Office Depot VP touts potential of off-the-shelf technology for supply chain applications
Brent Beabout of Office Depot has made a career of developing innovative IT solutions for logistics and supply chain problems. And the kinds of technologies he has used might surprise you.
Q: Could you walk us through your career path to date?
A: I guess I've had a pretty unusual career path in comparison with most folks in the supply chain field. I started out as a nuclear submarine officer in the U.S. Navy. I actually did that for quite a long time—13 years' active duty. That was a great background and training, certainly on the technology side, but more important, it taught me a lot about leadership.
After that, I applied for a fellowship at the Massachusetts Institute of Technology (MIT). It's called the Leaders for Global Operations Program. There were about 45 of us in the fellowship program. We earned dual degrees over two years. In my case, I got my M.B.A. from the Sloan School of Management as well as my master's in civil engineering with a heavy emphasis on network optimization and design.
Q: Two MIT graduate degrees in two years? Not bad.
A: Yes. Two degrees, two years. I left there and went to Amazon.com, which had a pretty good gathering of ex-MIT-ers. They recruited some of us out of that program, so I kind of fell into the retail world by accident, if you will. I started in management operations in one of its DCs in Nevada. I then went on to corporate up in Seattle, where I worked my way up to director of operations. I was in charge of DC design and DC optimization.
Q: From there, you went over to the service provider side of logistics at DHL. What did you do there?
A: I took a position in south Florida as vice president of engineering for DHL Express. That job was pretty much twofold. Primarily, I worked on improving the pickup and delivery on the "last mile" of the DHL network in the United States. At that time, we were loading and moving just under 20,000 trucks a day. One of the reasons they brought me in, I think, was to grow and improve the industrial engineering group there, which was kind of on the skids. I focused on bringing about Lean concepts and standardization to get their operations up to proper levels. It was about Leaning out the system.
The second part of the job was working with an outside software firm to develop a world-class solution using some proprietary technology to optimize the last mile of the network. The solution we came up with allowed us to re-optimize the route of any driver in real time throughout the delivery day.
We hooked that solution up with an off-the-shelf Garmin receiver you can buy at Best Buy. Basically, we wrote a software program to integrate the Garmin receiver and a GPS receiver in the truck with the dynamic route optimization process. What we ended up with was a system that provides optimized delivery plans for drivers that was so simple to use that even a new driver who didn't know the routes could follow it on the first day. He just followed the voice of the Garmin.
Q: That brings us to your current role at Office Depot. Could you tell us a little bit about your work there?
A: Office Depot is about a $12 billion company, as measured by annual sales. We operate approximately 1,150 retail stores in the United States. We have 16 distribution centers in the United States as well as international centers in about 52 other countries, but obviously nothing close to the size of operations in the United States.
We also have a very large direct-customer business. We call it the Business Services Division. That services customers like IBM and those kinds of folks with high purchasing volumes.
We are just now completing a DC consolidation program. We used to have two separate supply chains in the United States—we had a retail distribution network and we had the traditional DCs that fit the direct-customer business. In the last year and a half, we've gone from 33 buildings down to 16. We've put the inventory together, reduced our overhead with leases, and so on.
Q: Have you accomplished what you set out to do?
A: Actually, our service right now is probably approaching world-class levels. At this point, every store in the United States is receiving deliveries five days a week. Previously, it was two to three days per week. Obviously, the retail stores like that because they can put their labor on the floor selling as opposed to unloading a lot of pallets. Another nice thing is that we can now optimize our inventory in stores. We're very close to achieving our goal of replenishing, on a daily basis, only what was consumed the day before at that store.
One of the benefits is the very Lean concept of removing waste. Another is that the stores now make better use of labor because workers no longer have to spend time moving a lot of merchandise around in the back room. And obviously, it decreases overall inventory levels, which saves a lot of money for a company of this size.
Q: Turning to another topic, what do you consider to be the most important skill sets for a supply chain professional?
A: I think you need a combination of things and not just industry experience any more. As a matter of fact, I think that's a handicap.
I think you have to be a little bit, I will call it bilingual, not in the literal sense, but you have to be able to speak operations and have some operations experience, be that in transportation, the DC, or somewhere else. You need that street credibility to work well with the group that runs the supply chain, to be able to speak their language.
You also have to be able to speak the language of finance because at the end of the day, that's the language of business, right? That's what sells, if you will, at the CFO, CEO level.
You also have to be able to speak technology because technology is probably the key enabler when it comes to getting supply chain performance where it needs to be. So the supply chain executive, I think, now needs to speak all those languages to be competitive.
Q: Let's take a look at the horizon. What's next for the supply chain?
A: I do think robotics are going to expand considerably. We talk about them most often for a new-built facility, right? I think they're at the point now where they are flexible enough and cheap enough where you can justify investing in them to run critical parts of your business. They have been in manufacturing for years, but in supply chain, they just haven't been cost effective until now.
Second, I see a lot of potential in some of the technology out there that is not even necessarily supply chain-related—a lot of the things you see at Best Buy or in manufacturing or what have you. I think there is a lot of room for bolting together commercial off-the-shelf software or hardware with some kind of small software app in the middle, a little like we did at DHL—combine a Garmin with a GPS and a software package and together, they add up to more than the sum of the parts, if that makes sense.
Q: Yes, it does.
A: On the technology side, I think that's where the early bird gets the worm, so to speak. The people who figure that out—that it could be a whole lot cheaper to bolt together existing applications than to try to develop a proprietary system from scratch—will have the advantage over companies that don't think about that.
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