There are few who would deny that the acquisition and sustainment of sophisticated military capability is extremely challenging, made so by the requirement to bring together all of the Fundamental Inputs to Capability (FIC). Two critical FIC elements are “Supplies” and “Support” and are intrinsically linked to how the supply chain is designed and operated.

Defence, Defence Industry partners and Original Equipment Manufacturers (OEMs) all play critical roles in designing, implementing, operating and governing the supply chains that deliver our national defence capability.  Underperforming supply chains  have the potential to delay high-profile acquisition projects and degrade platform availability during the Sustainment phase resulting in cost overruns, reputational risk and impinging on the Government’s ability to meet its strategic objectives.  

COVID-19 served as a stark reminder of the need to design, build and operate supply chains that are not only efficient and affordable, but also resilient. With Australia’s high dependency on northern hemisphere originated supply chains, COVID 19 highlighted our exposure to supply shortages across all aspects of the supply chain including manufacturing, repair, freight consolidation and international freight capacity.

How can the highly complex Defence industry harness best supply chain practices to illuminate the specific risks and costs associated with various supply chain options, against agreed levels of military preparedness?

Take a mission-centric, risk assessed, cost modelled approach to supply chain design and planning

A critical step is to ensure the supply chain’s design is focused on the needs of the Capability Manager.  The conversation starts with an understanding of both the Capability Manager’s Raise Train Sustain (RTS) and Preparedness objectives. The conversation extends to informing other key supply chain considerations such as people, process, systems and data considerations.

Putting the Capability Manager at the centre of this conversation will ensure that the supply chain adopts a mission centric design

The RTS and Preparedness objectives coupled with any customer defined supply chain infrastructure constraints provides the basis for preparing the range of feasible supply chain design options. Analysis can then be conducted to prepare cost considerations (Capital and Operating) as well as resilience assessments for each supply chain design option.  

The key enablers for preparing the supply chain cost and resilience assessments include:

  • Digital twin – the creation of a digital model of the supply chain option to provide for ‘what if’ scenario analysis, to quantify supply chain costs and inform resilience risk assessments
  • Data – availability of supply chain data in a digital format
  • Secure/protected environment – secure environment in which to build and operate the digital twin

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Whilst the establishment of such a strategic supply chain analysis capability provides significant benefit to the acquisition phase the benefits are even greater during the Sustainment phase.  With the capability roadmap of each platform spanning 20+ years, the Sustainment phase is where the Platform’s actual performance materialises, and the original supply chain assumptions are tested. Additionally, the requirements of the Platform regularly change during Sustainment (with changes to availability/serviceability targets, changes to rates of effort, funding limitations, modifications/enhancements, policy changes and aging and obsolescence factors etc) which impact on the cost/service/risk aspects of the supply chain. Hence, a strategic supply chain analysis capability provides the ability to respond to Sustainment questions such as:

  • What RTS/Preparedness risk increases when supply sources are diminished or become less reliable?
  • What is the impact on supply chain costs when there are changes to RTS and/or Preparedness objectives?
  • What is the cost of mitigating a potential supply risk with additional inventory?
  • Where are my specific Preparedness risks if funding becomes constrained?
  • Is there a more cost-conscious supply chain design to meet the RTS/Preparedness objectives?
  • What would my supply chain costs be under a Performance Based Contracting (PBC) arrangement?
  • What are the cost / service implications of alternate repair pipeline models?

Leading organisations are investing in the supply chain enablers

The supply chain provides for critical service, cost and risk considerations for any military platform, but the tradeoffs are complex.  Organisations that are focussed on the key enablers to understanding the supply chain trade-offs – such as building supply chain digital twins, investing in reliable data and establishing secure environments – are delivering Capability Managers with mission centric supply chains that better recognise the service, cost and risk continuum.

Steven Kiley Bray

Managing Director – Strategy & Consulting, Supply Chain & Operations – Australia & New Zealand

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