Defence Supply Chain
For the purposes of this paper the Defence Supply Chain can be defined as ‘the network of organisations involved, through upstream and downstream linkages, in the different processes and activities that produce value in the form of products and services in the hands of the ultimate customer’ (Peck , 2005). The Defence Supply Chain grouping is a sizeable and diverse organisation that is responsible for the operation of this large and complex end-to-end process in addition to providing an array of other services across defence. The effectiveness of the Defence Supply Chain on operations has been questioned many times as it has relied on an ad hoc rearrangement and regrouping of peacetime assets, causing inefficiency, delayed responses and ultimately a lack of confidence from Front line Commands in its abilities and provisions (Booton, 2006). Indeed the End-to-End (E2E) Study has identified the requirement for an effective supply chain that satisfies both the operational and non-operational requirement of all three services.
As with all other public sector areas there is a relentless governmental drive to provide greater value for money yet, set against this, is the increased involvement in international conflicts and peace keeping operations necessitating the need to maintain and improve military capability. It is evident that, in order to achieve this balance, efficiencies need to be made in all areas and the supply chain is seen as a costly area in which savings could be made. One of the current problems that the MOD is facing in trying to improve the complex defence supply chain systems is the mistrust that still exists between the MOD and industry (Humphries, Wilding, 2004). There is much work, on both sides, currently being undertaken to address this issue; indeed the new Defence Industrial Strategy is seen as a major step in the right direction and directly addresses supply chain issues (MOD, 2005).
Such are the complexities of the defence supply chain it is often difficult to identify the first, second and third tier suppliers; in fact some suppliers are involved at different levels for different products (DTI, 2005). Figure 1 illustrates a supply chain’s component parts, all of which are inextricably linked. It is necessary to view the chain in this manner as it is apparent that the different levels require differing tools and techniques to manage the risks (Peck, 2005).
Many of the level one problems have already been identified by The Cleansing Project team (TCP) headed by Colonel Tony Anthistle in 2000. The team identified problems ranging from the incorrect codification of thousands of stock numbers to inconsistencies between the three services systems that would inevitably cause problems when operating in a tri-service environment. Within the MOD it is currently difficult to quantify many of the supply chain issues associated within level one due to the lack of available data; legacy IT systems failed to capture the data required for extensive analysis (Chapell, Peck, 2005). Clearly Information Systems (IS) are required that automate processes, enable fast and accurate data capture and give both visibility and accountability.
Figure 1: Defence Supply Chain Networks
Level 1
Process Control & Processes
Inventory Management IT Systems
Level 2 NEC
Infrastructure Asset
People, Transport Tracking
Level 3 Relationships
Government Policy, Doctrine
MOD, Headquarters
Level 4 PESTEL
Environment Operations
Source : Adapted from Peck, H. (2005), “Reducing Risk in the Defence Supply Chain”, (by H.Peck) Defence Management Journal, Issue 28, March 2005, pp20-21, 24.
Operation Granby was the first of recent major operation to highlight inadequacies in the defence supply chain, most of which have been left unaddressed (HMSO, 1991). More recently Operation TELIC has highlighted the need for the MOD to implement an efficient asset tracking system that would work in peacetime and on operations. Having served in Iraq with 2 Close Support Regiment (RLC) during the Gulf War it became obvious that many items of critical stock went undelivered simply because it couldn’t be traced, yet much of it had already been delivered to the theatre of operations as was evident by the lines of unopened containers at the port of disembarkation, all without inventories; this is clearly an unacceptable situation and one which caused a lack of confidence in front line Commands. Asset tracking is likely to be a key component of Network Enabled Capability (NEC) and it is likely that, in the near future, one organisation will be responsible for the level two routing, planning and control of personnel and cargo across all lines of communication (Booton, 2006).
Level three, in terms of defence, may include risk associated with changing political direction and policies as well as internal MOD policies and doctrine. The Joint Supply Chain (JSC) blueprint concept is underpinned by effective policy, doctrine and training. Clearly supplier relationships also fall into this category and are often difficult to manage within the UK defence environment. Red tape and being ‘seen to be fair’ have precluded the building of some relationships although it is hoped that the change in Defence Industrial Policy will help to break some of these barriers.
Level four risks may well include natural disasters that affect public and private companies alike but for defence it also includes the possibility of conflict. Most risks at this level could be identified using a PESTEL analysis; this is a technique for understanding external influences on businesses or processes: Political, Economic, Social, Technological, Environmental and Legal (Johnson et al, 2005). In defence terms level four risks could well include the results of direct enemy action. When the container ship, Atlantic Conveyer, was sunk on 25 May 1982 during the Falklands conflict the majority of supplies (including helicopters) were lost. This was a huge blow to the logistics support for this operation and a lesson in resilience that should have been learned.
Can Six Sigma Help ?
Whilst it is recognised that Six Sigma provides tools for continuous improvement and can help make processes more robust (Peck, 2003), there is little evidence to suggest that it can make them more resilient although it could be argued that if processes are continually refined then capability/capacity is created. Increased capability/capacity can be used in two ways; firstly it could be maintained to increase resilience or secondly it could be removed to introduce further cost savings.
The defence supply problem is particularly difficult to solve. The majority of time the supply chain operates in a relatively benign environment (peacetime) and offers the opportunity to apply six sigma and lean techniques to improve processes and create savings. Whilst on operations, however, there is a need for a much more agile supply system and the need for resilience increases.
In businesses where six sigma has been hailed as a success it has undoubtedly required a cultural change and substantial changes in the organisations structure and infrastructure (Coronado, Antony, 2002). Six sigma also needs businesses to be long term focused as the benefits are not realised in the short term (Dale, 2000). Initially, the implementation of six sigma can be resource intensive and costly; this is an area where, due to the annularity of its budget, the MOD had traditionally been perceived to lack commitment.
Analysis of the Defence Supply Chain shows that the three services still operate differently, yet need to use the same supply chain on operations. Different sites within the MOD logistics organisation also operate with differing procedures (Chapell, Peck, 2005) which can clearly be rectified by adopting six sigma methodologies. The lack of available data, particularly with regards low usage but operational critical spares, is seen as a hurdle for six sigma implementation but one that is not insuperable (Chapell, Peck, 2005) and the benefits that could be achieved by adhering to specific process models is enormous.
Perhaps the MOD can learn from its NATO allies. For instance Brigadier Schulz speaks about a shift of paradigm within the Bundeswehr: "In old-style materiel management every business economist was proud to have all necessary spare parts, to last him for up to 20 years if needed. Spares were possibly stockpiled for 20 years without anybody ever requiring them. What we are involved with now is process orientation, ensuring that the necessary information as well as the parts needed for a specific process, are available at the right time and in the right quantity".
The Defence Logistics Transformation Programme (DLTP) is an initiative already being undertaken by the MOD whose aim is to provide a single coherent programme of work incorporating all logistic transformation activities across defence - deployed forward on operations, within the defence industry, during the early stages of equipment acquisition, or when planning for disposal. It will be utilising process control methodologies and lean techniques to improve repair loop times and availability of spares; this, in turn, is likely to increase the supply chain resilience.
Conclusion
It is evident that, should six sigma be successfully implemented into the defence supply chain then it has much to offer and could, almost certainly, make the supply chain more resilient. For the MOD this process is a lengthy one and one in which few significant monetary savings can be made in the short term. To succeed it would have to be driven with commitment and enthusiasm at the highest level. It would require training, communication, changes in organisational structure and a cultural change; it is a difficult, time consuming path to follow but if the MOD wishes to reap the rewards it must recognise these hurdles and strive to overcome them. The DLTP is a step in the right direction.
There is currently a danger that the peacetime savings that can be realised using lean techniques will be afforded priority and this short term view will undoubtedly make the defence supply chain less resilient and more susceptible to failure on operations; an outcome which is unacceptable. There is a fine balance that can be achieved between agile and lean and providing ‘value for money’ to the taxpayer will always remain a key factor, particularly with the constant public and media scrutiny that public organisations work under. One study has suggested that the increased visibility of some processes brought about by the use of a process control methodology has aided supplier performance evaluation and control (Laframboise, Reyes, 2005). There is much evidence to suggest that methodologies such as six sigma, when implemented correctly, do reduce risk and certainly give greater control over processes. This increased control and reduction in risk will increase the resilience of the supply chain making it well placed to overcome disruptive events.
However, supply chain resilience can not be achieved by process control methods alone. Whilst it may go someway to helping overcome disruptive events it should be used in conjunction with other tools and techniques, such as the building of sound supply relationships. A good toolset can be found in the Department for Transport sponsored document, “Creating Resilient Supply Chains: A Practical Guide”.
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