If you watch TV at all, you've surely gotten the message by now—Best Buy stores are all about fun. And by and large, what the ads promise, the stores deliver. Walk through the doors of any of the 500-plus U.S. stores and you'll find yourself in what's essentially a digital playground stocked with a dazzling array of 21st century entertainment options.You can test-drive the Rhapsody digital music service, make a digital movie on the spot or watch a DVD of the Rolling Stones' concert tour. If it makes its stores fun, the retailer reasons, even the visitor who's just dropped by to pick up the latest edition of TurboTax might be tempted to plunk down cash for a set of two-way Klipsch floor speakers or at least a videogame.
Of course, the guy over in the corner engrossed in DarkAlliance II isn't likely to spare much thought as to how all that gear got there. But you can be sure a lot of work goes on behind the scenes to stock the outlets with the latest gizmos and gadgets. That's where Chas Scheiderer and his team come in. Scheiderer, who is senior vice president of logistics for the Minneapolis-based retailer, oversees the company's distribution centers, its delivery centers and its transportation network, which supplies more than 700 retail locations in the United States and Canada.
Scheiderer came to his current job with plenty of retail experience. Prior to joining Best Buy, he held management positions with Payless Shoes and Quaker Oats, with a focus on distribution and operations. He also spent two years as a management consultant with Richard Muther and Associates.
Coming off the busy holiday season, Scheiderer spoke with DC VELOCITY Editorial Director Mitch Mac Donald about what it takes to stock the shelves of one of the country's most successful retail outlets with everything from PC cords to household appliances.
Q: When you ask a kid what he or she wants to be when he or she grows up, no one ever answers, "I want to be a senior vice president of logistics." How did you get into this profession?
A: I used to say you go through life and as things happen, you just evolve into different roles—maybe that's how it happened. I'm an industrial engineer by training. But after I graduated in 1972, I went on to get my MBA because I had an older brother who suggested that that would be a wise thing to do. I was not focused on career plans as a young man, believe me. Growing up, I saw myself as a plant manager or a general manager with profit and loss responsibility for manufacturing. And indeed I began my career that way. I started out as a project engineer for a large business forms company. After a couple of years I moved to Quaker Oats, where I was responsible for production planning, budgeting and industrial engineering, as well as the actual management of the manufacturing force. I really loved that job because it focused on operations and it had an analytical side to it that allowed me to use my training as an MBA and as an industrial engineer.
Q: That's where you started but not where you've ended up. What changed along the way?
A: I thought that to get ahead I really needed to become a management consultant. I thought management consultants got to travel a lot and do the fun things in operations. It just seemed like a good move to make—a job that might be a bit more glamorous or exciting than what I was doing. So after a few years at Quaker Oats, I left to become a management consultant specializing in industrial engineeringI signed on with a small firm in Kansas City that focused heavily on long-range planning for industrial facilities. I loved the work. I did that for only two years, but in terms of personal rewards and satisfaction, I would rate it nine or 10 on a scale of 1 to 10. I did everything from developing long-range plans for a publisher of religious materials to designing the material handling system used in the manufacture of the Bradley fighting vehicle.
Q: If you enjoyed it so much, why did you leave?
A: I left the consulting world because it was so difficult to reconcile the demands of a young family with all the travel. I had gravitated toward distribution and logistics issues during my tenure at Quaker. At the time I was at Quaker Oats, the company recognized that distribution accounted for a large part of the company's expense. They assembled a sort of executive S.W.A.T. team, for lack of a better term, made up of a half dozen managers. We came from a variety of functional areas.We met at headquarters in Chicago on a monthly basis. Our job was to come up with cost reduction ideas for distribution.
Q: I recall that Quaker was one of the first big companies to embrace what was referred to a decade ago as a "core carrier program."
A: That's right. In North America, Quaker had been using something on the order of 250 LTL service providers. We set up a program to leverage that freight volume with a smaller number of carriers in order to achieve better pricing. We brought it down to, I believe, about six preferred or "core" carriers, and then maybe 10 secondary carriers. We exceeded the expectations: Not only did we reduce transportation costs, but service levels improved. That's when I think I really got interested in logistics. I built on that while I was in consulting. When I decided to move out of consulting and back into the corporate world, I focused on physical distribution when I did my job search.
Q: How did you find your next position?
A: It wasn't rocket science, by any means.My job search, if you would even call it that, consisted basically of writing letters and resumes in motel rooms when I was traveling. I sent one letter to a senior VP of operations and information systems at Payless Shoes. I knew I wanted to work in a distribution environment. It was tough to find executives at that time with what seemed like the right title. I couldn't find an executive with the right title there, but I figured the senior operations VP was the right person.
I lucked out with Payless. The letter I wrote was one of those very forward letters saying, "Here I am, here's my resume. I will call you next Thursday to arrange an appointment.' Very presumptuous. Nonetheless, his secretary called me the day before to say he would be out of the office on the day I was going to call and he would like to try to set something up now.
Q: And it worked out?
A: Yes. I stayed there for 10 years before I came to Best Buy.
Q: Describe your job today.What do you do at Best Buy?
A: I'm responsible for the distribution centers. We have multiple general merchandise distribution centers.We have one national entertainment distribution center in Indiana. We have a series of cross-dock operations and small warehouses across the country to support our bulky items and home deliveries.
Q: In aggregate, how much DC space are we talking about nationwide?
A: About 5 million square feet for the general merchandise centers, and roughly another 2 million square feet for the other facilities.
Q: That's a good chunk of space.What role do Best Buy's distribution centers play within the supply chain?
A: Well, like any company, we're really trying to transform the way we look at things. We strive to have a true "end-to-end view" of our supply chain from the moment our merchandise is manufactured at our vendors' plants up until the point where a customer takes an item home from the store. The distribution center is obviously a key component of that.We really focus on the distribution center and on speed and accurate order fulfillment. In recent years, we've focused quite a bit on each component of the supply chain and on improving reliability for each component. We've put a lot of effort into reducing the variability so that the inventory and allocation planners can be more precise.
Q: Isn't that a fundamental challenge today, reducing the variables wherever possible?
A: Absolutely.
Q: How do you define excellence in your logistics operation?
A: We measure virtually everything. If anything, we probably measure too much. Obviously, we're interested in productivity. We're interested in what we refer to as the level of service—that is, how fast we move things through our supply chain. This is a very important measure for us.
Q: How do you go about achieving excellence in your distribution center operations?
A: To achieve excellence in execution, you absolutely must have the right people on the job. If you have the right people on the job and you make sure that they assemble effective teams within their groups, you're virtually assuring excellence in execution. Of course, you have to have the business know-how and you have to be able to communicate what's happening to the teams, but you can't succeed without the right people and the right teams in place. That's another thing that we measure: the attitude of our employees at our facilities. That's a key measure of our DC management team members' success.
Q: How are logistics operations viewed at the boardroom level at Best Buy? Are they viewed as a cost center? Are they viewed as a driver of profitability or shareholder value?
A: Well, we clearly aren't a profit center because we're a retailer. But the company doesn't view us as a necessary evil of doing business, either.We consider ourselves a driver of value.We are considered a very important partner in delivering that value.We're providing a level of service and accuracy and performance that's among the best in the industry.
Q: How has technology changed the way DCs operate today versus when you first entered the field?
A: The effect that warehouse management systems have had on distribution center productivity is one of the biggest changes I've seen. All you have to do to understand the impact of those systems is to look at a DC that's using a good WMS package and compare it to one that is not. If you've got more than a couple hundred SKUs, a good WMS will double your productivity. The supply chain visibility that you get through that technology is just awesome. Even 15 years ago, when you were getting goods from the Far East, the most you could hope for were milestone data—you knew the shipment was on the water, you knew what was coming in and you could plan accordingly. Today, you have tools that can give you complete visibility every step of the way at every level of the organization.
Q: Have you found that there are basic principles of distribution center or logistics excellence that haven't changed despite new technologies that enhance operations?
A: I think our quest for excellence in execution remains the same. But now, with the enabling technologies we've brought online, the expectation is that you will execute perfectly. That gets back to the statement I made earlier about the people, the team performance, the understanding of the business, and having experience to do it.
Q: Do you have formal processes in place to help team members at the line level understand their role?
A: We have training programs and we encourage frequent communication. Every week the supervisor, their leader, meets with them and talks about what's going on. Some of it is an agenda that's delivered as a download and part of it is an interactive communication.We ask our managers to do that frequently. We have a structured set of meetings that encourage communication from top to bottom. There are certification programs for specific jobs, of course.We have standards.We talk about why the standards are important. We feel that if we want workers to perform to the standard, it's very important to sell them on the reasons why.
Q: What does the future hold for logistics? What, if you will, is the next big thing?
A: Visibility in the supply chain. The supply chain event management software that's now becoming available will allow everyone in the organization to see where their stuff is at any point. Everyone from the buyer to the inventory planner will be able to call up screens that show how many pieces have been shipped, what truck they're on and where that truck is right now. If there's a shortage, they'll be able to make decisions regarding substitutions much earlier in the process than ever before. Logistics will have the opportunity to re-channel merchandise and to send it through a different channel so they can speed it up if necessary—and managers will have the opportunity to make those decisions much earlier in the process than they did before. I think that's going to be the biggest thing. We're all excited, of course, about the opportunities for RFID, which will really drive that as well.
Q: Yes, RFID. Has there ever been a bigger buzz over an emerging technology?
A: RFID is just one of those things that will help enable that vision of having complete visibility and enabling speed.
Q: What do you consider to be the biggest DC or logistics challenge you've overcome in your career?
A: Every year I worry about some new challenge. But if I had to identify a single event, it would be a situation that I faced twice when I was a distribution center manager. That is, just walking into a new job and being confronted with overwhelming volume and a management team that thought they couldn't do what they were being asked to do. Both times we were able to overcome the challenges.We succeeded by tackling what I will call the grunt work and by figuring out the processes we'd need to follow every step of the way and then following through with our plan.We were able to work with that management team to show them they could do it.
Q: So you walked in as the new captain of a team that was all but ready to send up the white flag?
A: That's right. And we got the job done. I learned a lot and I think they did too.
Q: Let's go to the flip side. Have you ever been faced with a challenge that you were not able to overcome?
A: The answer is yes.When Best Buy purchased a company a few years ago, one of the assumptions was that there would be a lot of synergy between Best Buy's logistics operation and that of the newly acquired company. That did not turn out to be the case.
Q: So you found yourself somewhat hamstrung in executing on the objectives that you had been given?
A: Right.
Q: Of all your skills, what's the single most important thing you bring to the job every day?
A: The ability to simplify. It's very important for us to simplify things in this complex world.We talked a little bit about the technology. It's amazing how complex you can make things right now. But when you get right down to it, people focus on just a few things. It is essential to simplify. You need simplicity to get people to excel in operations. I also think it's important to develop what I sometimes call good "follower-ship." When I speak to a group of college students or summer interns about leadership, I like to ask the question, "Who are some good followers?"
Q: That's an intriguing question. What makes a great follower?
A: A great follower to me is someone who really understands his or her mission, someone who feels free to speak his or her mind—even if the ideas are at odds with the leader's—someone who functions well as part of a team with a great leader.
