The Art of War and Supply Chain Management:

PAPER PRESENTED AT SAPICS 37TH ANNUAL CONFERENCE AND EXHIBITION 31 MAY – 2 JUNE 2015, SUN CITY, SOUTH AFRICA

© SAPICS 2015, www.sapics.org.za ISBN 978-0-620-64684-0 PAGE 1

The Art of War and Supply Chain Management:

Applying Sun Tzu to 21st Century Supply Chain Management

JOE WALDEN CFPIM

Introduction

As trade with China and other Asian Countries increases in Africa, it is important to understand the

centuries old philosophies that drive business. This understanding will help posture African businesses

for success when trading with Asian partners or any other supply chain partner for that matter.

When it comes to supply chain management, there is no doubt that companies are in the thick of a

battle to beat their competition and gain dominance in market share. Unfortunately, the maps

pointing toward success are often poorly drawn. The goal of this paper and presentation is to show

how the ideas from the ancient Chinese warrior and strategist Sun Tzu provides the keys companies

need to focus their efforts.

Sun Tzu, depending on the translation you read, was either a great warrior, a compilation of several

writers in ancient China or a fictional character. The consensus among historians, however, is that he

did indeed exist and lived during Wu Dynasty coming to prominence around 519 BC.

His writings were first introduced to the Western world when French missionaries translated them

between 1772 and the early 1790s. Significantly, Napoleon Bonaparte studied the translation and

some of Sun Tzu’s principles can be seen in the plans for the battles of Jena and Austerlitz. During the

Napoleonic Wars, Baron Henri Jomini and Karl von Clausewitz served as both allies and opponents of

Napoleon at various times, and after the wars they wrote about Napoleon’s tactics and strategy, which

were based on Sun Tzu’s teachings. Their writings form the basis of today’s modern military thought

and, in fact, the modern principles of war.

The teachings of Sun Tzu were put into practice during U.S. military operations as Operation Desert

Storm and Operation Iraqi Freedom. During Operation Iraqi Freedom, the use of speed and deception

produced a much shorter war with much fewer casualties than expected; it also allowed coalition

forces to capture the Rumallah oil fields, averting an environmental disaster in the form of burning oil

wells.

The military implications are clear, but how can one draw the relationship between Sun Tzu and supply

chain management? The writings of Sun Tzu, which are collectively called The Art of War, are over

2,500 years old, and yet they are as applicable today as they were when they were first written.

Throughout Sun Tzu’s writings are the themes of leadership, communication, planning and

preparation, and discipline. Additionally, The Art of War was written in a universal style that lends

itself to templates, which have been translated into topics from financial to business management.

This paper will use the themes of The Art of War as they apply to supply chain management and supply

chain leadership.

Sun Tzu and Supply Chains

In the second chapter of The Art of War, Sun Tzu states, “War is a matter of vital importance to the

state; the province of life or death; the road to survival or ruin. It is mandatory that it be thoroughly

studied.” Few would argue that supply chain management is a matter of vital importance to any

THE ART OF WAR AND SUPPLY CHAIN MANAGEMENT



company. In fact, the biggest cause of the dot-com implosion was companies’ failure to properly

establish supply chain strategies. For example, one major toy chain paid more in coupons to

compensate for late deliveries at Christmas a couple of years ago than it made in profit

It is imperative for the survival of a company that these items be benchmarked internally and against

the competition to ensure that the good or service is delivered better and faster than the customer

desires or than the competition can offer. If what you are measuring is not important to your customer

or to customer support, it should not be important to the company and, therefore, should not be

measured.

“One who is confused in purpose cannot respond to his enemy.”

In this particular quote, Sun Tzu is talking about the importance of clearly-stated missions. The words

can easily be translated to mean: To know your purpose, you must have a clearly stated mission and

vision. The vision and mission have to be clearly stated, clearly articulated and, most importantly, must

be clearly understood at all levels of the organisation.

Sun Tzu said, “Knowledge that does not go beyond what the generals know is not good.” In other

words, a mission that is not understood at all levels of the organisation is not good. Sun Tzu’s rule for

finding a good leader to relay the mission is, “See who is able to make rules clear and commands easy

to follow.” Leadership is responsible for ensuring that the mission is clear and provides the vision

necessary to get the organisation moving forward. A large specialty retailer discovered that its lack of

clarity in its mission for supply chain visibility resulted in an extra $38 million in inventory — daily —

in its supply chain. However, a fully-understood mission on supply chain visibility later corrected this

error.

The supply chain leadership is also responsible for setting fully-understood goals that do not create

ambiguities that lead to subotimisation for the supply chain by encouraging local optimisation counter

to the goals of the supply chain. One drug firm learned this lesson the hard way: Its supply chain goals

rewarded traffic managers for maximising full truckload deliveries from their distribution centres.

When they did a full accounting of the supply chain goals and missions, they discovered that one traffic

manager was rewarded for saving $25 per truckload by waiting until the trucks were full truckloads.

The result was an additional $500,000 in interest charges.

Leadership

Leadership is one of the themes woven throughout Sun Tzu’s writings. Leadership is about people, not

assets. Keynote presentations at major logistics conferences always address a company’s

management team, and annual reports address the management team’s positions and goals; the

element that is missing is leadership.

In the first chapter of The Art of War, Sun Tzu says, “If people are treated with benevolence,

faithfulness and justice, then they will be of one mind and will be glad to serve,” which shows that

workers simply want to be treated fairly and have the faith of their co-workers and supervisors. In

chapter eight, Sun Tzu offers this advice on leadership traits: “Good Generals act in accord with events

— not quick to anger, not subjected to embarrassment. When they see possibility, they are like tigers.

Their action and inaction are matters of strategy.” Good supply chain leaders have to set the example

so that they are above embarrassment and above embarrassing their employees in public. In addition,

because the leaders have planned ahead, they are ready to take action when an opportunity appears.




In chapter three, Sun Tzu explains that, “Generals are the assistants of the nation. When their

assistance is complete (defined as good and wise; loyal and capable), the country is strong. When their

assistance is defective, the country is weak. Those whose upper and lower ranks have the same desire

are victorious.” Supply chain leaders are truly the assistants of the corporation. When the supply chain

leaders are strong, the company is strengthened; and when they are weak or exhibit a lack of loyalty,

the company is weakened. Strong leaders also enable a victorious company by developing and

fostering a corporate culture in which each member has a shared set of values. They do this by

providing purpose, direction and motivation to their employees.

Sun Tzu also says that disorder will result from a General who is “morally weak” and without discipline.

Leaders have to set the example. They have to provide vision that is understood, and they must

provide supply chain leadership, discipline and training. In all operations it is true that standards lead

to habits, habits lead to discipline and with discipline all things are possible. The supply chain leaders

must set the standards and then follow them.

Know Yourself

“Know your enemy, know yourself; in a hundred battles you will never be in peril.” To be invincible,

according to Sun Tzu, you must know yourself (or your supply chain) and must know your competition

and your customer.

Using Sun Tzu’s five key areas you can assess your company’s supply chain and your competition’s

supply chain:

1. The Way — this is the vision that was spoken of earlier in the article.

2. The Weather — in military operations the weather is an uncontrollable variable that can be

an advantage or disadvantage. In business there are uncontrollable variables as well. If your

plan and vision incorporates contingency planning, you will be prepared to take advantage of

such uncontrollable variables as the economy, the growth phases of a company or product,

and the acceptance of a new product.

3. The Terrain — in military operations the terrain, like the weather, can be an advantage or a

disadvantage. You have to consider the business terrain in which you are operating. Proper

planning and knowing yourself will enable you to avoid these terrains and/or use them to your

advantage.

4. The Leadership — this is covered in the section titled “Supply Chain Leadership.”

5. The Discipline — remember, with discipline all things are possible.

So, what is the best way to know your company’s supply chain? In my experience, the best way to see

and know a supply chain is through the use of detailed process maps or flow charts. The only way to

develop an accurate flow chart of your processes is to get out of the “swivel chair” and physically walk

the process. Take the action from the beginning until the end. While walking the process it is important

to ask” “Why?” While asking “Why?” it is also important to document the actions and results of every

process in the chain and the time necessary to accomplish the actions. Be sure to look for actions that

are non-value added, so they can be removed from the process.

Speed

“Speed is the essence of warfare.” Unarguably, speed is also the essence of supply chain management.

Speed in supply chains can take the form of faster cycle times, faster customer order times, faster




customer response times, faster time to market or even a faster escape out of a non-profitable market.

The key is that “speed” must not be confused with “hastily done.” An efficient supply chain is

dependent on accurate information and, in the end, should allow your company to reduce piles of

supplies.

Training and Remaining Current

“If officers are unaccustomed to rigorous training they will be worried and hesitant in battle” Sun Tzu

says the greatest of crimes is to be unprepared for battle, while the greatest of virtues is to be

prepared for any contingency. The only way to ensure that your leaders are not hesitant in the face of

competition or decisions is to make sure they are well trained.

And just as the military invests millions of dollars annually to prepare soldiers for any contingency in

combat operations, companies have to be willing to invest in training for their employees to ensure

success in business operations. Toyota invested $50 million in the University of Toyota to ensure

employees receive the proper training necessary for success.

There is a difference between training and education, however. Education is a classroom type of

learning and is important, but training, in contrast, is a hands-on form of learning. Toyota requires

every employee at its Ontario, Calif., parts distribution centre to have 80 hours of training every year:

two full weeks. This is one of the reasons that the retention rate for employees at Toyota is over 95

percent since the distribution centre was opened in 1996.

Another key area of training is cross training. This form of training is critical for supply chain success.

Nothing is more frustrating to a customer asking for assistance or asking a question than being told

that the person with the answer is on vacation and no one else is trained to do that action.

The Use of After Action Reviews

“Therefore, when I have won a victory I do not repeat my tactics but respond to circumstances in an

infinite variety of ways.” What Sun Tzu is telling us here is to change our tactics after we’ve looked at

what we did right or wrong in the heat of battle. In the Army, we use a process known as the After

Action Review. The process is used after every training event and every operation to determine what

went right according to the plan or what went wrong and why. This process is not designed to fix

blame for something that went wrong, but instead it is meant to find out why something went wrong

and how to preclude it from happening again. The After Action Review process can be a lengthy

process, a hasty process, or as simple as a 3×5 card with three ups and three downs. The main thing is

that you are able to answer the questions — “How do we sustain the ups? How do we fix and prevent

the downs?”

The Army’s After Action Review process is a seven-step, straightforward approach to getting to the

root cause of the problem:

• What was the plan?

• What actually happened? Did we follow the plan?

• What went right? How do we sustain that?

• What went wrong?

• Why?

• How do we fix it?

• Who is responsible for ensuring that it is fixed?




The keys to the success of the After Action Review process are honesty and the final two steps. You

will notice that who messed up is not a point here. The focus is on what went wrong and how to fix it.

A person or office is assigned the responsibility of ensuring the problem is fixed because of the old

adage: We only do well what the boss is checking. If no one is assigned the responsibility of ensuring

the problem is fixed, it will be repeated. In combat operations repeating the same mistakes could

mean the loss of lives; in business, it could mean the loss of customers and eventually the loss of the

company itself.

Conclusions and Applications of Sun Tzu Today

Sun Tzu provides a common sense approach to leadership and supply chains. His words are as true

today as they were 2,500 years ago when they were first written. Sun Tzu tells us that we must know

ourselves. Getting out of the office and seeing what is really happening in our supply chains is the best

way to accomplish this. You must also develop a detailed process map of your processes, which will

give you a good tool for training your employees, as well as improving your supply chain and customer

service. Know yourself and know your processes and you will be successful in supply chain leadership.

Throughout The Art of War, Sun Tzu lists the qualities of leaders and gives examples as to how leaders

should act. He reminds us that supply chains and supply chain leaders are truly the key to the success

or ruin of a corporation.

When the successful supply chain leader discovers a problem, or a plan does not proceed as expected,

Sun Tzu says an After Action Review should be conducted to determine why the plan didn’t work.

Finally, what Sun Tzu shows us through his ancient writings is that, as far as we have come in the past

2,500 years with technologies and customer demands for faster service, the basics of leadership and

root cause analysis for problems will still lead you to the top. Never stop learning and improving.




SPEAKER PROFILE

Joe Walden has over thirty six years of supply chain and leadership experience

on five continents. Joe has given presentations and seminars worldwide on

Applying Six Sigma to Supply Chains; Decision Making; Change Management;

Supply Chain Security; Supply Chain Preparedness; and Leadership. He is an

APICS Certified Fellow in Production and Inventory Management and

recognized by the International Society of Logistics as a Demonstrated Master

Logistician.

In 2002 he was selected one of the “5 Up and Coming Logistics Executives in

America.” He was selected as one of the “Top 20 Logistics Executives in America

for 2003” by the International Logistics Forum and the “2004 Supply Chain Practitioner of the Year”

by Supply and Demand Chain Executive Magazine. He has been profiled in “Who’s Who in America”

for the past decade and has been profiled in “Who’s Who in the World.” In 2013 he was the recipient

of the University of Kansas Business School Outstanding Educator Award and a 2014 finalist for the

University of Kansas Outstanding Progressive Educator Award.

He is the author of three books, three text books and over 40 published papers and articles in

publications from Iron Man, Japan to the Cargo Asia News.

Contact details

Email address [email protected]

Website https://www.ku.edu/

Telephone 17604473651