McKinsey: How are the logistics functions organized at Sears?

Gus Pagonis: I am a strong believer in centralized control, decentralized execution. In the Gulf War, General Schwarzkopf made the US Army's 22nd Support Command responsible for logistics. He agreed that there had to be a single of point of contact (SPOC) for all issues related to logistics. At Sears, Arthur Martinez, Chairman and CEO, had a similar vision. He agreed that our logistics organization, the Sears Logistics Group, be the SPOC for all Sears logistics. Previously, each one of our businesses had portions of our present logistics organization. So these logistics operations were buried within various structures throughout Sears. It used to be extremely difficult to put your finger on a logistics problem, because no one executive had total responsibility. I believe Sam Walton was the first retailer to have the vision of centralizing the logistics function in one organization and bringing in a logistician into his top management group.

What role do you play as a logistician on the executive committee of Sears?

Martinez, like Schwarzkopf, wanted logistics to have a voice on the executive committee equal to that of the various Sears businesses. This also would ensure that...