February 10, 2014

US Military Supply Chain, Burning Questions from the Private Sector

Doug Markle:

LTC John “Eric” Richardson has been a valuable contributor to our Supplierpedia blog over the past few months. Eric is transitioning into his next assignment and offered to field some questions. The following questions have been posed by several of HICX Solutions’ customers – and we hope you find the Eric’s answers insightful into an alternative view of supply chain / logistics.

 

LTC Richardson:

The intent of this article is to answer questions submitted related to the US Military supply chain.  As you might imagine a comprehensive answer to each question would not only be complicated but would also depend on a number of variables.  The main reason for this is the extreme diversity of the US military supply chain.  For example, for some items, the US Military owns the entire supply chain from production, to warehousing, to distribution, and of course the customers, such as the case with ammunition.  In other cases, we local purchase items such as copy paper reducing the length of the supply chain to the local economy.  On a much smaller scale, the US military will collaborate with industry to develop a new capability such as the recent addition of the MRAP vehicle.  Additionally, the US military owns the inventory, some of the patent rights, and some of intellectual properties that provides a great deal more autonomy than many civilian supply chains.  Another important aspect to point out is the need for a garrison and tactical supply chain.  A garrison supply chain is in many respects no different from any other civilian supply chain.  However, the tactical supply chain tends to be more complex and at times ever changing.  That said I have tried to provide a short detailed answer to each of the questions without getting lost in the potential variables.  Additionally, I should point out a few of these questions were outside my area of expertise so I had several friends review the answers to ensure the accuracy of the answers.

1. In a nutshell, how would you compare and contrast the military’s logistics/supply chain, versus the private sector?

  • By in large, private sector supply chains tend to be stable and predictable allowing organizations to focus on cost saving efficiencies.  However, a military supply chain tends to be focused on crisis/risk management while simultaneously balancing cost saving efficiencies.  With too much flexibility valuable resources are wasted, not enough flexibility then people could go without critical supplies.  For example, like the civilian sector the US military leverages automation technologies in order to reduce costs, increasing supply chain visibility and flexibility, while simultaneously reducing risks to the supply chain.  However, inventory levels and reorder points in a tactical environment would be much higher than in a garrison or civilian warehouse environment.

2. Have you found more successful methods than others in vetting suppliers (quality, capacity, delivery areas, etc.)?

  • It may go without saying, but I’ll say it any way, there are a few differences between civilian and government contracting.  The US military acquisition corps limit the amount of selection criteria to a handful of critical categories related specifically to the contracted items.  The first general question asked would be – is the item a commercial off the shelf item or a military only application item.  Based the answer to this question, a series of criteria would be generated to evaluate a potential supplier.  For instance, a copy paper supplier would go through a very different review process than say a weapons system supplier.  That being the case, there are a number of areas that would be reviewed to help determine the potential success of a supplier.  Evaluation criteria might include past government performance, current production rates, the ability to expand production, and cost.

3. When on boarding a new supplier, what are the most important data elements you need to capture?

  • Similar to above, the US Military develops basic criteria for evaluating potential suppliers that is intended to drive competition while reducing prices.

4. What procedures and tools do you use to vet suppliers?

  • Similar to above, past performance, technically acceptable, and cost.  The US military acquisition corps limits the amount of background investigating to a hand full of critical categories with the intent of reducing costs and improving competition.

5. Assuming many projects require coordination between two or more suppliers, how is this best facilitated?

  • Generally speaking, the US military contracts for completed items.  Using a vehicle as an example, we would contract for one company to provide the entire assembled vehicle.  However, we would also have contracts with each company supplying individual parts used in the assembly of the vehicle, for example a bearing assembly.  This would allow the US military to perform sustainment maintenance on the vehicle for life of the vehicle.

6. What policies do you have in place to overcome disruption (e.g., backup suppliers, etc.)?

  • We use a couple of strategies mitigate supply chain disruptions.  First, total asset visibility facilitates inventory cross leveling and second by prioritizing resupply based on mission requirements and organizational needs.  Combining these policies mitigates the impact of a disrupted and a constrained supply chain.

7. What are the most common causes for disruption (e.g., weather, etc.)?

  • Garrison disruptions are similar to civilian supply chains disruptions but most commonly associated with unforecasted spikes in demand. For example, similar to a manufacture recall, there might be a reason to change all the seat belts in a particular vehicle fleet.  This would fall into the unforecasted category and cause a disruption in our supply chain.  In a tactical environment disruptions tend to be transportation related.  Transportation disruptions include extreme weather, road network interruption, or limited transportation assets.

8. How do you prioritize dealing with incidents?

  • Specific to supply chain incidents, all incidents have the same priority and must be dealt with or mitigated as quickly as possible.  The only exception to this general rule would be if the duration or significance of the incident were such that it caused the on hand inventory level to be reduced to a point at which we would become concerned about life or health.  An example of a tactical incident might be the on hand water bottle inventory levels being significantly reduced because of an expiration concern.  Not having enough water on hand is a life and health concern that drives an immediate reaction drill to resupply the base to the appropriate water levels.

9. I imagine much of your supply chain is developing or accessing sensitive intellectual property (in the UK this would fall under the Official Secrets Act). As such, what are the security vetting requirements – and how is sensitive IP protected?

  • I would imagine the US and UK military have very similar concerns and processes for dealing with sensitive IP.  However, in the simplest of explanations, each item is reviewed on its own merit with the appropriate security limitations applied.  For a simplified explanation I would lump items into four broad categories: commercial off the self-items (copy paper), new technology (unmanned aerial vehicles), military specific and limited from the public (weapon systems), and military specific but available to the public (uniforms).  Commercial items are afforded the same protection as provided by commercial laws.  New technologies and military specific items are understandably more complex and would potentially have shared IP (contractor and government) and would be covered/protected by a number of federal laws.  Military specific but available to the public fall into a unique category and are dealt with on a case-by-case basis.  In some limited cases, it would be in the government’s best interest to purchase a copyright and then allow the unrestricted production of the item, such as in the case of uniform patterns.  Such a decision would allow the instantaneous expansion of production capabilities as well as potential spin off technologies.

10. How do you ensure you protect your supply chain from cyber-attack, as this could interrupt the supply chain, or to steal designs, etc.?

  • Similar to any other civilian organization, the US military has information management professionals who are dedicated to protecting the information systems that transmit supply chain information.

11. How much of an issue is Cyber Security within your supply chain and what steps are you taking to reduce risks?

  • Similar to above, the US military has information management professionals who are dedicated to protecting the information systems that transmit supply chain information.

12. How are future defense markets going to impact your supply chain, including financial risks, and what mitigations are you taking?

  • Because of the diversity of the US military supply chain each item and supplier must be evaluated on its own merits.  Similar to the examples used above, the supply chain for commercial off the self-items tend to be more resilient.  However, military specific items tend to be more sensitive to changes in national defense priorities.  A tank for example has limited commercial applications and must be evaluated on its own merits.  Mitigation strategies include working with industrial partners to ensure strategic production capabilities remain resilient.

13. When managing suppliers, what are the key metrics you monitor and why?

  • Because the government generally owns the inventory, the government limits its metrics to those outlined in the scope of the contract such as adherence to cost and schedule.  By controlling the inventory and the requisition priority, the US military can mitigate tier one level supplier disruptions.

14. What strategies, if any, are being looked at to streamline supplier management (i.e. paperless processes, supplier portals, etc.)?

  • The US military has been attempting to reduce paper and manual systems for a number of years and we seem to make a little more progress each year.  As most organizations we have been challenged with the number and complexity of information management systems, as well as each of the individual suppliers.  However, it appears within the past decade technology has advanced to a place that is allowing us to merge and network a number of systems which will allow for continued progression toward integration and visibility of the entire supply chain network.

 

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LTC John “Eric” Richardson is a United States Army logistician with over twenty years of experience leading, training, and mentoring at all levels of Army command. Eric has held the following positions: Army staff, brigade chief of staff, battalion chief of staff, battalion support operations officer, deputy brigade support operations officer, petroleum and water branch chief, company command, assistant brigade supply officer, supply and services officer, platoon leader, and aircraft crew chief. As a logistics officer, Eric has managed all facets of end-to-end domestic and international logistical operations – and is responsible for the leading, planning, integration, and directing all facets of sustainment activities (supply and services, transportation, maintenance, human resources, financial management, health services support, and operational contracting support) at the tactical, operational, and strategic level.

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The opinions or assertions contained herein are the private views of the author and are not to be construed as official or as reflecting the views of the Department of the Army or the U.S. Department of Defense.  Names of commercial manufacturers or products included are incidental only, and inclusion does not imply endorsement by the author, the Department of the Army, or the U.S. Department of Defense.

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