Sears Logistics Management Practices

            
 
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Case Details:

Case Code : OPER026
Case Length : 13 Pages
Period : 1993 - 2003
Organization : Sears, Roebuck & Company
Pub Date : 2004
Teaching Note :Not Available
Countries : USA
Retail

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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"For retailers, getting the right merchandise into the store at the right time is critical to customer satisfaction and our success."1

- Dave Giometti, Vice-President, Vendor Relations, Sears, Roebuck & Company.

Introduction

The US retailing giant - Sears, Roebuck & Company (Sears) was in deep trouble during the early 1990s. The company had experienced a declining trend in revenues since the early 1980s. The extent of the problem became apparent when Sears registered its biggest ever loss of $3.9 billion in the company's 100 year history in fiscal 1992. In the same year, Sears' merchandise division, contributing more than 90% of the company's total revenues, reported a loss of $1.7 billion.

In the course of fiscal 1992, Sears hired an outsider - Arthur Martinez (Martinez) to head its merchandise division.

Operations Management Case Studies | Case Study in Management, Operations, Strategies, Marketing Management, Case Studies

Martinez initiated drastic changes in the merchandise division, with the result that the division was able to make a profit in the very next year. Among other restructuring measures, Martinez focused on streamlining the logistics management practices at Sears by consolidating distribution centers, increasing warehouse automation and reducing transportation costs. Sears was also able to shorten the distribution cycle, improve logistics service levels, and centralize merchandise returns.

Martinez efforts to make Sears' logistics management system more efficient were carried forward by William Gus Pagonis (Pagonis), Executive Vice-President, Logistics who tightened the company's logistics through the 1990s and into the early years of the new millennium. Under Pagonis, Sears became one of the few retailing companies which applied military logistics strategies in practice. Sears had always been among the first movers to adopt modern IT tools and Internet-enabled technologies in logistics management. In 2001, when it installed Wireless Mobile Systems in its Retail Replenishment Centers (RRCs), Sears emerged once again as one of the first retailing companies to use mobile systems for managing logistics.

Commenting about logistics management, Pagonis remarked, "Logistics is reaching a new plateau. The supply chain is the last frontier - the last place where you can take out cost, improve service, and tip the balance on a P&L statement."2

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1] In the article "Sears Expands QRS Trade wave Message Exchange Services to Serve All Sears Retail Formats and Vendors," posted on the website www.qrs.com, April 10, 2001.

2] In the article "Supply Chain Hero," by Eric Hellweg, Business 2.0, January 2002.

 

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