Shifting Balance of Power Creates a Need for Supply Chain Optimization

By Dave Kleine, EVP Aerospace, Industrial Manufacturing & Services, Maine Pointe and Alfred Baumbusch, EVP Operations Excellence, Maine Pointe

 

Increased military spending, a shifting balance of global power and the re-drawing of traditional theaters are only a few of the many factors putting pressure on the military’s efforts to support the warfighter. Today and in the near future, the greatest challenge to the military may not be the threat of foreign aggression, but the threat of an inadequate supply chain which cannot keep up with the needs and requirements of the thousands of contracts, and which cannot keep up with the Maintenance Repair and Overhaul (MRO) imperative for existing aircraft.

Optimizing the supply chain

These complexities can be overcome through improved end-to-end supply chain collaboration and integration, which would benefit the warfighter effort with better and faster access to the large body of materiel required, as well as commercial suppliers which would be better able to keep up with the demand.

We’re also seeing some of the same challenges facing commercial suppliers, with new commercial aircraft orders and deliveries reaching new records, also putting the same pressure on commercial aircraft supply chains and operations as are being seen on the military side. This increase in commercial demand is creating a knock-on effect on firms which service the needs of the military. Addressing these challenges is key to commercial suppliers improving their book-to-bill ratios, an issue that has been raised by several analysts.

From a commercial perspective, suppliers must fuel their own revenue and margins by accelerating time-to-completion – the result of which not only enhances their own value-for-money, but also enhances the results for the Pentagon.

Blending commercial best practice with the needs of the military is key to achieving measurable improvement across the military buy-make-move-fulfill supply chain, an approach seen in Total Value Optimization™ (TVO) methodologies. The TVO process allows an organization to dynamically anticipate and meet demand by synchronizing the buy-make-move-fulfill supply chain to deliver the most value at the lowest cost to the organization. There are significant levels of untapped optimization opportunities at present due to existing siloed thinking, and a lack of integration internally and with the supply base.

Collaboration and best practices can be used to benefit both commercial suppliers and the military. Sharing facilities where it makes sense for example, as opposed to setting up completely different facilities for C&D checks, would generate tremendous savings opportunities.

To facilitate mission-ready military capability, and address the need for greater asset availability, cost efficiency, and maintenance effectiveness, the solution lies in driving optimization across maintenance and supply chains quickly. On the commercial side, those supplying the military must fuel revenue and margins by accelerating time-to-completion as well as improving their own end-to-end supply chains – thereby driving value-for-money for them and for the Pentagon as well.

In a true win-win scenario, optimizing the supply chain benefits both commercial supplier and the military consumer, with tactics like:

  • Eliminating the siloed supply chain environment
  • Significantly strengthening the collaboration and integration within the given culture
  • Improving availability of cash to spend on repair and acquisitions
  • Reducing overall repair and overhaul time
  • Reduce overall cycle time with improved procurement methods
  • Increasing overall operational capacity

The approach is critical to gaining buy-in and generating accelerated results. Tactics include leveraging industry experienced resources and partnering with company leadership and management to:

  1. Focus on identifying and defining the quantified real value to pursue and agree upon a specific accelerated timeline
  2. Validation of the operational maturity to assure improvements enhance the supply chain process, directly supporting the Art of the Possible
  3. Design and execute a pragmatic step-by-step aligned roadmap that retains focus and accelerates the expected results

The current administration has allocated $60 billion in additional funds to the military, contributing to a total military budget of over $700 billion. Making use of these funds and managing the $300 billion in contracts executed by the Pentagon, may be well allocated for defense of new frontiers, but that level of investment requires more than merely purchasing more airplanes. It requires a heightened level of optimization of the military’s people, processes and assets. New equipment and technologies may be the most visible part of military spending strategies, but in reality, management and optimization of the supply chain at the back end – which nobody sees – is what makes it all work.

End-to-end supply chain collaboration

End-to-end supply chain collaboration and optimization strategies will ensure that the military’s missions will be carried out effectively, the funds spent judiciously and the usable life of existing investments extended. Leveraging best practices in this area can be an untapped source of efficiencies, cost savings, faster delivery of products, and an improved MRO framework. Those best practices, and untapped opportunities, are highlighted in a recent white paper from the Global Supply Chain Institute at the University of Tennessee, entitled “End-to-end supply chain collaboration best practices.”

High-profile aircraft such as the F-35 added tremendous capabilities to warfighter efforts, but experienced significant delays and cost overruns with over two decades of development and testing, making its first combat mission only this year when the Israeli Air Force used the fifth-generation stealth aircraft to strike two different targets.

Lengthy development cycles as seen in the F-35 put pressure on the military to extend the life of legacy fighter aircraft such as the F-15, F-16 and F/A 18 to be extended thousands of hours beyond what was called for in their original design plans. Doing so is necessary and possibly even advantageous, but it requires Maintenance Repair and Overhaul (MRO) to occur much faster than originally planned, and the number of MRO flow days required to bring these legacy aircraft to total service capability must be reduced.

Achieving a state of readiness – and gaining full value from our military investment – can be achieved with a renewed focus on optimizing both the maintenance and supply chains. Driving this end-to-end supply chain collaboration could unlock hundreds of millions of dollars, both for the Pentagon and for commercial suppliers.

About the authors:

David Kleine is Executive Vice President Aerospace, Industrial Manufacturing & Services at Maine Pointe. He has more than 30 years of consulting, supply chain and operations experience mainly working in the manufacturing, high tech, aerospace and financial services industries. In the private equity and financial services sectors, David has generated over $7 billion in private equity funds for sale or acquisition on behalf of clients such as The Carlyle Group, ONEX, Permira and Goldman Sachs. Email: dkleine@mainepointe.com.

Alfred Baumbusch is Executive Vice President Operations, North America at Maine Pointe. He is an accomplished corporate leader with a 25-year track record at the helm of both domestic and foreign-owned companies. As an experienced C-level executive and international consultant, his expertise spans the full breadth of executive leadership with specific strengths driving large and medium-scale companies through organizational change. Email: abaumbusch@mainepointe.com.