REVOLUTION IN MILITARY
LOGISTICS
A STUDY OF SUPPLY-CHAIN
MANAGEMENT
Jonathan Darr
Steven 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
Hold
Box
Work
Center 2
Hold
Box
Hold
Box
Hold
Box
Move Card
Suppliers
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Production Card
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 Logistics
JIT 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)
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– IMPAC
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.
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