Code Blue

September 6 may go down as a defining date in Kmart chief executive Chuck Conaway’s effort to turn around the one-time king of discount stores in America. Five days before the twin towers tragedy, Conaway announced that Kmart would write off $195 million of assets held on its books that no longer had value. This included $130 million worth of supply-chain hardware and software that was being retired, and $65 million for the replacement of two outdated distribution centers. Conaway said implementing two new state-of-the-art distribution centers would allow hot-selling products to get priority treatment.

The technology write-offs were a sign that Kmart was scrapping some relatively recent investments, and even called into question Kmart’s sweeping plan to work with once high-flying i2 Technologies to overhaul its supply chain.

Whether the restructuring and write-offs announced that day defined success or failure remains to be seen. But Conaway was, if nothing else, putting himself on the spot.

He had just 337 days to go.

On Aug. 10, 2000, Conaway had set his first major metric for judging the success of his attempt to revive Kmart. He said it would take 730 days—two years—to make Kmart again competitive with Wal-Mart, which had stolen Kmart’s seeming birthright as the largest discount chain in 1990, and Target, which was about to sweep by Kmart to become the nation’s second-largest discounter.

Setting concrete goals and meeting them is key to Conaway’s method of achieving success for Kmart. “Chuck aggressively measures progress. If he’s not seeing it, he’s not against pulling the plug,” says one consultant who has worked on Kmart’s logistics systems.

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