Client Story: Macy’s
Macy’s, Inc. is one of America’s premier national retailers, operating 40 Bloomingdale’s stores and more than 810 Macy’s stores in 45 states, the District of Columbia, Guam and Puerto Rico. They are known for creating unique merchandise assortments, operating destination stores, hosting attention-getting community and fashion events, and driving innovation in fashion-oriented e-commerce.
Founded in 1994, Macy’s Logistics and Operations (MLO) performs a wide range of logistics, distribution and operations functions for all Macy’s and Bloomingdale’s retail divisions. The primary responsibility of MLO is to ensure the efficient and timely flow of fresh goods to the selling floor of the company’s stores—delivering the right merchandise to the right locations at the right time. To this end, the division operates small-ticket and large-ticket distribution centers, coordinates transportation and shuttle deliveries, and handles vendor returns and merchandise liquidation. MLO also delivers merchandise, primarily furniture and other large-ticket items, to customers’ homes and fulfills Internet and catalog orders.
Macy’s Logistics and Operations has always strived for continuous improvement in processes, technology, and the development of its employees to reduce supply chain and logistics costs, while simultaneously working to enhance service, speed and accuracy.
In early 2001, the MLO Senior Leadership team was looking for the right strategy to move the business to the next level and identified Six Sigma as the right system to drive critical change initiatives. Impressed by the practical and flexible approach outlined in the book The Six Sigma Way—by Pivotal Resources President Pete Pande—they engaged Pivotal to help deploy the Six Sigma effort. The MLO Leadership team, headed by President Pete Longo and with sponsorship from Macy’s Vice Chairman Tom Cole, established some ambitious objectives at the outset.
First was to accelerate business results with double-digit growth, year over year. Greater efficiencies were driven by systematically focusing on waste, defects and rework. And to increase overall customer satisfaction—including both stores and shoppers—they targeted improvement in key service factors such as timely and complete delivery.
A parallel and more long-range objective was to drive a new business culture based on a combination of data-driven thinking, customer focus, continuous improvement and boundary-less collaboration.
Finally, the effort aimed to strengthen the talents of MLO leaders and managers by developing skills of high potential individuals, helping them drive change efforts and solve tough problems as a team.
Pivotal Resources worked closely with the MLO* leadership team in helping to plan the initiative, select projects and train and coach teams. The effort evolved from a few pilot projects to a diverse array of efforts focused on critical issues in such areas as product breakage, delivery scheduling, store construction planning and execution, and vendor management.
MLO also adopted Pivotal’s FastTrack method—a rapid problem solving approach that links together Six Sigma and Lean/Kaizen—for efforts involving warehouse floor staff. “We knew what we wanted to achieve but we were not sure on how to tackle all our objectives and that’s where Pivotal Resources really helped us,” remarked Kevin Hart, Executive Vice President of Human Resources for MLO. “They helped our leadership team set the right direction and priorities, and then enabled our people to look at our problems and opportunities in a new way.”
The early results were positive, but the real benefits have been achieved by sustaining the effort and integrating the improvement mindset and skills into the business. “Obviously, it’s the numbers that tell the story, and we’ve attributed significant savings to the projects that were launched under the Six Sigma effort,” noted Hart. “It’s helped us make improvements intelligently.”
To achieve the more ambitious culture and talent goals outlined early on, MLO built on the foundation of projects and financial results by establishing a network of Business Process Teams, linked by aligned goals and measures, which created a new set of responsibilities for MLO managers. (See sidebar)
One of the best testaments to MLO’s ability to meet business challenges is its role in the integration of the May Company stores—a huge acquisition that relied on boosting efficiency and refocusing the entire company. The Logistics and Operations group actually was able to exceed the targeted cost savings it was tasked with delivering, and sooner than the anticipated date.
Continuing and Expanding the Focus
The newest challenge faced by MLO is again prompting the organization to seek to upgrade its processes and leadership. In May 2008, Macy’s Chairman and CEO Terry Lundgren announced a major new strategic initiative— named My Macy’s—which coupled an organizational consolidation with development of closer oversight over store merchandise selection and assortment. Noted Lundgren: “We are empowering local managers to make more decisions that are right for their local customers.” The Logistics and Operations role in My Macy’s is crucial, requiring greater flexibility and even higher demands on efficiency and teamwork.
To support that transition and help leaders address these challenges, Pivotal teamed with the MLO senior management to conduct a Leadership Performance Retreat for about 60 of the group’s functional and line managers. The two-day event, which featured an intensive computer based business simulation, gave the full team an opportunity to examine personal opportunities for improvement as well as develop better collective approaches to leading change. (Each participant received individual feedback and follow-up coaching through our 360º 21st Century Leader Assessment, which gauges a leader’s flexibility and adaptability in the midst of today’s rapidly-changing environment.)
One of the strengths of Macy’s Logistics and Operations—that has helped the entire company thrive in a time of intense competition in the retail industry—is the group’s constant push to improve, raise the bar, challenge assumptions, and deliver value to stores, consumers and shareholders. Those are characteristics demanded of a successful business in the 21st Century, and MLO provides a strong model for other firms and leaders to emulate.
Macy’s Logistics and Operations Process Management Team Initiative
One of the biggest challenges for organizations embracing a continuous improvement approach such as Lean Six Sigma is to make it more than a “side job.” Macy’s Logistics and Operations confronted just this quandary, even as the results of its Six Sigma program were showing very positive returns.
“We were using Six Sigma very successfully,” explains MLO President Pete Longo, “but it was still limited mainly to the projects we had underway. We realized we needed to make it part of how we run the business or the benefits would not grow as we’d hoped.”
The answer was to begin applying concepts such as voice of the customer, process excellence, better use of facts and data and teamwork, to the responsibilities of MLO leaders. A network of “Process Management Teams” (PMTs) was formed where critical activities could be overseen cross-functionally and where improvement efforts of all types could be targeted where most needed.
An important element of the Macy’s Process teams was to ensure a combination of local responsibility for performance, along with coordination and communication across the MLO network of distribution centers and functions. The solution was to make Facility Vice Presidents process owners of network or cross-business processes. For example, the head of Macy’s Atlanta distribution center, Bob Ackermann, took ownership of the sortation processes for all of the DCs. With that leadership, ideas and best practices began to be exchanged much more effectively, with dramatic results.
Meanwhile, Ackermann and the other Facility VPs each retained ultimate responsibility for all the processes in his or her operation. “This hybrid approach helps ensure we’re taking both a ‘big picture’ and ‘local operations’ view of the business,” explains Pete Longo.
It took time for the Process Management Teams to get comfortable with their roles and to develop better measures and improved ways to select and oversee projects. But the investment and effort have paid off substantially. “With the demands on our business, we needed a way to encourage both teamwork and individual initiative,” notes Longo. “We can’t wait for special projects to do that, and now instead of just a Six Sigma ‘program” it’s become the way we do business.”
In summary, the Process Management Teams provide:
- An effective way of setting priorities
- Process ownership and a more scientific way to manage processes
- A structure for change execution and continuous improvement
- Collaboration and help from the network
- A more effective vehicle for communicating and understanding the status of the business in a common format
- Visibility of actions that get results
Having the PMTs in place has helped MLO better evaluate and develop its talent, and is proving a significant advantage in addressing the latest strategic effort: the My Macy’s initiative, which is bringing merchandising expertise and selection closer to each local store.