Meeting the Unique Requirements of Supply Chain Management for A&D

The effectiveness of the military supply chain truly defines the ability of the services to function efficiently in almost any operational scenario and offers a radically different challenge to that faced by most commercial enterprises. Whilst operating cost is the enemy of profit in a commercial enterprise, minimizing costs in the supply chain isn't necessarily the primary driver for the military, though ensuring the highest state of operational readiness at any given time, is. John Worth of IFS Defence, specialists in developing solutions for the global Aerospace and Defense (A&D) market, takes a look at the unique challenges faced by the A&D market and how new Service-Oriented Architecture can enable military and A&D market suppliers to ‘pick and mix’ their own solution to meet demanding military requirements, without risk to military operations.

The raw definition of the term supply chain would be the business process that covers the acquisition of raw materials through production, storage, transport and eventual delivery to the end customer. The business reality is that the supply chain is the flow of goods towards the business (inbound) and away from the business (outbound). It follows that every company in the supply chain is either a customer or supplier – and in all probability, both – to one or more commercial entities.

As Shane Targett, Cranfield University's Inventory Optimization specialist, states, in spite of their vast differences, every organization operating complex equipment shares a common challenge:  that of achieving the optimum balance of maximum performance at minimum cost. “Modern Supply Chain Management with its fundamental principle of information management, is vital to meeting this challenge. The universally accepted maxim of substituting inventory with information is mature, proven and well understood.”

But how does this apply to the Aerospace and Defense (A&D) industry?

A&D: The Fundamental Differences
The A&D supply chain needs to focus, uniquely, on support as well as supply – managing maintenance, repair and overhaul (MRO) operations as an integrated process.

For A&D, maintenance and repair is a key part of the supply chain. Military aircraft spend more time on the ground than commercial airlines, and military assets can sit dormant for weeks or months, ready to go at anything from a week’s notice to half an hour. Maintaining this state of readiness requires a vast number of boxes to remain continuously ticked – the asset has to remain fueled, prepped, in perfect working order and, crucially, in the right place at the right time.

The military's ability to implement robust supply chain management is also complicated by the uniqueness of defense hardware. The gearbox from a military heavy lift helicopter has a globally complex supply chain, almost entirely made up of specialist parts and often built to order from specific suppliers located in multiple different geographies. Obtaining a replacement when one breaks can often take weeks, if not months, while the part is made to order. And the nature of military deployment makes it more likely that things will get broken.

The military landscape contains a further complexity especially in the more developed regions of the world where there is a growing trend to move the responsibility for managing aspects of the supply chain into industry. Originally pioneered in the USA, Performance Based Logistics (PBL) is seeing rapid adoption as budget-strapped governments seek a greater return than they could have possibly achieved internally. Because PBL is implemented as a contract there are comprehensive Service Level Agreements (SLAs) applied and punitive penalties applied for failure.

Supply chain – broader reach for the military than commercial enterprises
As IT business systems have matured, two distinct families of Supply Chain solutions have evolved: Supply Chain Management (SCM) and Supply Chain Execution (SCE).

SCM typically encompasses all of the front-end business processes centered around manufacturing and MRO, and will usually include sub systems such as demand forecasting, whereas SCE covers the physical storage and transportation of raw materials and finished goods.

Visibility across the entire process keeps military in control
Closely linked to this is the need for agility to be able to respond when something unexpected happens – key for the military who cannot predict wars or military intervention requirements.

So any military supply chain solution has to provide clear visibility across the whole process – from maintenance through to part delivery. And visibility is crucial to almost all business planning processes – the ability to see goods and materials as they are planned through a supplier's production facility with an expected dispatch date means the down-stream customer can in turn plan their business activities, removing wasted time and reducing inventory. And in military terms, increased visibility means that the optimal state of readiness can successfully be achieved.

Predicting Requirements Planning keeps military agile
Alongside cost control, 'spare utilization' is a huge issue for the military, and the ability to predict failure of components in advance is an important point of the MRO process. Health and usage monitoring systems (HUMS) are starting to be used to provide valuable data to increase safety and reliability as well as reduce operating costs, by providing critical component diagnosis and importantly prognosis.

They provide an ‘early warning’ system that can alert a maintenance team when it is going to need to replace a component and therefore, form an important addition to managing the supply chain for the military, enabling it to stay agile in unpredictable times of conflict and sudden deployment requirements.

Meeting strict SLAs keeps military in the driving seat
With this level of visibility across the enterprise, Service Level Agreements (SLAs) become a key part of the management of the supply chain.  In the A&D market, this has driven the need to measure the performance of the supply chain, in real time, to be able to apply corrective actions on a sooner-rather-than-later basis. SLAs can then be enforced, because in the military supply chain, being late with a delivery is not acceptable, and often penalties are applied to those that fail.

Such strict SLAs are applied to industrial suppliers in the PBL space, particularly with regard to suppliers Contracting for Availability or Contracting for Capability to the military.

So the modern military supply chain contains both military and industrial elements, and there are now solutions that enable organizations to customize their own ‘cockpit’ display where key performance indicators can be viewed and measured using easy-to-read dials and graphs, and with end-to-end visibility across the entire supply chain.

No strategy leakage
Because of their design, these solutions can be stand-alone or quickly and easily plugged into an existing ERP system. This avoids “strategy leakage” across the organization by linking corporate strategy to supply chain business execution across all management roles.

The military and its suppliers have a huge responsibility to provide a supply chain management solution that can integrate all this information from specialist part to prognosis of lifespan of part, being able to identify and make sure the parts are there for fixing problems as soon as they appear. And this doesn’t have to be part of a complicated, expensive solution.

No-Risk approach best for the military
New approaches to enterprise planning now provide pre-configured and templated solutions that are built around a SOA architecture that enables the military to 'pick and mix' solutions as and when required to develop, application by application, their own customized ERP solution. A Service-Oriented Architecture can enable defense organizations to add, change or modify their solution with elements such as demand forecasting or corporate performance management as their business requirements change and as their needs evolves. All without risk to their day to day operations and fully budgetable – application by application.