March 1, 2006
thought leaders | The DC Velocity Q & A

The road less traveled: interview with Bill Hutchinson

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.

By Mitch Mac Donald

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.

Bill Hutchinson

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.

About the Author

Mitch Mac Donald
Group Editorial Director
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.

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