News | Nov. 1, 2018

Former retail leader teaches lessons in supply chain management

By Dianne Ryder DLA Public Affairs

During an Oct. 30 professional-development session on supply-chain management at the McNamara Headquarters Complex, Defense Logistics Agency Director Army Lt. Gen. Darrell Williams hosted Chris Sultemeier, former president and CEO of Walmart Transportation and later, executive vice president of logistics for Walmart Stores.

Sultemeier relayed stories and advice from his 30-year career spanning military service and the private sector to leaders of DLA headquarters organizations and major subordinate commands before taking questions.

“I want to tell you about myself and my background … and a little bit about the Walmart supply chain,” he said, urging participants to draw parallels between DLA supply chain operations and Walmart’s. Sultemeier also talked about areas of new development in supply-chain operations.

The speaker talked about growing up in Texas, playing football in high school and then at the United States Military Academy.

“While up at West Point, I ended up falling in love with the military,” he said.

After he injured both knees so badly he could no longer play football, he was graduated from West Point with a degree in mechanical engineering. Sultemeier then went to Airborne training and Army Ranger School before serving in the 1st Engineer Battalion.

When he left the military in 1989, he went to work for Walmart and retired in 2017. Since then, Sultemeier said his priorities have centered on his roles as husband and father, instructor at Massachusetts Institute of Technology, board member of several private equity groups and as a minister in his church.

Sultemeier said while many people think of Walmart only in terms of the local store, the company has more than 11,000 locations in 27 countries. In international markets, however, the stores do not typically carry the same banner or even the Walmart name.

He compared Walmart logistics in the U.S. to that of United Parcel Service; Walmart’s business is twice that of UPS and its supply chain is made up of 12 different networks.

Of the 200 Walmart distribution and fulfillment centers, about 100 of those facilities are of 1 million square feet or larger, Sultemeier said.  

“There are another 20 buildings that are either import buildings or fulfillment centers for dot-com merchandise,” he said. Others are specialty networks — professional services, pharmacy, optical services and return centers, the reverse logistics component.

Williams asked a question about direct delivery to customers versus delivery to a distribution center or retail location.

The speaker said 87-88 percent of merchandise flows through a distribution or fulfillment center, to a store or an online customer. About 13 percent of items such as bread, chips, beer and spirits are delivered directly to the retail facility. Fuel is delivered directly to the servicing gas station.

Providing milk to customers presented another challenge for Walmart, as Sultemeier pointed out a single company controls 75 percent of the U.S. milk market.

“When I left Walmart, we were building our first milk dairy and [distributing] milk ourselves, but we only had one. The rest of the milk was going direct to store,” he said. “That’s why we decided to vertically integrate in milk, to be able to have a little bit of advantage from a price standpoint and a price negotiation leverage opportunity.”

Sultemeier said another way Walmart controls costs is through its own fleet of trucks.

“We always wanted to control transportation if we could, because the suppliers would use our volume to leverage their transportation costs to give everyone else a lower price based on our scale,” he said. “That was always a challenge.”

DLA Disposition Services Director Michael Cannon asked the speaker whether Walmart’s return centers are integrated with forward logistics or independently operated.

“The return centers handle goods from all retail locations — stores, clubs, distribution centers and online customers,” Sultemeier said. At the return centers, the item’s condition is assessed and, depending on the supplier, sent back or liquidated.

Although most of the return centers are independently operated, Sultemeier said nothing in the Walmart network is “100 percent outsourced — we would always run two or three of the operations ourselves so that we could understand the business and the cost structure.”

Sultemeier also addressed issues facing all organizations including data capture and complexity, platforms, cloud computing and robotics.

The age-old logistics question, “Where’s my stuff?” has become, “What has happened with my stuff?,” he said. Customers are focused not just on tracking the product’s location but on its condition, temperature, movement and vibration, he said.

“We’ve got the ability to capture all of that information today,” he said. “What we all have to operate from is strictly an exception management process because you don’t want to know when something’s good, you want to know when something’s bad.”

Consumers want to know where and how something is produced, and they often have the ability to find out.

“You need to know this information,” he told the audience. “This complements the block chain, because it gives you that encrypted data at a level so you can know all the way through the supply chain the exact status, if you choose.”

When an attendee asked about cybersecurity as it related to competitive advantage, Sultemeier said speed is the only real competitive advantage.

“So much of what we do is ‘out there,’ or if it’s not out there already, it’s going to be,” he said. “The key is how fast you can adopt, deploy and execute on the back end.”

Another question dealt with where Walmart builds in quality assurance.

“Everywhere,” Sultemeier answered. “Every distribution center has a quality department. That QA area monitors all the product, inventory accuracy, how you measure people, and then everyone in the Walmart facilities are under engineered standards.”

Sultemeier talked about many things that have changed over the years, but he said vision and leadership do not change.

He told a story about Walmart founder Sam Walton’s method of communication with employees and associates.

“He would get down to the people’s level. He would come into a facility and have everyone sit on the floor and then he would take a knee and talk to the people face-to-face and eye-to-eye,” he said. “He typically had legal pad; he was listening and taking notes.”

The speaker closed his presentation with a photo of the Walmart employee badge that reads, “Our people make the difference.”

“It doesn’t matter about the whiz-bang technology — you need it, it’s good, you’ve got to have it — but at the end of the day, it’s about inspiring, motivating, [and] ensuring that you communicate so everyone understands the mission.”

Before transitioning into a structured Q&A session, Sultemeier paraphrased a quote about the pursuit of perfection being an organization’s end goal.

“The goal is not winning; [that’s] a temporary measurement of your performance compared to someone else,” he said. “It’s that goal of getting better every day.”

“No matter how much we talk about blocking and tackling, technology and vendor relationships — it comes back to being a servant leader and how you have that honor to lead your team.”

Williams said that as a learning organization, DLA and its leaders appreciated hearing a veteran businessman’s perspective. He thanked Sultemeier for coming and said the speaker gave DLA leaders a lot to think about regarding transformation and reform.