05 March, 2001 EMGT 364

REVOLUTION IN MILITARY LOGISTICS

A STUDY OF SUPPLY-CHAIN MANAGEMENT

Jonathan DarrSteven Sattinger

05 March, 2001 EMGT 364

Outline

• Supply Chain Management– Evolution– Principles– Imperatives

• Revolution in Military Logistics– Strategy – System – Analysis

• Lessons Learned• Advantages• Disadvantages

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Just-In-Time

• Developed by Taiichi Ohno (Toyota)– Reduce inventory and other non-value

added operations– Improve QC through small lot size

• Kanban System/Flexible Manufacturing

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The Kanban System

Inbound Stockpoint

Outbound Stockpoint

Inbound Stockpoint

Outbound Stockpoint

Work Center 1

Work Center 2

Hold Box

Hold Box

Hold Box

Hold Box

Move Card

Production CardSuppliers

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From JIT to Supply-Chain Management

• Kanban system = manufacturing

• What if:– Outsource parts production?– Retail/Service Industry?

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Supply Chain Management

The coordinated flow of materials and products across the enterprise

and with one’s trading partners

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Principles(1 of 2)

• Formulate a differentiated supply chain strategy by channel

• Organize business units around major processes or channels, not functions

• Work collaboratively with customers, suppliers, trading partners, and 3rd parties

• Invest or re-invest in information technologies

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Principles(2 of 2)

• Invest in supply chain knowledge, people, skills, and learning

• Operate or manage by product or channel

• Outsource elements of the chain for flexibility, higher performance

• Think globally…build regionally…act locally

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Imperatives(1 of 2)

• Build in flexibility

• Plan and measure accurately

• Develop logistically separate operations

• Get lean (simplicity and speed)

• Optimize information

• Treat customers unequally – segment and stratify

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Imperatives(2 of 2)

• Operate globally• Practice virtuality and collaborative

management• Exploit e-commerce• Leverage people• Operationalize new product

introductions• Mass-customize and postpone

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Revolution in Military LogisticsJIT v. JIC

• Purpose: “produce savings so resources can be redirected into weapons systems and improving the readiness of the forces”

• “Efficient business practices and reduced overhead not only free up resources, they also contribute directly to the transformation of the department’s support structure . . . The old philosophy was the big eat the small. Now, it’s the fast eat the slow. My goal is for the Defense Department to be fast and lean. We must be competitive.”

- William S. Cohen, Secretary of Defense

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President’s Quality Award (PQA)

• Strategy and Action Plans– Customer and market focus– Organizational level

• System– Leadership Triad– Results Triad

• Information and Analysis– Historical Information– Predictive Models

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Strategy and Action Plans (1 of 5)

• Infrastructure Reductions– Consolidation of distribution regions ($11

million)– Defense Reutilization and Marketing

Services and Offices (DRMS and DRMO) reductions ($35 - $40 million)

– Human Resources Operations Center (HROC) opened at Defense Supply Center Columbus

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Strategy and Action Plans (2 of 5)

• Inventory Reductions– Wholesale & retail inventory reduced 59%– Logistics response times reduced 90%– Distribution workload reduced 20-30%– Saved storage space: 70 million cf

• Excess Property– Eliminate excess where value does not

surpass cost of ownership

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Strategy and Action Plans(3 of 5)

• Public/Private Competition-A-76– Office of Management and Budget (OMB)

Circular A-76 “Performance of Commercial Activities”

– Began public-private competition for operation of distribution depots

• Commercial Practices– Prime Vendor Programs ($21 million)

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Strategy and Action Plans(4 of 5)

• Commercial Practices (cont’d)– Corporate Contracts– Outsourcing– Energy Management– Unit Cost Management– Management Reform Memorandum #10– Paperfree Contracting– Single Process Initiative (SPI) ($.5 billion)– Product Verification and Testing Programs ($85 million)– “Smart Cards” ($10 million)– IMPAC

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Strategy and Action Plans(5 of 5)

• Wartime Readiness– Medical Readiness– Virtual Wartime Visibility

• Purchases information rather than supplies• Convertible to supply mechanism if needed, as

contractor supplements supply as needed

• Protecting Interests– Dispute resolution shift from formal litigation to

Alternative Dispute Resolution (ADR) and mediation.

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System(1 of 3)

• Areas of Focus (3 Rings)– Information

• Total Product Visibility• Reporting and tracking

– Logistics and Acquisition• Dominant Battlespace Logistics• Focus on systems, not people

– Transportation

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System(2 of 3)

• Leaders and managers must:– Commit to lead systems and people– Commit to PQA for assessment– Commit to process and system

improvement– Commit to objectives in the Strategic Plan

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System(3 of 3)

• Results– Systems and subsystems are mutually

supportive– Customer supplier and stakeholder

feedback to improve systems and products– Assessment through competition for PQA

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Information and Analysis

• Links Strategy and System• Sources of Information

– Historical data• Previous Conflicts• Training and Testing

– Training Centers and Product Development

– Predictive models• Simulation• Mathematics

– Consumption formulas

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Lessons Learned

• Desert Storm– JIC logistics success– Thoughts of the time

• Pre-positioning of resources critical• Time-distance relationships require push of supplies• Transportation assets are largely insufficient

– Revisionist Position• Cumbersome and slow logistics (transportation) can be

replaced with outsourcing• Wasted resources by planning excessive contingencies

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Advantages

• Annual cost savings in operations– Consolidation and size reduction– Reduced inventory

• Finite budget– Saving allows spending elsewhere

• Reduced waste– Excess reutilization– Short shelf-life items

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Foreseeable Disadvantages(1 of 2)

• Reliance on accurate data– Advances in technology brings unknowns into

equations and models– Historical data becomes obsolete– Simulation is not perfect

• Reliance on outsourcing– Little control over employees– Higher risk in wartime– Host nation support is unreliable

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Foreseeable Disadvantages(2 of 2)

• Consequences of failures– Lives v. money

• JIC no longer seems wasteful• JIT appears risky

– Redundancy lacking

• Fog of War– Anticipation imperfect– Relies on highly accurate reports

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But is it good Supply-Chain Management?

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Summary

• Disadvantages have catastrophic consequences

• Future is uncertain and changing

• Lessons learned call for more infrastructure and pre-positioning

• Constraints of finite budget are real

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Conclusion

“Without supplies neither a general nor a soldier is good for anything.”

»Clearchus of Sparta, 401 B.C.