|
By Ian Garrick Mason
IF YOU READ
the business press, it's easy to get the impression that
the civilian and military worlds are perfectly analogous.
In their daily work, CEOs plan “strategies,” COOs
execute “tactics,” and market researchers collect “intelligence.” Weak
firms are vulnerable to “hostile takeovers,” and “guerrilla
marketing” was last decade's hot trend. Sun Tzu's “The
Art of War” is a perennial presence on the business
shelves.
Yet as the recent news from Iraq attests, the intersection
of business and the military is more than metaphorical. Outsourcing
has become not just a domestic but a foreign policy issue,
as controversy swirls around the Pentagon's dependence on
private security firms whose approximately 20,000 employees
effectively form the second-largest armed contingent in the
US-led coalition. Increasingly, private contractors have
become targets of insurgent attacks: The four Americans killed
and mutilated in Fallujah earlier this month were employed
by the security firm Blackwater USA, and attacks on civilian
convoy drivers working for Halliburton contributed to the
coalition authority's decision to close major portions of
the highways leading into Baghdad. For all the dangers, however,
the American military's embrace of private business is unlikely
to slacken any time soon, particularly in the critical area
of logistics - the unglamorous but all-important job of getting
the right materials and supplies to the right people at the
right time. The military has been learning from the corporate
world and applying business technology and practices to its
own logistics challenges for many years now. While the benefits
have been real, recent experience in Iraq raises the question
of whether this military-business convergence is reaching
its practical limits.
- - - - - - - - - - -
Today, William “Gus” Pagonis, senior vice president
for Supply Chain for Sears, Roebuck & Company, is responsible
for Sears' logistics functions. But back in 1991, he was
Commanding General of the 22d Support Command, responsible
for all logistical operations during the Gulf War. “My
transition from the military to Sears was a piece of cake,” he
says. “Instead of moving ammo, I move dresses.”
Pagonis, who wrote “Moving Mountains: Lessons in Leadership
and Logistics from the Gulf War” (1992), is emphatic
on the parallels between civilian and military logistics. “There's
a 100 percent overlap, in my personal opinion,” he
says. “A soldier carrying a rifle has to kill the enemy,
and he's your customer. Everyone else is supporting that
person - the guys that buy the rifles, buy the uniforms,
fly the planes. In the civilian world, the consumer is the
center, and everything else is based around that.”
The two worlds began to converge in business schools as
much as 40 years ago. “In 1964, I taught the first
course at Penn State ever called Business Logistics,” says
John Coyle, emeritus professor of Supply Chain and Information
Systems at Penn State's Smeal College of Business. “I
borrowed a lot of stuff from military logistics, because
I thought the military was ahead of the private sector at
that time.”
These days, knowledge generally flows in the other direction.
Penn State, like many other universities, regularly enrolls
military officers in its business logistics courses. And
the effects show, starting at the level of jargon.
“Our value to the warfighter resides in our ability
to deliver capability and sustainment on time and ensure
that we can provide timely accurate in-transit visibility
and total asset visibility of all surface equipment and supplies
at all times,” wrote Major General Ann Dunwoody, commander
of the military's Surface Deployment and Distribution Command,
in a recent issue of Translog (“The Distribution Magazine
of the U.S. Army”). Try to imagine Patton speaking
those lines.
The Pentagon itself encourages this embrace of business
thinking. In addition to his post at Sears, for example,
Pagonis is chairman of the Defense Business Board, a group
of high-ranking executives (including US News & World
Report publisher Mort Zuckerman and Denis Bovin, vice chairman
for investment banking at Bear Stearns & Co.) that advises
Defense Secretary Donald Rumsfeld on the military application
of industry “best practices.”
The Department of Defense is pushing particularly hard to
adopt off-the-shelf logistics software, adapting commercial
products for use in everything from naval maintenance and
supplies to tracking shipments to the combat zone in Iraq.
At the Pentagon, as Penn State's Coyle points out, enterprise
resource planning software and even auction systems are being
explored to help make procurement more efficient.
Similar logic applies to the more controversial practice
of outsourcing. As in the commercial sector, Coyle explains,
the military is asking itself, “What is our core competency?
What is it that we do best? We used to use low-ranking soldiers
to clean latrines. Should we? - - - - What things can we
buy from someone else, to allow us to be more effective at
our primary objective?”
Military transport, warehousing, and technical systems support
are already heavily outsourced. And the 2005 defense budget
calls for a further “conversion” of 10,700 military
jobs this year, primarily administrative jobs which would
be turned over to civilian employees or contracted out. According
to the magazine Government Executive, the defense department
ultimately plans to cut as many as 300,000 military support
jobs from its ranks.
As in any organization with finite resources, every additional
person on the military's payroll comes with a host of financial
and legal commitments. “The Department of Defense has
the same problem that General Motors has: built-up pension
liabilities,” says Ann Grackin, CEO of ChainLink Research,
a consulting firm in Cambridge. According to the Congressional
Budget Office, downsizing the armed forces since the late
1980s has helped the department cut its retirement fund payments
in half, down to $12 billion a year in 2002.
Yet while the bottom-line pressures felt at the Pentagon
may be similar to those at GM, the military can't speak the
plain language of corporate cost-cutting. “You never
talk about ‘cheaper’,” says Grackin. “It's
all about ‘service levels’, about ‘supporting
the warfighter’.”
- - - - - - - - - - -
Civilian logistics today is a well-oiled and finely tuned
machine. Consumer demand is forecasted using months or years
of statistical data, and manufacturers use “just-in-time” delivery
to minimize inventory costs. In general, business can rely
on some certainties. Says ChainLink's Grackin, “The
supplier ships to the warehouse, the warehouse ships to the
store. The locations are fixed.”
But war, by its very nature, is about uncertainty. Though
back-end supply lines - the ones running from the United
States to the theater of operations - may be fixed, once
in-country this can become a liability. After all, says Grackin, “the
enemy can attack fixed supply lines.”
This is exactly what happened in the first weeks of Operation
Iraqi Freedom, as Army and Marine combat units smashed their
way up the Tigris and Euphrates, moving at unprecedented
speed and stretching behind them a thin supply line hundreds
of miles long.
“The process of supporting and supplying the invasion
of Iraq was not without its kinks,” Sergeant Frank
Pellegrini, a former journalist who covered the war for US
Army Reserve Public Affairs, wrote in the September 2003
issue of ARMY magazine. “Sending troops forward with
a basic load of just five to seven days of supplies proved
to be cutting it close when stiff Iraqi resistance pinched
off supply routes like the one through Nasiriyah.”
Meanwhile, in the frontless combat zone of today's Iraq,
civilian contractors increasingly find themselves in harm's
way. “Since civilians now augment the Army in areas
where technical expertise is not available or is in short
supply within the military unit, they in effect become substitutes
for military personnel who would be combatants,” writes
Craig Simonds, chief of the Materiel Staging and Fielding
Division, Army Materiel Command (Europe), in a recent issue
of Army Logistician.
So far, nobody is suggesting that outsourcing and other
business practices will themselves become casualties of combat.
But the kinds of lethal uncertainties that have emerged in
Iraq will no doubt affect the cost-benefit analyses on which
the military's business decisions are based. How do you price
a contract for work that carries a high risk of employee
abduction and death? For the private firms providing security
in Iraq, such risks are business as usual. Now those driving
the convoys and stocking the warehouses may be forced to
make similar calculations, reminding the Pentagon planners
that there is, after all, a difference between a contractor
and a soldier.
.
©2004
ChainLink Research, Inc.
|
