Facing Reduced Defense Spending, The Pentagon Needs To Invest More In Predictive Logistics
If the Department of Defense (DoD) were a private corporation it would be number one in the world in terms of its logistics system, supply chain and inventory, ahead of Walmart, Costco or McDonald’s. The Pentagon spends some $200 billion annually on logistics and maintenance alone and $400 billion on all goods and services. Moreover, the Pentagon is required to deliver supplies to locations that even the most daring private company would avoid. Most of what moves through the logistics system are basic goods such as food, water, fuel and mail. But if forces are engaged in combat the supply chain also must acquire, move and deliver lots of ammunition, spare parts and medical supplies.
With its global commitments, forward positioned forces, network of domestic and overseas installations and expeditionary formations, the DoD logistics system must acquire and maintain relatively large inventories. According to the Government Accountability Office there is a continuing problem with inventories of equipment and parts excess to demand and, in some cases, entirely obsolete. In other cases, changes in circumstances on the ground can create a surge in demand that is difficult to fill. Overall, the system could be made more agile, responsive and efficient, thereby improving both support to the warfighter and reducing costs.
The private sector has made tremendous strides in using analytic tools and methods, including the exploitation of so-called big data, to improve their logistics and maintenance activities and reduce costs. The military services and the Defense Logistics Agency have had great success with their business practice reengineering efforts. While DoD as a whole has made some efforts to apply such tools and methods, most notably the adoption of enterprise resource planning software, much more could be done.
In particular, DoD’s management of its logistics and sustainment system could benefit greatly from the application of commonly employed practices in the commercial world to perform predictive analytics, thereby anticipating logistics problems or supply chain shortfalls and allowing logisticians to take preventive actions to avoid problems. A recent article in Military Logistics Forum makes the case for improving the ability of DoD logisticians and maintainers to anticipate and act.(*)
A number of defense companies such as Boeing, Pratt & Whitney, Lockheed Martin and BAE Systems, to name just a few, have used such tools in support of their Performance-Based Logistics contracts. Gathering large amounts of data on the performance of systems and parts allows these companies to make anticipatory decisions regarding failure rates and the demand for spare parts. These insights also contribute to design changes to improve system and part reliability. These approaches have a demonstrated capability to save money.
In addition, advanced analytics have been shown to be very effective in improving the performance of health care delivery, public safety and communications systems. DoD could benefit from the use of these tools and techniques to assist in military medical response, counterinsurgency planning and improving IT network reliability.
(*) James Hall, “Anticipate and Act,” Military Logistics Forum, November/December 2012, p. 22