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Acquisition Review Quarterly — Fall 2002 274 Report Documentation Page Form Approved OMB No. 0704-0188 Public reporting burden for the collection of information is estimated to average 1 hour per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden, to Washington Headquarters Services, Directorate for Information Operations and Reports, 1215 Jefferson Davis Highway, Suite 1204, Arlington VA 22202-4302. Respondents should be aware that notwithstanding any other provision of law, no person shall be subject to a penalty for failing to comply with a collection of information if it does not display a currently valid OMB control number. 1. REPORT DATE 3. DATES COVERED 2002 2. REPORT TYPE 00-00-2002 to 00-00-2002 4. TITLE AND SUBTITLE 5a. CONTRACT NUMBER A Lean Sustainment Enterprise Model for Military Systems 5b. GRANT NUMBER 5c. PROGRAM ELEMENT NUMBER 6. AUTHOR(S) 5d. PROJECT NUMBER 5e. TASK NUMBER 5f. WORK UNIT NUMBER 7. PERFORMING ORGANIZATION NAME(S) AND ADDRESS(ES) 8. PERFORMING ORGANIZATION Naval Undersea Warfare Center,1176 Howell St,Newport,RI,02841 REPORT NUMBER 9. SPONSORING/MONITORING AGENCY NAME(S) AND ADDRESS(ES) 10. SPONSOR/MONITOR’S ACRONYM(S) 11. SPONSOR/MONITOR’S REPORT NUMBER(S) 12. DISTRIBUTION/AVAILABILITY STATEMENT Approved for public release; distribution unlimited 13. SUPPLEMENTARY NOTES Acquisition Review Quarterly?Fall 2002 14. ABSTRACT 15. SUBJECT TERMS 16. SECURITY CLASSIFICATION OF: 17. LIMITATION OF 18. NUMBER 19a. NAME OF ABSTRACT OF PAGES RESPONSIBLE PERSON a. REPORT b. ABSTRACT c. THIS PAGE Same as 24 unclassified unclassified unclassified Report (SAR) Standard Form 298 (Rev. 8-98) Prescribed by ANSI Std Z39-18 A Lean Sustainment EnteOrpPrIiNseI OMNodel for Military Systems A LEAN SUSTAINMENT ENTERPRISE MODEL FOR MILITARY SYSTEMS Mario Agripino, Tim Cathcart, and Dennis Mathaisel, Ph.D. As existing weapon systems age and the costs and cycle times on the maintenance, repair, and overhaul of these systems increases, various organizations within the U.S. Department of Defense are conducting indepen- dent studies to help the system become more efficient. Current research efforts on maintenance repair and overhaul operations focus on individual elements of this “sustainment” system. However, to more effectively solve the sustainment problem, research should be conducted on the whole enterprise, from raw material suppliers to final product delivery. To accomplish this objective, the authors developed a new “lean” framework for military systems sustainment. The goal of this model is to minimize non–value-added activities throughout the entire enterprise. S ince 1990, the Department of De- • Increased life extension of existing fense (DoD) has reduced its budget weapon systems due to delays in new by 29 percent. This reduction has system acquisition. greatly impacted weapon system acquisition and in-service support (Cordesman, (cid:127) Unforeseen support problems associ- 2000). Reduced budgets have forced the ated with aging weapons systems. military branches to extend the life of current legacy systems with significant reduc- (cid:127) Material shortages because of dimin- tions in acquisition of replacement sys- ishing manufacturing resources and tems. In addition, current weapon systems technological obsolescence. are faced with escalating operations and maintenance costs. These “sustainment” As sustainment costs increase, there is costs are due to: less funding available to procure replacement systems. An analysis conducted by (cid:127) Increased operational tempo. the DoD (Gansler, 1999) concluded that, unless mission requirements and the op- (cid:127) Increased mean time between mainte- erational tempo are reduced, or there are nance (MTBM) cycles due to increased significant increases in the budget, the operational requirements. operational maintenance cost portions of 275 Acquisition Review Quarterly — Fall 2002 the budget will equal the total current (net In order to effectively compete in a sig- present value) budgets by the year 2024 nificantly smaller market, the industry has (Figure 1). This chain of events has been seen a large number of corporate mergers. illustrated and characterized in Figure 2 With the restructuring of the new indus- as the DoD death spiral. To waive off this try base, many of the supply chain net- death spiral, DoD must find innovative works no longer exist. Second and third solutions to support legacy systems that tier supply chain businesses have gone out are cost effective and flexible. The DoD of production. The defense industry sector must economically manage these system is changing, and their associated supply lifecycles in order to address obsolescence chain network is eroding rapidly. and modernization issues without degrad- With over 60 percent of the total air- ing readiness, cost, and performance craft system life-cycle cost associated with objectives. operations and aircraft maintenance, and Along with DoD budgets, the defense as aircraft systems age, there is great op- industry sector has shrunk dramatically. portunity to optimize sustainment costs Substantial Defense "Strategy-Resources" Mismatch Already Exists QDR Force Is Not Affordable 780 Steady State Funding s Required to Support QDR n o DoD Budget Billi520 (Supply) Force (Demand) s - ar oll D Shortfall 9 Acquisition 9 9260 1 Y F Operation & Support 0 8 0 2 4 6 8 0 2 4 6 8 0 2 4 6 8 0 2 4 6 8 0 2 4 7 8 8 8 8 8 9 9 9 9 9 0 0 0 0 0 1 1 1 1 1 2 2 2 9 9 9 9 9 9 9 9 9 9 9 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2 2 2 Fiscal Year (Note: From Dr. J.S. Gansler, USD(A&T), Acquisition Reform Update, January, 1999.) Figure 1. DoD Budget Profile 276 A Lean Sustainment Enterprise Model for Military Systems (Note: From Dr. J.S. Gansler, USD(A&T), Acquisition Reform Update, January, 1999.) Figure 2. DoD Death Spiral (Blanchard & Fabrycky, 1998). With some 1. Modernization through commercial degree of success, industry and govern- off-the-shelf technology solutions ment partnerships have been formed to (technology refresh and technology attempt to address these issues. Examples insertion). include the U.S. Army’s Modernization Through Spares program (Kros, 1999), 2. Manufacturing, production, and logis- Agile Combat Support (Eady, 1997), the tics methods (Just-In-Time, Lean, and Lean Aerospace Initiative (2001), the Lean Agile initiatives). Sustainment Initiative (2001), and Flexible Sustainment (Performance-Based Busi- 3. Modernization of the industrial base ness Environment, 1997). These initiatives (the Flexible Manufacturing System, focus on three primary areas: Material Resource Planning Systems, and Advanced Manufacturing Tech- nologies). 277 Acquisition Review Quarterly — Fall 2002 However, these initiatives focus on proposes a new lean sustainment enter- individual elements of the sustainment prise model for how sustainment should system, not the whole enterprise. The be structured. Finally, the paper concludes question arises: Are these efforts coordi- with a brief description of an initiative (the nated? Organizations have the mind set U.S. Navy and Air Force Cartridge Actu- that if it was not invented here it has no ated Device/Propellant Actuated Device value. Therefore, the results of indepen- [CAD/PAD] program) that has some ele- dent efforts often are not used by organi- ments of the proposed lean sustainment zations other than those that are the target model. This example is used to illustrate of the investigation. These projects over- that the proposed model is realistic, and lap, and in many cases multiple initiatives that it can be implemented. are conducted on the same research areas (General Accounting Office [GAO] Report, BRIEF BACKGROUND ON “LEAN” 1998). One approach to the problem is to turn “Lean” was first defined in 1990 in a to the “lean” principles for guidance. book, entitled The Machine That Changed Using these concepts, the idea is to de- the World (Womack, Jones, & Roos, velop synergies along the whole supply 1990), which documents how the Toyota chain, from the original automobile production system became equipment manufacturer more efficient. Now other industries, in- “These lean to the customer. These cluding the aerospace and pharmaceuti- concepts provide lean concepts provide a cal sectors, are applying the concepts a set of tools and set of tools and an over- (Liker, 1997). Several characteristics are: an overriding riding philosophy on philosophy on how to transform how to transform “lean (cid:127) Lean is a dynamic process of change ‘lean manufactur- manufacturing” into a driven by a systematic set of principles ing’ into a ‘lean “lean sustainment sup- and best practices aimed at continu- sustainment ply chain.” However, in ously improving the enterprise. supply chain.’” order to effectively coor- dinate these efforts, and (cid:127) Lean refers to the total enterprise: from to bring military sustain- the shop floor to the executive suite, ment into the lean paradigm, a new frame- and from the supplier to customer value work or model for the whole enterprise chain. needs to be developed. In this paper, the authors develop this lean framework/ (cid:127) Lean requires rooting out everything model for military systems sustainment. that is non–value-added. The goal in the model is to minimize non– value-added activities throughout the entire (cid:127) Becoming lean is a complex business. enterprise. There is no single thing that will make The paper begins with a brief introduc- an organization lean. tion to the lean philosophy, follows with a characterization and analysis of the cur- Lean can mean “less” in terms of less rent military sustainment system, and then waste, less design time, less cost, fewer 278 A Lean Sustainment Enterprise Model for Military Systems organizational layers, and fewer suppli- (cid:127) Labor hours: 10 to 71 percent improve- ers per customer. But, lean can also mean ment. “more” in terms of more employee em- powerment, more flexibility and capabil- (cid:127) Costs: 11 to 50 percent improvement. ity, more productivity, more quality, more customer satisfaction, and more long-term (cid:127) Productivity: 27 to 100 percent im- competitive success (Nightingale, 2000). provement. In short, lean is focused on value-added activities. (cid:127) Cycle time: 20 to 97 percent improve- How does an enterprise know if it is ment. lean? Benchmarking oneself against best internal operations, external direct com- (cid:127) Factory floor space: 25 to 81 percent petitors, external functional best opera- improvement. tions, or generic functions regardless of industry, can be one measure of the rela- (cid:127) Travel distances (people or product): tive value of one’s leanness. In addition, 42 to 95 percent improvement. appropriately chosen metrics are the performance characteristics that are used to (cid:127) Inventory or Work in progress: 31 to assess whether or not an enterprise is lean. 98 percent improvement. Examples might include reducing cycle time, lowering costs, minimizing waste, (cid:127) Scrap, rework, defects or inspection: and improving quality. Some of the dem- 20 to 80 percent improvement. onstrated metrics used to measure improvements in production/manufacturing (cid:127) Set up time: 17 to 85 percent improve- as a result of applying these lean concepts ment. include (Lean Aerospace Initiative, 2001): GM Framingham Toyota Takaoka Assembly hours per car 31 16 Assembly defects per 100 cars 130 45 Assembly space per car 8.1 4.8 Ave. inventory of parts 2 weeks 2 hours (Note: From World Assembly Plant Survey, International Motor Vehicle Program, MIT, http://web.mit.edu/ctpid/www/impv.html) Figure 3. Example of Mass Production vs. Lean Production 279 Acquisition Review Quarterly — Fall 2002 (cid:127) Lead time: 16 to 50 percent improve- Logistic Support (ILS), and (4) the In-Ser- ment. vice Engineering process. This current model, shown in Figure 4a, illustrates the To illustrate the benefits of being lean, coordination among these sustainment Figure 3 shows the distinction between organizations. traditional mass production measures of Referring to Figure 4a, the Supply Sup- performance for a General Motors plant port function consists of the supply chain, in Framingham, Massachusetts against the supply system, and the Government In- lean production measures involved in a dustry Data Exchange Program (GIDEP). Toyota Takaoka. The supply chain is comprised of the ven- dors (V) and suppliers (S) that provide consumable materials and refurbishment CHARACTERIZATION OF THE CURRENT services to the supply system and depot. MILITARY SUSTAINMENT SYSTEM The item manager has overall responsi- bility for inventory management, handled The current military sustainment sys- through Inventory Control Points (ICPs). tem can be characterized as comprising Inventory locations are referenced as Des- four major elements: (1) Supply Support, ignated Stock Points (DSPs), which main- (2) Intermediate/Depot Maintenance and tain spares and consumable inventories. Operational Support, (3) Integrated (Acronyms are defined in Appendix) Figure 4a. Current Military Sustainment Model 280 A Lean Sustainment Enterprise Model for Military Systems The Intermediate and Depot Mainte- ture that is necessary to ensure effective nance functions consist of those mainte- and economical support of a system nance organizations responsible for keep- throughout its existing life (Blanchard, ing weapon systems in a serviceable con- 1998). The primary objective is to achieve dition. The Designated Overhaul Point and maintain readiness objectives. Logis- (DOP), also known as an organic military tics includes all of the support elements depot, performs maintenance that includes necessary to sustain the weapons system, servicing, inspection, test, adjustment- including such elements as training and alignment, removal, replacement, reinstal- support; packaging, handling, storage, and lation, troubleshooting, calibration, repair, transportation (PHS&T); and computer modification, and overhaul of weapon resources/support. systems and components (Jones, 1995; The In-Service Engineering Process, at Blanchard, Verma, & Peterson, 1995). the top of Figure 4a, is responsible for Maintenance data and failure analysis maintaining the system configuration of is provided to the In-Service Engineering the product and identifying post-produc- Process. Intermediate maintenance orga- tion support plans (PPSP) and product nizations provide operational support ser- improvements associated with the opera- vices at the customer’s base of operations. tion, maintenance, and integrated logistic Depot maintenance organizations perform support of all weapon system support maintenance, repair and overhaul (MRO) elements. Other responsibilities include services to the weapon system and its as- the evaluation, definition, and testing of sociated components. The depot procures solutions to possible PPSP problems using consumable materials from the supply systems engineering processes in an system and commercial sources. effective and expeditious manner to The Integrated Logistics Support func- support required readiness objectives for tion is a composite of all support consid- the remainder of a weapon system’s life erations including “system design for cycle (International Council on Systems sustainability” and the logistics infrastruc- Engineering [INCOSE], 1998). Figure 4b. Military Sustainment Model Supply Chain (6 Levels) 281 Acquisition Review Quarterly — Fall 2002 ANALYSIS OF THE CURRENT The supply channel on the right includes MILITARY SUSTAINMENT MODEL the processes necessary to replenish the RFI stock inventory required to support the distribution channel. This process in- To illustrate the inefficiency and com- cludes replenishing the consumables, the plexity of the current military sustainment maintenance, repair, and overhaul of RFI model, Figure 4b shows the system from spares, and the associated lower level sup- the perspective of the distribution chan- ply chain activities. Note that there are nel and the supply chain. In that figure, seven levels for the distribution and sup- the distribution channel on the left in- ply chain. Another perspective of this cludes the processes necessary to provide complexity is illustrated in Figure 4c, a “Ready for Issue” (RFI) spare part to which places the item manager in the cen- the war fighter, including the technical ter of the complicated supply channel and maintenance services provided by the distribution channel activity. Such a model maintenance sustainment organizations. Figure 4c. Military Sustainment Model Distribution and Supply Channels 282