Purchasing

1
Purchasing Supply Chain Management
Transformation

• Presented By
• HUGH T. FOSKEY
• 583 CBSS
• 5 OCT 06

2
Overview

• History
• The Case for Transformation
• Commodity Councils
• Opportunities
• Challenges
• Summary

3
History of Transformation
DoD
Develop the kinds of forces and capabilities
that can adapt quickly to new challenges and
unexpected circumstances. Secretary of Defense
Donald Rumsfeld
USAF
eLog21
AFMC
Sustainment Transformation
Depot Maintenance (DMT)
Product Support
Purchasing Supply Chain Management (PSCM)
Supplier Relationship Management (SRM)
Change Mgmt (CM)
Advanced Planning Scheduling (APS)
Commodity Councils (CC)
Customer Relations Mgmt (CRM)
Weapon System Supply Chain Mgmt (WS SCM)
4
The Need for Change

• Provide Better Support to the Warfighter
• Logistics must evolve with the new global
  expeditionary doctrine
• Demand for faster and more reliable combat
  support to the warfighter in the next-generation
  battlefield
• Take Advantage of Recent Advances in Technology
  and Processes
• Current processes are NOT broken, but we can do
  significantly better
• Supply chain management innovations in private
  and public sectors hold promise for major
  improvements within the AF supply chain
• Prepare for an Impending Loss of Intellectual
  Capital
• Many members of AFMC workforce are eligible to
  retire by the end of 2009
• 51 of AFMC logistics workforce
• 33.5 of AFMC contracting and manufacturing
  professionals
• We must increase the skills and flexibility of
  our remaining workforce
• Counteract Increased Competition from the Private
  Sector

5
Air Force and AFMC Transformation

• Expeditionary Logistics for the 21st Century
  (eLog21)
• The AF transformation campaign plan to improve
  logistics to meet both the current and future
  threat environment
• The campaign consists of 20 initiatives focused
  on training, business process redesign,
  performance metrics, systems, supply chain
  management, change management, and more
• Technology is not the focus, but an enabler
• Being implemented across AFMC and MAJCOMs
• Logistics Enterprise Architecture (LogEA)
• A single authoritative strategic map of Logistics
  business practices, systems, and organizations
  that will provide the overall future state
  direction
• Expeditionary Combat Support System (ECSS)
• Commercial-off-the-shelf (COTS) system that will
  enable the future Logistics vision defined in
  eLog21
• Replaces AF logistics legacy systems with a
  commercial Enterprise Resource Planning (ERP)
  Package and limited COTS bolt-ons

6
Sustainment Transformation Goals
Goals
Depot MX 25 ? in Flow Days 100 On Time
Delivery 10 ? in Costs 20 ? in A/C Avail
eLog21 Goals
Product Support Campaign
10 Decrease in Annual Operating Support Cost
by FY 2011
Product Support Max System Capabilities Reduce
Logistics Footprint Min Total System Sust
Cost Satisfy Warfighter Req
20 Increase in Equipment Availability
PSCM 50 ? Sourcing Cycle Time 20 ? Supply
Materiel Avail 20 ? Supply Repair Cost
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AFMC Logistics Transformation Goals

• 11 Aug 02 memo from Grover Dunn directed AFMC/LG
  FM to reflect material savings resulting from
  transformation initiatives.
• Savings numbers which had been provided to ILI
  were subsequently pulled from MAJCOM CPFH
  accounts with the promise of no loss of buying
  power
• Projected savings

Total mandated savings through FY11 are 806M,
with more to come from BRAC
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USAF/ILI Mandate
Strategies need to address savings targets!!!

• 11 Aug 02 memo from Grover Dunn directed AFMC/LG
  FM to reflect material savings resulting from
  PRPS and APS.
• Savings numbers provided to ILI were subsequently
  pulled from MAJCOM accounts with the promise of
  no loss of buying power
• Required savings 806M (all of AF)

of
Mandated Cost Savings (M)
ALC
Spend
Total
FY06
FY07
FY08
FY09
FY10
FY11
(FY01-03)
806
27
102
148
155
183
191
Oklahoma City
55.0
443
15
56
81
85
101
105
Warner Robins
35.0
282
9
36
52
54
64
67
Ogden
10.0
81
3
10
15
16
18
19
Savings Mandate based on of MSD Spend per ALC
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USAF/ILI Mandate - 2
Savings Mandate based on of MSD Spend per FSC
grouping
Mandated Cost Savings (M)
Commodity Type (IPTs and C-Cs)
ALC
Total
FY06
FY07
FY08
FY09
FY10
FY11
806
27
102
148
155
183
191
Propulsion
36.8
297
10
38
54
57
67
70
Accessories
9.5
77
3
10
14
15
17
18
Instruments
Oklahoma City
5.2
42
1
5
8
8
10
10
Other
3.5
28
1
4
5
5
6
7
OC Total
55.0
443
15
56
81
85
101
105
Comm Electronics
17.7
143
5
18
26
27
32
34
Aircraft Sructures
7.6
61
2
8
11
12
14
15
Warner Robins
Support Equipment
7.3
59
2
7
11
11
13
14
Other
2.4
19
1
2
4
4
4
5
WR Total
35.0
282
9
36
52
54
64
67
Landing Gear
5.2
42
1
5
8
8
10
10
Secondary Power
2.6
21
1
3
4
4
5
5
Ogden
Other
2.2
18
1
2
3
3
4
4
OO Total
10.0
81
3
10
15
16
18
19
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What is a Commodity Council?

• Definition
• A cross-functional group, charged with
  formulating an
• AF-wide commodity/supplier strategy that
• - Executed locally (ALC level)
• - Represents the enterprise
• Objectives
• Eliminate duplication of effort
• Minimize costs
• Provide supplier development
• Leverage USAF spend

• Whats Different About this Approach?
• Robust governance that provides enterprise-level
  focus, measurement and accountability of
  commodity-centric strategic sourcing
• Leverage and development of enterprise-wide
  commodity expertise
• From item-based to commodity (class of
  items)-based sourcing strategies
• Commodity expertise, augmented by process
  expertise, is the key ingredient for strategic
  sourcing
• Holistic view of supplier base (organic and
  commercial)
• Persistent structure which allows for ongoing
• Market intelligence
• Development and maintenance of commodity-specific
  sourcing strategies
• Supplier relationship management and development
  for both competitive and sole source

Bottom Line.Reduce ALT, PLT, Cost and Improve
Performance
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Commodity CouncilCore Members
Commodity councils are cross-functional teams
that will develop and executeAF-wide commodity
sourcing strategies

• Responsible For
• Developing AFMC-wide commodity sourcing strategy
• Executing commodity sourcing strategy
• Monitoring supplier performance
• Developing and managing supplier relationships
• Researching commodity market

Business requirements analyst
Procurementmanager / specialist
Commodity expert
CC DirectorandCC Deputy Director
Market intelligence analyst
Data specialist

• Not Responsible For
• Developing the demand planning forecast
• Managing customers, weapon systems or items
• Conducting tactical planning, scheduling and
  asset management
• Performing tactical contract management
  activities

Commodity supply chain analyst
Sourcing supply analyst
Commodity sub-council manager
Illustrative Commodity Council
Commodity councils are enterprise and
cross-functional
Note List is not all inclusive
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Commodity Groups (92 Enterprise Spend)
Aircraft Accessories 9.55
Propulsion 36.82
Support Equipment 7.35
Instruments 5.19
Material Governance Process
Aircraft Structural 7.56
Secondary Power Systems 2.56
Communications / Electronics 17.7
Landing Gear 5.15
OC-ALC WR-ALC OO-ALC
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Commodity Groups (97 Enterprise Spend)
Aircraft Accessories 17.17
Propulsion 36.19
Support Equipment 7.50
Material Governance Process
Secondary Power Systems 2.72
Aircraft Structural 7.61
Communications / Electronics 19.67
Landing Gear 6.38
OC-ALC WR-ALC OO-ALC
Percentage based on FY03-05 spend for Budget
Code 8 and Support Equipment Items
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Commodity Council Future Business Practices

• Enterprise-wide procurement strategies  
• Reducing duplication of effort
• Integrating customers and suppliers in strategy
  development
• Driving commonality and standardization
• Leveraging purchasing volume
• Strategic contracts supplier relationships
• Fewer contracts, more orders/contract
• Proactive planning, flexibility
• Joint forecasting, sharing of data, partnerships
• Win-Win opportunities
• Technology, innovation, new business practices
• Electronic ordering, automatic payment, direct
  shipment

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Opportunities

• ASCC (George Kalebaugh)
• Competitive Item Strategy
• Possible 10M Savings
• Qualify Source by Process versus NSN
• Reduce First Articles, ALT and PLT
• Organic Strategies Possible Partnership
• CECC (Janice Gillen)
• High Number of Sole Source Items
• Increasing Number of Corp Contracts
• Possible Competitive Strategies
• SECC (Vacant)
• Third Party Logistics Support
• Remanufacturing Effort for Support Equipment
• Honeywell Corporate and Oscilloscope Success

16
Tinker AFB and Hill AFB Councils

• Tinker AFB
• Propulsion CC
• Successful launch of Parts Manufacturer Approval
  (PMA) approach
• Large sole source item population
• Accessories CC
• Previously two Councils Aircraft Accessories and
  Instruments
• Competitive Prime Vendor Initiative underway
• B1 Flight Control Strategy
• Hill AFB
• Landing Gear CC
• Landing Gear Prime Vendor initiative
• Strategic metals strategies being developed
• Secondary Power CC
• PBL initiative for secondary power units

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Opportunities

• Performance-Based Logistics Contracts
• Organic Partnerships
• Lean Initiatives
• Critically Evaluate Your Processes
• Include as Evaluation Criteria for Awards
• Shared Savings or Longer Term Contracts
• Enterprise Approach to Doing Business
• Learn More About the Councils at the Requirements
  Symposium 8-9 Nov 06!!

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CHALLENGES

• Savings Must be Achieved
• We Are All Affected by Smaller Budgets
• Team Approach
• Material Shortages Will Continue
• DoD and Industry Need to Leverage Buying Power
• We Need Your Help to Resolve
• Industrial Base May Be Smaller and Leaner
• Socio-Economic Concerns
• Obsolescence and Diminishing Sources
• Company Philosophy and Focus Must Be Flexible

WE MUST RE-TOOL AND RE-ARM OUR WARFIGHTERS!!!
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SUMMARY

• Transformation is More Than a Buzzword!
• We Learn From the Past, But We Control The Future
• Paradigms Must Continue to Change
• We Must Continue to Change Our Thinking, Our
  Actions and Our Focus
• Hang OnYou Havent Seen Nothing Yet!
• We Are One Team!! We Succeed or Fail as One
• We Must Succeed..Our Young Men and Women Are
  Depending On Us!!

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Discussion/Questions