www.dcvelocity.com MARCH 2014 DC VELOCITY 27
to work with suppliers in building a more responsible
global supply chain. Today, 93 percent of Walmart’s
direct sourcing merchandise is produced in top-rated
factories.
A native of Baxter Springs, Kansas, Scott received
his Bachelor of Science degree in business from
Pittsburg State in Pittsburg, Kan., and in 1995, was
named an outstanding alumnus by the university. He
has also completed executive development programs
at Penn State and Columbia. He is currently a senior
adviser and advisory board member of Solamere
Capital and the chairman of the business advisory
board for BDT Capital.
He met recently with DC VELOCITY Group Editorial
Director Mitch Mac Donald to discuss his career,
lessons learned from his tenure at Walmart, and the
trends he sees reshaping logistics operations in the
years ahead.
Q The concept of leveraging logistics to gain a competitive edge was introduced in the 1980s by
a consultant from A. T. Kearney. The most often cited
example of a company that does that is Walmart.
What led the company to embrace that strategy?
A Sam Walton viewed what is now called “logis- tics” as a necessity because he wasn’t satisfied
with the service that was available in the small towns
where he was building his stores. As he went along in
the late ’70s and early ’80s, he came to appreciate the
fact that it was a competitive advantage in places like
Jonesboro and Harrison, Ark., or Muskogee, Okla.,
to be able to service those stores yourself and service
them quickly.
Q In most people’s eyes, what differentiates Walmart from the pack is its low prices. What’s
the connection between that and logistics?
A Think about logistics at Walmart in two ways. One is availability. Are you running a program
that results in your stores’ having a higher in-stock
level than your competitors do? Second, are you
running it in a way that gives you a price advantage?
Walmart has grown on only about a 5-percent price
differential among discount chains.
Sam was really focused on how to best service the
customer across health and beauty aids, household
chemicals, and household paper goods. Those are
categories where high margins were being taken
in grocery stores. Through the use of logistics, we
moved high volumes of those products into the stores
very efficiently and very quickly, and focused on not
having to carry inventory weeks on end in a store. It
seems normal today, but it wasn’t normal back then
to us. That strategy allowed us to take costs out of the
system. We were able to pay suppliers very quickly
and build a really good reputation with them. As a
result, we could get the best possible price and be
extraordinarily competitive. And that really is how
the company was built. Logistics played a very big
part.
Q A lot of folks point to you as a sort of poster child for logistics career success—someone who started out in logistics and worked his way up to become
CEO of the world’s largest retailer. How do you feel
about that?
A I like it. I am proud of it. My career started as a management trainee at Yellow Freight System
and then at Walmart as assistant manager for the private fleet in 1979. We logisticians as a group tend to
be very pragmatic, very common sense-oriented, and
very hard working. It is not a glamour job. It doesn’t
suffer big egos. If you are going to walk the floor of a
warehouse and deal with the people who are doing all
the work, you’re going to find they don’t have much
tolerance for oversized egos.
Q Is it fair to say a background in logistics gives a rising executive a nice, broad generalist look at
a lot of different aspects of the company?
A Having an understanding of logistics—not just an appreciation of it, because I think most CEOs
appreciate it—is a competitive advantage for a CEO.
Folks say that a number of a company’s most important functions are touched by logistics. I would say
that almost every function that really creates value in
a company is touched by logistics.
Q There is a current industry initiative called the Roadmap for Material Handling & Logistics
that MHI is spearheading. Its aim is to identify some
of the key trends and issues that will affect the logistics and supply chain professions between now and
2025. Drawing on your background both in logistics
