Meeting the Logistics and Sustainment Challenge: Towards a New Bargain Between Industry and Government
In a recent interview Sldinfo conducted with Lou Kratz, Vice President, Logistics and Sustainment, Lockheed Martin Corporation, the core significance of shaping an effective partnership between industry and the Department of Defense was underscored. Indeed, Lou Kratz laid out an approach towards shaping a new convenant between industry and government in forging a success-based sustainment model. Such a model would focus on implementing shared understandings of effective outcomes for logistics support and sustainment activities.
Lou Kratz drew upon the findings of a May 2009 Aerospace Industries Association’s (AIA) study on logistics, entitled “Modernizing Logistics“, to underscore that in 2008 more than $272 billion was spent on logistics and sustainment. “The AIA study makes clear that without substantial savings from the logistics and sustainment budgets, we would undercut our ability to buy new equipment and to keep weapon systems at the appropriate readiness levels.” He added that “just by accelerating on-going DoD initiatives and modernizing the logistics sector, an annual saving of up to 32 billion dollars could be achieved.” The AIA study includes several key recommendations, among which Lou Kratz underscored the importance of “the development of an end-to-end supply chain” and “the migration of the acquisition approach towards buying a service rather than a product”.
Lou Kratz emphasized that the new Administration and the Congress were highlighting the significance of logistics and sustainment for the acquisition process. He then identified three key developments, which underscore such a trend:
- The first has been to meet the overall “Iraq challenge, which raised the visibility of logistics as a whole, while no asset visibility existed during the Gulf War I”; today the impact of the Iraq withdrawal is even more compelling in demonstrating the need for efficient logistics management and operations: “The Iraq withdrawal will cost billions of dollars and highlight the importance of doing a better job in inventorying equipment and knowing the condition of that equipment. If there were greater transparency with regard to the numbers and condition of the equipment, acquisition would be improved as the Department looks to year procurements.” With the current redeployment from Iraq to Afghanistan, “the challenge for the Pentagon is to retrograde people and equipment: a decision concerning some 300,000 containers deployed in Iraq must be made for them to move to Afghanistan or come back and then reset and synchronized”, he notes.
- The second is evidenced by the emphasis which Dr. Carter, the Under Secretary of Defense of Acquisition, Technology and Logistics, is placing upon logistics and sustainment. One manifestation of this is the importance being placed on a study being currently conducted by Randy Fowler, ADUSD (Materiel Readiness). This study is an outgrowth of the work of the Product Support Assessment Team and is focused on concrete ways whereby industry and government and industry can work together to improve product support. The report in draft form is entitled “DOD Weapons System Product Support Assessment: Shaping the Next Generation Life Cycle Sustainment”. Lou Kratz noted that “while some critics in the press have focused on the tensions between the Administration and industry over their working relationship, Carter and Fowler clearly wish to see this working relationship as the engine for delivering capabilities to the warfighter and to the ability to have 21st century life cycle support.”
- The third development is the central role which sustainment considerations will play in the acquisition of major weapons systems. Lou Kratz pointed to the importance of section 805 of new National Defense Authorization Act. This section seeks to “maximize value to the Department of Defense by providing the best possible product support outcomes at the lowest operations and support cost.” To achieve this outcome the Act proposes the creation of “product support managers” for major weapons systems and a comprehensive set of responsibilities to be performed to improve attention to weapon system product support objectives and deliver equipment readiness-benefitting outcomes.
Lou Kratz emphasized that the private sector strongly supports such an effort, and welcomes a more effective set of approaches to achieve product support. “Establishing proper metrics for achieving success and effective communication between the government and the private sector will be important to achieving such a result. (…) “For that to happen”, he added, “ more DoD experts are indeed needed in order to optimize the support of the industry” Although not directly discussing the shift towards more insourcing in the government to replace some private sector contracting efforts, Kratz did emphasize that what both sides want is the same: a stable and effective partnership to shape improved capabilities to deliver more effective outcomes in logistics and sustainment efforts.
Lockheed Martin’s Global and End-to-End Approach: Building a Success-Based Sustainment Model
Lou Kratz believes that logistics and sustainment are no longer the last element of the chain of operations, but that they are at the very heart of any sound acquisition strategy.
Lockheed Martin is involved in a wide-range of logistics and sustainment acitivities. For example, Lockheed Martin is involved in two major ways in the Retrograde process from Iraq: “via asset visibility management (RFID) and via the resetting of equipment once they are back in the organic depots”, he explains. “LMC is also running 22 Performance-Based Logistics Initiatives (PBL) ranging from the F22 Raptor to smaller programs and has been recognized by DoD as a PBL Award winner.”
With the increasingly stringent defense budget, a very dynamic theater environment requiring overall agility, as well as the need to embrace global solutions for logistics and sustainment, whether for deployed US or allied forces or in working with allied or partner governments, Lockheed Martin is playing a key role in the re-crafting of the logistics and sustainment enterprise. Lou Kratz emphasizes that Lockheed Martin plays across the spectrum of logistics solutions and is innovating to shape new approaches to partnering to deliver value to customers.
Certainly, Lockheed, like other Original Equipment Manufacturers, focuses upon leveraging its own platforms to provide logistics and sustainment solutions. The C-130J, Aegis, C-5, F-22 and many other examples come to mind. On the international level, Lockheed “closely works with the United Kingdom via a 25 year contract for the C-130; it also works on the C-130 with Australia and is in the final negotiation with Canada. It has also developed a wide-ranging partnership with Singapore delivering airplanes and its simulators and ensuring pilot training (in this case, the obligation of results for the company and remuneration are directly translated into the number of graduated pilots)”, explains Lockheed Martin’s Vice president, Logistics and Sustainment.
He also points to the new F-35 model as an example of the shift whereby shaping a global support and sustainment for the new aircraft is part of the production model and the business case. Lockheed is leveraging its global partnering experiences with these platforms and programs to build an innovative new approach to the newest combat aircraft, the F-35. “The F-35 will succeed in part because it is more effectively built for sustainability than any tactical aircraft ever built. The global partnership to build the aircraft is already providing core elements of the sustainment model.” Lou Kratz highlights the global reach of the aircraft as providing an ideal opportunity to shape global partnerships and regional support centers for the aircraft. “As such, this allows Lockheed working with its partners to deliver value to the three US services who will use the aircraft as well as our global customers. This is a unique opportunity to shape 21st century solutions to logistics and sustainment built around a 21st century aircraft.”
Building New Tailored Skill Sets
For Lockheed Martin, the OEM “extension” model of logistics and sustainment is however only part of the story. LMC is building a portfolio of capabilities, and as such building skill sets which allow it to work with a diverse customer base and to work with a broad set of partners from the commercial and defense industries.
- One example is the provision of tires to the Navy and the Air Force. Here Lockeed provides assured material availability to the CONUS and deployed Naval and US Air Force airplanes. The team has a track record of 100% fill rate, a turn around in 33 hours in CONUS and a turn around outside of CONUS in 55 hours. The projected savings per year to the government customer of Lockheed management of the supply chain is projected to be around $46 million.
- SAVI, which is a wholly owned Lockheed Company, constitutes another example : providing asset-tracking systems for a variety of government and commercial customers, SAVI is indeed the pioneer in RFID tracking technologies and is leveraging this technology to provide new solutions for data transparency.
- Another example is the 2008 contract from US Transportation Command (USTRANSCOM) and the Defense Logistics Agency (DLA) to help enhance the military’s distribution network. The Lockheed team is merging DLA’s Integrated Data Environment (IDE) distribution systems with USTRANSCOM’s Global Transportation Network (GTN) into a unifed system called IDE/GTN Convergence (IGC). Lockheed Martin builds and maintains GTN and is synchronizing the systems with other key information systems. IGC will provide a common information platform that enables the military to more collaboratively and cost-effectively improve end-to-end supply visibility, responsiveness, decision-making, service and logistics processes. The platform includes a single repository and universal access to logistics data so that any user or developer can easily find, access or manage supply chain information.
This contract is part of an overall effort by Lockheed Martin to shape leading asset management visibility tools and practices. Among the areas where Lockheed works according to Lou Kratz are the following:
- Building and managing leading asset visibility tools;
- Joint asset management and engineering systems;
- Supporting the DOD global transportation network
- Developing and supporting DLA business systems;
- Supporting the US Air Force global combat support systems.
Towards a Global and Comprehensive Approach
In addition to support for its products and involvement in global IT systems, Lockheed is involved in a number of global activities associated with support for contingency operations. Among the activities in which Lockheed is engaged according to Kratz are the following:
- Base operations and support;
- Logistical support services;
- Peacekeeping support services;
- Airfield and airport support services
- Personnel placement services.
An example of the above is Lockheed Martin’s role in Africa. PAE , a Lockheed Martin company, currently manages more than 2,000 African workers across the continent and is developing and training African workers to assume jobs, previously held by foreign works. PAE also has experience supporting peacekeeping and law enforcement missions in countries such as Sudan, Sierra Leone, Bahrain, Haiti, Liberia, Timor Leste and Afghanistan. Under a contract from the US Department of State, PAE has supported peacekeepers in Darfur by building and supporting base camps that house African Union’s multi-national force.
Lockheed martin is also currently managing the Roberts International Airport in Monrovia with the Liberia Civil Aviation Authority. And Lockheed is seeking to work with other African nations in the construction and enhancement of their airports. The goal and the hope are that, through security, quality partnering and logistics, Lockheed Martin will contribute to solutions necessary and complementary to the support of African development efforts.
In other words, Lockheed has a broad and comprehensive view of the portfolio to be shaped to engage in logistics and sustainment, in the military, security and civil sectors. Lou Kratz underscored that in “collaboration with our customers we would pursue integrated product support frameworks, develop and support end-to-end supply chain analysis tools, engage in joint logistics concept development and support end-to-end asset management.” In that sense, he considers that “allied integrated logistics and the fact that NATO is now stepping in are absolutely crucial”.
In short, for Lockheed Martin today “logistics and sustainment are not an afterthought. It is central to our core activities and central to our future in working with our customers.”
***Posted November 23rd, 2009