Creating a Military Supply Chain Management Model

by Dr. Kristine Lee Leiphart

    Military logistics and commercial logistics are parts of the same industry. Both are concerned with focused logistics, precision and velocity, coordinated delivery schedules, fast and flexible distribution, and good infrastructure and equipment at distribution centers. In realizing the Department of Defense's (DOD's) Joint Vision 2010, key distribution measures may be needed that extend beyond what the military services, or the entire public sector, can achieve. The military supply chain management system should look at the experience and expertise of the private sector.

    When the Deputy Under Secretary of Defense for Logistics, Roger Kallock, was interviewed by the journal Transportation and Distribution in 1999, he stated that his vision was to deliver any cargo, anytime and anywhere, in 5 days or less. He stressed three key requirements for achieving this goal: information-driven logistics, a fully integrated system, and customer-focused logistics. These also are of utmost importance to logisticians in industry. By 2005, the Department of Defense has a goal of 100 percent asset visibility, which means the military will need fully integrated cargo tracking and information systems.

    Integrating the military's logistics experience with private-sector logistics expertise can help meet the challenges set forth for 2005. The Joint Vision for military logistics calls for a military supply chain management model, in which readiness means realizing optimal procurement, supply, maintenance, and distribution times. Military supply chain management integrates the business practices used in the commercial sector with the strengths of military readiness and global visibility.

Military and Commercial Parallels

    Military and commercial readiness can be defined as the optimization of available resources to operate in a possible unforeseen event. In this sense, readiness can be viewed as situational management of an event. Time, cost, and quality are still crucial to measuring situational logistics management. A thorough assessment of supplies, resources, and manpower would need to be matched with the needs of the unforeseen event under surge circumstances.

    Customer wait time measures the time needed to deliver an item to the customer's door, including the time a component may spend in maintenance. Door-to-door delivery times can be measured for other situational logistics scenarios. Take, for instance, the hypothetical release of a biological weapon such as Anthrax in the subways of New York City, or the crash of a busload of tourists on a congested Los Angeles freeway that results in critical injuries. These scenarios are not very different from a wartime surge scenario requiring logistics management. Whether it is for a military or commercial surge scenario, carefully planned situational logistics and effective supply chain management can get the supplies to the people in need in an emergency. Both of these hypothetical scenarios involve fundamental logistics processes, such as quickly exchanging information, identifying available supply resources, and delivering supplies. Such scenarios call for an integrated plan involving military, governmental, and commercial services.

Military Supply Chain Management Model

    Operations Desert Shield and Joint Endeavor allowed the military to show the Nation a new logistics challenge for conducting surge operations. Whether for deployment or other emergency situations such as natural disasters, the Nation has to be equipped with the best readiness resources. To do so requires the achievement of the following common national goals.

    Standardization of commercial and military logistics metrics and equipment. Establishing standardized procedures and data that are either adaptable or resistant to further technological change is a necessary step for military supply chain management. When military cargo is to be handled by commercial and military logistics providers, common data and equipment for tracking intransit cargo visibility become necessary for packing, identifying, shipping, and tracking shipments to the customer's door.

    Real-time stockage information. It is important to have the most current supply status. Status information is needed to improve the military's maintenance readiness and to integrate information about procurement actions and required repair parts, so there is no need to rely on equipment carcasses for spare parts.

    Minimal customer wait time. Achieving optimal procurement, supply, maintenance, and distribution times is fundamental to creating an efficient supply chain management system. Just-in-time deliveries and lean manufacturing strategies have become popular with private industry because components can be costly and the value of finished products can drop overnight. High-tech manufacturers have made it possible for companies to operate with little or no inventory. Internet auction portal sites have offered help in tracking down required parts. However, the long-term success of these portals is uncertain because they cater mainly to larger companies. In industry, the safety stock level commonly is set at twice the standard deviation of the demand, given a certain lead time. With million-dollar component parts and lack of carcasses to replenish the inventory, stocking the inventory at twice the standard deviation may not be a realistic goal for the military.

    For repair and maintenance operations, it is not realistic to rely solely on maintenance operations overseas. There are not enough carcasses to replace component parts in warehouses outside the continental United States (OCONUS). The price of military components is so high that forward stocking all the possible parts needed would not be realistic either. What may benefit the military is the use of technology to signal when supplies from authorized stockage lists reach a low point so that flights can deliver the parts reliably to forward support activities. Surge channels must be set up to take advantage of factories at CONUS locations or intermediate staging bases.

    In transportation and distribution, private industry operates on scheduled deliveries, because having shipments arriving according to a schedule permits maintenance of lower inventories. For surface deliveries, giving trucking companies more lead time by forwarding the shipping schedules from the suppliers eases their work load. For air cargo deliveries, the military may consider forward stocking heavy, voluminous cargo during the months of January and February and pre-positioning them in warehouses to cut annual transportation costs for sustainable operations; this is because January and February are months of low air cargo volume, and small package carriers frequently can offer lower rates during those 2 months.

    The Automated Manifest System can help speed the last leg of delivery to the customer's door. That final leg of the supply chain system has been the most difficult bottleneck to resolve because customers do not operate on a definite time system for receiving cargo. Reliability—a guaranteed level of service—is still key for customers in the logistics industry.

Combining Military and Commercial Strengths

    As the national infrastructure networks and ports become stressed by capacity constraints, logistics companies are relying more on intelligent distribution methods such as the Internet. Virtual service providers allow large corporations to exchange supply information among globally situated retail locations. Since economy of scale is the driving force in commercial industries, the larger the conglomerate, the better the business. When businesses are located all over the globe and information acts as another mode of transportation in logistics, technology becomes increasingly important for daily operations. Some logistics providers have become information management firms. With the adoption of the Internet for electronic commerce, customers have come to expect ready access to real-time inventory procurement, ordering, and tracking. The Information Revolution is leading the changes in supply chain distribution and fulfillment patterns.

    E-commerce, e-procurement, e-retailing, and virtual warehousing concepts are changing the relationships between suppliers and distributors, altering the implications for freight movement patterns, and—since the Internet offers accessibility from any location—redefining the relative location of the workplace. Real-time access to business data on potential customers and suppliers provides managers with dynamic inventory control and immediate vehicle dispatching capabilities for freight delivery systems.

    Each military installation can be conceived of as a decentralized retail center that can be connected to a centralized hub or a major distribution center that can distribute supplies. If end items are in need of repair parts, the technology is available to signal low stockage at a CONUS or OCONUS location for that particular repair part so it can be reordered instead of waiting for carcasses. Transportation delivery systems are fairly reliable and are not the major bottlenecks to getting the necessary parts to the soldier in the field. Finding the manufacturer who can make component parts to order and connecting that manufacturer with the direct support operations may be the next logical step in military logistics.

    In private sector logistics, direct coordination of retailers, suppliers, and transporters using technology such as the Internet has enabled retailers to fill empty shelves more quickly because such a system helps the respective parties predict each other's needs. For the military, an Internet-based system connecting installations would require that all of the installations share information with military procurement, supply, and transportation offices. The usefulness of technology such as the Internet during wartime is debated among military logisticians. However, technology such as the Internet was created with wartime scenarios in mind, and, according to Bill Lucas of the Military Traffic Management Command, the Internet-based Global Transportation Network had 3,000 hits per day during the Kosovo air war.

    Lack of spare parts is not necessarily the major hindrance to efficient military logistics. Having the spare part where it is needed is the key area for logistics improvement. During Operation Desert Storm, $2.7 billion worth of spare parts went unused, according to a 1992 General Accounting Office report. It is estimated that, if the Army had had an effective cargo-tracking method during the Gulf War, DOD could have saved about $2 billion. As a result of the Gulf War experience, automatic identification technology and intransit visibility systems have been established by DOD as mechanisms that will save the military money in the long term.

    For military surface distribution, the idea of having coordinated, scheduled truck deliveries at installations is not very different from the type of coordination that occurs between the retailers and the supply chain management system. During the Gulf War, there also was a lack of equipment needed for deployment, and the ports of embarkation and debarkation were overcrowded with supplies that had to be processed and moved to direct support locations. Although military manpower has been reduced since then, capital investments in technology have helped expedite deployment operations (as seen in increases in the speed of loading cargo onto vessels at CONUS ports). The payback for the investments made may be realized when a faster and more accurate defense transportation system is in operation.

Future Directions

    There are four areas of growth in commercial logistics that also may be relevant to military logistics in the future.

    Inventory reduction. Stocks in warehouses will be kept at a minimum through continuous resource reduction, supplies kept "on wheels," inventories managed directly by vendors, component parts made to order, and distribution based on one-touch, Internet-type information exchange.

    Increased reliance on technology. The paperless cargo manifest is a good example of how technology can speed cargo delivery for an interrelated supply chain. Cargo can be transported only as quickly as the accompanying bill of lading and other necessary paperwork. In that sense, electronic data interchange (EDI) offers electronic customs clearance, real-time information exchange, and more lead time for scheduled pickups of cargo. An automated system linking retailers to manufacturers can flag replenishment needs so reorders can be shipped directly from the manufacturers' distribution centers.

    Strategic outsourcing. Outsourcing some services to specialized service providers may work well when there is a change in manpower, when logistics providers merge, when operations are consolidated, or when it is desirable to tailor services to the individual needs of customers. If the military is to outsource some of its supply chain management operations, total visibility from order placement to distribution destinations will be essential.

    The first step in determining what part of military logistics operations to outsource may be determined by customer demands. Customer needs should be the number one variable for creating the military supply chain management system and making asset investment decisions. After all, without the customers who create demands, there is no need for a supply chain management system. Over time, accounting for the changing needs of customers and devising a mechanism for the Federal agencies that also are logistics users to share that information will lead to the best expenditure of appropriated funds.

    Joint use of public assets. As trade and transportation become more global and seamless, joint use of infrastructure and equipment—whether they belong to the military or other branches of the Government—may serve as cost-cutting measures. Some of the Nation's highways already are designated as corridors of national significance by Congress to serve national security purposes as well as everyday mobility needs. More conversions of military airbases to all-cargo airports and of naval bases to commercial use may be warranted since there is commercial demand for using the airbases and seaports.

    Use of commercial rates for frequently traveled routes. Cargo deliveries that use frequently traveled routes cost less and can have shorter delivery times. An example of frequently traveled routes for the military are the routes between CONUS and Europe or Asia. States that consume the most imported products serve as natural gateways for trade. As long as a particular state is a major consumer of imported cargo, that state will always retain business at the port of entry. The logistics industry is investing in southeastern states such as Florida, Alabama, and Georgia to prepare for a forecasted increase in manufactured items imported from Latin America.

    These are some ideas from commercial sector logistics that are relevant to the needs of the military supply chain management system. To achieve the goals of Joint Vision 2010, the military must look beyond the conventional practices to manage innovation and change.

    Kristine Lee Leiphart, Ph.D., works on logistics, transportation, and land use issues at the RAND Corporation in Santa Monica, California. She is certified in transportation logistics management and holds the professional designation of Global Logistics Specialist.