Army Lays Groundwork for Revolution In Logistics Management

Army Lays Groundwork for Revolution In Logistics Management<@VM>Thick Walls

Eric Stange

By John Makulowich



With the tentacles of business process re-engineering probing deeper into the structures of public and private organizations, it seemed only a question of time for the Defense Department to grab hold.

The most recent evidence is the Army's request for proposals issued April 29 and due June 28 to outsource two software development centers: the Logistics Systems Support Center in St. Louis and the Industrial Logistics Systems Center in Chambersburg, Pa.

The contract, called the Wholesale Logistics Modernization Program, is worth an estimated $1 billion over its 10-year life. Five prime contractors are chief contenders for the contract, which is set for award in February 2000, according to industry officials. They are Boeing Co., Computer Sciences Corp., Litton Industries Inc.-PRC Inc., Lockheed Martin Corp. and Raytheon Co.

At stake is more than a logistics management exercise to ensure the smooth flow of support to soldiers in the field. While the fits and starts of the solicitation are a tale in themselves, the key point is the extent to which business process re-engineering is stretching the notion of logistics management and the role it will play in the military.

As the request for proposals notes, "A revolution in logistics business processes is central to preparing for future military operations, and is also the fulcrum of our efforts to balance readiness and modernization. The Army will not be prepared for the future unless we complete an unprecedented transformation in how we supply and sustain the Total Army.

"The Army must exploit technology; establish a long-term partnering relationship with a company that is the best in class; eliminate activities that do not add value; develop processes which expedite sound decision making, both on the battlefield and at home; create open architecture systems with the potential to grow; and design systems for an Army that will thrive on knowledge and speed."

For the winning contractor, it could represent a bountiful harvest of logistics management contracts at the federal, state and local levels for years to come. It was no surprise that the pre-solicitation conference in late 1997 attracted 314 individuals.

Beyond the core sense of logistics as the procurement, maintenance and transportation of military materiel, facilities and personnel is the concept outlined by the Institute of Logistics, Northamptonshire, England: "The movement and storage of goods together with associated information flows from the beginning to the end of the supply chain."

When viewed from the vantage point of the manufacturing firm, a notion not alien to the military, it is "the supply chain extended from procurement of raw materials and components through all production processes to the final distribution of finished goods to either end users or retail intermediaries."

Logistics represents about 33 percent ($85.1 billion) of the Defense Department's fiscal year 1998 budget of $260.1 billion, according to John Olio, vice president for materiel management at the Logistics Management Institute, a McLean, Va., non-profit corporation that offers management consulting, research and analysis to governments and other non-profit organizations.

That figure includes three components: wholesale or national logistics, such as maintenance depots; 500,000 people in the force structure who provide support; and a series of direct appropriations for logistics support, such as cargo handling battalions in the Navy, ammunition and petroleum.

At issue is "figuring out how to manage all of that. The supply chain goes from the supplier's supplier to the customer's customer," Olio said. "Retail has a pretty simplified customer base. If you take the military and push it down to force structure as well as the national level, and cover all the customer's customers, the metrics become much more difficult. That's because you have to extend a whole level further down."

According to Olio, there are additional issues to address when analyzing military logistics and the supply chain. The fighting in Kosovo is a case in point: It involves wartime and strategic mobility issues that do not arise in the private sector.

And it is more difficult to put commercial best practices in place when the system is based on mass customization rather than mass movement of materiel. The response times are shorter and faster.

"As we look to the future and we look to supporting weapons systems or equipment, how do we do that in a competitive way so that the private sector can have a bigger piece? And how do we look at it on a piece-by-piece basis? And how far forward on the battlefield does the contractor come?" Olio asked.

At bottom, the role of the field commander will become one of managing information. Olio said very few organizations have outsourced supply chain management. Most have outsourced the functions. The Army solicitation is a good example of the Defense Department moving more to a broker role than a doer role.

Roger Dooley

While many observers of the logistics scene in the private sector see commercial best practices extending the supply chain further in to customers and further out to suppliers, they also observe thick walls among functions in the military.

Eric Stange, a partner in Andersen Consulting's Defense Logistics Group, sees breaking down those walls as part of the opportunity in the Army solicitation, to adapt and adopt by encouraging advance planning with suppliers and closer visibility of the ultimate customer to better optimize the supply chain.

He noted that most enterprises for which logistics is a critical component of their successes have outsourced, modernized or gone out of business.

"The heart of the Army's logistics management problem is that the current systems are stovepiped, based on obsolete technology and difficult to maintain. The skills to overcome those issues are not a core competency of the Army," Stange said.

He said the Air Force, Navy and the Defense Logistics Agency are in similar straits and are watching how this program unfolds. However, other defense agencies do not appear ready to use the Army's RFP as a template.

When asked if other agencies or units of the Defense Department have expressed interest in this solicitation as a possible template for their own, Cleo Zizos, spokesperson for the Army Communications-Electronics Command, said: "No, there hasn't been any expressed interest in using this solicitation as a template."

Aside from its interest in the Army's Wholesale Logistics Modernization Program, Andersen Consulting is working on other logistics contracts.

Its defense practice is partnering with the Air Force to develop the Integrated Maintenance Data System. The system will modernize how 150,000 personnel plan, manage and execute maintenance processes. It also will provide detailed equipment maintenance histories and weapons systems records to support operations and maintenance activities of the service's 6,800 aircraft at 200 sites worldwide. Once in place, the system will let those in charge know much more quickly which planes are ready during wartime.

The new system will replace a large number of aging maintenance information systems with a single database and offer the Air Force a complete picture of its assets. The bottom line is more precision to logistics operations, fewer parts shipments during a military maneuver, and fewer maintenance people needed close to the fighting.

Working on the Integrated Maintenance Data System project is Roger Dooley, a managing partner of Andersen Consulting's Defense Portfolio. He said the Defense Department now is taking a much broader view of logistics.

"In the past, each branch would suboptimize the supply chain. Neither the total supply chain nor the components were optimized. When you integrate, then you come with correct, tailored solutions," said Dooley.

Like Olio, Dooley feels that in wartime, predicting total logistics requirements can be very difficult since the supply chain strategy is built on flexible sourcing, multiple sourcing options and rapid response. One innovation for the Defense Department is using electronic commerce and the World Wide Web to reduce lead time and procurement costs.

The status of the Integrated Maintenance Data System project is the successful completion of the Beta operation. Andersen now is finishing development of the core systems, and operational tests and evaluations are set for May 1, 2000. While Dooley could not reveal full details of the sensitive project, he did note the Beta operation involved selected Air Force weapons and aircraft with more than 800 people using the system.

When completed and accepted by the Air Force, the IMDS will capture and display data where those in charge prepare an aircraft and equipment for its next assignment. At the flight line, maintenance personnel will carry portable maintenance aids linked to a wireless local area network, allowing them to review and update an aircraft's maintenance history.

Another Air Force logistics project is under way by BBN Technologies, a Cambridge, Mass., research and development unit of GTE Corp., one of the largest telecommunications firms and a provider of integrated telecommunications services. It was selected recently by Unisys Corp. of Blue Bell, Pa., to develop a customized application of its BEST Solutions (Business Engineered Scheduling Technologies) to optimize the schedules of the Air Force Air Mobility Command's globally dispersed air crews. The application will allow better planning and execution of critical national defense missions.

The development of the Unit-Level Planning and Scheduling system will allow the Air Mobility Command to schedule and reschedule air crews more efficiently. Among the benefits of the customized system, according to Sean Moore, division scientist at BBN Technologies, are:

*Optimal use of air crew resources while supporting as many missions as possible.

*Maintaining the stability of crew members' schedules in response to new or modified requirements.

*Automated scheduling tasks.

*Improved productivity by integrating supporting information systems into a single, desktop presentation.

*Reduced training costs when reassigning personnel by using the same decision-support system across the force.

While noting that it is difficult to get business processes changed, the case for the BEST Solutions program was compelling because it is cheap and available. BBN officials declined to reveal the value of the Air Force contract.

"What we bring to the table with the BEST Solutions technology is planning and scheduling. Planning is macro; scheduling is actually when you are in execution. The good business process will constantly be updating and correcting based on dynamic real time information," said Moore.

He added that BEST Solutions is not a commercial, off-the-shelf product; it is a repeatable solution in which there is a core system as a base from which to build any system and which lets the customer define his or her requirements. About 60 percent of the product, written in the Java programming language, is core.

"One key feature of the product is the dynamic distributed scheduling. With quality of life an important issue for the Air Force ... the product allows scheduling flexibility, just-in-time scheduling, as it were," said Moore.

Behind his point is the Air Force's effort to retain pilots, who increasingly are being wooed by commercial airlines. Real-time scheduling offers the possibility of fair and even-handed delivery of duties for the person on the roster.

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