Utilizing Religion as a Foreign Policy Tool

Introduction

Prior to entering the great power competition (GPC) with China and Russia, the United States was embroiled in the Global War on Terror (GWOT), and before that was the Cold War. Now that the GWOT is over, America has returned to a situation similar to the Cold War, but with a difference: China and Russia are now far more sophisticated in their approach to international relations.

Instead of just using military power (hard power), China and Russia are using all the instruments of foreign power: diplomacy, information, military, economic, and cultural, which includes religion. China is especially adept at this, combining these instruments and coordinating their using their usage.

In this paper, certain methods of China’s approach to GPC are considered, in particular the Belt and Road Initiative (BRI). The operation and the motivations of the BRI are described. Next, the BRI is fitted into Nye’s framework of hard/sharp/soft/smart power. The consequences a country faces when it decides to enter partnership with China are listed. Finally, the role of religion in combatting the BRI is explored.

Sharp, Hard, Soft, and Smart Power

During the Clinton Administration, the Center for Strategic and International Studies (CSIS) released a report entitled “CSIS Commission on Smart Power” coauthored by Joseph S. Nye, Jr.¹ He was one of the first people to use the term “smart power”, and a four-fold classification of styles of implementing foreign policy was described: sharp, hard, soft, and smart power.

Hard power is the overt use of coercion to influence the actions of other nations. Here, “coercion” can include economic sanctions, coercive diplomacy, and military threats.

Sharp power uses subtle means to influence or manipulate through deceptive means including propaganda and information warfare. The goal is to not so much to change behavior but rather to change perception to cause political instability, change the opinion of the target nation towards the nation using the sharp power, etc. It is typically used by totalitarian countries like China to influence free(er) nations, taking “advantage of the one-sided openness of Western states and societies to Chinese capital, ideas, and actors. C.C.P. influence has entered through the open front door, eagerly courted by those in the West hungry for a large slice of the growing China cake.”²

Soft power can be defined as “the ability to get what you want by attracting and persuading others to adopt your goals.”³. It involves getting a nation to behave in a certain way using culture, political values, and foreign policy. Soft power co-opts a nation by getting them to want what you want. It is difficult to wield since the needed tools (such as cultural tools) are not under government control, and that it does not produce immediate results since using cultural and political values need time to shape the diplomatic process.

Smart power is the use of sharp and soft power in combination to achieve America’s foreign policy goals. “Smart power means developing an integrated strategy, resource base, and tool kit to achieve American objectives, drawing on both hard and soft power.”⁴ The CSIS report recommended four broad strategies for implementing smart power: invest in a “new multilateralism,” global development, public diplomacy, and economic integration. From today’s standpoint the goal of these strategies might be called “pre-globalism,” and was the driving foreign policy of both Clinton and Obama.

The Belt and Road Initiative

The Belt and Road Initiative (BRI) is China's global economic development strategy. It was advocated by Xi Jinping and adopted by China in 2013. BRI is implemented by heavily investing in a country's infrastructure projects which can include railways, highways, hospitals, port facilities, logistic hubs, real estate, power grids, etc.⁵ The BRI in called "One Belt Road" in China and is sometimes called the "New Silk Road." Transnational networks of highways and railways have been built, but the BRI is not simply a physical infrastructure program - it also includes trade agreements and streamlined border crossings as well as the creation of economic zones that favor adoption of Chinese technology. This network expands the use of Chinese currency and thus the political influence of China.

The BRI: China in Red, the members of the Asian Infrastructure Investment Bank in orange. The proposed corridors in black (Land Silk Road) and blue (Maritime Silk Road).

In 2024 there are 149 countries involved in BRI projects.

Should an infrastructure project be successfully completed in a country, China or state-owned businesses maintain a significant share in the project. Operation of that project entails that funds go to China, so that country becomes a vassal state to China. Further, requiring that transactions between the Chinese and the target county’s companies take place using Chinese yuan renminbi freezes the foreign company into a relationship with the Chinese one, since China’s yuan is a non-convertible currency.

When economic factors force a country to default on BRI loans, China could nationalize foreign assets and return them only should their “owner” perform certain actions. This results in the country going sovereign default, which happened in Ghana and Zambia. When Pakistan defaulted, they were bailed out by the International Monetary Fund. When Sri Lanka defaulted on a $435 million BRI loan to build a harbor there, China enforced a debt-for-equity swap giving China 70% stake in the harbor.

The Council on Foreign Relations maintains a "Belt and Road Tracker" website⁶ (unfortunately it has records only up to 2017) which shows the imports from China as a percentage of GDP, foreign direct investment from China, and the external debt owed to China. Foreign direct investment is the percentage of the country's incoming investment and is indicative of the control China has over the internal politics of that country.

Some examples...

• Imports from China constitutes 4.9% of Egypt's GDP
• 10.4% of Sri Lanka's inward foreign direct investment comes from China.
• 7.0% of Sri Lanka's inward foreign direct investment comes from China.
• 17.2% of Ethiopia’s GDP is debt to China.

These are the economic consequences to becoming involved in the BRI. BRI thus includes elements of soft power and smart power.

BRI’s Relation to China’s General Model of Unrestricted Warfare

The BRI is part of China’s general approach to warfare, called “unrestricted warfare” by its inventors. The Chinese colonels Qiao Liang and Wang Xiangsui developed and wrote Unrestricted Warfare⁷ in response to lessons learned from America’s victory in the First Gulf War. Qiao and Wang realized that China would be unable to match the United States’ technical virtuosity in kinetic warfare. Unrestricted warfare is an elaborate system involving redefinitions of terms such as “warfare” and “weapons.” For them, a weapon is not just a tool to kill or destroy. Instead, they realize that “everything that can benefit mankind can also harm him… The new concept of weapons will cause ordinary people and military men alike to be greatly astonished at the fact that commonplace things that are close to them can also become weapons with which to engage in war.” These weapons include:

• Financial
• Ecological
• Psychological
• Smuggling
• Media warfare
• Drug warfare
• Network warfare
• Technological warfare
• Fabrication
• Resources
• Economic aid warfare
• Cultural warfare
• International lawfare

Most importantly, unrestricted warfare redefines “victory” to mean that the enemy nation is forced to serve one’s own interest. “The best way to achieve victory is to control, not to kill,” they wrote.

The BRI would fit within financial, economic aid, and cultural warfare. This is explicitly stated in a 2015 paper written by Colonel Qiao⁸. Indeed, BRI forces the aid recipient to serve one’s own interest.

How the United States Builds Relationships with Non-Secular Countries

The relationships the United States has with other countries (except China, Russia, Iran, and DPRK) are based on trade agreements and mutual self-defense. Examples of the international trade organizations and agreements include the World Trade Organization (WTO), the United States-Mexico-Canada (USMCA) Agreement, and the Asia-Pacific Economic Cooperation (APEC) forum. The US has Free Trade Agreements (FTAs) with numerous countries including ones in Central and South America, Israel, Jordan, etc. The US also has Trade and Investment Framework Agreements (TIFAs) with nations on six continents.

Examples of military alliances of which the United States is a member include the North Atlantic Treaty Organization (NATO), the North American Aerospace Defense Command (NORAD), and the Australia, New Zealand, and US Security Treaty (ANZUS).

The relationships we make with nations that are strongly religious are usually covered under either trade agreements or military alliances. For example, many religious countries in Eastern Europe including Poland, Hungary, Croatia, Latvia, and Slovakia are members of NATO.

Using Religion as a Tool in Support of US Strategic Interests

Religion is about exploring and strengthening the relationship between individuals and God, so religion should not be used directly as a political tool. To further complicate this, a wide variety of religions are practiced in the Indo-Pacific Area of Operations. Here are some examples:

• Australia - Christianity
• Bangladesh - Islam
• Brunei - Sunni Islam
• Cambodia - Buddhism
• Democratic People's Republic of Korea (DPRK) - None
• India - Hinduism
• Indonesia - Islam
• Japan - Shinto and Buddhism
• Korea - Christianity or Buddhism
• Laos - Buddhism
• Malaysia - Sunni Islam
• Maldives - Sunni Islam
• Philippines - Christianity
• Thailand – Buddhism

Because of this variety of faiths, the United States cannot use a single approach to defend against Chinese influence in those nations. But there are alternatives that would appeal to the variety of faiths while staying true to the nature of religion.

Missionary work can spread American ideals to individuals of other nations, and in that way they would work to advance those ideals, and so US strategic interests would be served because the US embodies those ideals. However, many contemporary American churches or religions work against or subvert traditional American cultural values (such as individualism, freedom, honesty, decency, family, optimism, equality, generosity, charity, etc.) so those should certainly not be involved in any overseas work.

Another approach that doesn’t turn religion into a political tool is to inform a nation of the consequences of accepting BRI. These consequences involve decreased sovereignty for that nation including economic servitude and cultural replacement.

Religion is forbidden in Communist countries if for any other reason the government sees religion as a competitor. Presumably, China does not explicitly mention its suppression of Christians or Muslim Uyghurs within China or the suppression of Buddhists in Mongolia when it invites a country to join the BRI.

As China gains control over a country via BRI, it should be expected that religion would be suppressed in that country either through direct repression or advocacy of anti-religions secular ideas. Within China itself, believers are painted as enemies of the state, enemies of social order, anti-scientific, or members of cults. It would be expected that propaganda of this form would be used in BRI member countries, but gradually, at least at first.

How can the US counter China’s use of Religion as a Sharp Power?

As a nation that enforces atheism, China would not directly use religion as a sharp power. Religion there has been co-opted and exists there only in "approved" form. However, China would certainly use the religions of another country against that country by fomenting division between those religions.

Another way of stating this is that if China is indeed using religion as a sharp power, it will be in the form of a “package deal” – atheism will be only one part of their propaganda, and religion will be only one target.

Seen in this way, the question can be reformulated as follows: how might the US counter Chinese use of propaganda and other forms of sharp power? “The C.C.P. elites understood that almost anything in Western capitalist societies can be bought. There was hardly any protective layer that Chinese would-be “sharp power” had to pierce.”⁹

Some recommendations in Benner et al, 2018¹⁰, include restricting foreign funding of political parties and limiting certain investments. More is necessary, however.

Politicians and administrators must be made aware of the symbolic and economic significance of interacting with the Chinese Communist Party. In another paper¹¹, Benner gives two examples of how Germany failed in this aspect.

First was the acceptance of a statue of Karl Marx by the German city of Tier – this statue was a gift from China.¹² Second allowance by the mayor of Duisburg to install or expand various technologies such as the city-wide WLAN network, broadband connections in Duisburg public schools, streetlamps, and eGovernment solutions.¹³

In the United States, a massive number of residential properties were purchased by China, including 40,600 properties purchased in 2017¹⁴. There have been commercial properties purchased as well, but exact number of such properties is unknown. A large amount of agricultural land was also purchased, but the relevant law for tracking this, the Agricultural Foreign Investment Disclosure Act (AFIDA) of 1978, is not being enforced¹⁵.

In addition, there have been attempts to purchase land or place structures close to US military bases and other secure locations. For example, China attempted to donate a pagoda to the National Arboretum which could gather signal intelligence from the US Capitol and federal agencies. The FBI stopped the donation¹⁶. China has also purchased meat production plants such as Smithfield Foods, the nation’s largest pork producer¹⁷.

China also ran police stations in major US cities¹⁸ in order to monitor Chinese nationals and have positioned Confucius Institutes on university campuses to spread propaganda¹⁹.

China also has considerable influence over American popular media. Consider how the plots or characters of Hollywood films are altered to present China in a positive light, or at least in a non-threatening manner²⁰. An example of this is with the movie called “Red Dawn”. In the 1984 version, the US is invaded by the Soviets. The original script to the 2012 remake involved the Chinese invading the US. In the final release of “Red Dawn”, it was the North Koreans who did the invading.

 

Conclusion

As shown above, China is using economic means such as the BRI to extend its control to a global scale, but the BRI is not the only method it uses. China is also using a whole spectrum of approaches to extend its ideals of communism and atheism – this spectrum includes media warfare, land purchase, purchase of food production facilities, etc. There are ways of fighting this operation, but doing so involves engaging the interest of politicians and revitalizing the relevant federal agencies.

Footnotes

1. Armitage & Nye, Jr., CSIS Commission on Smart Power.
2. Benner, Ewert, Fulda, Siemons & Shi-Kupfer, “How to Fight China’s Sharp Power.”
3. Nye, “Propaganda Isn’t the Way: Soft Power.”
4. Armitage & Nye, Jr., CSIS Commission on Smart Power.
5. Lew & Roughead, “China’s Belt and Road: Implications for the United States.”
6. Steil, “Belt and Road Tracker.”
7. Qiao & Liang, Unrestricted Warfare.
8. Qiao, "One Belt, One Road."
9. Benner, Ewert, Fulda, Siemons & Shi-Kupfer, “How to Fight China’s Sharp Power.”
10. Ibid.
11. Benner, Gaspers, Ohlberg, Poggetti & Shi-Kupfer, “Responding to China’s Growing Political Influence in Europe.”
12. Carrel, “Marx's German birthplace unveils controversial statue of him.”
13. N/A. “Huawei Deepens Cooperation with Duisburg to Transform Germany’s Industrial Heartland into a Smart City.”
14. N/A, “Total number of residential properties purchased by Chinese buyers in the United States from 2010 to 2024.”
15. Burack, “China’s Land Grab.”
16. Ibid.
17. Ibid.
18. Office of Public Affairs - DoJ, “Two Arrested for Operating Illegal Overseas Police Station of the Chinese Government.”
19. Yang, “Controversial Confucius Institutes Returning to U.S. Schools Under New Name.”
20. Martin & Williamson, “Mapping Chinese Influence in Hollywood.”

Bibliography

Adelman, K. “Not-So-Smart Power.” Foreign Policy, 18 April 2011. Retrieved 8 October 2024 from https://foreignpolicy.com/2011/04/18/not-so-smart-power/

Armitage, R. & Nye, Jr., J. CSIS Commission on Smart Power. Center for Strategic & International Studies, 2007. Retrieved 11 October 2024 from https://carnegie-production-assets.s3.amazonaws.com/static/files/csissmartpowerreport.pdf

Benner, T., Gaspers, J., Ohlberg, M., Poggetti, L. & Shi-Kupfer, K. Responding to China’s Growing Political Influence in Europe. Mercator Institute for China Studies, February 2018. Retrieved 10 October 2024 from https://www.merics.org/sites/default/files/2020-04/GPPi_MERICS_Authoritarian_Advance_2018_1.pdf

Benner, T., Ewert, I., Fulda, A., Siemons, M., & Shi-Kupfer, K. “How To Fight China’s Sharp Power.” ChinaFile, 20 August 2018. Retrieved 10 October 2024 from https://www.chinafile.com/conversation/how-fight-chinas-sharp-power

Burack, B. “China’s Land Grab: The Sale of U.S. Real Estate to Foreign Adversaries Threatens National Security.” Heritage Foundation, 9 May 2024. Retrieved 10 October 2024 from https://www.heritage.org/sites/default/files/2024-05/BG3825.pdf

Carrel, P. “Marx's German birthplace unveils controversial statue of him.” Reuters, 5 May 2018. Retrieved 10 October 2024 from https://www.reuters.com/article/world/marxs-german-birthplace-unveils-controversial-statue-of-him-idUSKBN1I60J0/

Lew, J. & Roughead, G. “China’s Belt and Road: Implications for the United States.” Council on Foreign Relations, 2021. Retrieved 9 October 2024 from https://live-tfr-cdn.cfr.org/cdn/ff/ocjY82x697hFr2wwfpEShIemYoUoRHQjGedMutfvyis/1617323169/public/2021-04/TFR%20%2379_China%27s%20Belt%20and%20Road_Implications%20for%20the%20United%20States_FINAL.pdf

Liu, X., “What Sharp Power? It’s Nothing but “Unsmart” Power.” USC Center on Public Diplomacy, 15 November 2018. Retrieved 11 October 2024 from https://uscpublicdiplomacy.org/blog/what-sharp-power-it%E2%80%99s-nothing-%E2%80%9Cunsmart%E2%80%9D-power

Martin, M. & Williamson, C. “Mapping Chinese Influence in Hollywood” Kennedy Papers on Indo-Pacific Security Studies 4, January 2023. Retrieved 7 October 2024 from https://www.airuniversity.af.edu/Portals/10/AUPress/Papers/KP_04_Martin_Mapping_Chinese_Influence_in_Hollywood.pdf

N/A. “Huawei Deepens Cooperation with Duisburg to Transform Germany’s Industrial Heartland into a Smart City.” Retrieved 12 October 2024 from https://www.huawei.com/en/news/2018/9/huawei-duisburg-germany-smartcity

N/A, “Total number of residential properties purchased by Chinese buyers in the United States from 2010 to 2024.” Statista. Retrieved 11 October 2024 from https://www.statista.com/statistics/611020/total-number-of-properties-purchased-by-chinese-buyers-in-the-us/

Nye, J. “Propaganda Isn’t the Way: Soft Power.” Belfer Center for Science and International Affairs, 10 January 2003. Retrieved 11 October 2024 from https://www.belfercenter.org/publication/propaganda-isnt-way-soft-power

Office of Public Affairs – US Department of Justice. “Two Arrested for Operating Illegal Overseas Police Station of the Chinese Government.” 17 April 2023. Retrieved 12 October 2024 from https://www.justice.gov/opa/pr/two-arrested-operating-illegal-overseas-police-station-chinese-government

Qiao L. "One Belt, One Road." LimesOnline.com, 17 July 2015. Last retrieved 10 October 2024 from https://www.limesonline.com/en/regions/one-belt-one-road-14720766/

Qiao & Liang. Unrestricted Warfare. Shadow Lawn Press, 1999. Retrieved 8 October 2024 from https://www.c4i.org/unrestricted.pdf

Spalding, R. War Without Rules: China's Playbook for Global Domination. Sentinel Press, 2022.

Steil, B. “Belt and Road Tracker.” Greenberg Center for Geoeconomic Studies, 1 June 2022. Retrieved 8 October 2024 from https://www.cfr.org/article/belt-and-road-tracker

Wilson III, E. “Hard Power, Soft Power, Smart Power.” The Annals of the American Academy of Political and Social Science, 2008; 616; 110. https://doi/10.1177/0002716207312618

Yang, L. “Controversial Confucius Institutes Returning to U.S. Schools Under New Name.” Voice of America News, 27 June 2022. Retrieved 12 October 2024 from https://www.voanews.com/a/controversial-confucius-institutes-returning-to-u-s-schools-under-new-name/6635906.html

Joseph as a Supply Chain Manager

Introduction

The overall theme of the story of Joseph as found in Genesis 37-50 is that of forgiveness: Joseph’s brothers threw him down a cistern then sold him into slavery, then convinced their father that Joseph was eaten by a wild animal. Later, after Joseph rises to power in Egypt, he invites his brothers and the rest of the family to live there. This was not unlimited forgiveness, however: he verified that the brothers were indeed remorseful before inviting them to Egypt. For purposes of this paper, the story of Joseph and how he overcame famine in Egypt will be interpreted through the lens of supply chain management.

Joseph's Coat Brought to Jacob
by Domenico Fiasella, c. 1640

Story of Joseph from the Book of Genesis

Joseph, son of Jacob, lived in Canaan with ten half-brothers, one full brother, and at least one half-sister. Joseph was Jacob’s favorite son, and two things made his brothers jealous. First, Joseph told them about two dreams he had that suggest his brothers will bow down to him. Second, Jacob gives him a "coat of many colors."

Joseph's brothers are mad enough to kill him when he comes looking for them in Dothan. The eldest brother, Reuben, instead suggests that they throw him into a cistern, with intentions to come back for him later. They follow through with this plan: they take his coat of many colors and then throw him down one of the cisterns.

The brothers see a caravan of Ishmaelites carrying spices and oils en route to Egypt. Judah (one of the brothers) says "we could kill our brother and hide his body. But then we will not get anything for ourselves." The brothers agree to this plan. They pull Joseph out of the cistern and sell him to the Ishmaelites for twenty silver coins (Genesis 37:28). The Ishmaelites took Joseph with them to Egypt.

Reuben returns to the cistern and sees that Joseph was not there - he's very upset. Reuben finds his other brothers and says: "Joseph is not in the well! What can I do now?" The brothers kill a goat and put its blood over the coat of many colors. They take the coat back to Jacob. Upon seeing the coat Jacob says: “It is my son's coat! A wild animal must have eaten him! The animal has torn Joseph's body into pieces.” His children tried to comfort Jacob, but he was inconsolable: “I will be sad until the day that I die, because my son is dead.”

Meanwhile, the caravan took Joseph into Egypt, where he was sold to Potiphar, captain of the Pharaoh's guards. Joseph eventually becomes the superintendent of Potiphar’s house.

Potiphar’s wife falsely accuses Joseph of sexual harassment, and he is imprisoned. God is with Joseph even while he's in prison, and as such the warden puts him in charge of all the other prisoners.

Joseph meets the Pharaoh's cupbearer and chef, both imprisoned for offending the Pharaoh. Both the cupbearer and the baker have disturbing dreams on the same night. Joseph interprets the cupbearer’s dream, learning that in three days the cupbearer will be released from prison and the Pharaoh will restore him to his former position. Joseph asks the cupbearer to remember him to the Pharaoh to get him out of prison. Joseph next interprets the baker’s dream, but the interpretation is grim: in three days, the Pharaoh will have the baker executed.

Three days later, on the Pharaoh's birthday, the events foretold by Joseph occur: the baker is executed, and the cupbearer is released and regains his position in the court. Unfortunately, the cupbearer forgets to ask the Pharaoh to release Joseph.

Two years after that, the Pharaoh has two disturbing dreams. In the first, seven lean cows eat seven fat cows. In the second, seven healthy heads of grain are devoured by seven thin, scorched heads of grain. The Pharaoh's wise men cannot interpret the dreams. The cupbearer then remembers Joseph and how he correctly interpreted the dreams while in prison.

Joseph is released from prison and credits God for his ability to interpret dreams. The Pharaoh's dreams, Joseph explains, mean the same thing: there will be seven years of abundance followed by seven years of famine. Joseph recommends that the Pharaoh appoint someone to oversee the collection of a fifth of the produce produced all throughout Egypt and store it for the famine. Joseph is recommending emergency preparedness (Martinez, 2022, p. 177-181).

Impressed with Joseph’s interpretations, the Pharaoh gives Joseph the role, making him second in command of Egypt: “I hereby put you in charge of the whole land of Egypt” (Genesis 41:41). Joseph, who is now 30, travels throughout Egypt, organizing the collection and storage of food during the seven plentiful years. Egypt is thus prepared for the famine.

When the famine strikes, Joseph opens the storehouses and sells grain back to the Egyptians. The famine was so severe that people from other countries came to Egypt to purchase grain, too. The inhabitants of Egypt, except the Egyptian priests, run out of money. “Then bring your livestock,” said Joseph. “I will sell you food in exchange for your livestock, since your money is gone.” (Genesis 47:16). The result was that the people sold their properties and themselves into slavery to Joseph for food. As the famine ended, Joseph mandated that 20% of all the food that the people grow will go to the Pharaoh. This condition will last until the time of Moses.

Lessons Learned from Joseph

First, Joseph based his plans upon forecasts – in this case, forecasts based on dreams interpreted through Divine knowledge. This continues to the present day, except that historical records, data science, and machine learning are potential sources of information. The important part is that the plans were knowledge-based, and following those plans would today be called “strategic planning” and “emergency preparedness.” Joseph’s overall approach was similar to what would now be called an anticipatory business model (Quigg, 2022, p. 16), except that instead of buying components and materials then manufacturing products from them. The food or grain was sent to storage for later sale.

Anticipatory Business Model (Quigg, 2022, p. 16)

Second, Joseph used storage to overcome the seven years of famine. This was done by collecting 20% of the people of Egypt’s grain during the previous seven plentiful years. The impact of this is to “smooth out” the available supply of grain, decreasing it during times of plenty and increasing it during the famine.

Third, Joseph used what we would now call warehouses to store the grain. This is important because warehouses are not just places of storage, but they are buildings that can be defended from looters as well as rodents.

Fourth, the warehouses were distributed throughout Egypt. This reduced the distance that people would have to travel to get their grain, but also minimized the risks of fires or floods to the overall food supply.

Joseph thus took a very rational, very modern, approach. By planning for the long term and executing those plans in a continuous and incremental manner (Parris & Pope, 2020, p. 29), he was able to get the people of Egypt through the seven-year famine.

References

Martinez, J. (2022). “Developing a resilience mindset: Joseph and his coat of many sufferings.” In B. E. Winston (Ed.), The mind of a leader: A Christian perspective of the thoughts, mental, and perceptions that shape leadership behavior. Palgrave Macmillan, pp. 175-198. https://doi.org/10.1007/978-3-031-07206-2_12

Parris, A. & Pope, D. (2020). “What Christian leaders can learn from lean.” Management Sciences 21, pp. 26-34. https://digitalcommons.acu.edu/mgt_sciences/21

Quigg, B. (2022). Supply Chain Management (1st ed). McGraw-Hill Create. https://bookshelf.vitalsource.com/books/9781307866025

Review of "Effect of Supply Chain Integration on the Ppuri Industry"

Abstract

This is a review of “The Effect of Supply Chain Integration on Supply Chain Risk Management Capability and Firm Performance in the Ppuri Industry” (Jung et al, 2022). The background concepts as well as the relevant concepts from supply chain management necessary to explain this research are defined. The research model they study is described, a research model they are unable to verify. Some of the reasons the authors give for this failure are listed. The managerial applications (or lack thereof) are described. We conclude with comments about the follow-up research they expect to conduct.

Authors’ Purpose

The ppuri industry is a niche industry in South Korea (Dongki, 2021) involved in creating or finishing metal parts used in the making of automobiles, industrial machinery, household appliances, etc. The ppuri industry is also in trouble: ppuri companies have not expanded in any significant manner in recent times, and in fact many of the companies investigated by the authors in this paper went out of business during their research. The authors attempt to explain this by looking at the operation of the supply chain of ppuri companies. They examine the relationship between supply chain integration, supply chain risk management capability, and firm performance. The expected relationships do not hold, and the authors interpret why this happens.

Summary of the Article and its Context

This paper is a study of the ppuri industry in South Korea, an industry that produces or finishes metal parts for large manufacturers. The industry has been struggling in recent years, and the authors attempt to understand the cause of this in terms of supply chain operation. In their study, they find that the relation between supply chain integration and firm performance is not what the authors expected.

They admit that their study suffered from some problems (it used a small sample size and was conducted during COVID-19) but are unable to explain this counterintuitive situation. They make some observations about the conditions in the ppuri industry that may explain this, the most striking one involves the significant difference in size between ppuri companies and the manufacturers they supply. They leave this investigation for future research.

Background of the Issue

The ppuri industry, also called the "root industry," in South Korea is the industry of making metal parts using casting, molding, plastic working, and welding, or finishing those parts using heat or surface treatment (Jung et al, 2022, p. 32-33). These parts are then assembled by manufacturers into automobiles, appliances, industrial or restaurant equipment, etc. (Dongki, 2021). It is called "root" because those parts are of fundamental importance to the manufacturers, and that the parts find their way into many industrial and consumer products.

The ppuri industry has been struggling as illustrated by the facts that ppuri companies are small companies that remain small, that companies have difficulties in finding employees, and that the companies are unable to be competitive due to lack of R&D activities. A South Korea-Japan trade dispute in July 2019 only intensified these problems (Yung et al, 2022, p. 33).

Attempts have been made to strengthen the competitiveness of this industry using strategies that involve increasing supply chain integration. It is expected that tightening SC integration would improve the performance of ppuri companies. But does it?

The authors attempt to investigate the relationship between supply chain integration, the capacity to manage supply chain risk, and overall firm performance. They do this by surveying managers working in ppuri companies and arrive at some counterintuitive observations.

Application of Relevant Supply Chain Management Theory

Modern supply chain management (SCM) has long recognized the fundamental importance of supply chains in company operation, and SC managers understand how well-run supply chains can add value to the products that customers purchase. Because of this, risks to the supply chain must be well understood.

A supply chain risk (Son, 2018, p. 2296-2297) is any event that diminishes the operation of the supply chain. These risks can include buyer-related risks (distortion of demand information or demand volatility), supplier-related risks (poor raw material quality or supplier bankruptcy). Finally, there are internal-process risks such as change in production costs. Supply chain risk management (SCRM) (Son, 2018, p. 2297-2300) are the steps needed to reduce risks or vulnerabilities to the supply chain.

Supply chain integration, one of the holy grails of contemporary supply chain management (Quigg, 2022, p. 24-52), is the degree of cooperation within and between participating organizations. The authors classify integration as being internal or external, and external integration is further broken down into supplier integration and buyer integration.

Supplier integration is an organization’s ability to develop, maintain, and manage long-term relationships with suppliers (Jung, 2022, p. 35). Buyer integration is the practice of managing customer relationships and improving overall customer satisfaction.

External integration allows for cost reduction, productivity and agility improvements, and ease of obtaining resources (Quigg, 2022, p. 373). It also improves operational performance measured by quality, cost, delivery, and flexibility. This improved operational performance should eventually lead to increased company performance (Jung, 2022, p. 35).

In contrast, internal integration are organizational practices that encourage various departments to share knowledge (Jung, 2022, p. 35-36). This knowledge supports external integration and allows the company to achieve company goals. It also allows sharing and cooperation among departments thereby reducing conflict and promoting corporate stability.

Managerial Implications of Article Findings

Based off all this, the authors propose the following hypotheses about the relationships between the above types of integration and overall company performance:

H1a: Supplier integration improves firm performance.
H1b: Buyer integration improves firm performance.
H1c: Internal integration improves firm performance.

Internal integration also makes the supply chain more agile, enabling faster and more effective responses to environmental changes. Further, it also improves the company’s ability to identify internal risks in the supply chain. Integration is thus expected to improve SCRM capability, and the following hypotheses are posited by the authors:

H2a: Supplier integration improves SCRM capability.
H2b: Buyer integration improves SCRM capability.
H2c: Internal integration improves SCRM capability.

Finally, improvement of SCRM capability should have a positive impact on corporate performance, so the authors propose one final hypothesis:

H3: SCRM capability improves firm performance.

Combining these hypotheses together generates a research model where each of the three types of integration (supplier, buyer, and internal) positively bolster firm performance and SCRM capability, and that SCRM capability improves firm performance.

Research Model from (Jung et al, 2022)

The authors are unable to verify this research model, however common-sensical it may seem. In particular, supply chain integration does not improve firm performance, at least when it comes to supplier and buyer integration. Supplier and internal supply chain integration were shown to have a positive impact on SCRM capability, but buyer integration was not. Finally, SCRM capability was shown to positively impact firm performance.

The authors were thus unable to verify three of the seven hypotheses stipulated above. In summary:

H1a: Supplier integration → firm performance – not supported.
H1b: Buyer integration → firm performance – not supported.
H1c: Internal integration → firm performance – supported.
H2a: Supplier integration → SCRM capability – supported.
H2b: Buyer integration → SCRM capability – not supported.
H2c: Internal integration → SCRM capability – supported.
H3: SCRM capability → firm performance – supported.

How can this be explained? The authors specifically note that their study may suffer from a small sample size: surveys were sent to 928 ppuri companies, seventy-five responded, but one was rejected because it was incomplete. The authors used the remaining seventy-four responses as the base of this study. They also state that many of the unreturned responses were caused by the ppuri companies going out of business.

Another flaw in their study noted by the authors is that it was conducted during the COVID-19 plague. They did not investigate how the plague specifically hampered their investigation.

The authors do propose an explanation for the unexpected relationships between supply chain integration, firm performance, and SCRM capability:

Firms in the Ppuri industry play a role as suppliers of large companies in the supply chain, and most of them perform simple manufacturing and processing tasks at the request of buying companies. Therefore, even if the level of buyer integration increases, firms in the Ppuri industry might not fully achieve the advantages of buyer integration, including cost reduction, productivity improvement, and ease of securing resources, due to the power imbalance between supply chain partners. (Jung et al, 2022, p. 43)

In other words, the great difference in size between ppuri companies and the manufacturers they supply somehow explains the lack of expected relationships. They do not investigate this explanation, either statistically or through deductive logic. If they do investigate it in a future paper, they should check to see if a similar phenomenon occurs in other situations where this “power imbalance” is in effect.

The authors recommend that ppuri companies do take steps needed to integrate suppliers and buyers into their supply chain, and they expect that this will improve SCRM capability and firm performance. These recommendations are not borne out in this paper, and verifying their recommendations would require A/B testing.

Because of the quality of the research and the very niche nature of the ppuri industry, implementing their unproven recommendations in another industry is justified only because having an integrated supply chain makes sense.

Conclusion

The authors have established that supply chain integration doesn’t necessarily improve supply chain risk management capabilities nor firm performance. Because of the counterintuitive nature of that statement – as well as problems executing this study – further research is certainly needed.

References

Bax, J. & Ruel, S. (2021). “Can supply chain risk management practices mitigate the disruption impacts on supply chains’ resilience and robustness? Evidence from an empirical survey in a COVID-19 outbreak era.” International journal of production economics, 233, 107972. https://doi.org/10.1016/j.ijpe.2020.107972

Dongki, L. (2021). “What is PPURI industry?” Korea National PPURI Industry Center. Retrieved 8 October 2021 from https://www.techconnect.kr/html/?pmode=UserAddon&smode=ajax&fn=ViewFile&fileSeq=6724

Jung, J., Shin, J., & Yang, H. (2022). “The effect of supply chain integration on supply chain risk management capability and firm performance in the ppuri industry.” Seoul Journal of Business, 28 (2), 31-48. https://doi.org/10.35152/snusjb.2022.28.2.002

Quigg, B. (2022). Supply Chain Management (1st ed). McGraw-Hill Create. https://bookshelf.vitalsource.com/books/9781307866025

Son, C. (2018). “Supply chain risk management: A review of thirteen years of research.” American Journal of Industrial and Business Management, 8 (12), 2294-2320. https://10.4236/ajibm.2018.812154

Longshoremen, Automation, and Obsolete Machines

Robots have replaced many workers in supply chains positions, and this was one of the issues for which the International Longshoremen's Association went on strike. In fact, ILA president Harold Daggett demanded “absolute airtight language that there will be no automation or semiautomation” in the contract they want to get with the United States Maritime Alliance (USMA) (Lynch & Weil, 2024). It is interesting that Daggett did not call for retraining of dockworkers, and he is doing nothing ameliorate the effects of automation on dock workers. Any good leader would do all he can for his men, and there are things that he can be doing: retraining, transferring his men to areas less likely to be automated, etc. Otherwise, Daggett's men will soon be nothing more than obsolete equipment.

They did go on strike, and one of the strikers' signs read "robots don't pay taxes." This only adds to the problem - most people not in a union would read this and deduce that people are paying too much in taxes.

Then there's Daggett's statement that "I will cripple you, and you have no idea what that means." This came at the end of an interview with him on the YouTube channel ran by the International Longshoresmen's Association:

Guys who sell cars can’t sell cars, because the cars ain’t coming in off the ships. They get laid off. Third week, malls are closing down. They can’t get the goods from China. They can’t sell clothes. They can’t do this. Everything in the United States comes on a ship, they go out of business. Construction workers get laid off because the materials aren’t coming in. The steel’s not coming in. The lumber’s not coming in. They lose their job. Everybody’s hating the longshoremen now because now they realize how important our jobs are… In today’s world I’ll cripple you. I will cripple you, and you have no idea what that means, nobody does. (ILA, 2024)

This is more than bluster, it is an out-and-out threat aimed not at the USMA but at American society as a whole.

ILA President Harold J. Daggett

These three things - bad leadership, the calls to be tax chattel, and the leader's threat against America - are arguments in favor of automation, or at least reasons for the ILA to replace Daggett.

The ILA strike began on 1 October 2024 and ended three days later. The ILA and the USMA agreed to a 62% wage increase for the dock workers over the six year tentative deal. The issue of automation will be addressed in approximately 100 days, on 15 January 2025, after the election.

Automation of the type that ILA is rightfully concerned is limited to businesses large enough to afford robotics: Amazon, auto manufacturers, companies requiring large warehouses, etc. Smaller companies are immune to this form of automation, at least at present. Daggett can position his men at these smaller companies. Daggett can also have his men trained to repair the same automation systems the USMA so desperately wants. Irony, though, is something lost on Daggett.

References

International Longshoremen's Association. (2024, 5 September). A Candid Conversation With ILA President Harold J. Daggett On Wide Range of Important Topics [Video]. YouTube. https://www.youtube.com/watch?v=822WNvhQHKI

Lynch, D. & Weil, J. (2024). The Washington Post, 5 October 2024. Retrieved 6 October 2024 from https://www.washingtonpost.com/business/2024/10/05/port-strike-workers-jobs-automation-union/

The First Gulf War as a Successful Joint Operation

Introduction

In this paper it is argued that the First Gulf War was a successful joint operation, and that the “jointness” was organized according to the Goldwater-Nichols Department of Defense Reorganization Act of 1986. To justify this thesis, the historical events that lead to the passage of the Goldwater-Nichols Act are explained, and the Act itself is described. Next, the history of the First Gulf War is briefly recounted. The war is examined through the lens of the Goldwater-Nichols Act, and we see that it was executed in the manner prescribed by the Act. Finally, the connection between successful execution and successful joint operation is examined, and the thesis is thus supported.

USAF photo of F-16A, F-15C, F-15E war planes flying over burning oil wells during Desert Storm, 1991

Background

The concept of joint operations has been present in US military thought since at least 1905¹, but it came to the fore with the passage of the Goldwater-Nichols Department of Defense Reorganization Act of 1986, and eventually became part of doctrine². The Act streamlined the military hierarchy while allowing different branches to work better together. There were two small military operations during the Carter Administration whose outcomes led to the passage of the Act.

The first was the attempt to rescue the hostages taken from the US Embassy in Tehran by followers of Ayatollah Ruhollah Khomeini. The operation, called Operation Eagle Claw³, began on 24 April 1980 with eight helicopters. The helicopters encountered severe dust storms which disabled two of them. After refueling, one of the remaining helicopters was found to be faulty. This brought the number of helicopters to five, below the minimum viable number needed to complete the rescue and so the mission was aborted. As the helicopters were refueling for departure, one of them crashed into a C-130 tanker, killing eight servicemen.

An analysis of this incident, the “Holloway Report”, found twenty-three issues⁴, which included problems with command and control, coordination of joint training, and a lack of weather reconnaissance. From these recommendations, the Joint Special Operations Command was established in December of 1980.

The second military operation was the liberation of Grenada in October 1983. On 13 March 1979, the Marxist New Joint Endeavor for Welfare, Education, and Liberation Movement, also called the New JEWEL Movement, or the NJM, seized control of Grenada, and formed the People’s Revolutionary Government. This happened when Eric Gairy, the prime minister, was out of the country.

The United States recognized the new government on 22 March 1979. The American ambassador promised aid projects, but a US-backed coup d’état led by Gairy seemed imminent. Grenada broke-off relations with the United States and formed relations with the Soviet Union, Nicaragua, and Cuba.

Reagan won election in 1980, and in response to the growing relation between Grenada and Fidel Castro as well as concerns for the safety of 600 American medical students on the island, an invasion of Grenada, called Operation Urgent Fury, was planned. The operation began on 25 October 1983. The People’s Revolutionary Government was toppled, Soviet and Cuban forces were expelled, the students were rescued, and a new government was installed. The operation ended after 8 days, on 2 November 1983.

The operation, while a military success, exposed problems that would later be addressed by the Goldwater-Nichols Act. Intelligence was lacking. In particular, the 600 medical students were located at two different campuses, and American forces took 30 hours to reach the second campus. The maps used were not topographic maps but rather tourist maps with hand drawn MGRS lines⁵. Communication systems used by the US forces were incompatible between the branches and this hindered the coordination of operations⁶.

The Goldwater-Nichols Act

The Goldwater-Nichols Act had made several changes to military structure, and therefore operations and planning⁷, the most relevant being:

First, it created the position of the chairman of the Joint Chiefs of Staff. This position is the principal military advisor to the President, the National Security Council, and the Secretary of Defense. This arrangement allowed the chairman to choose overall strategies while giving command authority to joint combatant commanders. However, the chairman “may not exercise military command over the Joint Chiefs of Staff or any of the armed forces.”^{8 9}

Second, the various branches were to use combined procurement to not only share the latest technology but also to ensure communication interoperability.

Finally, the service chiefs no longer had any operational control of their forces. This role was taken over by combatant commanders, and those commanders were responsible for either geographic regions or specific functions. Since multiple branches were involved in all the regions or all the functions, combatant commanders are inherently joint commanders.

The First Gulf War

The first major test of the Goldwater-Nichols Act was the First Gulf War of 1991. The issues prompting that war were the Iraqi invasion of Kuwait starting on 2 August 1990 and fears that Iraq would next invade Saudi Arabia.

This invasion prompted immediate and universal condemnation. Included in the reaction was UN Security Council Resolution 660 which demanded the immediate withdrawal of all Iraq forces from Kuwait, and Resolution 661 which imposed international sanctions against Iraq.

The US and UK deployed forces into Saudi Arabia to deter Iraq movement into Saudi Arabia as well as to force Saddam Hussein to follow Resolution 660. Meanwhile, President George H. W. Bush began building a large coalition of nations, encouraging them to either contribute their own forces or provide support.

Among the nations to join the coalition were many Arab/Muslim nations including Saudi Arabia, Egypt, Bahrain, Morocco, Oman, Pakistan, Qatar, Syria, Turkey, the United Arab Emirates, and the Kuwait government in exile. Of those, Saudi Arabia and Egypt provided considerable support to the coalition - Egypt would commit 35K to the operation, while the Saudis not only hosted coalition forces but provided troops and air support.

The final ultimatum, Resolution 678, came from the United Nations, giving Iraq until 15 January 1991 to withdraw from Kuwait. They didn’t withdraw, and Operation Desert Storm started the next day.

In an attempt to fracture the coalition, Iraq launched missile strikes on Israel starting on 17 January 1991, hoping that an Israeli response would alienate the Arab nations and cause them to drop out. At the urging of the Americans, Israel did not retaliate, and the coalition mostly held throughout the war.

The Gulf War was fought according to the AirLand Battle doctrine¹⁰. In this, land and air forces collaborate with the air forces depriving the enemy of air and logistical support. Ground forces then performed rapid and aggressive maneuver warfare to dominate enemy targets. To do this, a large amount of materiel must be pre-positioned, say in Saudi Arabia.

The air campaign lasted from 17 January 1991 to 23 February 1991 - 42 consecutive days and nights. It consisted of over 100,000 sorties, performed primarily by the US Air Force, with the Navy and Marine Corps also contributing. The other coalition partners, even Middle Eastern countries (Saudi Arabia, Qatar, Bahrain, and the UAE), also supplied aircraft.

Immediately prior to the start of the ground campaign, an artillery barrage was used to weaken or defeat any Iraqi defensive positions that survived the air assault. Performed by the Army’s 1st Infantry Division Artillery, 90,000 artillery rounds were fired in a period of 2.5 hours.

The ground campaign involved infantry and armored divisions from the US Army, the USMC, and the British 1st Armoured Division. Four of the largest tank battles in America’s history were fought during this phase of the Gulf War.

American and British forces crossed from Kuwait into Iraq on 24 February 1991. Saddam Hussain ordered that his remaining forces in Kuwait to withdraw on 27 February. Iraqi troops stationed at Kuwait International Airport didn’t get the memo, and their defeat was the end of combat operations within Kuwait. The next day, Iraq’s foreign minister announced that Iraq would accept the UN Security Council resolutions against it.

The First Gulf War as a Joint Operation

The above recounting of the history of the First Gulf War illustrates the influence the Goldwater-Nichols Act had on military operations. Operation Desert Storm was not only a multinational operation, it was a joint operation: the US military branches had to collaborate with partner nations, but more importantly the US military branches had to work in a coordinated manner¹¹.

This was possible primarily because the Joint Chiefs of Staff were given a Chairman. This position, then held by General Colin Powell, is purely advisory but it ensures that the separate combat commanders have a central point of contact. This allowed the branches to operate in a coordinated fashion.

The combined procurement required by the Goldwater-Nichols Act ensured that communication breakdowns seen during Operation Eagle Claw and Operation Urgent Fury would not happen again.

Finally, the Goldwater-Nichols Act encouraged interactions between the services in that combatant commanders were joint commanders that had operational control over their forces, not service chiefs. General H. Norman Schwarzkopf Jr, the combatant commander of the First Gulf War thus had control over multiple military branches.

Success Factors

The First Gulf War was indeed a military success, and it was indeed a joint operation executed in a manner prescribed by the Goldwater-Nichols Act, as argued in the previous sentence. Was that success due to it being a joint operation?

It may be attempting to attribute the victory to the fact that it was a multinational operation, but other multinational operations were failures.

It is more reasonable to attribute success to the use of the AirLand Battle doctrine under a brilliant and experienced combat commander in pursuance of finite and delineated goals. This theory is ruled out because AirLand Battle doctrine explicitly requires control of the air and land dimensions of the battlespace. While this doesn’t necessarily imply that multiple branches of the military must be involved, the combined air and land capabilities of a single branch may not have been sufficient alone.

Conclusion

The First Gulf War was thus a successful joint operation, but there is one problem…

The only point of fault of this joint operation was the lengthy time needed to form a coalition. The people of Kuwait were living under the Arab Socialist Ba’ath Party for almost 7 months, from 2 August 1990 to 27 February 1991, and socialists can do considerable damage in that period of time. The presence of Middle Eastern nations in the coalition may have prevented the war from expanding should the United States acted alone, however.

Barring this, the First Gulf War must be classified as a tremendous success for modern joint strategic planning and warfare. It demonstrated that while individual military branches are themselves powerful, they are even more powerful when they are used in a collaborative manner.

Footnotes

[1] Crosbie, “Getting the Joint Functions Right”
[2] JP 3-0: Joint Operations.
[3] Morrow, “Operation Eagle Claw remembered 40 years later.”
[4] Holloway, Final Report of the Special Operations Review Group.
[5] Bolger, “Operation Urgent Fury and its Critics.”
[6] Nightingale, “How Grenada Changed How America Goes to War.”
[7] Cook, “The Importance of Joint Concepts for the Planner.”
[8] PUBLIC LAW 99-433-OCT. 1, 1986, 10 USC 152c.
[9] Here’s looking at you, General Milley.
[10] King & Boykin IV, “Distinctly Different Doctrine: Why Multi-Domain Operations isn’t AirLand Battle 2.0.”
[11] Marquis et al. “The Advent of Jointness During the Gulf War: A 25-Year Retrospective.”

Bibliography

Bolger, D. “Operation Urgent Fury and its Critics.” Military Review, July 1986. Retrieved 5 October 2024 from https://www.armyupress.army.mil/Journals/Military-Review/Directors-Select-Articles/Operation-Urgent-Fury/

Cook, J. “The Importance of Joint Concepts for the Planner.” Joint Force Quarterly 99. National Defense University Press. 19 November 2020. Retrieved 4 October 2024 from https://ndupress.ndu.edu/Media/News/News-Article-View/Article/2421455/the-importance-of-joint-concepts-for-the-planner/

Crosbie, T. “Getting the Joint Functions Right.” Joint Forces Quarterly 94, 25 July 2019. Retrieved 5 October 2024 from https://ndupress.ndu.edu/Media/News/News-Article-View/Article/1913080/getting-the-joint-functions-right

Holloway, J. Final Report of the Special Operations Review Group. July 1980. Retrieved 5 October 2024 from https://nsarchive.gwu.edu/document/19709-national-security-archive-doc-10-final-report

Joint Chiefs of Staff, JP 3-0: Joint Operations. 11 August 2011. Retrieved 6 October 2024 from https://www.moore.army.mil/mssp/security%20topics/Potential%20Adversaries/content/pdf/JP%203-0.pdf

King, S. & Boykin IV, D. “Distinctly Different Doctrine: Why Multi-Domain Operations isn’t AirLand Battle 2.0.” Association of the United Stares Army. 20 February 2019. Retrieved 5 October 2024 from https://www.ausa.org/articles/distinctly-different-doctrine-why-multi-domain-operations-isn%E2%80%99t-airland-battle-20

Marquis, G., Dye, D., & Kinkead, R. “The Advent of Jointness During the Gulf War: A 25-Year Retrospective.” Joint Force Quarterly 85. National Defense University Press. 1 April 2017. Retrieved 5 October 2024 from https://ndupress.ndu.edu/Media/News/Article/1130670/the-advent-of-jointness-during-the-gulf-war-a-25-year-retrospective/

Morrow, K. “Operation Eagle Claw remembered 40 years later.” U.S. Army, 24 April 2020. Retrieved 5 October 2024 from https://www.army.mil/article/235436/operation_eagle_claw_remembered_40_years_later

Nightingale, K. “How Grenada Changed How America Goes to War.” Small Wars Journal, 23 October 2013. Retrieved 5 October 2024 from https://smallwarsjournal.com/jrnl/art/how-grenada-changed-how-america-goes-to-war

PUBLIC LAW 99-433-OCT. 1, 1986. The Goldwater-Nichols Act of 1986. https://history.defense.gov/portals/70/documents/dod_reforms/goldwater-nicholsdodreordact1986.pdf

Predictive Analytics in Supply Chain Operations

Background

The common commercial availability of artificial intelligence (AI) and machine learning (ML) technologies has and will continue to have great impact on any field including commercial endeavors. Although the most popular form of AI is large language models (LLMs) such as ChatGPT or Grok AI, machine learning techniques will most likely have greater impacts. One very promising ML technique is predictive analytics.

Predictive analytics is the use of historical data combined with current information to forecast future conditions. There are several techniques for doing this, including the use of statistical models and regression analysis. Predictive analytics can be applied (Cote, 2021) to forecasting product demand, predicting equipment malfunctions, estimating cash flow, etc.

Potential Consequences of Implementation

For sake of discussion, we limit the examples to predicting equipment failure and forecasting cash flow.

To predict equipment failure, detailed maintenance logs must be maintained, data must be extracted, and from this, valuable information can be determined, most importantly date of last failure and mean times between failures. From this, a schedule for performing preventative maintenance can be established. Doing this ensures that equipment downtime can be minimized.

This is of course beneficial to any company using this equipment since downtime for maintenance can be scheduled for off-hours (when the machine in question is not heavily used) whereas downtime due to failure can happen at the most inconvenient time - and usually will.

There are several problems with using maintenance logs to predict equipment failure (Yadav et al, 2024). First, with companies using modern supply chain methodology, it is quite possible that the equipment in question is not owned but rather leased. Further, the company using the equipment, the equipment manufacturer, and the technicians servicing the equipment may be three separate businesses. These arrangements are possible third-party logistics arrangements (Quigg, 2022, p. 164-169). Who should collect and track maintenance records?

Also, what level of detail should the maintenance records be maintained: the equipment as a whole, subsystems, individual components? 

If the company using the equipment has only one of this type of equipment, there will not be sufficient data to make accurate predictions. The equipment manufacturer may not track their equipment once it is delivered to the customer. Finally, there may be multiple service companies that perform maintenance. Again, who collects the maintenance records and performs the predictive analytics?

The best solution would be to have the equipment manufacturer maintain relationships with the service companies. This often happens, and when it does, the companies providing service are called "authorized" or "certified" service technicians. Thus the equipment manufacturer would collect the data and perform the predictive analytics. The downside is that the company using the equipment must rely on the manufacturer for the predictions - which leaves open the possibility that mean time between failures are artificially shortened thereby inflating maintenance costs.

Unlike the prediction of equipment failure, the prediction of cash flows is very straightforward: there are only two possible places where data can be collected. The responsibility of collecting records of revenues and expenses lies either with the company itself, or with an external accounting firm. With the external accountants, no additional trust needs to be earned in order to perform cash flow forecasts (Quigg, 2022, p. 301-302).

Proposed Response

When considering whether to adopt predictive analytics, or any other technology, a company must consider the profit and loss associated with applying that technology.

By using predictive analytics to forecast cash flow, there really are no costs since all tools used for accounting and finance are capable of some form of predictive analytics. For example, Excel has the "Data Analysis ToolPak" for performing linear regression. The benefits of predicting cash flows is that this prediction allows for early business actions - it is not necessary to allow business savings to accumulate before purchasing an item (Wach et al, 2021).

The decision whether to use predictive analytics for anticipating equipment failures is not so clear. As indicated above, the primary company may not have access to the historical data needed to make such forecasts. Servicing companies can collect the data, but may not have complete data if the equipment manufacturer retains multiple servicing companies. The only company for which it is even possible to predict maintenance requirements is the equipment manufacturer, assuming qualified service companies send reports to that manufacturer. For the manufacturer, it does indeed make sense since the maintenance records can be used to improve product quality and can be touted as a benefit to using their machines. This benefit then carries over to authorized service providers and the company that uses the equipment and service technicians since it allows them to better anticipate operating costs.

References

Cote, C. (2021). "What is predictive analytics? 5 examples." Harvard Business School Online. Retrieved 3 October 2024 from https://online.hbs.edu/blog/post/predictive-analytics

Quigg, B. (2022). Supply Chain Management (1st ed). McGraw-Hill Create. https://bookshelf.vitalsource.com/books/9781307866025

Wach, M. & Chomiak-Osra, I." (2021). "The application of predictive analysis in decision-making processes on the example of mining company’s investment projects." Procedia Computer Science 192. https://doi.org/10.1016/j.procs.2021.09.284

Yadav, D., Kaushik, A., Yadav, N. (2024). "Predicting machine failures using machine learning and deep learning algorithms." Sustainable Manufacturing and Service Economics 3. https://doi.org/10.1016/j.smse.2024.100029