Glance at his resume and you're immediately struck by the depth of Nick LaHowchic's background. In a career that's spanned just three decades, he's worked in health care, pharmaceuticals, food and beverages, and consumer goods—some of the most demanding and high-pressure outposts of the supply chain world. He's worked at Thomas J. Lipton and at RJR Nabisco. More recently, he's held executive-level jobs at Colgate-Palmolive Co., where he spent five years transforming its logistics and customer service organizations, and as president of Becton Dickinson Supply Chain Services, creating an operating division of the $3 billion medical technology company.
After all that, what could be left? Retail, of course. Today, LaHowchic runs one of the world's largest retail-based logistics and distribution center operations. He's president and CEO of Limited Brands Logistics Services Inc., which stocks the shelves and garment racks of 4,100 specialty stores run by the $9.5 billion retailer's eight chains (Victoria's Secret, Bath & Body Works,White Barn Candle Co., aura science, Express, Express Men's, Limited Stores and Henri Bendel). The group also fills orders for catalog and Internet customers around the world and provides logistics support for two former members of the Limited Brands family, Lane Bryant and Lerner New York, which combined operate approximately 1,000 stores.
But LaHowchic's group does much more than ship out body lotion and bras. In recent years, it has added a staggering array of support services that range well beyond the typical logistics offerings, including engineering services, strategic procurement, production support, distribution planning, quality and regulatory assurance, international trade and customs compliance, and even international country of origin and labor standards compliance management.
On top of running a full-service logistics organization, LaHowchic has also had to carve some time out of his schedule to accept awards. In 1998, he received the Salzberg Leadership Award from Syracuse University. In 2000, The Logistics Forum and E-Supply Chain Forum named him one of today's top 20 logistics executives. Today, he remains active in the Council of Logistics Management, Warehousing Education and Research Council and the National Retail Federation and is a frequent speaker at conferences and seminars. He's also managed to set aside some time for community service work in Columbus, where he chairs board seats for the Greater Columbus Chamber of Commerce and the United Way. LaHowchic spoke recently with DC VELOCITY Editorial Director Mitch Mac Donald about his career, the business challenges he faces and the future of logistics.
Q: Tell us about your background and career path. How did you come to be in the position you hold today?
A: My background has been in logistics and the supply chain from day one, although in various roles and various industries.How I wound up in retail from my previous position in healthcare is still a wonder to me.
But looking back, maybe it's not such a coincidence. Healthcare and retail are both industries that have been on the leading edge when it comes to logistics and supply chain practices—whether it's straightforward logistics tasks or planning or IT. Take retail, for example. Retail was once a much simpler business where logistics was concerned: You simply purchased goods and then redistributed them. Now products are being designed and manufactured on a contract basis to fit customers' exact needs. That's forced some big changes in logistics. Logistics plays a major role in determining whether or not that approach can be successful. To compete in the retail world today, a business must be vertically integrated from the product design stage right up to the point where the cash register rings. In other industries, you see pieces of that being applied to operations, but in retail, it's really what we have to be all about. If we don't manage the process like that from end to end, we won't succeed.
Q: So in the retail business, comprehensive supply chain management has to be more than a goal—it has to be a reality of doing business.
A: There's no question about it. Rather than worrying about one or two links in the process, we're focused on every link in the chain from raw materials to the consumer. Everything, of course, is being driven by the consumer. For us, it's all about how well we can respond to the consumer, whose buying patterns tell us exactly what he or she likes or doesn't like about what we have to offer.
Q: Retailers have come a long way in responding to customer demands during the course of your career.How important has technology been in making that possible?
A: I actually think two things have made that possible: the emergence of technology and new thinking on the retailers' part about the way we manage the overall process. Certainly, technology allows us to do things differently from before, especially as it relates to the ability to make rapid-fire decisions in parallel to material flow and to plan in parallel rather than in the kind of sequential hand-offs you saw in the nottoo- distant past.
In this business, what we're looking for is velocity, flexibility and agility. Speed is clearly a prerequisite for much of what we do, given that we still bring half of our product in from Asia. Our success depends on our knowing what the consumer wants and getting to market first with it.We know what consumers want because we can track what's selling and what isn't. Given that in this business whatever we bring to market will eventually be marked down, it's critically important to get what we need to the market first.
That has two implications for management: First, companies have to figure out how to integrate their inter-company business models. Second, they have to recognize that succeeding means dealing with a supplier on the other side of the world just as adroitly as if you were dealing with the guy across the street. Our products are brought in from 50 or 60 countries. To do that well, you need great partnerships, great relationships, great talent and a strong technological backbone.
Q: As chief logistics officer of a retail company, do you find you get involved in some issues that might not appear to be directly related to logistics?
A: That's a very good question. Where do I begin? As you'd expect, our logistics operation moves everything from sweaters to candles from the factory to the store and everywhere in between.What you might not expect is that it also oversees all kinds of quality and compliance activities. Although we don't manufacture any of the things we distribute, the products we manage and sell are covered by up to 10 different federal statutes. And because our operation is vertically integrated, we have to comply with the laws that cover manufacturers, wholesalers and retailers. Indeed, if you take all the people at our headquarters and in the field, we probably have 90,000 people whose work falls under the purview of some standards or regulatory body. As a result, we've had to align the compliance organization to cover activities in the supply chain from end to end.
Q: Having your staff involved in daily compliance activities must also help minimize surprises.
A: Yes, but there's more to it than just making sure there are no surprises and operating lawfully. There's also the challenge of meeting the brand promise. The promise is to be the first to market. That's where we see the real value-add of a fully integrated model. Our merchants are extremely fashion-driven. We have to be sure that we know what the consumer wants; that we know where to get it and how to have it made; and that we can be the first to go to the marketplace with it. Everyone—from the merchants, designers and researchers to the logistics team— must collaborate to make that happen fast.
Q: How does the distribution center fit into your overall operation?
A: On three campuses here in Columbus (Ohio), we have about 4.8 million square feet of distribution center space. These are predominantly production centers in that we don't store a whole lot of product here. Instead we sequence inventories to stores, transform whatever arrives in a trailer or container into store-ready merchandise and basically do what it takes to feed 5,000 stores and millions of direct consumers through the system efficiently—both for our own business and for the thirdparty businesses that we run here.
It's important to us to be able to assure our customers— both internal and external—that their merchandise will spend very little time in our DCs. For merchandise moving by air, for example, we promise 72 hours transit from Asia to the Columbus DC. At peak times we promise a day to a day and a half to take it through the DC and then two and a half days to get the goods to all stores. So within approximately a week, we can promise to move merchandise out of Asia and onto the store shelves—but it spends no more than 36 hours in a DC.
Q: Your operation is a great example of how efficient distribution and production centers can help optimize the supply chain. If you didn't have that integrated with the rest of your operation, you obviously would have a fairly impressive bottleneck.
A: No doubt. The other challenge is remaining flexible. Depending on whether we're talking about spring or our peak season, Christmas, we may be sending anywhere from 350,000 to 1.6 million cases a week through this operation.
Q: That's quite a swing.
A: It sure is. It's incredible. The question is how do you accommodate such a wide variation from the standpoint of people, systems, technology and infrastructure? That requires velocity and flexibility. Our 5,000 stores have come to expect time-definite deliveries with two-hour windows.We're hitting those windows 97 to 98 percent of the time day in and day out. And if the stores can count on our hitting their two-hour delivery windows, they can focus on their real task, which is selling to customers, not worrying about how product gets to the store. Likewise our direct customers expect reliability from our catalog and Web business.
Q: A lot of the things you achieve on a daily basis simply weren't possible, say, 10 to 15 years ago. What's changed? What's happened that has enabled this?
A: It starts with people. People in our profession—and indeed the entire industry—have been pushed to think outside the box. Part of it is having people who can step away from their day-to-day duties and design a new and better mousetrap. Part of it is relationship management and change management. Then there's the technology. We couldn't do what we do without it, but even then, it comes down to the people and how they use the capabilities that technology provides.
Q: Is any one of those factors more important than the others?
A: That's tough to say. They're all critical. Take change management, for instance. Today's emphasis on speed has brought about a change in attitude and a different way of thinking about who we are. There's no longer an end state in this business.We're continually taking our pulse to see how we're doing as far as improving the quality of the delivery or the sale.At the end of the day, it's all about growing the top and bottom lines. If we cannot think about how we're doing that, we're wasting our time.
Q: What does the future hold? How will your operation deliver even more velocity, flexibility and agility in the future?
A: I think the real challenge for us is in re-addressing our capabilities to bring an item from concept to market.We're always asking ourselves how we can cut our cycle time in half. All of us—whether in logistics, production, planning or technology—are convinced that whatever we're doing today is not good enough for tomorrow. We think we can find ways to produce higher sales and margins by cutting in half the time required to take a product from the commercial development stage to the store shelf. So we're all working hard to determine where we need to be and to use more postponement, more pre-positioning.
Collectively, we're also trying to figure out what we need to do to make the process more reliable as we try to take it to a higher speed.We've made a lot of progress in the past five or six years. In 1997, almost all of the products that the Limited sent through DCs came through Columbus. After we got everything running as fast as it could, the only thing we could do was cut down on distance: You can only physically move products so fast; you can't beam things down yet. Part of the answer has been restructuring our network. Today, much of our product still comes through Columbus, but not necessarily as a distribution center. It may come to it for cross-docking or something like that, but it doesn't come here to be transformed. And now between 50 and 70 percent of our non-apparel business flows from factories through our three flow centers to be remixed to go right out again.
Q: It sounds as if the term "warehousing," at least in the traditional sense of storing material until it's needed, has almost become a dirty word at the Limited.
A: Well, "warehousing" or storing inventory adds a step to the process—and it's a step that doesn't add any value. This is especially important from a marketing or sales perspective. The marketing and sales groups are in the business of continually putting out new and/or improved products. The more steps you can take out of the process, the faster you can go to market with newer product. The less stuff that's clogging up the pipeline, the less stuff I'll have to move before I can get to my next product, and the fewer items there will be to mark down.
Q: Any closing thoughts?
A: As the pace of business picks up, the only way to keep up will be through further integration of the processes. The largest challenge for any functional activity is how to become more cross-functional inside the company and with our trading partners.How do you create a day-to-day work plan that's less about the function and more focused on using cross-functional teams? You can't do it alone any longer. It's not about what supply chain people are doing or what logistics people could do. It's about what collaborative teams can do to drive parts of the business. That's the continual learning process that must take place inside a company.