The rumble in the supply chain: Knocking out the barriers to true SC costing

From the January-February 2025 edition of Supply Chain Management Review.

January-February 2025

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When Cassius Clay Jr. was 12 years old, someone stole his new bike. Upset, Clay told a police officer he wanted to “whup” the thief. The officer, Joe Martin, responded that Clay had better learn to fight first. Martin enrolled Clay at his local gym, where he taught Clay to box. So began the career of the man you know as Muhammad Ali, arguably the greatest heavyweight boxer of all time. Sports Illustrated, the BBC, Newsweek, and Time all named Ali the “Athlete of the 20th century.”

Clay started turning heads in 1960, winning Olympic boxing gold in Rome. Four years later, at age 22, Clay, an 8-to-1 underdog, stopped Sonny Liston to win the heavyweight title. He changed his name to Ali two weeks later. Pundits consider Ali the greatest for two reasons. He reigned in the Golden Age of heavyweights, beating greats like Liston, Joe Frazier, and George Foreman. And he did things never seen—before or since—in boxing. As a young champ, Ali was scary fast. He was almost unhittable. As he aged, Ali recreated himself, blending an unmatched will to win with unsurpassed ring savvy. Ali became the only three-time lineal heavyweight champion.

Perhaps you’re thinking: “Ali was amazing, but what can I, a supply chain leader, learn from his story?” One response: “Ali was remarkably resilient, his longevity notable. To remain relevant, he repeatedly reimagined ‘The Sweet Science.’” The more insightful story, however, is a cautionary tale. When he took training seriously, Ali was unbeatable. Yet twice he took dangerous opponents—Ken Norton and Leon Spinks—lightly. The result: Humbling defeats. What went wrong? Ali convinced himself he was “good enough” and failed to pay the price—i.e., to sacrifice—to get into fighting shape.

In 30 years working with supply chain champions, we have repeatedly watched this psychology play out as companies pursued winning competencies. Nowhere have these mind games undercut desired outcomes more than in the quest for strategic SC costing capabilities. Let’s take a closer look. 

Knockout costing capabilities

Great boxers aren’t just brawlers. They enter the ring with a plan to strategically exploit an opponent’s weaknesses. Pierce Egan, back in 1813, described this scientific approach to fighting as “The Sweet Science,” which Ali skillfully deployed.

The Sweet Science in the ring

Before matches, Ali employed psychological warfare to rile opponents up and wear their wits down. During weigh-ins, he taunted. During interviews, he insulted. He snuck onto rivals’ turf to unbalance them. Sonny Liston, who feared no one, thought Ali was crazy, an unnerving notion.

In the ring, Ali met rivals—at least the toughest ones—with a well-defined plan. Before the first Liston fight, Ali didn’t just study tape of Liston’s recent fights; he dissected Sugar Ray Robinson’s footwork, rhythm, and timing. Ali’s goal: Use non-stop motion to wear down the more powerful Liston. He likewise danced in Ali-Frazier II to keep the hard-hitting Frazier off balance.

Before the Rumble in the Jungle, Ali goaded, “George can’t hit what his eyes can’t see.” Yet in the ring, Ali settled into the ropes letting Foreman punch himself out. Ali’s rope-a-dope tactics set Foreman up to be knocked out in the eighth, earning Ali his second heavyweight crown. Ali got scientific again to avenge his loss to Leon Spinks, clinically dismantling the young champ. Title number three to Ali.   

The Sweet Science in the supply chain

Great companies aren’t just profitable. They gain an enduring strategic edge by consistently creating unbeatable value. True costing, the name we give to refined, evidence-based costing practices, is supply chain’s sweet science. True costing enables companies to knock out misperceptions and outpoint rivals through superior decision-making. It empowers managers to exploit opponents’ weaknesses, reimagine SC relationships, and earn customer trust.

 

True costing enables advantage. Consider this scenario. You’ve put true costing to work. During a price negotiation, a supplier argues your cost estimates are too low. You walk through the costing together. Two “aha” moments are possible.

1. Your costing is accurate. The outcome: You teach the supplier how to improve their processes.
2. Your costing is wrong. The result: The supplier teaches you how to improve your costing model.

Both are wins. As long as Option #1 occurs most frequently, you earn trust across the supply chain. Competence builds confidence, a valuable psychological edge.  

Equally powerful, true costing leads to better decisions, processes, and products. You deliver unique, valued customer experiences, enabling you to win in the marketplace. Critically, winning creates fans. Just as fans came to fights to see Ali, SC partners will want to be in your corner.

Building knockout costing capabilities

For the Sweet Science to work, the boxer must work. No matter how scientific or strategic your fight plan, if you don’t put in the effort to build needed capabilities, you get pummeled. The ring is unforgiving. Mike Tyson explained: “Everyone has a plan until they get punched in the mouth.”

Ali grasped preparation’s power at an early age. Joe Martin, Ali’s first coach, trained thousands of boys. He described Ali’s determination and willingness to sacrifice, saying:

“When he first began coming around, … he was just ordinary … About a year later, though, you could see that the little smart aleck—I mean, he’s always been sassy—had a lot of potential. He stood out because, I guess, he had more determination than most boys … He was a kid willing to make the sacrifices necessary to achieve something … I realized it was almost impossible to discourage him. He was easily the hardest worker of any kid I ever taught.”

Ali’s early results—Olympic gold at 18, world heavyweight champ at 22—validated Martin’s assessment. Preparation precedes power. As Ali said, “It’s not bragging if you can back it up.”

Ali’s early attitude, work ethic, and success make his later lapses against Norton and Spinks more puzzling. How could he drop his guard at such pivotal moments? We answer this question by depicting Ali’s ring results as a limits-to-growth model, which emphasizes the power of painstaking preparation and the need to avoid the psychology of “good-enough” thinking. Grasping these dynamics can help you devise a fight plan to build prized true costing capabilities.

 

Painstaking preparation the Ali way

Boxing is brutal. Imagine stepping into a ring for 15 three-minute rounds of punishment. Heavy hitters like Liston, Frazier, and Foreman landed punches at over 1,000 psi force. After taking 440 fearsome punches from Frazier, Ali described the Thrilla in Manila as “like death.” But it was Frazier’s trainer Eddie Futch who stopped the fight after 14 rounds. Frazier’s eyes had swollen shut, leaving him defenseless. Futch had seen four fighters die in the ring. Your takeaway: Survival demands preparation. To compete for the title, the price is painstaking training.

Though Ali didn’t like training, he liked the results. So, when he had “something to prove,” he trained seriously. Before the Rumble in the Jungle, Ali asked former champ Joe Louis, “Did you ever chop wood when you were training?” Louis responded, “All the time.” Ali said, “I think I’ll chop some before the Foreman fight.” Louis advised: “Better chop a lot.” Ali did, and he stopped Foreman in the eighth round. Swinging an axe boosted Ali’s confidence, but it was just a small part of his three-step, 16-week quest to “float like a butterfly, sting like a bee”—and regain the title.

1. Get to weight. Ali’s training for the Rumble in the Jungle began at Fighter’s Heaven, his camp in Pennsylvania’s Poconos mountains. He spent the first weeks running before dawn, hiking up hills, and cutting down trees. The goal: Get to weight. At 212 pounds Ali was unstoppable. He weighed 221 in his loss to Norton, 224 in losing to Spinks. Ali started gradually, only running a mile a day at first—a difficult task wearing his favored heavy army boots. He then added a mile a day until he reached his 6-mile goal. After a week, Ali added an afternoon workout to his routine. In eight weeks Ali dropped 10 pounds.
2. Build endurance. Once at weight, Ali ratcheted up the intensity. His goal: Build endurance efficiently. He sought the stamina to go the distance, i.e., 15 rounds (longer than Liston or Foreman needed to KO most opponents). At this stage, he trained through pain to exhaustion. His goal: Hurt more in training than he would in a fight. Ali counted on being able to outlast rivals.
3. Reach peak performance. In the final weeks before the fight, Ali had one goal: Enter the ring in peak mental and physical condition. To get psyched for the fight, Ali studied film on every Foreman fight. As he identified a Foreman vulnerability, he formulated a plan. At the end of the first round, he would make a call. If his legs couldn’t dance 15 rounds, he would cajole Foreman into punching himself out. This rope-a-dope strategy was Ali’s secret—not even his corner knew.

To be physically primed, Ali raised the intensity of his training. Eight days before the Rumble in the Jungle, he described his afternoon workout, saying:

“On this day I have three rounds of shadowboxing, five rounds on the speed bag, four skipping rope, three on the heavy bag. After that I go in the ring with my sparring partners, feeling the kind of fatigue I know will come in a real fight, but I drive myself through nine hot three-minute rounds of boxing. I’m ready.”

When Ali invested in this structured success sequence, he never lost. Fighting Foreman for the title was the right incentive to get Ali to pay the champion’s price.

Painstaking preparation the SC way

Global competition is also brutal, customers are often unforgiving. Painstaking preparation precedes building winning competencies, beginning with SC costing. Our work with SC leaders shows managers get it. They know they need better costing to make winning decisions. So, how do they prepare? They invest in IT and employee training, which deliver early benefits. However, peak performance remains out of reach. Why, you ask? Answer: Managers haven’t figured out costing’s success sequence. The result: They come to the market ill-prepared to earn the title, “industry champion.”

Now, a little good news: Our research delineates costing’s success sequence. It parallels Ali’s training regimen—and is just as demanding (see Table 2).

1. Know thyself. Ali knew his ideal fighting weight; you must know your core competencies. Then you can target costing investments efficiently to gain the insight needed to enhance these core competencies. Many decisions don’t require deep costing insight. Don’t waste time on them.
2. Think systemically. Ali relied on disciplined training to build the endurance to go the distance. You also need disciplined action to define key systems and identify relevant costs. You must dig into the details. If you only capture some relevant costs your decisions are just guesstimates.
3. Create visibility. Ali achieved peak performance by confronting the brutal facts, i.e., the need to train rigorously, keep a strict diet, and give up sex. Your big challenge: You can’t confront the brutal facts if you can’t see them. You must create deep process visibility to get costing right.

 

Now, an invitation: Just because most managers don’t grasp costing’s success sequence doesn’t mean you can’t. ALDI, the German deep discounter, integrates true costing into critical SC decision-making. Consider how ALDI pursues costing’s success sequence.

• Know thyself. Every employee knows ALDI’s core competency is taking costs out everywhere, a feat that enables ALDI to offer convenient shopping for quality products—at the lowest prices!
• Think systemically. Systems thinking is ALDI’s modus operandi. Executives always ask, “If we do this, then what happens?” Systems thinking guides the analysis that yields the answers.
• Create visibility. SC mapping and optimization modeling are part of ALDI’s standard decision-making toolkit. The goal: Envision how decisions will impact costs and performance.

With this toolkit, true costing comes naturally and is helping ALDI rise up the ranks of the world’s most formidable grocers. Even Walmart winces when ALDI steps into the ring. One final thought: ALDI built its own Fighter’s Heaven in Austria to design the supply chain of the future. Your takeaway? ALDI has made Ali-like investments to do the costing needed to come to market ready to win.

Good enough thinking: Ali’s nemesis

Ali’s psyche played an outsize role from the outset of his pro career. He had vision, was a quick study, and was willing to pay victory’s price, but nobody could tell him what to do. Consider his relationships with trainers Archie Moore and Angelo Dundee.

1. Archie Moore. In November 1960, Ali’s advisors sent him to train at light-heavyweight champ Archie Moore’s camp, the Salt Mine. Moore required fighters to cook meals, wash dishes, and scrub floors. Ali didn’t like being “ordered” around. He quit camp after less than a month.
2. Angelo Dundee. Ali landed with Angelo Dundee, who quickly grasped that working with Ali was a “whole different ballgame.” Ali didn’t respond well to classic training. He claimed, “Angelo doesn’t train me.” Angelo agreed. What did Angelo do? Rather than instruct, Angelo guided. The key: Ali needed to feel he was the innovator, “doing things on his own.”

Ali’s MO revolved around a simple equation. If his estimation of expected benefit (or feared loss) was greater than the effort he needed to invest, he paid the price. Here’s the key point: It was Ali’s estimation that mattered. Sadly, Ali often sensed he was “good enough.” The result: He often trained less than he should have. Talent and will delivered more than one escape. But the threat of miscalculation was ever-present. Twice complacency caught up with Ali, leading to humbling losses.

1. Regaining the title. After Ali lost the “Fight of the Century” to Joe Frazier, he plotted a rematch. Then the unexpected happened: George Foreman knocked Frazier out. Ali would need to earn a title shot against Foreman. Ken Norton stood in his way. Though the 6th-ranked heavyweight, Norton was mostly unknown. Sportscaster Howard Cosell noted the fight should be “a routine exercise for Ali.” Ali agreed, underestimating Norton. He entered the ring teeming with confidence. He left with a broken jaw—and a deflated reputation.  What went wrong? Ali shortcut his tried-and-true success sequence. He trained fewer than three weeks. Skipping roadwork, Ali tired quickly on the heavy bag. Herbert Muhammad, Ali’s manager, chided him for overconfidence and poor conditioning. Ali didn’t listen.
2. Repeating mistakes. Ali got “lazy” again in 1978 as he prepared to face Leon Spinks. Spinks, an ex-marine and Olympic champ, had only fought six pro bouts. Spinks’ inexperience seduced Ali into thinking the fight would be easy. To Ali’s way of thinking, Spinks was just an “amateur.”

Taking Spinks lightly cost Ali dearly. Setting aside his proven success sequence, Ali only trained two weeks, sparring fewer than two dozen rounds. Butch Lewis, who promoted the fight, noted Ali ate more, worked less, and sloughed off in the gym. Ali’s fight weight: 224 pounds.

The result: A split-decision loss. During the post-fight press conference, Ali gave Spinks credit for fighting a good fight, but admitted, “I messed up; I was lousy. … He made fools of everybody, even me.” Ali lamented the loss was “my own fault.”

You could rightly conclude that the price for overconfidence—i.e., Ali’s sense of “I’m good enough”—was disaster. Yet, defeat gave Ali something to prove, a reason to return to the ring—and to his success sequence! Ali’s record in rematches: Perfect, he never lost.

Consider Ali’s response to the Spinks’ loss, the defeat that stung the most. He said, “I had to fight him again. I wanted to get my title back. What they paid me didn’t matter.” He committed to “get up and run with the moon and the stars.” And he did, running three to six miles every morning and enduring “tortuous ring exercises” each afternoon (including 200+ rounds of sparring). Ali described the sacrifice:

“I’ve never suffered like I’m forcing myself to suffer now. I’ve worked this hard for fights before, but never for this long. All the time, I’m in pain; I hurt all over. I hate it, but … I don’t want to lose and spend the rest of my life looking back and saying, ‘Damn, I should have trained harder.’”

Such was the psyche that made Ali “the greatest.”

 

Good enough thinking: SC’s nemesis

Getting psyched up to do hard things, like true costing, is also a SC challenge. Our work with SC leaders shows that when it comes to costing, decision-makers often settle for good-enough, even when they know better! The result: Time and again, we’ve seen that skipping costing’s success sequence—i.e., the painstaking preparation—leads to poor decisions and poorer performance. Regret results. Consider Boeing’s tragic 21st-century track record.Caption

As the 2000s began, Boeing and Airbus were locked in a fight for air supremacy. Airbus announced its 550-seat A380 in early 2000. Boeing responded with the 787—dubbed the Dreamliner—in January 2003. As the first commercial carbon-fiber airframe, the 787 promised to reduce operating costs 20% while elevating customer comfort. Airlines found the 787’s value proposition irresistible. As 787 orders shot skyward, A380 sales stalled.

Boeing, however, couldn’t deliver to promise. Design and production SNAFUs delayed delivery to All Nippon Airways, the 787’s launch customer, from 2008 to October 2011. Why didn’t 787 production get off the ground? To cut the 787’s estimated $10 billion development cost in half, Boeing encouraged suppliers to take on the cost of designing and building major modules of the new plane. Suppliers weren’t ready for this new development model—nor was Boeing.

Now, the backstory. Early on, Boeing’s SC team argued the shared-design-and-production model wouldn’t work. They warned that Boeing was making decisions based on the “tip of the iceberg”—i.e., highly visible, upfront R&D costs—but ignoring the below-the-surface costs of managing the supply network. They didn’t, however, do the costing. So the C-suite pressed forward! The resulting SC nightmare pushed launch costs to over $30 billion—3X the original cost estimate—and eroded Boeing’s first-mover advantage by 3.5 years, giving Airbus space to launch the A350.

 

Here’s the key point: Boeing decision makers, at multiple levels, succumbed to “good enough” thinking.

1. SC design. Confident in Boeing’s design competence, C-suite executives felt Boeing was good enough to handle disruptions caused by the new development model. It couldn’t. Breakdowns in design, and in the SC work flow, staggered Boeing.
2. SC costing. Confident in their influence, SC leaders forgot a core reality, “If you don’t have the numbers, it’s just your opinion.” By shortcutting costing’s success sequence, they undercut their own influence. Their story was neither concrete nor credible.

Long story short: Good enough wasn’t good enough, costing Boeing billions.

Curiously, unlike Ali, the 787 debacle didn’t motivate Boeing to return to its success sequence. Still fixated on the “tip of the iceberg,” good-enough thinking permeated Boeing’s culture. The hubris of chasing short-term costs caught up to Boeing on the 737 Max program. Two avoidable crashes, killing 346 people, debased Boeing’s reputation. Poor delivery, caused mainly by mandated groundings, dented Boeing’s order log. Good-enough costing is often more expensive than you think.

Where champions are made

Ali smartly noted, “Champions aren’t made in gyms. … They have to have the skill, and the will. But the will must be stronger than the skill.” Will, or emotional fortitude, is more than the ability to take a punch. It includes the ability to counter good-enough thinking. Boxing’s training-to-competition ratio is, after all, one of the highest in sports. For Ali’s success sequence, the ratio approaches 1,000:1 (i.e., 16 weeks prep for an hour in the ring). Will is critical before the fight begins. 

 Because its success sequence is detailed and demanding, true costing’s analysis-to-decision ratio is among the highest in a SC manager’s toolkit. Because senior leaders often talk about but seldom measure and reward it, making the case for true costing also requires emotional fortitude. Further, when you need true costing’s deep insight, if you haven’t invested in its success sequence, you can’t just turn it on. Will is needed before the day of decision arrives. Otherwise, you may find the price of poor decisions acutely painful.

Now, a warning: True costing’s value emerges from better decision-making. But better decision-making requires you to think and act differently. If you’re not ready for change, true costing’s insight has little value, and its ROI is elusive. Inertia is your foe. For example, when a leading steel producer deployed ABC-costing, leaders learned key “A” customers were unprofitable.

They were shifting resources from “C” customers to secure more business from these “A” customers. The problem: These “C” customers were profitable. If pursued, the strategy would have led to bankruptcy. ABC-costing intervened, but action was needed. What were the decision makers’ options?

• They could raise prices, a tough sell with “A” customers.
• They could fire their unprofitable “A” customers, perhaps viable, but impractical.
• They could pursue crucial conversations with these customers, engage in joint process re-design, and change the relationship to reduce service costs.

Here’s your takeaway. ABC costing didn’t just identify a problem, it informed the tough conversations and enabled the collaborative efforts needed to change course, reduce service costs, and create win-win relationships. This is the promise, and power, of true costing in all of its forms.

Like Ali, you may hate every minute of the nitty-gritty, sometimes painful preparation needed to make true costing a competitive capability. That said, success—both yours and your company’s—depends on how well you use true costing to make better decisions, build better relationships, and exploit market opportunities. Ali would invite you to pay the price now and live the rest of your life as a champion.

About the authors

Stanley E. Fawcett, Ph.D., is a professor of global supply chain management at Logistikum Steyr, University of Applied Sciences, Upper Austria, and Chief Engagement Officer, ENGAGE2E.... He can be reached at [email protected].

Amydee M. Fawcett, Ph.D., CEO, ENGAGE2E…. She can be reached at deefawcett @engage2e.com.

A. Michael Knemeyer, Ph.D., is a professor of logistics at Fisher College of Business at The Ohio State University. He can be reached at [email protected].

Sebastian Brockhaus is an assistant professor of supply chain management at the Monte Ahuja College of Business at Cleveland State University. He can be reached at [email protected].

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