Order pickers, forklift drivers and truck loaders at The Container Store's DC love their jobs, but not for the reasons you might think. It's not perks like break rooms with hot tubs, concierge service or free lunches that make them happy. It's something far simpler: they're treated with respect, they're kept informed about the company's financials and long-term plans, and their employer believes it has an obligation to provide a fun work environment so that employees look forward to coming to work each day.
A lot of the credit for that goes to Amy Carovillano, vice president of logistics and distribution for the company, which sells products to help consumers organize their homes, cars and offices. It was Carovillano who realized that the quirky worker-friendly culture that has landed the company on Fortune magazine's list of "Best Companies to Work For" six times could do for the DC what it did for the corporate office and retail stores—slash turnover and boost productivity. She made it her mission to create a DC that's a truly special place to work, one where employees can have fun while working hard in an upbeat, team-based environment. The result? The Container Store today boasts what may be the lowest turnover in the industry.
Carovillano herself is a Container Store lifer, at least so far. She joined the company right out of college and soon afterward found herself opening the retailer's first Houston store. Under her stewardship, the store almost instantly became the company's highest-volume location. In December 1994, Carovillano, who worked closely with company founders Kip Tindell and Garrett Boone to draft what have come to be known as the company's "Foundation Principles"—a set of "do unto others" guidelines for how to treat employees, customers and vendors—became one of the company's first operations managers, with responsibility for overseeing the Fort Worth and Arlington, Texas, stores. The next year, she moved to the company's Dallas headquarters as the strategic planning director and a year later was promoted to vice president of logistics and distribution. Today, she oversees all aspects of distribution, logistics, inventory control and transportation for the 34-store retail chain. Outside the office, she has served on the National Conference on Operations & Fulfillment's advisory board for the past three years and has recently joined the North Texas Commission Logistics Committee.
Carovillano spoke recently with DC VELOCITY Editorial Director Mitch Mac Donald about her transformation from biocHemiät to logistician, why a company that's lauded for its progressive human resources policies operates without an HR department, and why The Container Store is not joining the rush to embrace RFID.
Q: Tell us about The Container Store. A company that has made Fortune magazine's list of America's 100 Top Places to Work for six years must be a pretty special place.
A: It really is. The Container Store, which sells everything you need to organize your kitchen, your closet, your home office and more, is literally a big small business. Despite achieving 20-percent growth every year for 27 years, the company has stayed true to its roots. It's still privately held. And our founders, Kip Tindell and Garrett Boone, are still very involved in the business.
Q: Tell us about your role in the company.
A: I am vice president of logistics and distribution. I oversee what is lovingly called the "back end," which is the whole supply chain—imports, transportation, the distribution center, inventory, purchasing and in-store logistics—pretty much all the things that relate to marketing and merchandising and getting the product where it needs to be when it needs to be there.
Q: How many retail outlets does the company have?
A: We have 34 stores located across the country. All of the merchandise bound for those stores comes through our central distribution center here in Texas. Nothing is drop-shipped to the stores. I think part of our mission in the distribution center is to enable the stores to concentrate on selling and taking care of our customers. We check on all the merchandise here and fuel the trucks. They don't even do an inventory check at the store. They just look at the truck as one load.
Q: From the stores' viewpoint, then, you've done your job if you've gotten the right material on the right shelf at the right time and the whole process remains transparent to the people at the store?
A: Exactly. We do a lot of value-added stuff here to get the merchandise ready for the stores so they don't have to. For example, all of the ticketing is done by our vendors or here in the distribution center.
Q: Do all the products coming into the DC in Texas arrive complete or does the DC get involved in light manufacturing?
A: We do light manufacturing on a few product lines, but not many. One of our advantages is that we're willing to work a little bit more with our vendors than, say, a Wal-Mart-type operation can. We buy closer to the mill. Many of our products were originally commercial products that had never been sold in retail, which means that a lot of them either need some kind of packaging or explanatory label. We do some light manufacturing on a few products to pull them together. A good example is the penny candy jar—the kind that you see on a convenience store counter. When the jars arrive, they come in two pieces—a jar and a lid—because candy manufacturers want them separate. We have a "Special Processing" area in our distribution center where we put the lid on the jar and stick a price tag on the bottom so we can sell it as one item.
Q: The company has grown, on average, 20 percent a year for almost 30 years now. Do you folks still see that level of growth on the horizon?
A: We expect to continue to grow at a rate of 20 per cent a year. We open three to four new stores a year. Probably the biggest challenge we face is having the discipline to limit ourselves to that level of growth. There are so many opportunities presented to us. But we want to stay in control of our culture and our brand.
Q: You've been with the company for 18 years. You started out on the retail store floor in the late 1980s. How did you end up at "uh-oh" corporate?
A: My background is that I have a double major in biocHemiätry and microbiology.
Q: What a perfect fit for a logistics professional in a retail environment!
A: Absolutely. I took a job on the retail sales floor, like many of our employees, thinking this was just a temporary position until I found a real job. I ended up falling in love with the company, the culture, and the core values that Kip and Garret make sure permeate the whole business. I was moved into store management and managed our top-volume store for a number of years before moving into multi-store management. Kip was really the one who singled me out for my leadership skills and what he says is my ability to motivate employees and spread our culture, which is really our strength. He decided that I was the type of person our logistics operations needed. He asked me if I would take over distribution and go to corporate. I told him I didn't know anything about distribution, as if that needed to be said. But, I must admit that I had always been fascinated by the activities that took place behind the scenes. I said, sure, under one condition: I want to hire the very best logisticians I can and get the best management team—certainly people better at this than I am. Together we really turned the DC into a real class operation.
Q: I have always maintained that there is very little that is more important in a manager's role than hiring the right people.
A: Absolutely. The only thing more rare than talent is the ability to recognize and motivate talent.
Q: Great line. Talk to us a little more about the links in The Container Store's supply chain. I assume that you have a lot of stuff coming in from overseas?
A: A little over half of our products are imported.
Q: That's not all that much these days.
A: No, but there will be more coming from Asia as we grow. We still import a great deal of our merchandise from Europe—in particular, from one of the few manufacturing plants in Sweden. They make our closet organizing system, Elfa, which is one of our top-selling products.
Q: Have you run into problems with the port congestion we hear so much about these days?
A: We've been able to avoid a lot of that chaos for a couple of reasons. One is we do carry a little bit more inventory than probably a Wal-Mart-type operation would. We do that because we deal with some smaller vendors. Because we consider customer service to be our core competency, we really don't like to have out-of-stock situations. Our mission is to try to sell solutions. If you have 10 of the 11 products the customer needs to put his or her closet together, you don't have a closet. We need to make sure that we have items in stock. We have a much lower tolerance for out-of-stocks than other stores. So we carry a little bit more inventory.
Another reason why we've been able to avoid some of the congestion headaches is that one of our six Foundation Principles is "Fill the other guy's basket to the brim. Making money then becomes an easy proposition." It is about forging mutually beneficial relationships with everyone we do business with—our customers, each other, our business partners. We've fostered good relationships with our freight people, our customs brokers, our trucking companies, our 3PLs, everyone we work with—in many cases, becoming their favorite customer because we do business ethically. We are very consistent. We're not just about the price when it comes to dealing with our logistics vendors. We are nice people. The Container Store is just a company filled with really nice people. When it comes to business, being nice and being successful are not mutually exclusive. You don't have to take a Machiavellian approach to business to succeed. I think that's probably The Container Store's proudest accomplishment—showing the world that you can have a great place to work, be nice to your business partners, and be incredibly successful.
Q: Sounds like our economy, not to mention our culture and society, could use a lot more Container Stores.
A: There's no doubt about it. It is so refreshing to lead in a company like that. As an employer, we have an obligation to create a work environment where our employees wake up every day and look forward to coming to work. That is our obligation. Another one of our Foundation Principles is: One great person equals three good people. That means, to us, that one great person can do the work of three good people. That great person needs to be motivated and trained well and taken care of. But why in the world would you ever have anything but great people working for you? We have surrounded ourselves with an incredible workforce here.
Q: How about some more detail on the DC in Texas? How large is it? How many employees go to work there? How much stuff comes in and goes out?
A: Well, we just moved into our current facility in Coppell, Texas. It was built specifically for us. It is 1.1 million square feet but we are only occupying 675,000 at this point. We have written the lease to be able to take it over in 150,000-square-foot increments over the next 10 years, so we will expand as our needs expand, which is a unique leasing situation.
We have between 200 and 250 employees in the distribution center. About 95 percent of our outbound volume is going out to our stores in full truckloads.
Q: OK. While the world is going to a higher volume of much smaller shipments, here's The Container Store consolidating shipments into full truckloads going out to each store. I guess conventional wisdom isn't always the best approach. Do you folks see yourselves as contrarians in some ways?
A: We do. Part of our challenge has been to remain focused on what is right for our business and not to become distracted by the latest technology or by benchmarking with other people. We need to make sure that it is appropriate for The Container Store and protect our brand. It is really part of our brand, the way we approach our distribution.
Q: So let's see. You carry considerably more safety stock than most retailers, because you refuse to risk running out of stock at the store. Instead of a higher volume of small shipments moving via LTL or parcel carrier, you're sending truckloads directly to the store. And although you are importing, you import only about half of your goods, many of them from Europe not Asia. What comes to mind is what my teenage son would refer to a George Costanza Opposite Day, a reference to a "Seinfeld" episode in which the character George Costanza forces himself to do exactly the opposite of what his instinct tells him to for a full day. It turns out, as I recall, to be one of the best days of his life. But enough about sitcoms. Let's get back to business. What are the biggest challenges you face in maintaining your success?
A: I think the challenge is guarding against becoming complacent. We are the recognized leaders in storage and organization. We are at the top of Fortune's list of best places to work in America and have been for six straight years. The challenge is to keep moving forward and not rest on our laurels.
Part of that involves the technology and mechanization and systems end of it—making sure that we are constantly on top of that rather than letting the business get ahead of our support system. Another part is the people side of it— continuing to challenge and recruit and retain and move forward with great people. When you have great people, you have to make sure that you continue to motivate them and train them and challenge them. Great people aren't willing to just do what they are told. They are constantly questioning and helping you run your business, which is incredibly motivating, but it's also hard work. You're always explaining things to them. We are constantly communicating. We say communication is leadership, which means we are constantly sharing everything with our employees. Part of our corporate culture is maintaining open communication with all our employees about everything except individual salaries. For instance, at the last staff meeting, which included about 400 people from around the company, including 20 or 30 from the DC, Kip made a presentation on our finances, our P&L, our real estate plan and our five-year plan. It was exactly the same PowerPoint he presented to our board of directors. That actually gets printed up and distributed in hard copy to every single employee, including the order pullers, the truck loaders and the truck drivers. It's amazing how motivating communication can be; how it gives every one of the employees in the distribution center a tremendous sense of ownership.
Q: I am going to have you point me to your HR director at the end of this conversation!
A: We are always looking for great people! You know, we don't have an HR department and that is another unique thing about The Container Store. Years ago we began to re-examine the role of the human resources department. If you assume that your people are your resources, who knows better what they need to succeed than their direct manager? It's the manager's job to take care of them and look out for their best interests. If they have a problem, they need to come to their manager for help. Their manager needs to know what kind of help the company offers. So, yes, we have a payroll and a benefits department, but we don't have an HR department.
Q: Let the decision be made by the manager who is closest to the task?
A: Yes. Why would you want it any other way?
Q: I wouldn't. Is there anything else you'd like to share with the 50,000 executive-level decision makers who are reading your words this month in DC VELOCITY?
A: I see a tendency to rely heavily on analysis and not trust instincts and intuition. I think you have to know your business and what's right for your business and have the confidence to do what's right for your company and not be swayed by what everyone else is doing. I see that so often when I go to conferences or even when I read magazines. Take RFID. Everybody's doing RFID. Many people have asked me why we aren't doing RFID. My answer is that our customers are stores and 5 percent of our business goes to our Web customers as direct shipments out of our distribution center, so why would we need RFID? There is nothing driving that. Yes, they respond, but it's the new trend! That, as I see it, is the big challenge: Not to become overly enamored of the new technology. You have to have the courage to stick to your convictions.
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