out how to do it well, we see it as a value added service we can provide our customers."