the road less traveled: interview with Bill Hutchinson
While the other young go-getters were clawing their way to the top in the world of finance, Bill Hutchinson saw a wide-open opportunity in the unglamorous yet game-changing world of logistics.
Mitch Mac Donald has more than 30 years of experience in both the newspaper and magazine businesses. He has covered the logistics and supply chain fields since 1988. Twice named one of the Top 10 Business Journalists in the U.S., he has served in a multitude of editorial and publishing roles. The leading force behind the launch of Supply Chain Management Review, he was that brand's founding publisher and editorial director from 1997 to 2000. Additionally, he has served as news editor, chief editor, publisher and editorial director of Logistics Management, as well as publisher of Modern Materials Handling. Mitch is also the president and CEO of Agile Business Media, LLC, the parent company of DC VELOCITY and CSCMP's Supply Chain Quarterly.
Supply chain consulting experience, a stint managing logistics for an ill-starred dot-com, executive-level supply chain positions ... they're all there on Bill Hutchinson's resume.
That's nothing unusual, as resumes go, except that it's not exactly what you might expect from someone who started out in finance. Nor is it the career path Hutchinson himself envisioned back when he graduated from Clarkson University in Potsdam, N.Y., with a degree in finance and economics. Like other young go-getters of the era, he found the world of finance beckoned.
Hutchinson spent a couple of years in the financial services industry but quickly became restless. As he looked around, supply chain management caught his eye. What he noticed, in particular, was how the Dells and Wal-Marts of the world were wielding their supply chain expertise like a club, using the pricing and service advantages made possible by hyper- efficient supply chains to wallop the competition. Let the others vie to be the next Warren Buffett, he thought. Here was a wide-open path to the top. Hutchinson went back to school, this time enrolling in the University of Tennessee's MBA program, with a double concentration in logistics and marketing.
It looks like it worked for him. Today Hutchinson is the vice president of transportation and global logistics for retail giant Best Buy, responsible for all domestic inbound and import transportation as well as transportation from distribution centers to the company's 700-plus U.S. stores. Of course, he didn't go there directly out of school. Along the way, he worked as head of logistics for an ill-fated dot-com. He served as senior manager of Accenture's supply chain consulting practice, where he worked with a number of Fortune 500 clients. And he's held senior supply chain positions at food distribution specialist Nash Finch and pharmacy chain Rite-Aid Corp.
Hutchinson spoke recently with DC VELOCITY Editorial Director Mitch Mac Donald about why DCs are back in vogue, doing business in an era when even a $10 million contract may not be enough to tempt carriers, and why, for him, the road less traveled has made all the difference.
Q: Tell us a little about your career to date. How did you migrate to the the team to try to make our operation logistics and supply chain corner of the better, to try to make the service we probusiness world?
A: After graduating from Clarkson University, I spent a couple of years in financial services and decided that the field wasn't giving me the kind of personal challenges and development opportunities I wanted. So I switched gears and decided to go for my MBA. I targeted the University of Tennessee, based on the strength of its supply chain program. At Tennessee, I had the chance to work with a strong academic team with faculty like John Langley, Ray Mundy and Tom Mentzer. This experience really helped me to develop an interest in the supply chain. From there I joined Andersen Consulting's supply chain strategy practice, where I worked in a number of different industries like forest products, chemicals, natural resources, and retail as well as electronics and high tech.Most of my work there was focused on transportation operations and strategy, network design, and supply chain strategy.
Q: Finance and economics to logistics and supply chain? What prompted you to veer off onto that path?
A: For one thing, there seemed to be a lack of younger or newer talent in the profession, quite frankly.When you looked at career opportunities and career progressions to the top, you didn't have to look any farther than Wal-Mart and Dell for examples of companies that had succeeded on the strength of their supply chain management and to see how supply chain expertise could rapidly elevate your career.
Q: What was your next step?
A: I spent some time in the dot-com world, and when that fizzled, I returned to Andersen, which by that time had changed its name to Accenture. In my second term there, if you will, I worked with clients like Applied Materials, Exxon Mobil Chemical, BP and Rite-Aid. Not long after my Rite- Aid project, I joined that company as vice president of transportation.
Q: What personal skills serve you best when you go to work each day?
A: I think number one would be readiness to act as a change agent. That means constantly challenging the status quo, and constantly working with the team to try to make our operation better, to try to make the service we provide to our customers better, and to try to get better visibility into what we do. I think that would be kind of a guiding principle for everything I've tried to do throughout my career. One of the other things would be a focus on understanding the numbers, the operating metrics of your business, and being able to use that common language cross-functionally to drive change and improvement.
Q: When it comes to introducing change, it seems that most companies have no problem deciding on their strategies and tactics, but run into real difficulty getting buy-in from their people. How do you go about convincing people to embrace change?
A: I think as a consultant, change management was the most difficult thing to get the organization to buy into. It was usually the thing that someone would cut out of a proposal, perhaps because that person considered it fluffy or felt it wasn't directly correlated to a benefit.What many people don't understand is that the change management component of any activity is what enables the benefit. It's what makes the benefit stick. All of us can read about best practices. Most of us are familiar with what "best in class" looks like, but to be able to assess your organization's strengths and the capabilities and set meaningful milestones and goals and then execute against that schedule— that's the secret sauce, so to speak, of how to make things flow. Helping an organization understand that, helping the team understand that change is not a bad thing, that actually in many ways change can improve our operations, is the core challenge.
Q: What are the major challenges to achieving supply chain excellence?
A: The capacity constraints that we've all seen in the industry—the crazy variable drivers surrounding fuel prices, the availability of truck drivers, equipment costs and the like. Second would be the fact that everything, every element of our business, is changing and changing very rapidly. Then there are the demands of any large organization, particularly a retailer, around how flexible we are in the supply chain. Taken together, they create an opportunity for leading organizations to differentiate their operations based on their supply chain capabilities.
Q: How so?
A: It used to be that success meant getting the best price. Now, we're really talking about leveraging and understanding what our trading partners need out of the relationship as well. I think those are the challenges that face folks in any organization, but particularly in the retail organization, when they are being asked to do more and more with less and less.
Q: Isn't it also a profound shift in the approach to doing business?
A: Absolutely. I think you really have to look down the road. It's very similar to a chess game—you have to be looking four or five moves ahead. When you're trying to plan around variable costs, you need the flexibility to align yourself with different partners for different elements of your business. It does require a shift in the way you do business. We used to talk about core carriers because it was about standardizing and simplifying relationships with a small number of players. The reality is that those players aren't necessarily interested in large chunks of business with a company anymore. Most folks are interested in finding the parts that work well in their network. Are carriers interested in doing $10 million of business with Company A or are they interested in doing $1 million of profitable business with Company A? Technology has allowed us to broaden some of those relationships, given the dramatic reduction in transaction costs that used to be a barrier to maintaining a large carrier base. We truly need to leverage that in this day and age. Most organizations need to do that to be able to meet the service needs of their business.
Q: Could you give us a quick rundown on the operation you oversee at Best Buy?
A: I am responsible for transportation, which includes domestic inbound and import transportation as well as our outbound DC-to-store transportation.
Q: Speaking of the DC, how do you account for the distribution center's emergence as a critical hub in the past few years?
A: really comes back to theItdemand for flexibility—the ability to deliver product in whatever way the customer wants it, be it dot-com fulfillment or delivering product to your stores packaged and loaded in ways that will streamline the put-away process. All of those activities require more flexibility at a distribution center. Retailers can take a lot of the costs out of store operations by moving activities like pricing and display creation upstream to a place where you can more readily develop a core competence in those activities. This increase in value-added service obviously has a profound impact on the supply chain and on the DC, in particular. It is for the good of the company, but it does add complexity to your distribution and transportation operations. I think that's one of the fundamental reasons why the DC has come back into vogue, so to speak.
Q: Over your career, what are some of the biggest changes you've observed in logistics operations?
A: The role that supply chain plays in an organization. We have always been the offensive lineman. Typically if they don't call your number, that's a good thing. It means you didn't miss the block. I think the proactive role that supply chain takes in a leading organization today has been one of the biggest changes I've seen.
Q: For years, we've all been clamoring about the need for logistics and supply chain operations to be represented in the boardroom. Are we there yet?
A: I think we are there—at least in the savvier organizations. The focus on supply chain transparency, the value of speed to market, and the percentage of sales that supply chain cost represents ... all those things have really driven that.
Q: How about the flip side? Are there some core logistics principles that remain constant in the face of change?
A: Absolutely. Getting back to basics is a strong underlying theme for many of the activities in which we're involved. Three of these basics are capacity utilization, investing in your people, and managing change. Take capacity utilization, for instance. In the transportation or distribution space today, understanding how to maximize the utilization of capacity—whether it's your own capacity or a third-party provider's—is the name of the game. With variable cost in our world higher than ever, there is a renewed interest in understanding how to grow back- haul programs, utilize third-party capacity during peak periods, and get more real-time activity information about our business. Investing in your team always has and will continue to be your best investment. You need to recruit, develop and retain the best people; our changing environment requires it. Staying nimble and flexible is another guiding principle that hasn't changed over the years. We need to use our systems capabilities and effective third-party relationships to supplement our own networks if we are to remain flexible and cost effective.
Q: Any closing thoughts?
A: Just to stress the importance of always maintaining a focus on improvement. Understanding the fundamentals and understanding the process throughout the supply chain. You should always be asking questions: How does it work today? What's my goal? How do I continue to improve our business process and build flexibility into our supply chain? Supply chain is all about cost containment, customer service and flexibility. We have to focus on all three of these capabilities to be truly best in class.
Most of the apparel sold in North America is manufactured in Asia, meaning the finished goods travel long distances to reach end markets, with all the associated greenhouse gas emissions. On top of that, apparel manufacturing itself requires a significant amount of energy, water, and raw materials like cotton. Overall, the production of apparel is responsible for about 2% of the world’s total greenhouse gas emissions, according to a report titled
Taking Stock of Progress Against the Roadmap to Net Zeroby the Apparel Impact Institute. Founded in 2017, the Apparel Impact Institute is an organization dedicated to identifying, funding, and then scaling solutions aimed at reducing the carbon emissions and other environmental impacts of the apparel and textile industries.
The author of this annual study is researcher and consultant Michael Sadowski. He wrote the first report in 2021 as well as the latest edition, which was released earlier this year. Sadowski, who is also executive director of the environmental nonprofit
The Circulate Initiative, recently joined DC Velocity Group Editorial Director David Maloney on an episode of the “Logistics Matters” podcast to discuss the key findings of the research, what companies are doing to reduce emissions, and the progress they’ve made since the first report was issued.
A: While companies in the apparel industry can set their own sustainability targets, we realized there was a need to give them a blueprint for actually reducing emissions. And so, we produced the first report back in 2021, where we laid out the emissions from the sector, based on the best estimates [we could make using] data from various sources. It gives companies and the sector a blueprint for what we collectively need to do to drive toward the ambitious reduction [target] of staying within a 1.5 degrees Celsius pathway. That was the first report, and then we committed to refresh the analysis on an annual basis. The second report was published last year, and the third report came out in May of this year.
Q: What were some of the key findings of your research?
A: We found that about half of the emissions in the sector come from Tier Two, which is essentially textile production. That includes the knitting, weaving, dyeing, and finishing of fabric, which together account for over half of the total emissions. That was a really important finding, and it allows us to focus our attention on the interventions that can drive those emissions down.
Raw material production accounts for another quarter of emissions. That includes cotton farming, extracting gas and oil from the ground to make synthetics, and things like that. So we now have a really keen understanding of the source of our industry’s emissions.
Q: Your report mentions that the apparel industry is responsible for about 2% of global emissions. Is that an accurate statistic?
A: That’s our best estimate of the total emissions [generated by] the apparel sector. Some other reports on the industry have apparel at up to 8% of global emissions. And there is a commonly misquoted number in the media that it’s 10%. From my perspective, I think the best estimate is somewhere under 2%.
We know that globally, humankind needs to reduce emissions by roughly half by 2030 and reach net zero by 2050 to hit international goals. [Reaching that target will require the involvement of] every facet of the global economy and every aspect of the apparel sector—transportation, material production, manufacturing, cotton farming. Through our work and that of others, I think the apparel sector understands what has to happen. We have highlighted examples of how companies are taking action to reduce emissions in the roadmap reports.
Q: What are some of those actions the industry can take to reduce emissions?
A: I think one of the positive developments since we wrote the first report is that we’re seeing companies really focus on the most impactful areas. We see companies diving deep on thermal energy, for example. With respect to Tier Two, we [focus] a lot of attention on things like ocean freight versus air. There’s a rule of thumb I’ve heard that indicates air freight is about 10 times the cost [of ocean] and also produces 10 times more greenhouse gas emissions.
There is money available to invest in sustainability efforts. It’s really exciting to see the funding that’s coming through for AI [artificial intelligence] and to see that individual companies, such as H&M and Lululemon, are investing in real solutions in their supply chains. I think a lot of concrete actions are being taken.
And yet we know that reducing emissions by half on an absolute basis by 2030 is a monumental undertaking. So I don’t want to be overly optimistic, because I think we have a lot of work to do. But I do think we’ve got some amazing progress happening.
Q: You mentioned several companies that are starting to address their emissions. Is that a result of their being more aware of the emissions they generate? Have you seen progress made since the first report came out in 2021?
A: Yes. When we published the first roadmap back in 2021, our statistics showed that only about 12 companies had met the criteria [for setting] science-based targets. In 2024, the number of apparel, textile, and footwear companies that have set targets or have commitments to set targets is close to 500. It’s an enormous increase. I think they see the urgency more than other sectors do.
We have companies that have been working at sustainability for quite a long time. I think the apparel sector has developed a keen understanding of the impacts of climate change. You can see the impacts of flooding, drought, heat, and other things happening in places like Bangladesh and Pakistan and India. If you’re a brand or a manufacturer and you have operations and supply chains in these places, I think you understand what the future will look like if we don’t significantly reduce emissions.
Q: There are different categories of emission levels, depending on the role within the supply chain. Scope 1 are “direct” emissions under the reporting company’s control. For apparel, this might be the production of raw materials or the manufacturing of the finished product. Scope 2 covers “indirect” emissions from purchased energy, such as electricity used in these processes. Scope 3 emissions are harder to track, as they include emissions from supply chain partners both upstream and downstream.
Now companies are finding there are legislative efforts around the world that could soon require them to track and report on all these emissions, including emissions produced by their partners’ supply chains. Does this mean that companies now need to be more aware of not only what greenhouse gas emissions they produce, but also what their partners produce?
A: That’s right. Just to put this into context, if you’re a brand like an Adidas or a Gap, you still have to consider the Scope 3 emissions. In particular, there are the so-called “purchased goods and services,” which refers to all of the embedded emissions in your products, from farming cotton to knitting yarn to making fabric. Those “purchased goods and services” generally account for well above 80% of the total emissions associated with a product. It’s by far the most significant portion of your emissions.
Leading companies have begun measuring and taking action on Scope 3 emissions because of regulatory developments in Europe and, to some extent now, in California. I do think this is just a further tailwind for the work that the industry is doing.
I also think it will definitely ratchet up the quality requirements of Scope 3 data, which is not yet where we’d all like it to be. Companies are working to improve that data, but I think the regulatory push will make the quality side increasingly important.
Q: Overall, do you think the work being done by the Apparel Impact Institute will help reduce greenhouse gas emissions within the industry?
A: When we started this back in 2020, we were at a place where companies were setting targets and knew their intended destination, but what they needed was a blueprint for how to get there. And so, the roadmap [provided] this blueprint and identified six key things that the sector needed to do—from using more sustainable materials to deploying renewable electricity in the supply chain.
Decarbonizing any sector, whether it’s transportation, chemicals, or automotive, requires investment. The Apparel Impact Institute is bringing collective investment, which is so critical. I’m really optimistic about what they’re doing. They have taken a data-driven, evidence-based approach, so they know where the emissions are and they know what the needed interventions are. And they’ve got the industry behind them in doing that.
The global air cargo market’s hot summer of double-digit demand growth continued in August with average spot rates showing their largest year-on-year jump with a 24% increase, according to the latest weekly analysis by Xeneta.
Xeneta cited two reasons to explain the increase. First, Global average air cargo spot rates reached $2.68 per kg in August due to continuing supply and demand imbalance. That came as August's global cargo supply grew at its slowest ratio in 2024 to-date at 2% year-on-year, while global cargo demand continued its double-digit growth, rising +11%.
The second reason for higher rates was an ocean-to-air shift in freight volumes due to Red Sea disruptions and e-commerce demand.
Those factors could soon be amplified as e-commerce shows continued strong growth approaching the hotly anticipated winter peak season. E-commerce and low-value goods exports from China in the first seven months of 2024 increased 30% year-on-year, including shipments to Europe and the US rising 38% and 30% growth respectively, Xeneta said.
“Typically, air cargo market performance in August tends to follow the July trend. But another month of double-digit demand growth and the strongest rate growths of the year means there was definitely no summer slack season in 2024,” Niall van de Wouw, Xeneta’s chief airfreight officer, said in a release.
“Rates we saw bottoming out in late July started picking up again in mid-August. This is too short a period to call a season. This has been a busy summer, and now we’re at the threshold of Q4, it will be interesting to see what will happen and if all the anticipation of a red-hot peak season materializes,” van de Wouw said.
The report cites data showing that there are approximately 1.7 million workers missing from the post-pandemic workforce and that 38% of small firms are unable to fill open positions. At the same time, the “skills gap” in the workforce is accelerating as automation and AI create significant shifts in how work is performed.
That information comes from the “2024 Labor Day Report” released by Littler’s Workplace Policy Institute (WPI), the firm’s government relations and public policy arm.
“We continue to see a labor shortage and an urgent need to upskill the current workforce to adapt to the new world of work,” said Michael Lotito, Littler shareholder and co-chair of WPI. “As corporate executives and business leaders look to the future, they are focused on realizing the many benefits of AI to streamline operations and guide strategic decision-making, while cultivating a talent pipeline that can support this growth.”
But while the need is clear, solutions may be complicated by public policy changes such as the upcoming U.S. general election and the proliferation of employment-related legislation at the state and local levels amid Congressional gridlock.
“We are heading into a contentious election that has already proven to be unpredictable and is poised to create even more uncertainty for employers, no matter the outcome,” Shannon Meade, WPI’s executive director, said in a release. “At the same time, the growing patchwork of state and local requirements across the U.S. is exacerbating compliance challenges for companies. That, coupled with looming changes following several Supreme Court decisions that have the potential to upend rulemaking, gives C-suite executives much to contend with in planning their workforce-related strategies.”
Stax Engineering, the venture-backed startup that provides smokestack emissions reduction services for maritime ships, will service all vessels from Toyota Motor North America Inc. visiting the Toyota Berth at the Port of Long Beach, according to a new five-year deal announced today.
Beginning in 2025 to coincide with new California Air Resources Board (CARB) standards, STAX will become the first and only emissions control provider to service roll-on/roll-off (ro-ros) vessels in the state of California, the company said.
Stax has rapidly grown since its launch in the first quarter of this year, supported in part by a $40 million funding round from investors, announced in July. It now holds exclusive service agreements at California ports including Los Angeles, Long Beach, Hueneme, Benicia, Richmond, and Oakland. The firm has also partnered with individual companies like NYK Line, Hyundai GLOVIS, Equilon Enterprises LLC d/b/a Shell Oil Products US (Shell), and now Toyota.
Stax says it offers an alternative to shore power with land- and barge-based, mobile emissions capture and control technology for shipping terminal and fleet operators without the need for retrofits.
In the case of this latest deal, the Toyota Long Beach Vehicle Distribution Center imports about 200,000 vehicles each year on ro-ro vessels. Stax will keep those ships green with its flexible exhaust capture system, which attaches to all vessel classes without modification to remove 99% of emitted particulate matter (PM) and 95% of emitted oxides of nitrogen (NOx). Over the lifetime of this new agreement with Toyota, Stax estimated the service will account for approximately 3,700 hours and more than 47 tons of emissions controlled.
“We set out to provide an emissions capture and control solution that was reliable, easily accessible, and cost-effective. As we begin to service Toyota, we’re confident that we can meet the needs of the full breadth of the maritime industry, furthering our impact on the local air quality, public health, and environment,” Mike Walker, CEO of Stax, said in a release. “Continuing to establish strong partnerships will help build momentum for and trust in our technology as we expand beyond the state of California.”
That result showed that driver wages across the industry continue to increase post-pandemic, despite a challenging freight market for motor carriers. The data comes from ATA’s “Driver Compensation Study,” which asked 120 fleets, more than 150,000 employee drivers, and 14,000 independent contractors about their wage and benefit information.
Drilling into specific categories, linehaul less-than-truckload (LTL) drivers earned a median annual amount of $94,525 in 2023, while local LTL drivers earned a median of $80,680. The median annual compensation for drivers at private carriers has risen 12% since 2021, reaching $95,114 in 2023. And leased-on independent contractors for truckload carriers were paid an annual median amount of $186,016 in 2023.
The results also showed how the demographics of the industry are changing, as carriers offered smaller referral and fewer sign-on bonuses for new drivers in 2023 compared to 2021 but more frequently offered tenure bonuses to their current drivers and with a greater median value.
"While our last study, conducted in 2021, illustrated how drivers benefitted from the strongest freight environment in a generation, this latest report shows professional drivers' earnings are still rising—even in a weaker freight economy," ATA Chief Economist Bob Costello said in a release. "By offering greater tenure bonuses to their current driver force, many fleets appear to be shifting their workforce priorities from recruitment to retention."