An old adage has it that generals always do a great job of fighting the last war. But in the case of one general—three-star lieutenant general Gus Pagonis—that shot couldn't be farther from the mark. When masterminding the military supply chain in the first Gulf War, Pagonis didn't hesitate to use all that modern technology had to offer, revolutionizing military logistics in the process. Under his command, for example, the Army began using GPS technology to track the movement of the food, water, gas and ammo needed to feed and clothe battalions of GIs and keep them equipped for battle—a management feat that General Norman Schwarzkopf lauded as a gigantic accomplishment.
In the months following the Gulf War, Pagonis wrote a book about his experiences. That book, Moving Mountains: Lessons in Leadership and Logistics from the Gulf War, caught the eye of Arthur Martinez, then chairman and CEO of Sears, who hired Pagonis to run the giant retailer's supply chain. Pagonis soon found himself applying the same management techniques he used for moving nearly 500,000 soldiers and seven million tons of supplies halfway around the world to the home delivery of appliances. Although Pagonis retired from the retailer last year, his legacy remains at Sears, where staffers still hold his trademark "standup" meetings (Pagonis famously banned chairs from staff meetings to discourage non-essential discussions) and submit their ideas in summaries that fit on a 3 by 5 index card.
Given Pagonis's military and business accomplishments, it's hardly a surprise that he remains much in demand today—as a consultant, as a speaker at meetings and conferences, and as an advisor and board member for some leading logistics companies. Pagonis currently serves as chairman of the board at RailAmerica Inc., the world's largest short line railroad. He is the vice chairman of the board for Genco—a logistics service company that specializes in reverse logistics. He also chairs the volunteer Department of Defense Business Board, established by Secretary of Defense Donald Rumsfeld to encourage the sharing of ideas among private sector companies and the military.
Pagonis spoke recently with DC VELOCITY Editorial Director Mitch Mac Donald, sharing his thoughts on the similarities between military and private-sector logistics, the importance of salesmanship to logistics success, and how he would shake things up if he came to work at DC VELOCITY.
Q: During your career, you've masterminded the supply chain for both the military and in private industry. As you look back, what strikes you most about your career?
A: I'd say it's the way my work experiences have mirrored the changes in the profession overall—including some big shifts in the terminology we use. When I started out at Penn State as an undergraduate, the discipline was called physical distribution and was pretty much limited to transportation and warehousing. When I joined the military back in 1964, the term logistics was coming into wider use, though not really in the private sector at that point. As I migrated from the military world to the private sector, I saw the wider use of the term logistics and an expansion of what that meant in terms of overall management of the process, well beyond just transportation and warehousing. Then the term supply chain management came along, which in essence, is just a deeper, more integrated approach to improving logistics operations and processes.
But I want to emphasize that this isn't a case where we've just kept doing the same things and found new, splashy names for what we do. The whole approach to logistics and supply chain management has forced us to take a closer look at what we do and how we get things done. We've learned that it's better to be fully integrated across a company, and we've seen a lot of companies establish a track record of using logistics and supply chain excellence as a driver of business success.
Q: Why do logistics and supply chain management have such a deep impact on a business's fortunes?
A: It's the connection with the customer. There are few, if any, other parts of a company's operations that have more steady or direct contact with the customer. In fact, my career in logistics didn't grow out of an interest in the discipline. It really evolved from my interest in the customer. I joined the military and I went into the infantry because that's where the "customer" was. I feel that for logisticians to be successful, they really need to understand their customer, whether it is in the military or in the main sector.
Q: Do you think a typical logistics professional understands the customer?
A: That a tough one to answer. Some do. Some don't. Overall, though, I think more and more at least understand the relationship between logistics and customer service. You have to remember that although some of today's logistics leaders grew up in the profession and have a strong tactical knowledge of logistics, an awful lot of today's high-level logistics executives didn't start out in that field. They were simply talented executives who migrated to leadership positions in this discipline when a logistics job opened up, as a way to advance their careers.
I think the executives who have backgrounds in areas other than logistics might bring a bit more of a customer-service focus to their jobs, while those executives who are career logistics pros bring a deeper knowledge of the actual operations of logistics. Together, it can lead to good things. If you can bring together that mix of skills and backgrounds, you can achieve both logistics and customer service excellence.
That's where you start seeing some of the basic principles of successful supply chain management. When you bring together folks with different perspectives and areas of focus—like sales, marketing and customer service—and place them all on a team that has wide-ranging and comprehensive responsibility to serve the customer, you have a chance for a real breakthrough in performance.
You have to keep in mind that this whole supply chain thing is unique. There are probably only a couple of people in the entire world who can truthfully be said to manage a supply chain from end to end. Most of them are facilitators or coordinators. They coordinate the various functions because they don't own all of the process.
We see people with the title "VP of Supply Chain," but really, there are only a few guys in the whole world who own the supply chain. After all, the supply chain includes every step in the process: bringing up the raw materials, processing them, transporting them, moving them to a plant, manufacturing and converting those raw materials into a product, delivering that product to a distribution center, delivering it to a retail store for sale to a consumer, and then recycling it after the customer is done.
Q: From what you've just described, there's actually very little that happens within a company that doesn't touch the supply chain.
A: Yes. That's why I maintain that most of us, including myself at Sears, are what I think of as "supply chain coordinators." In other words, at Sears, I commanded certain functions of the supply chain, no question about it. I coordinated or facilitated the transportation, the warehousing, and a lot of the other processes, right? Here's the rub, though. I wasn't truly in charge of Sears' entire supply chain because a truly integrated supply chain extends far beyond the borders of any single company. It's a sprawling network that stretches from that company's vendors and partners all the way to that company's customers. Some executives in the private sector find this all terribly frustrating. Everyone wants ownership and control of the complete process. It's simply not possible to have that and have a top-flight supply chain process. It's interesting, in the military, we use a lot more dotted lines to describe areas of responsibility and accountability and process. I found in the civilian sector people have a much harder time with that.
Q: Everybody wants one boss, and they want it to be very clear whom they work for.
A: Don't get me wrong. I'm a great believer in that. There should be a single point of contact. There should be one person in charge, but you absolutely can and will have dotted lines. As a supply chain coordinator, you do not own the buying of the merchandise, but you'd better have a system in place for coordinating with the people who do because details like the way the merchandise is packaged or where the bar-code label is placed on the boxes have a major effect on how efficiently that box moves through the supply chain to the end customer. Again, the critical component of that is knowing the customer. As I said, I went into the infantry, then I migrated to transportation and eventually I became a logistician. In each instance, my job was to serve the customer.
Q: That's the second time you've said that. You said you selected the infantry because that's where the customer was. Can you expand on that a little bit?
A: Yes. In the military, the guy carrying the rifle is the customer. He's the one carrying out the core mission of the military: He has to close in on and destroy the enemy. But he can't do it alone. For every guy carrying a rifle, there are about 12 people in the Army to support him. Everything the other 12 folks do is all about helping that soldier, the customer, fulfill his or her mission. If it weren't for the guy carrying the rifle, no other service would be needed.
Q: There you are. And in the private sector, if it weren't for the customer, there wouldn't be any need for all the activities we call logistics and supply chain management, right?
A: None at all.
Q: On the subject of comparisons between your experiences in military logistics and your time in the private sector, have you come across any situations in which principles of military logistics simply didn't apply in the private sector?
A: I've got to tell you, I can't think of anything. Everything logistical in the military has a direct application in the civilian sector. The difference is the consequences aren't so dire—it's not a matter of life and death. For example, if you don't get the ammunition to the troops in a timely manner—or water or medical supplies, for that matter—lives can be lost. That's why I had a lot of fun at Sears because without that kind of stress, there's hardly anything you can't accomplish.
Q: It must have been a relief to be able to practice your craft without the pressure of knowing someone's life depended on your actions.
A: There is no question about it. You still have to have urgency. You still have to be dynamic because you're competing against competitors and all that, but it certainly helps you keep your perspective.
Q: In your experience, what's the single most important trait of a successful supply chain manager?
A: Leadership. Supply chain management is truly one discipline in the business world for which you must possess leadership abilities if you hope to succeed. If you're leading a marketing or finance operation at a very high level, for example, you're working with and supported by college graduates. They are themselves experts in their fields. When you're working in the supply chain, by contrast, in many instances the person executing your great new idea drives a truck or a forklift. It's much more important, even critical, to get through a chain of command from the top to the bottom. That means your rules have to be simple, understandable and concise. They have to be translated into the right language for the person executing the mission.
Q: You've gained a certain amount of fame for importing some leadership practices you used in the military to your management job in the private sector. I'm talking about your "stand-up" staff meetings, where you banned sitting in order to keep the discussions moving, and your insistence that staffers submit reports and proposals boiled down to fit on index cards, not multi-page memos. What reaction did you get when you brought these principles to Sears? Did people embrace them or did they just roll their eyes?
A: It takes some selling. For example, if I were to come to work for your publishing company and wanted to implement stand-ups, the first thing I would do is gather everybody in a room and give them a class. I would sell them on the idea. I would list the benefits. I would demonstrate the value of doing this. If you do it that way and get a buy-in from everybody, people will embrace your management style, no matter what it is.
When I joined Sears, I went on a campaign of sorts, selling these concepts. I spent the entire first month doing nothing but visiting all my people at all my facilities. I presented my leadership style. I explained my view on how we could most effectively communicate. I laid out my vision for, essentially, how we were going to function. I got a total buy-in. By the beginning of my second month on the job, my ideas were being implemented everywhere. Many places in Sears now use stand-ups and the index card reporting format. I'm gone, but the practices remain.
Q: Did you get a lot of push back from people?
A: Not really. I don't try to force my management techniques on anyone. If they're working directly for me, they have to either show me a better way of doing it or use my techniques. If other people within the organization who don't [report] to me want to use them, that's fine with me, but I don't force it on them. I have found through the years that people like to communicate. They like to keep it short and concise. They just need to have some guidelines.
Q: Sure. It forces them to cut through the fog of details and get to the point, right?
A: Yes. Just think about it. Our society has changed dramatically with the use of information technology. We're inundated with information every minute of every day. There are still many of us who are getting 300 e-mails a week. Nobody has time to read them all.
Q: So you're saying that in addition to strong leadership traits, a successful leader in this field also needs to possess a certain amount of salesmanship?
A: Salesmanship and an understanding of how to put together a team. I once went to a rodeo whose events included a race among teams of six horses, with each team pulling a covered wagon. I happened to meet the guy driving one of those teams after the event. He explained to me how the fastest horse wasn't the lead horse because it would kill the other five horses. The lead horse was a steady horse, one who was pretty fast. The fastest horse was placed second. He urged them on. The same thing goes with human beings. You have to work as a team. A team effort means the leader determines the capability of all his subordinates and then he puts together a team. In the military, teamwork is absolutely essential to everything you do. There's absolutely no room for anybody who is not a team player.
Q: If you were talking to young folks who were thinking about entering the logistics field, how would you advise them to proceed?
A: First of all, I'd suggest that they check into the wonderful programs of study in logistics and supply chain management offered by colleges in the United States. In addition to seeking out formal instruction, I would tell them that they've got to have a strong understanding of the capabilities technology can offer. Information technology is the cement that holds everything together in the supply chain. It takes you into a high-speed world. It allows you to do the analytical work needed to determine where your problem areas are. The next thing I would tell these kids is if you have a chance to sign up for electives, take an industrial engineering course. It's a wonderful tool for analytically laying out functions and that's what you do in the supply chain.
Q: How about advice for those already in the profession—the people who face new challenges every day in the form of rapidly changing technology, globalization and ever-more-demanding customers. Any thoughts on things they should be doing to stay up to date?
A: Yes. I personally think there are wonderful conferences going on out there, probably too many. Someone told me—though I don't know how accurate this figure is—that there are more than 5,000 supply chain/logistical conferences held each year. You need to pick the right ones for you and go out there and get yourself educated by listening to other people. You're never too old to learn. I like to seek out conferences that have very strong keynote speakers. Keynote speakers are essential. You go there. You listen to the keynote speaker. It gets you revitalized. It gives you new ideas. It is a wonderful way to really get yourself up to speed.