Home' Army Acquisition Logistics and Technology Magazine : Army ALT April-June 2013 Contents anything that they ve done. So we have a
process in place, standards to help ensure
that once a supplier has been with us for
a certain period of time, typically at least
one or two years, a decision to terminate
that relationship must be vetted at the
highest level of management.
If they ve done something dishonest, if a
vendor did something wrong, they re out.
If the proverbial manufacturer of butter
cookies took a little butter out of the cookie
because butter prices went up, changed
the quality without telling us, that s fatal.
You have to be upfront and honest with us.
At the same time, if the price of something
has changed dramatically, come to us and
talk to us about it, and we ll work with you.
e message throughout the organization
is that we want our buyers to be tough but
fair with our suppliers. We want the best
quality at a great price, and they won the
business based on that. But ultimately we
recognize that they ve got to make money,
too. We just want us and them to make a
little money, a lot of times.
Q. ere s a lot of discussion in the military
about the 80 percent solution. And that
is, when you look at the portfolio, what
you may want, ideally, may not be what
you get because of pricing and because
of a ordability, availability, logistics,
whatnot. From that point of view, to get
back to the peach example, how does
Costco choose which peaches it s going to
get, other than through oversupply and
the possibility of a discount?
A. Somebody has to prioritize all those
requirements: What must you live with,
and what can you live without? So we ve
started with the premise that you, the
customer, will generally be happy with
any one of the three or four high-quality
brands. And we ve also started with the
premise that most cans of peaches are not
bought to present them on a party tray in
a particular way, in other words sliced vs.
diced vs. halves.
Now that doesn t carry through to every
item. We re going to sell only the best-
quality fresh meat, USDA Choice and
above, even though we might be able
to save you money if we sold processed,
Good or Select, which is certainly healthy
and ne to buy, but it s not the cut that
we re prepared to sell our members. In
the case of peaches, many of those brands
are ne, but there s probably an institu-
tional-grade can of peaches that we re not
prepared to sell, even though we could
save the customer a little more money.
Not that there s anything wrong with it;
it s our choice.
It s the di erence between perfection
and excellence. It s going to cost you
a lot more money to get to perfect, but
excellent is going to cost you less. You ve
still got to put a lot of e ort into it. It s
the same thing with the 80-20 rule:
We re going to sell the 20 percent of
items that represent 80 percent of the
sales. We re going to spend all of our
time focusing on the things that can
accomplish 80 percent of what we do
and recognizing that those last little
incremental improvements sometimes
are ine cient.
Q. Getting back to the vendors, a follow-
on question: How do you encourage cost
e ciencies, productivity and innovation
in your vendors? Do you have any sorts
A. ere s no incentive, like, if you save
us this much more, you ll get a piece of
the action. But when you get back to the
limited selection, what always amazes
people when they hear from our buyers
is rst, the degree of knowledge that
they have, not only on the quality---if
it s apparel, the thread count; or if it s
food, commodity pricing---and the
cost of the tin cans and packaging, and
the freight costs. When we re trying to
manage 3,800 items in a location, the
buyer s trying to buy those 3,800 items
compared to buyers managing 150,000
to 250,000 di erent items.
Part of our genius, if you will, is our
simplicity. It s a lot easier to be smarter
on fewer things. We re a very lean
company. We don t have any research
IT S THE DIFFERENCE BETWEEN PERFECTION AND
EXCELLENCE. IT S GOING TO COST YOU A LOT
MORE MONEY TO GET TO PERFECT, BUT
EXCELLENT IS GOING TO COST YOU LESS.
110 Army AL&T Magazine
THE GENIUS OF SIMPLICITY
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