Transforming Army supply chains: an analytical architecture for management innovation

Air Force Journal of Logistics, Winter, 2008 by Greg H. Parlier

An army fights with its weapons but lives off its logistics ...

--Military maxim

So now let us embark on our enquiry into what is true ... we sometimes notice that our senses deceive us, and it is wise never to put too much trust in what has let us down ...

--Rene Descartes

Nothing is more powerful than an idea whose time has come.

--Victor Hugo

Introduction

The US Army's logistics enterprise is truly enormous in scale and scope. However, it is not merely the size and complexity of the supply chain that causes difficulty, but rather the structure and policies within the system that are the root cause of persistent problems. Army logistics has especially suffered from several disorders which are both systemic and chronic. This ongoing research project has illuminated these problems using inventory management theory, supply chain principles, and logistics systems analysis as key sources of diagnostic power. To summarize generally, 5 years ago when the project described in this article was launched, these causal disorders and their respective effects were found to include the following:

* Lack of an empirically measured readiness production function which induces both uncertainty and variability at the point of consumption in the supply chain resulting in inappropriate planning, improper budgeting, and inadequate management to achieve readiness objectives

* Limited understanding of mission-based, operational demands and associated spares consumption patterns which contribute to poor operational and tactical support planning and cost-ineffective retail stock policy

* Failure to optimize retail stock policy to achieve cost-efficient readiness (customer) objectives, which results in inefficient procurement and reduced readiness

* Failure to proactively synchronize and manage reverse logistics which contributes significantly to increased requirement objectives (RO), excess inventory, and increased delay times (order fulfillment) with reduced readiness

* Inadequately organized depot repair operations that may be creating a growing gap in essential repair capacity while simultaneously precluding the enormous potential benefits of a synchronized, closed-loop supply chain for reparable components

* Limited visibility into and management control over disjointed and disconnected manufacturing (original equipment manufacturer) and key supplier procurement programs which are vulnerable to boom and bust cycles with extremely long lead times, high price volatility for aerospace steels and alloys, and increasing business risk to crucial, unique vendors in the industrial base resulting in diminishing manufacturing sources of materiel supplies, and growing obsolescence challenges for aging aircraft and vehicle fleets

* Independently operating, uncoordinated and unsynchronized stages within the supply chain creating pernicious bullwhip effects including high RO, inadequate stock levels, long lead times, and declining readiness

* Fragmented data processes and inappropriate supply chain measures focusing on interface metrics which mask the effects of efficient and effective alternatives, and further preclude an ability to determine readiness return on net assets or to relate resource investment levels to readiness outcomes

* Lack of central supply chain management and supporting analytical capacity results in multiagency, consensus-driven, bureaucratic responses hindered by lack of an Army supply chain management science and an enabling analytical architecture to guide logistics transformation

* Lack of an engine .for innovation to accelerate then sustain continual improvement for a learning organization

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[FIGURE 1 OMITTED]

We found the existing logistics structure was indeed vulnerable to the supply chain bullwhip. While endless remedies have been adopted over the years to address visibly apparent symptoms, the fundamental underlying disease has not been adequately diagnosed or treated, much less cured. Now, better understanding these underlying causes of failure, a new approach to logistics management is required for the US Army.

The analytical challenge is to conquer unpredictability: to better understand their sources, then attack the root causes of variability and uncertainty within each stage and their collective contributions to volatility across the system of stages--the bullwhip effect. By improving demand forecasting and reducing supply-side variability and inefficiencies within each of the stages, logistics system performance is moving toward an efficient frontier in the cost-availability trade space.

The first step in suppressing the bullwhip effect is to isolate, detect, and quantify inefficiencies within each stage and their respective contributions to system-wide aggregate inventory RO. The next step is to use this knowledge to drive inventory policy. Since Army inventories are managed to these computed ROs, reducing the value of the RO is critical to eliminating unnecessary inventory. As recommended prescriptions for improved performance are implemented in each of the stages, their respective contributions to reducing RO (while sustaining or actually improving readiness performance) can be measured, compared and assessed within a rational cost-performance framework (see Figure 2).