m..** Logistics: The Future Role for Analysis DERA

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1 Logistics: The Future Role for Analysis Presented at 15 ISMOR Is a Revolution in Analysis Required? on 1 September 98 Authors Dr Robert Bristow, Principal Consultant, TA Group Ltd Newnhams, West Street Famham, Surrey, GU9 7EQ Tel: +44(0) , Fax: +44(0) robert. bristow@ragroup.co.uk Dr Jordan Giddings, Technical Leader Logistics, DEWCDA DERA Chertsey, Chobham Lane Chertsey, Surrey, KT16 OEE Tel: +44(0) , Fax: +44(0) Abstract This paper reviews the future role of analysis in logistics in light of the increasing emphasis on flexibility and deployabiity emerging from the Strategic Defence Review (SDR). After discussing the issues that arise from this change in emphasis, the current state of logistics analysis is reviewed against these issues, identifying the challenges for the analysis community. The themes discussed include: a) the organisational issues associated with the harmonisation of the three Service logistics infrastructures to support joint operations; b) c) the strong linkage of effective logistics management to information systems; the applicability of and lessons learnt fiom commercial practices in supply chain management; d) the broader role that cost and risk analysis can play; e) the extent of the role of detailed modelling and analysis in a messy area where emerging techniques may have increasing applicability. These themes are illustrated by examples taken from both the military and civil environments and are drawn together to present the authors views on how logistics analysis could be approached. m..** Page 1 of 8 DERA

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3 1. Background With the change of emphasis of UK military policy and doctrine towards manoeuvre warfare and the increased demand on the supply chain both in terms of tempo and wider ranges of deployment, the need to consider logistics has significantly increased in importance within the MOD In terms of this paper, the scope of logistics is encapsulated by the NATO definition of logistics. NATO' defmes logistics as: The science of planning and carrying out the movement and maintenance of forces. In its most comprehensive sense, the aspects of military operations which deal with a) Design and development, acquisition, storage, transport, distribution, maintenance, evacuation and disposition of materiel2; b) transport of personnel; c) acquisition or construction, maintenance, operation and disposition of facilities; d) acquisition or furnishing of services; and e) medical and health service support Logistics in its broadest form has recently been highlighted in the SDR, a far reaching review that has given far greater emphasis to the support of the fiont-line forces. This has been evidenced by the creation of the new 4* Chief of Defence Logistics (CDL) fiom 1 September As stated in the supporting notes to the SDR White Paper: 'The creation of CDL is a change of the greatest strategic signijcance to defence. It will ensure that our management and delivery of logistics enables us to provide effective support to joint operations in the next century. ' The key tasks of the new CDL post are understood to be: a) to harmonise logistics systems and spread best practice; b) to develop a common approach to supporting fiont line forces without diluting the diversity necessary to support operations at sea, on land and in the air; I 2 AAP-6 (NATO Glossary of Terms and Definitions) Materiel: equipment in its widest sense including vehicles, weapons, ammunition, fuel, etc. Page 2 of 8 DEW

4 c) to deliver the benefits of the Smart Procurement Initiative within the logistics area; d) to ensure a common approach to industry in the support area The significant changes to MOD S way of doing business that affect the logistics area thus include: a) an emphasis on output related eont line requirements which demand a highly responsive and adaptable support structure; b) continuing the trend towards more joint (Joint Force 2000, Joint Helicopter Command, Joint Defence Centre, Joint Transport and Movements Agency, Defence Storage and Distribution Agency, Defence Aircraft Repair Agency, etc) and combined operations; c) the introduction of Resource Account Budgeting (through Project CAPITAL) and the consequential focus on asset management as evidenced by moves to drive down stock levels and consolidate the Defence estate; d) e) the further involvement of the commercial sector (increased exposure of a number of areas to Public and Private Partnerships); the output of Smart Procurement and the Acquisition Organisation Review and its impact in terms of Integrated Project Teams It is clear that arising from these influences there are a number of issues that are likely to be of direct interest including: a) stock. at what reasonable minimum level can stocks be maintained while remaining capable of meeting required readiness times and resupply requirements during and &er operations? b) c) jointey: what should be managed jointly and where and how should the boundaries between single service and joint activities be established? commercialisation and smari procurement: in what areas and to what extent should activities be commercialised and how will logistic support considerations during equipment procurement be linked to overall operational supply chain management? d) infastructure: what logistics support facilities and other resources should be rationalised and what business processes are most cost effective? e) output based: how is output requirement linked to support provision? The issue of informution in terms of the information systems inthstmcture that will be required to ensure cost-effective solutions to all of the above issues will also be critical. m. D* Page 3 of 8 DERA

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6 2. Analysis capabilities The above issues are broader in nature than those that have historically been addressed by the analysis community and continue the trend of moving the balance of analysis away from the Cold War emphasis on combat. As such, it is not swprising that a wider range of techniques will be required to address these issues. Figure 1 presents some of these capabilities schematically, illustrating their relationship to the logistics issues At the centre, the figure shows the topics of demand and distribution modelling that established OA techniques have traditionally addressed. The top half of the outer ring shows the additional issues that SDR and changes in operations now bring into focus; namely the issues of commercialisation, output based requirements, jointery, and infrastrvcture and stock management. In response to these, the bottom half of the outer ring identifies a number of analysis capability areas that will, to a greater or lesser extent, need to be more fully integrated into the analysis community. Although these may not provide a complete coverage of the required skills, they probably provide a useful starting set. F Figure 1: Map of capabilities to logistics issues Page 4 of 8

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8 Before addressing these capability areas in more detail it must be noted that established OA techniques wil continue to have a major role to play. There is still a need to model the demand that combat places on the supply chain, the distribution of those supplies down the chain and, increasingly, the impact of combat on the performance of the supply chain and vice versa. There are, however, several techniques such as benefits analysis, group decision making and soft systems methodologies that are now gaining an increasing role in the defence analysis community. The utility of these emerging analysis techniques is being driven particularly by the softening of the assumptions bounding studies and the shortening of timescales within which the answers to study questions are required. These trends apply equally to logistics analysis indicating an increasing role for such emerging techniques in this area. Business process analysis is used as a generic term to cover process analysis and organisational studies. With the creation of the Chief of Defence Logistics and the far greater focus on joint support to combined operations, there will clearly be a requirement for these techniques in supporting any reorganisation of the supply chain, support inflastmcture and logistics management process. This need is further reinforced by the move to activityloutput based costing. Efficient logistic management depends critically on having accurate and timely infomation on the state of the supply chain and the demand profile. An ability to undertake information systems analysis will therefore be important in addressing the optimisation of logistics supply, and wil be closely linked to any business process analysis. The use of business process analysis and information systems analysis has historically been separated from operational analysis. The need to consider the whole supply chain from factory to foxhill and the timeframe within which supply can be achieved does, however, provide a significant driver to integrating the use of these techniques. The final capability. cost and risk analysis, is already utilised within the analysis community. However, there is a need to broaden the scope of their use. For example, in the case of cost analysis, a broadening to financial analysis might be appropriate in view of the trend towards commercial practice within MOD with the introduction of resource account budgeting and outpa costing, and the continuing use of the Public Private Partnership initiative. In terms of risk, a broadening to consider issues such as contingency planning may be required given the drive to minimise stock levels. m..* Page 5 of 8 DERA

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10 Illustrative Studies Section 2 discussed the broadening of analysis capabilities that could support the treatment of logistics questions within the defence analysis community. This section illustrates how this broadening is starting to happen through a number of example studies, both military and commercial, undertaken by CDA andor TA. Joint Logistics Support System (JLSS) Strategy Stu+ This study is investigating the future concepts and scope of the Joint Logistics Support System. It aims to determine the need for an information system to support the joint logistics command and control process and to compare the benefits of JLSS with alternative investments. The study will utilise the emerging benefits analysis technique to capture and analyse requirements. White Good Suppry Chain Rationalisation: This study considered the benefits that a white goods supplier could gain from having better knowledge of the demand pattem from its retail customer. In essence, with the improved demand knowledge, the supplier is able to optimise the manufacturing process and reduce both the number of depots required and the total stock held. The study has therefore drawn on a range of techniques in: a) using process analysis and activity based costing to model the supply chain; b) c) d) assessing the management information system requirements; undertaking a full costing of the supply chain options including aspects such as the value of stock held; addressing the commercial basis on which the customer and supplier might share demand information Review of A my Support Infiastructure: This study is addressing the rationalisation of Army support areas in the light of changing contingency and operational requirements and the introduction of output costing under Project CAPITAL. The study aims to: a) undertake an analysis of the options available to manage the suppoa areas, considering the management structure, the degree of forward basing of support and any areas appropriate for commercialisation; b) c) U) articulate the output services provided by the support areas to the operational areas; use process mapping and activity based costing to develop a modelling capability that will enable the support areas to cost these output services under different management options; undertake a risk analysis to assess the robustness of the options to changes in operational demand; Page 6 of 8 DERA

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12 e) produce a strategy for the development of supporting management infomation systems Future Fuel Vehicle requirement definition stu&: This study is looking at the future requirement for fuel transportation and delivery on the battlefield. In particular, it is developing a service based output to enable PPP to be considered as an option to meet the requirement. The activities have included a) b) c) specification of service based output for fuel lift; analysis of the supply chain to investigate more efficient Concepts of Operations and consequent support in developing Future Fuel Policy; consideration of the best use of MIS to support operational management; d) development of Requirement Specification for hture fuel vehicles Air Freight Handling Review: This study is reviewing a major commercial air fkeight handler, looking to improve the efficiency of its operations. This has included a) benchmarking the operational processes across several sites in order to introduce the best local practices across all sites; b) reviewing the warehousing requirements; c) developing an IS strategy to support the more efficient management of the organisation Equipment Availability/Readiness Linkage: This study addressed the linkage between the availability of equipment and its readiness for deployment on operations. The focus of the work was in: a) consideration of appropriate measures of equipment availability; b) considering the equipment support area's outputs and the customer/ supplier relationships with other areas; c) identifying the MIS requirements to enable more effective supply chain management and support the planning of equipment readiness profiles Each of the above has used to a greater or lesser extent a mixture of traditional and non-traditional analysis techniques. In general these non-traditional techniques have been drawn from those commonly adopted within the commercial anma. It should also be noted that, in almost all of the examples highlighted, highly detailed modelling and analysis has not been applied. The main reasons for this are associated with the requirements for timely answers coupled with a recognition that 80% to 90% of the answer can be achieved without incurring such a costly approach. Page 7 of 8 DEW

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14 4. Conclusions Questions asked in the logistics area post SDR are likely to be significantly broader, with an opportunity for an enhanced role for analysis. However, in order to fulfil this role, the analysis community needs to consider a wide range of analysis techniques in order to be able to answer these broader questions in the timefiame available. Particular areas that must be addressed include: a) the organisational issues associated with the harmonisation of the three Services logistics idiastructures to support joint and coalition operations; b) the strong linkage of effective logistics management to information systems; c) the applicability of commercial practices in military supply chain management; d) e) the broader role that cost and risk analysis can play; the extent of the role of detailed modelling and analysis in a messy area where emerging techniques may have increasing applicability. Page 8 of 8 DEW