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TRANSCRIPT
DOING MORE
WITH LESS
KEITH LIPPERT,
VADM – US NAVY, RET.
ACCENTURE RETIRED
MANAGING DIRECTOR
HIGH PERFORMANCE
LOGISTICS IN
CHALLENGING TIMES
Copyright 2017 Accenture. All rights reserved.
2
THE BURNING PLATFORM
Global Defense organizations are currently faced with the
unprecedented challenge of dramatically reducing costs while
ensuring uncompromised mission support.
Copyright 2017 Accenture. All rights reserved. 3
ESTABLISHING A FRAMEWORK
FOR HIGH PERFORMANCE
Defense Executives are faced with many complex and challenging questions:
• How can I dramatically cut costs and while maintaining critical operational
readiness?
• Do my IT systems provide me accurate and actionable information for rapid
decision making?
• Where are my greatest supply chain risks and how can I control them?
• What should my supply chain network look like and how can I get there?
• Is my workforce prepared to meet “do more with less?”
Meeting these challenges requires Defense organizations to establish
a framework for achieving high performance, that includes:
• Foundation for Success – Executive Sponsorship & Governance
• Case for Change – a clear & quantifiable business case with dedicated
change management
• Integrated Performance Levers – alignment of people, process, and technology
Copyright 2017 Accenture. All rights reserved. 4
“WE’VE BEEN THERE BEFORE…”
Case Study: US Defense Logistics Agency (DLA)
Background
$46 Billion global enterprise – more than 27,000 military
and civilians in 28 countries
One of the largest and most complex supply chains
in the world
Primary DoD Warehouse Function
Reverse logistics processor…reutilization and disposal
• Manage nearly 5 million product line items, across 8 supply
chains, supporting over 2,200 weapon systems
• Supplying 84% of all Military Services’ repair parts and 100%
of fuel and troop support consumables
• Processes nearly111,300 requisitions and more than 11,000
contract actions a day.
• $2.4B in Foreign Military Sales supporting 110 Nations
Copyright 2017 Accenture. All rights reserved. 5
DLA’S CHALLENGE
By the late 1990’s, DLA was at a crossroad
DLA need to find a way to reduce cost and improve service…
or risk “going out of business”
In 1999, DLA decided it was time to change…
• Observations of DLA from military customers
• Prior Efforts to Transform Failed to Meet Expectations
– “It takes too long to get material from DLA”
– “DLA is too expensive”
– Previous IT modernization programs not delivered
– DLA remained a loose confederation of organizations that acted independently
– People, process and technology were misaligned
Copyright 2017 Accenture. All rights reserved. 6
DLA’S TRANSFORMATION & GROWTH
1990s 1960-89 2000s
1962 Defense Supply Agency
1977 Defense Logistics Agency
• DOD assigns most Service-unique consumables, warehousing and cataloging to DLA
• Increased direct customer interface
• Employed commercial practices
• Implemented Distribution Standard System
• Implemented Enterprise Business Systems (SAP/ERP)
• Expanded forward presence
• Increased mission w/BRAC
– DLR Procurement
– Industrial Support
– Commodity Privatization
• Strategic Sourcing
• Continued business systems enhancements
MANAGEMENT
EFFICIENCIES
FOR COMMON
ITEMS
MANAGING
SUPPLIES
MANAGING
SUPPLIERS
BETTER LINKING
SUPPLY AND
DEMAND
Integrating functions to enhance EFFECTIVENESS and EFFICIENCY
2010s
• Continued vital role
in SWA
• Logistics efficiencies
• Single national
inventories
• Leverage ERP
capability
• Strategic Network
Optimization
• PBL role
Copyright 2017 Accenture. All rights reserved. 7
ESTABLISHING A FRAMEWORK
FOR HIGH PERFORMANCE: BUSINESS
SYSTEMS MODERNIZATION (BSM)
Sponsorship
• Starts at the top…senior executives across all effected organizations are
engaged and personally sponsoring program
• Full-Time “Visible” Project Leadership
Governance
• Decision-making authority is engaged, readily available, and has the
necessary span of control, responsibility, authority, and incentive to drive
change
• Decisions around key issues are dealt with in structured manner, resolved
quickly, and are not re-visited
• “Single” Process owners established for all functions
• Partner with Integrator
BSM was not conceived as an “IT modernization” initiative, but rather a
comprehensive transformation initiative to enable DLA to reduce cost while
improving service.
Copyright 2017 Accenture. All rights reserved. 8
A FRAMEWORK FOR
HIGH PERFORMANCE LOGISTICS:
UNDERSTANDING THE CASE FOR CHANGE
Business Case
• Value proposition is documented with quantifiable, time-phased benefits
• Contracting model that creates incentives for both customer and integrator
to achieve the business case
• Program objectives are aligned to an outcome-based contract
• Business value judgment used in making scope/cost tradeoff decisions
Change Management
• Business case is shared and communicated throughout the enterprise
• Willingness to embrace changes is driven by shared recognition of
program importance, often accompanied by performance
incentives/bonuses for individuals
Copyright 2017 Accenture. All rights reserved. 9
A FRAMEWORK FOR
HIGH PERFORMANCE LOGISTICS:
ENABLING PERFORMANCE LEVERS
People
• Train, train, train…new skill sets needed
• Measure performance
Process • Improve process with greatest impact on supply chain performance
• Reengineer to align with core technology
• Measure performance
Technology
• Leverage COTS functionality
• Implement the new business processes through software
configuration, not customization
• Start with concept demonstration, capture lessons learned,
scale with added functionality
• One version of the truth
• Measure performance
INT
EG
RA
TIO
N – Demand Planning – reduce forecast error through customer collaboration
– Supply Planning – optimize inventory levels with cost to serve
– Procurement – reduce lead time, reduce spend through strategic sourcing
Copyright 2017 Accenture. All rights reserved. 10
BUSINESS SYSTEMS MODERNIZATION
RE-BASELINED JUNE 2003
FY 2000 FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 FY 2006
2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3
System Releases
Users and Materiel Added
Full Operating Capability
Medical
BPR Design, Build, Test
FOC
Release
2.2
Phased
Roll-outs
Release
2.1
OSD OP
Tests
Release
2.0 Core
Release 1.2
C&T,
Legacy
Procurement
Release 1.1
Subsistence
&
BDUs
Release 1
Concept Demo
– Hardware &
Troop Support
170K Line Items $300M Sales
390 Users
250K Line Items $3B Sales 1175
Users
5.2M Line Items ~$18B Sales ~7000 Users
Release 2.2.1 Enhanced
Copyright 2017 Accenture. All rights reserved. 11
HIGH PERFORMANCE DELIVERED
Improved Service
• Achieved 99.7% system availability…single ERP instance
• Reduced Logistics Response Time (21 days to 15 days)
• Reduced order status notification (>24 hours to 4 hours)
• Ground breaking changes in operating model with Implemented
Sales & Operations Planning
Cost Reduction
• Achieved $72M in cost savings over legacy systems
• Reduced cost recovery rate from 22.1% to 14.4%
• Reductions in forecast error…$500M in cost avoidance by reductions
in forecasts
Compliance
• First successfully deployed ERP in DoD…delivered on-time, on-budget
• Provided 100% supply chain interoperability with services
• Positioned DLA for DOD financial compliance
Copyright 2017 Accenture. All rights reserved. 12
BEYOND BSM…
ENTERPRISE BUSINESS SYSTEMS (EBS)
Extend Capabilities with Improved Demand Planning
• Leverage Existing Technology - modify business rules/configuration settings
to further reduce forecast error
• Extend Collaboration – integration of customer maintenance data with
Demand Planning
Enhance Strategic Sourcing Capabilities
• SAP SRM - modernize contract writing system with new COTS functionality
• Leverage Existing BI/BO Functions - extend analytical functions to support
Strategic Sourcing
Extend Capabilities with Advanced Analytics
• Strategic Network Optimization – utilize advanced analytical tools to optimize
the DOD Distribution Network (identified $731M in transportation savings, $2.5B
in recurring inventory savings & $4.75B in infrastructure savings)
• High Risk Procurement – developed advanced analytic algorithms/models
that effectively predict and reduce the occurrence of awards of contracts
for overpriced items, counterfeit items or to high risk suppliers
(net 5-year savings of $215M)
With the successful completion of BSM in 2007, DLA initiated a EBS, a new transformation
initiative to extend capabilities, meet new mission requirements, and enable $10B in cost
savings over the next 5-years.
Copyright 2017 Accenture. All rights reserved. 13
BENEFITS FROM IMPROVED DATA
INTEGRITY
• Reduced the number of statistical demand planners from 134 people to 8
• Reorganized into one unit at DLA Headquarters
• Inventory Reduction Efforts
• For DLA managed material on long term contracts, procure monthly consumption vice EOQ, demand over procurement lead time, and safety level
• Supplier engagement is critical
If successful, next steps are to expand to material not on
long term contracts
Copyright 2017 Accenture. All rights reserved. 14
BENEFITS FROM IMPROVED DATA
INTEGRITY – CONT.
• Management of individual items conducted by item managers within DLA
• Before the ERP implementation:
• Item managers spent countless hours “cleaning the data” as part of the procurement process
• AFTER the ERP implementation:
• With improved data integrity, item managers are freed up resources
• With the War on Terror, DLA’s revenue more than doubled but no additional item managers were required to keep up with the increased workload