Being a thirty year veteran of the Washington policy scene, some of my “light” reading consists of reports and analyses published by this town’s numerous government departments, federally-funded research organizations, independent think tanks and policy centers. Whatever the topic, somebody in Washington has done a study; when it is a big policy issue or if lots of money is involved, you can usually find dozens of reports, commentaries, testimonies and briefings.
Still, it is unusual for me in the same day to run across two current sources that raise serious questions regarding the ability of the U.S. Air Force to manage its supply chains and support the maintenance, repair and overhaul (MRO) of its aircraft fleets. Why is this significant? Because of all the military services the Air Force is most insistent about its ability to perform these functions successfully and save money in the process. Not in all cases, certainly. But Air Force sources insist that business case analyses they have sponsored generally support their contention that their Air Logistics Centers can do sustainment work more cheaply than the private sector alternative. An efficient supply chain is critical to keeping costs of MRO work low. Also, the Air Force wants to take responsibility for managing the global supply chain for the F-35 Joint Strike Fighter away from prime contractor Lockheed Martin.
The first report that caught my attention was one by the National Research Council of the National Academy of Sciences with the title Examination of the U.S. Air Force’s Aircraft Sustainment Needs in the Future and Their Strategy to Meet those Needs. Hot stuff, right? What makes this study even more interesting is that it was commissioned and supported by the Air Force. A major conclusion of this study was that the supply chain for aircraft spare parts which involves both the Air Force and the Defense Logistics Agency is broken.
“To a severe extent, the supply chain’s ability to provide spare parts to the maintenance organizations is ineffective and disrupts depot maintenance and parts repair. There are mismatches between direct support to production activities and the growth of requirements at the production level. Importantly, a modern enterprise resource planning tool, although promised as “forthcoming,” is not available, despite being desperately needed. Finally, and disappointingly, despite repeated requests for key measures of effectiveness and efficiency, the only well-defined metric supplied was for aircraft availability, and many more organizations than just the ALCs impact aircraft availability. The ALCs make the current situation work, but the full spectrum of resources needed to make an effective and efficient organization is not available.”
The second analysis I ran across dovetails with the one by the National Resource Council. It concerns the Pentagon’s efforts to implement modern enterprise resource planning (ERP) and supply chain management systems. In testimony before the House Armed Services Committee, Feriz Khan, Director of Financial Management and Accountability for the Government Accountability Office (GAO) stated that “DOD’s ERP implementation has been impaired by delays, cost increases, failures in delivering the necessary functionality, and a lack of compliance with required standards. Delays in implementation have extended the use of existing duplicative, stovepiped systems, and the need to fund them.” Among the programs with major difficulties, delays and cost overruns, according to Khan, are the Air Force’s two premier supply chain management and ERP systems, the Expeditionary Combat Support System (ECSS) and the Defense Enterprise Accounting and Management System (DEAMS).
Two independent, even unrelated, analyses produced this year basically concluded that the Air Force currently lacks the capacities, including ERP systems, to successfully manage its supply chains. Private companies have been managing global supply chains and successfully employing ERP systems for decades. So good is Lockheed Martin at running supply chains that it, along with Michelin Tires, won a prize this year for its management of one that provides aircraft tires to the military worldwide.
So what makes the Air Force think that it can manage better than Lockheed Martin the global supply chain for F-35 spare parts, an aircraft that has not even entered full rate production, will be deployed in the thousands and be operated by the U.S. Air Force, the U.S. Navy, the Marine Corps and at least eight foreign countries? From its inception, the F-35 program was planned on the basis of a single, integrated global supply chain designed to save on sustainment costs. If the Air Force takes over managing spare parts there will be two supply chains, one run by Lockheed Martin for the JSF’s production line and another managed by the Air Force to support deployed aircraft and two supply chain managers. Oh yes, according to the GAO, one of these managers doesn’t have a working ERP system. How could this possibly save money and improve performance?
There are published reports that the Pentagon intends to demand that Lockheed Martin absorb any future costs associated with design changes to the aircraft under a so-called concurrency clause. My colleague, Loren Thompson, has warned that this alone could kill the program. It would certainly raise the cost of buying the F-35. At the same time the Air Force wants to insource the F-35 supply chain, thereby almost certainly increasing the program’s sustainment costs. How many ways can the Pentagon devise to undermine its one new fighter program?
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