Nobody Calls Me General Anymore

Abstract

An interview with Gus Pagonis, Executive Vice President for Logistics, Sears Gus Pagonis: I am a strong believer in centralized control, decentralized execution. In the Gulf War, General Schwarzkopf made the US Army's 22nd Support Command responsible for logistics. He agreed that there had to be a single of point of contact (SPOC) for all issues related to logistics. At Sears, Arthur Martinez, Chairman and CEO, had a similar vision. He agreed that our logistics organization, the Sears Logistics Group, be the SPOC for all Sears logistics. Previously, each one of our businesses had portions of our present logistics organization. So these logistics operations were buried within various structures throughout Sears. It used to be extremely difficult to put your finger on a logistics problem, because no one executive had total responsibility. I believe Sam Walton was the first retailer to have the vision of centralizing the logistics function in one organization and bringing in a logistician into his top management group. What role do you play as a logistic ??? on the executive committee of ??? Martinez, like Schwarzkopf, wanted logistics to have a voice on the executive committee equal to that of the various Sears businesses. This also would ensure that all new ideas could be reviewed for their logistical impact. If for example, someone wanted to find out whether we could logistically support a concept, we would test it. We may find it was too costly in some markets, and unnecessary in others, all of this being done, of course, prior to making a national decision. The same goes for some of our seasonal items. Air shipping snow blowers or lawn mowers from one of our stores in one region to a store in another region to meet growing demand might seem to make a lot of retail sense, but when you examine the logistics cost and the gross margin it does not make economic sense. Having the Executive Vice President of Logistics with an equal vote on the CEO's Executive Committee allows all costs to be considered in the decision. We can also act on the logistics related issues much sooner. Take promotional items. We know six months in advance what items are going to be promoted, so we can take appropriate logistics related actions. Unlike in the military, where the enemy situation can suddenly change, here we have the opportunity to make more deliberate plans. For example, we need to be prepared for Christmas every December. The only downside is that while I used to enjoy Christmas in the past, I now begin worrying about it in May. How does the CEO know whether the logistics team is meeting its objectives? Just like we did with General Schwarzkopf in the Gulf War, every month we present Martinez and the other members of the executive committee with a single sheet of paper that contains all data on logistics performance - good and bad. This Logistics Situation Report (LOGSITREP), prepared by my finance department, has all the service and cost metrics for our various channels, including direct delivery (home deliveries), take with (merchandise customers can carry from our stores), and fashion - broken down to the level of per carton, per order, and per piece. All of these numbers are tied in with the company's financial numbers so the committee has a clear idea as to how much we are incurring in transportation, distribution, and delivery costs and how well we are managing our inventory, our vendors (in so far as recovering the costs of defective products), and even our home office expenses. This single piece of paper is probably the most universally used document within both our logistics organization and the businesses we support. How much of the old logistics organization have you retained? I have always tried to work with any existing organization I inherit since I don't want to lose the things that are working. Military training is good in that regard. …