Above-Board At Borders

March 1, 2005
When it comes to being up front with employees, Border's Steve McAlexander, group vice president of distribution and logistics, walks the talk.

Steve McAlexander
Borders' Group Vice President of Distrribution and Logistics

Borders recently announced that it has embarked on a multi-year effort that will create a more centralized distribution network. The $3.9-billion company headquartered in Ann Arbor operates 15 distribution centers worldwide, a total of two million square feet with facilities ranging in size from 4,000 to 500,000 square feet that serve 460 Borders and 700 Waldenbooks stores in the U.S. alone.

Two thousand logistics and distribution employees at the company must manage the normal fourth quarter retail sales bulge, which is exacerbated by the 800-plus temporary mall kiosks that Borders operates from September to January. (The company is the largest purveyor of calendars in the world.) Value-added work performed in the distribution centers includes special labeling, kitting and seasonal promotions. They do everything they can to make the work in the stores easier, McAlexander reports. The centralization initiative will reportedly let the distribution centers service any store, any brand, from any location.

When it announced its new distribution strategy, the company also announced it would be expanding activities at some of its facilities, and closing its flow-through facility in Fishers, Ind., where it currently receives bulk shipments that it then repalletizes for retail store delivery. The announcement was made a full two years prior to the anticipated closing in 2007.

Please summarize the changes that Borders is making to its distribution network.
"We were really a decentralized network, in that we used a lot of flowthrough where product is pushed to the stores. That network has changed and the requirements have changed. Now we need a centralized environment that allows us to do pushes to the store, and pull based on replenishment. It gives us more flexibility in terms of servicing our stores.

"The advantages of a centralized operation are lower freight costs, better timeto-market, labor and efficiency synergies, better redundancy or backups (if one large center goes down, we'll have the capability to service from other locations), the inventory leverage from a more consolidated network, and more consistent product flow to the stores.

Why did you announce the Indiana facility closure so far in advance?
"We have a program in the logistics area called: TLCSAP. It's a leadership program. T stands for 'Teaching point of view.' L stands for 'Leadership development mindset.' C stands for ' customerservice culture.' S is a 'Supply-chain orientation.' A is 'Aggressive business goals.' And P is a 'Positive work environment.' We built that amongst our own directors. Those values require us to be upfront, good news or bad news. When you know something you share it. Even though this is two years in advance of when we are going to close that facility, it was the right thing to do."

If this centralization initiative is so critical, why isn't Borders moving faster to implement the changes?
"We're going through a complete systems initiative. We have a complete merchandising system that we're in the process of designing and implementing. We have a brand-new WMS system. We're re-engineering not only the physical supply chain, but the system that supports it. I don't subscribe to the big-bang theory where you do everything at once. You have to sequence it, and you have to do it logically, when your systems enable you to do it."

Diversity appears to be a core value at Borders. How is that manifested within the logistics and distribution operations?
"Diversity means a lot of things to a lot of people. Diversity to us means the obvious diversity of ethnicity and culture, but we also encourage a diversity of viewpoint. We have 'waigaya,' a term I carried over from Japanese industry in which I worked [for 20 years at Honda of America]. You have no rank and no privilege. All of our directors sit in a room and we give our opinions on everything. You come up with the best solution based on the diversity of that opinion and viewpoints. We try to capture that from as many people as we can when we're making big decisions."

How does Borders measure the performance of its distribution operations?
"Borders is a very financially driven company. We have more data than NASA, which is good. That's one of our strengths. We sit down at weekly executive meetings and each pyramid head talks about their sales. The supply chain group, both transportation and distribution, will look at our expenses and we monitor them on a week-toweek basis, a quarter-to-quarter basis (because we're a publicly traded company), and on an annual basis.

"In the DCs, if it moves it gets measured. We look for trends. We have a continuous improvement mentality. Each year we have to improve. We are a public company. Our shareholders expect that. We have to find ways through material-handling systems, or group management sharing of ideas, to pay for increases in wages, salaries, and utilities."

What do you like about overseeing distribution and logistics for Borders?
"We have a great talented team. I've been able to bring in some good professionals to build on the existing team. Our directors are some of the best in the industry in the logistics area. I enjoy working with them.... We have a lot of talented people in our stores, in our merchandising, in our finance, distribution and marketing. A lot smart people. When you're around people like that it causes you to try to reach the top of your profession too....

"It's a retail environment. We focus on the store. Oftentimes I look at the backrooms of the stores as extensions of the DCs. We went in and did a joint process to help them improve their efficiency. The whole point of that is to get product on the shelf, from the shelf to the customer, customer to the sale. I like that synergy in the supply chain."

What advice would you give to individuals who are pursuing a supply-chain related career today?
"Supply chain is such a important role in any company today. It's important that they volunteer and get exposed to cross-functional teams. That's where you learn about all the different viewpoints and disciplines. When we have projects, that's the best way that we can proceed as a team, whether it be finance or merchandising, marketing, store operations, or DC operations. Getting involved in those teams exposes you to different thoughts and viewpoints, and it helps you understand relationships and how to be a better professional manager."

"You also have to have some field experience, whether that's in the DC or the store, and then corporate, to make yourself better. If you only have corporate experience, I don't think you can understand what it's like to be on the frontline. That's even more important than participating in cross-functional teams."

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