Sears’ hiring of Lt. General William “Gus” Pagonis on Nov. 1, 1993, as senior vice president of logistics, may seem like a call for war on competitors, and for the most part it is. For a long time now, Sears has played second fiddle to Wal Mart, who has strategically maneuvered its way to the top of the retail store industry. In the past Sears might be satisfied with the backseat, but watch out if you’re a competitor with Sears these days — the general has a long leash and he’s using every bit of it to improve logistics operations at Sears and help bring the store back to the top. And part of his plan, which is currently in action, includes outsourcing.
Though the term logistics wasn’t used much in the armed forces until the late 80s, it defined what Pagonis did for the better part of his 29 years in the Army, and it was during the Gulf War that it became a military byword. It was during that period of time that General “Gus” Pagonis, set a new standard for what could be moved through a war zone.
In his book Moving Mountains, Pagonis compares the moving of equipment, food and troops to the Campaign in late 1990, to “transporting the entire population of Alaska, along with all their belongings, to the other side of the world, on short notice.” In the first 30 days of Desert Shield alone, 38,000 troops landed in the Middle East and were processed along with their 163,581 tons of equipment.
The operation’s numbers for a one year period of time from August 1990 to August 1991 are staggering: 122 million meals served, 1.3 billion gallons of gas, 52 million miles driven in the war theatre, and 31,800 tons of mail delivered to troops.
Pagonis was the single point of contact for the logistics undertaking, that experts call the biggest and most successful military logistics operation ever.
“In previous wars there was a general in charge of ships, a general in charge of the railway, a general in charge of the food, and a general in charge of the trucks,” Pagonis says. “In a discussion with Schwarzkopf and Powell, I told them that I had to be the single point of contact for all logistics, and if we did it that way it would be a very successful operation. The concept was tremendously well received and well-carried out.”
Keeping a Cool Head in the Desert
Though it may be the incredible numbers that civilians will remember most about the logistics side of the war, soldiers on the ground will remember Pagonis’ personal touches. Drawing from the mistakes of one German field marshal, Pagonis constructed a plan.
“If you’re a student of history you know that during the African campaign in the desert, Rommel didn’t lose any physical battles, he lost the medical battle,” he says. “His core was incapacitated from illness and sickness. The desert carries a lot of parasites and diseases, and lets not forget it’s pretty hot.”
The first thing Pagonis’ logistics units did was build latrines, showers and wash basins so that soldiers would be able to stay clean and maintain hygiene. Next, Pagonis got fresh fruit and vegetables brought in from Jordan to supplement the canned and boxed rations the soldiers ate. He also brought in fresh bottled water from Saudi Arabian water plants for the soldiers to drink. Because the troops had access to large amounts of readily available water, there were very little indications of dehydration, which is unheard of in the desert.
Also, another step Pagonis took to bolster moral and to give the troops a little taste of home, was bring in 150 mobile trailers equipped with propane stoves. The trailers roamed the desert and served hot dogs, hamburgers and french fries to American soldiers throughout the entire war zone.
From Tanks to Tank Tops
After his assignment in the Gulf he became the commanding general for logistical operations in Europe. And soon after, on Oct. 31, 1993, he retired from the military and joined the Sears senior executive staff in Chicago.
Pagonis, a three-star general, said that Congress only allows so many three- and four-star generals. Instead of staying in and tying up a spot, Pagonis decided that it was time to let someone else have a shot. “I also found a perfect fit at Sears,” Pagonis says. “They came to me and made a terrific offer, where I could come in and organize the logistics any way I wanted it.”
He took full advantage of the opportunity. The first thing he did, as he did in the Gulf War, was appoint himself as the single point of contact for all logistics operations. All the functions that Pagonis now controls were at one time under three different executives.
Pagonis now heads a logistics organization that consists of 11,000 employees and about 6,000 contract employees. It may seem big, but on military terms its not. He is used to dealing with hundreds of thousands of troops. And now Instead of moving tanks he moves merchandise “I know more about dresses than I will ever want to know,” he says.
He says that all of Sears’ transportation needs are outsourced to third-party providers. Sears owns most of the warehouses, but they do outsource some of the warehouse operations, as well. “I like to keep a balance,” he says. “If it is a competency that I don’t mind sharing with the world I may outsource it. If it is something I don’t want to share I won’t”
Pagonis kept a balance of outsourcing and in-house operations during the Gulf War, as well. During the entire first four months of the Gulf War, Pagonis and his logistics’ team used third-party contractors from countries like Pakistan, Bangladesh and the Philippines. There was no other way to do it, Pagonis explains.
General Schwartzkopf made a decision, which Pagonis supported, to send combat troops in right away. Iraq had 500,000 troops ready to strike Saudi Arabia, and The United States had to get combat troops on the ground. The cargo planes were mostly used to ship troops and their personal equipment, not the ground vehicles needed to transport them. For the first three months there was no Army logistical troops, water purification units or trucks in the Middle East. “I had to support the entire operation by outsourcing those kinds of issues to third party,” he says. “I outsourced 6,000 trucks; I rented the truck, the driver and the mechanic.”
Battle Plans for Logistics Outsourcing
At Sears, Pagonis says the service contract is extremely important and has to be written by the people implementing it, not just attorneys. When Pagonis first came to Sears the attorneys were writing 90 percent of the contracts and the people who used the contract everyday were writing only 10 percent. Now Sears’ employees write 90 percent and the attorneys review it to make sure it is legal and then write the other 10 percent. “Nobody in the trenches could understand the contracts before,” he says. “It is important that everyone understands the contract all the way down to the guy who loads the trucks.”
Another key to outsourcing logistics, Pagonis points out, is that you have to make sure you write compliance and penalty requirements in the contract that are agreed to by both parties. Penalties and rewards are very important. If a person exceeds their efficiency and productivity, they should be able to benefit by sharing in the profit made. “But we also have to remember that it is often tailored to the situation,” he says. “When people try to apply certain measurements across the board on the same standard you can get into some trouble.”
You might think that Pagonis suffered a let down when he left the Army, but he says his job at Sears is very similar to his job in the Army.
“I’m doing everything I did in the Army, but on a much smaller scale,” he says. “Sure it takes a lot to get me excited because of the things I have been through in the military. If a warehouse sets on fire I may get a little excited, but at least no one is shooting at you while you try to put it out.”