Building an Efficient Supply Chain
Written by Les Shaver
MLF 2011 Volume: 5 Issue: 10 (November/December)
In August, the U.S. Marine Corps Logistics Command (MARCORLOGCOM) released an announcement that drew some interest in the contractor arena. By October 2013, MARCORLOGCOM aims consolidate two USMC organic depots located in Albany, Ga., and Barstow, Calif., under a unified Depot Maintenance Command.
The Marines estimate that the plan will provide an integrated and synchronized logistics solutions for the Marine Corps while also realizing an estimated cost savings of $40 million to $60 million over the Five Year Defense Plan. The service was seeking an outside source to assist MARCORLOGCOM’s depot maintenance consolidation implementation team throughout the development of integration plan and implementation.
For Jim Beggs, a principal in the McLean, Va., office of Booz Allen Hamilton, the announcement definitely represented a sign of the times. “The idea is they could combine those two; they could reduce the cost of overhead and still meet the capacity that those two depots offer,” Beggs said. “That is the start of maintenance command areas trying to get more efficient and more effective with this upcoming slug of work.”
Right now, the military is facing a double whammy as its heads into 2012. The increased operations from the campaigns have already taxed weapons systems, equipment, parts and supply lines. Add impending budget cuts and the challenges to keep the supply line running become even greater.
“The big challenge for the supply chain is for the maintenance and infrastructure side,” Beggs said. “There’s going to be a huge pressure on budgets and there’s also going to be a significant pressure on getting things done.”
Others agree. “If budget is down, they have to make decisions of what they can get with that,” said vice president of operations Tom Hazelbaker at Virginia Beach-based ADS.
But there’s hope. “We believe that there is more that all of the maintenance commands can do to meet this challenge,” Beggs said.
Refilling the Pipeline
With operations in Iraq shutting down, there will be lots of equipment on its way back to the States. That will lead to questions. “How does the decision process go for what they leave in theater, and are they going to be able to repair everything that comes back?” Beggs asked. “What’s the importance of getting it repaired within a reasonable timeframe?”
With budget constraints, the government isn’t buying new systems as fast as it was before. “The challenge is with the budget pressures can we rest, complete the repairs, and get our equipment and readiness, and keep that running under the same budget pressures?” Beggs said. “On the supply chain, the difficulty is the depots and contracts to the OEM. Are they going to be funded to a point to where they work to their capacity?”
Beggs said the military needs to consider how it can maximize its productivity under budget pressure, become more efficient, and do more or the same amount with fewer resources. This system also forces the services to prioritize, but that gets tricky.
“If I prioritize, I will make sure the engines get fixed and I have a vehicle can actually move,” Beggs said. “The electronics and communications suites may get short shifted. Do you have a fully capable unit if you end up prioritizing that way?’”
Revamping your buying strategy can help; Beggs is a firm proponent that if an organization hasn’t evaluated their purchasing system in the last decade, it needs to take a harder look at it.
“Processes and capabilities degrade over time,” he said. “If you did it 10 years ago and haven’t analyzed it in the last 10 years, there’s a good chance things have gotten out of control and don’t make sense anymore.”
Beggs also suggested that it’s important to take a look at the services you’re buying, whether it’s parts, maintenance support, or even the company that’s cutting the lawn at your facilities. For something like computers, centralization may be best—while items like paper clips can be bought independently. “Some things you can centralize for efficiency,” he said. “Some things you empower people to buy because it doesn’t make sense to centralize. When you are buying, how does the approval process work so that it’s efficient?”
Replacing What’s Lost
The procurement strategy can get harder if a manufacturer that originally produced a part is no longer around, according to Willie Brown, director of obsolescence management services at Arlington, Va.-based BAE Systems Support Solutions, which is managing the loss of either a qualified of manufacturer or mitigating the loss of your on-line source materials, like metals and chemicals.
“[Obsolescence management] has been something that’s been growing in awareness for at least the last 15 years,” Brown said. “With tightening of budgets, there’s been the realization that this is both an opportunity and a risk for the government and industry.”
With platforms lasting longer than expected, the original supplier of a part may no longer be around. “Increased tempo and use rate is going through the existing supply that they have on hand,” Brown said. “That is heightening the awareness of the need for obsolescence management.”
In fact, the government is writing into contracts that you will have a proactive obsolescence management program. “The supplier may have been mom and pop,” Brown said. “If I have a program or platform designed to last for 20 years and you’re in the 1950s, as some of the Air Force programs are, then that poses a big problem with supplier base. In sustainment mode, you may not go back to that supplier for five or 10 years, then you find out they no longer exist.”
That’s the reason BAE offers a program monitoring vendor health. That way, they keep the supply chain flow if someone disappears. BAE also tries to keep up with those vendors and it determines how many vendors are making a product. “We’re pinging a vendor on a quarterly, semi-annual, or annual basis depending upon the vendor and the type, and we’re asking them if they’re still supplying it,” Brown said. “If not, do they have a recommended substitution?”
Other companies are trying to help with future budget issues by putting replacement parts together. ADS specializes in pulling together gear from many different manufacturers and putting it into a mission-ready kit that eliminates logistics problem of multiple deliveries from multiple suppliers. “They just have one part number and one supplier to get all of the components in,” Hazelbaker said. “With the Army dyed kit, they were buying 20 parts from 15 suppliers.”
Hazelbaker said the ultimate goal is to free up guys who would be loading and unloading packages to do other things. “Some of the things that we offer are warehousing, buying and holding, issuing gear to individual units, shipping it to wherever they may need, and smarter inventory procurement and practices,” he said. “Where we can consolidate buying power, we can offer alternatives to help their budget dollar go further.”
Better Parts
One obvious way to make the supply chain better is with better parts. StandardAero is the Air Force’s depot for C-130 and C-56 engines and also overhauls some Navy, Army and Coast Guard engines.
“We have tried to give value back to the customer through an extended life on wing, as well as cost reduction built into certain contracts,” said Daniel Gonzales, vice president of the government and military sector for Tempe, Ariz.,-based StandardAero.
In addition to that, StandAero has a side project called engineering services, which does a lot of data analysis for customers and assists them in doing things smarter.
In the process, the company has learned that time can save money. “One of the most basic things that we do is in our maintenance factories is we designed them for speed,” Gonzales said. “We designed a factory to ensure they come within 40 or 45 days.” The company also constantly collects and analyzes data from its factories, collects usage and condemnation data, and does trend analysis.
“When you’re able to collect very robust data, analyze it in real time and give it back to the suppliers, they’re able to support you with parts,” Gonzales said. “It minimizes the demand on the parts suppliers. Our goal is have a 95 percent first pass fill rate.”
StandAero ensures that if they don’t have the part the customer will get it within five days. It also has tools that allow them to analyze data and predict how an engine will act in the field. “That can save costs with predictability,” Gonzales said. “It’s a philosophy of using the customer’s data to do things smarter—using depot data and field data to build reliability models and predictability that allow the customer to extend life on wing.” ♦
Naval Maneuvers
As suppliers get ready for budget cuts, the Navy Enterprise Resource Planning is focused on improvement. “The challenge for Navy ERP and the Navy’s supply capabilities has always been to improve the ability to deliver the things sailors need, where and when they need them, anywhere in the world,” said Dr. Jennifer Carter, program manager, Navy ERP Program. “When the Navy embarked on an integrated ERP system, leaders recognized that fully integrating the supply system with the financial system would provide a robust, near real-time view of all critical aspects of the logistics operations of the Navy, and speed its ability to supply sailors the things they need.”
The service seems well on its way to accomplishing this. “Getting the Navy’s Working Capital Fund repair assets and inventory management into a single supply solution, and having that solution also integrated with real-time financials, offers commanders visibility over all their assets,” Carter said. “This positions the Navy to plan its purchases and repairs with a higher degree of confidence and effectiveness.”
And it represents an upgrade over its 1960s era aging information technology system. “A multitude of stovepiped legacy systems, not necessarily compatible with each other, difficult and costly to maintain, and supported by an aging workforce, were being relied upon to support our sailors working on the front lines,” said Karen Meloy, NAVSUP (Naval Supply Systems Command) ERP program manager. “The legacy systems did not offer real-time data, often just a snapshot in time. They worked, but often by means of manual workarounds, bolt-on solutions, and sometimes users literally had to pick up the phone and call the particular location and have inventory levels checked by hand counting.”
The Navy implemented ERP using state-of-the-art technology provided by Systems, Applications & Products in Data Processing (commonly referred to as “SAP”). In the program, one database holds all of the data, which means there is no need for periodic reconciliation of financial or inventory data, which is why it’s called a single supply solution. Navy ERP will provide $500 million in inventory efficiencies for the Navy, by increasing the velocity of its inventory.
“SAP provides, in one system procurement, planning, inventory, financials, and enterprisewide material and inventory forecasting,” Meloy said. “Additionally, life cycle requirements calculations can forecast five years into the future, as well as provide five years of historical data.”
In March, the first deployment of Release 1.1, or “Phase I” of the single supply solution was successfully implemented at the Naval Supply Systems Command (NAVSUP). A couple of months later, in July, the first of four regional go-lives for Navy ERP at NAVSUP’s Phase II of the single supply solution was deployed. Phase II of single supply solution should complete in August of 2012.
“Currently, Navy ERP provides a single planning engine, improved asset visibility, and improved material support, complete visibility of repair pipeline, and complete visibility of customer demand,” Meloy said. ‘Navy ERP will help to enable our sailors to be aligned, agile and armed to support our sailors worldwide in a single integrated data system in near real-time.” ♦