Just when you think you've heard of every possible route to the top, along comes someone like Danny Garst. Garst breached the upper ranks of supply chain management (he's vice president of supply chain management and information technology for Philips Consumer Electronics North America) not by working his way up from the warehouse floor or taking the MBA route, but by dazzling his superiors with his info tech (IT) acumen.
Garst had toiled away in the backwaters of customer service, operations and logistics at Philips Consumer Electronics (which makes such things as flat-screen TVs and DVD players) for some years when he was handed the challenge of his career: overseeing the replacement of literally a hundred legacy computer systems with SAP's multi-headed enterprise resource planning system. Though Garst claims to have lost a lot of hair during the run-up to the switch, he gained something more important: top management's respect.When the day arrived for Philips to turn off the legacy systems and take the ERP system live, things went off without a hitch. Garst was soon rewarded with a vice presidency—one with responsibility for not just one, but two, areas. Struck by the interdependency of IT and global supply chain operations, top management had decided to bundle the functions and make Garst responsible for both. Today, he oversees strategy development and implementation and has operational responsibility for supply chain and IT.
A member of both the Georgia Tech Executive Supply Chain Forum and the Council of Supply Chain Management Professionals (CSCMP), Garst speaks regularly at local and national meetings. He sat down recently with DC VELOCITY Editorial Director Mitch Mac Donald to discuss his unique position at Philips, what led the company to outsource its delivery operations and why we shouldn't fear change.
Q: When I look at all the jobs you've had throughout your career, the question that comes to mind is: How does an IT guy end up in logistics? What's up with that?
A: Well,my background—a mix of IT and customer service —may be a little strange, but I don't think I'm the only logistics professional out there who has followed this path. The two things called logistics—or maybe more appropriately, supply chain—and IT have really come together in a big way. Over the last few years, Philips realized that at the global level, the IT function and the supply chain function were so closely intertwined that it made sense to put the two functions together.
Q: How is your job structured?
A: My current responsibilities include overseeing NAFTA-related issues, distribution and warehousing, and customer service as well as our event planning and forecasting processes in this region (North America). I'm also a member of the Consumer Electronics Global Supply Chain Board, whose members meet three or four times a year to make global policy decisions. We talk about what systems we're going to use and the priorities for our work. Bringing the board members together several times a year may be expensive, but it's necessary. If we didn't hash out these issues—if all of my counterparts were using their own systems and setting parameters that I wasn't aware of or didn't agree to—we'd have very little chance of succeeding. And, yes, I am also responsible for IT.
Q: What are some of the biggest challenges your operation has faced?
A: I'd say we met a huge challenge two or three years ago when we launched an initiative that would end up transforming our supply chain. It all started with our suspicion that perhaps our DCs weren't performing as well as they could, and in fact they weren't. But as we looked more deeply into it, we realized that the conversation wasn't just about DCs; it was really about transforming our supply chain. As you very well know, the distribution centers are really the execution arm of a very, very long supply chain. If you limit your focus to just part of the chain, like the DCs, you risk sub-optimizing the process as a whole.
That's particularly true today when the supply chain has become a global entity. Things were simpler back when most of our factories were located either here or in Mexico. Now, like so many industries, we find that our supply chain includes Europe, China and other Far Eastern countries. That has greatly complicated the picture and increased our risk of running afoul of the law of unintended consequences. For example, somebody could decide to purchase a certain part from a certain factory to save a penny, but that could generate a whole series of other problems and play havoc with our schedules.
Once we realized we would be tackling the entire supply chain, we got some outside help from IBM's consulting business. With IBM's help, we were able to model the entire supply chain, looking at questions like how much inventory we would need to carry if we wanted to hit this or that service target given the variations in lead times in factories around the world and the amount of demand variability for a single product.
Going forward, I think the biggest challenge will be obtaining a holistic view of our supply chain and managing it from end to end. Another challenge is educating our colleagues in the business to make them understand that the DC isn't necessarily responsible if something isn't delivered to a customer on time.
Q: You talked about some of the problems you encountered in the past. Have they been rectified?
A: Yes. For example, we were fairly sure that our DCs weren't operating efficiently, and that turned out to be the case. We were paying too much, and they weren't performing. After some discussion, we decided to outsource our entire regional logistics operations to Ryder. When we handed over the operations, however, we set very specific inventory accuracy targets.As a result, our inventory location accuracy shot up from the low 80s to over 99 percent. That's a huge turnaround, if you think about the impact on your DC operations, your fill rates and your ability to fulfill a customer's order. Without accurate inventory information, you have no way of knowing if you're out of an item. Or if you do have it, you may not be able to find it or at least find it quickly.
Today Ryder has full responsibility for our deliveries. We basically hand over the orders generated by our enterprise resource planning (ERP) system to them. We give them delivery windows, which are our customers' delivery windows, and we measure their performance on whether they hit the windows or not.
Q: Makes sense.
A: In fact, previously, we couldn't measure how well we were meeting the delivery windows. But now that we have integrated our systems with Ryder's, we're able to do that.
Q: How far back does your direct involvement in logistics date?
A: Well, I'd say my involvement in pure logistics, meaning distribution and transportation, dates back about 10 years.
Q: So you've been around long enough to see how technology can transform an operation. What technologies do you see making the biggest splash in the future?
A: RFID. As I see it, integrating RFID technologies from product manufacture to the retailer's shelf, and getting a return on investment will be our next big challenge.
Q: Is there anything that hasn't changed much in the past decade?
A: The need to meet the customer's requirements hasn't changed. What has changed are the requirements themselves. Customers have always had very definite expectations, but now those expectations are higher. For example, we used to talk about things in monthly buckets. Then we started talking about things in weekly buckets. Now retailers are stating their requirements in days.
Q: What's the biggest logistics challenge you've overcome in your career?
A: I think my answer would depend on which hat I had on at the moment. But I think the biggest challenge, honestly, was implementing an ERP system. We had maybe a hundred legacy systems that we replaced with SAP's ERP system in a "big bang" effort. Almost overnight, we turned off all those legacy systems and replaced them with SAP's financial, order management, material management, and SD (sales and distribution) modules. I lost a lot of hair during that two-year period. It wasn't so much the system; it was getting our people to understand and accept the changeover to the new process.
Q: Looking back, would you take that big bang approach—as opposed to a phased installation— again?
A: Probably not if I had a choice, but we didn't have a choice at the time.
Q: What skills or personal attributes do you draw upon most when you go to work each day?
A: Probably my refusal to be intimidated by change. I have no fear of change. I know that's a crazy thing to say because it's human nature to resist change. But look at what we've been able to accomplish in the last five years: we've implemented the SAP system, we've implemented an i2 [optimization system], we've completely outsourced our logistics operations. If we had been scared off by the prospect of change, we wouldn't have gotten the job done. I would also point to my willingness to lead change efforts. The likelihood of encountering some conflict along the way doesn't discourage me at all.
Q: What have you learned from managing all this change?
A: I think it would be to focus on processes, not systems. To me, if there is one thing we need to do in the supply chain community, it's to stop making our own stuff so darn complicated that you can't even explain it to someone on your own staff. We tend to rattle on about all this complicated stuff that makes CEOs look at us like we're crazy. Let's tone it down and keep it simple.