Overview of RAND’s Supply Chain Management Research

Supply Chain Risk Leadership Council

Nancy Moore and Elvira LoredoOctober 8, 2008

Logistics 08 2

Outline

• Overview of RAND

• DoD’s supply chain challenges

• RAND’s supply chain research

Logistics 08 3

What Is RAND?

• An independent, nonprofit research institution founded in 1947 by the Air Force to preserve the war effort of scholars

• A producer of multi-disciplinary, quantitatively oriented research

• A tackler of large, complex problems

• A center for education and training in policy analysis

Logistics 08 4

We Are Guided by Our . . .

• Charter“To further and promote scientific, educational, and charitable purposes, all for . . . public welfare and security of the United States.”

• MissionTo help improve policy and decision-making through research and analysis

• Core valuesQuality and objectivity

• VisionTo be the world's most effective and trusted global provider of research and analysis

Logistics 08 5

RAND Has Evolved to Meet New Needsfor Research and AnalysisResearch

person years

600

500

400

300

200

100

01940s 1950s 1960s 1970s 1980s 1990s

Domestic and international

Domestic and international

National securityNational security

Project RAND formed byUSAAF at

DouglasAircraft

The RAND Corporation

formed

Domestic Research Division formed

Firstnon-USAF study

First work for OSD,

civil agencies

RAND Graduate

School established

Project RAND

becomes Project AIR

FORCE FFRDC

2000s

Army and OSD FFRDCs formed

First sustained

work in private sector

RAND Europe and

Science and Technology

Policy Institute formed

RAND-Qatar Policy Institute opened RAND

Gulf States Policy Institute opened

Logistics 08 6

Our Research Is TypicallyCharacterized by . . .

Issues that involve:

• Competing objectives and perspectives

• Intersection of public/ private interests

• "Messy" data, major uncertainties

• Implications for the future

An analytic approach that is:

• Integrative, collaborative, and multidisciplinary

• Empirical, with technical depth and methodological rigor

• Innovative, but informedby past findings

• Buttressed by demanding standards of quality and objectivity

RAND strives to build long-termrelationships with its clients

Logistics 08 7

RAND's Key Resource Is Its 737 MemberProfessional Research Staff

Degree Discipline Degree Level

Masters30%

Masters30%

Doctorate57%

Doctorate57%

None 1%Other 1%No degree

1%

Computersciences

Businessand law

Arts and letters

Physical sciences

Engineering

EconomicsMath, operations research, statistics

Policy analysis

Social sciences

8%8%

7%7%

9%9%

10%10%

12%12%

11%11%

11%11%

5%5%

12%12%

8%8% Behavioral sciences

Life sciences

Political science and international relations

3%3%3%3%

Bachelors11%

Bachelors11%

Logistics 08 8

RAND’s Customers

• Defense – Air Force, Army, Navy, Marine Corps, Defense Logistics Agency,

U.S. Transportation Command, Office of the Secretary of Defense

• Other federal government – Department of Health and Human Services, Department of

Justice, Department of Homeland Security, National Science Foundation, …

• State and local governments– State of California, City of Los Angele, …

• Foundations – Pew, McArthur, Robert Wood Johnson, …

• Companies

Logistics 08 9

IDA

All RAND Department of Defense Research Is Conducted by FFRDCs

• Source: FAR. FFRDCs ...

• Access to Government and supplier data, including sensitive and proprietary data, and to employees

• Required to operate in the public interest with objectivity and independence

• Free from organizational conflicts of interest

• Not ... use its privileged information or access ... to compete with the private sector

10 DoD FFRDCs, RAND has 3

Studies &Analysis

Engineering &Technology Development

• Congress est. 36 Federally Funded Research and Development Centers• Long-term contracts to

• ensure independence• encourage long-term engagement on key issues

CNA

NDRI

PAF

Arroyo Center

Logistics 08 10

Outline

• Overview of RAND

• DoD’s supply chain challenges

• RAND’s supply chain research

Logistics 08 11

A Significant Portion of DoD’s Budget Goes to External Providers

FY

48

FY

50

FY

52

FY

54

FY

56

FY

58

FY

60

FY

62

FY

64

FY

66

FY

68

FY

70

FY

72

FY

74

FY

76

FY

78

FY

80

FY

82

FY

84

FY

86

FY

88

FY

90

FY

92

FY

94

FY

96

FY

98

FY

00

FY

02

FY

04

FY

06

Personnel

Procurement

RDT&E

Goods andservices

DoD Total Obligation Authority (TOA) ($B)341

86

368

142

520

276

472

291

364

254

364

287

618

604

178

14

354

34

447

76

347

40

380

50

Source: OUSD(Comptroller), National Defense Budget Estimates for FY 2009, March 2008, Tables 6-1 and 6-2 http://www.dod.mil/comptroller/defbudget/fy2009/fy2009_greenbook.pdf

NOTE: Data in Constant FY2008 Dollars.

100

90

80

70

60

50

40

30

20

10

0

Per

cen

t

(Constant FY 2008 Dollars)

(Nominal Then-Year Dollars)

Logistics 08 12

Avionics

Assemblies, Sub-components,

PartsProducts

Supply Base

Customers

Enterprise

Goods and

services

WeaponSystems

Air Force

Army

Navy

Marine Corps

Central Command

Pacific Command

…

Purchasing Logistics

Returns

Supply Chain

Manufacturing

DoD Purchases, Operates, Repairs, Modernizes, and Overhauls Weapons - It Does Not Make Them

Logistics 08 13

Military Supply Chain ManagementFaces Unique Challenges

• Operating environment– Often austere, hostile environments

– Requires rapid response anywhere in the world

– Unpredictable and widely varying operational tempo

– Very wide range of material– Wide array of expensive service parts, many with low and highly

variable demand

• Business environment– Benefits / outcomes not measured in monetary terms

– Fixed, annual budgeting, regardless of potential project ROI

– Political constraints

Logistics 08 14

DoD Is Adopting/adapting Commercial Best Practices Where Appropriate

• Converting repair depots to lean operations

• Applying Six Sigma to processes

• Outsourcing some non-core functions– Performance Based Logistics (PBL) arrangements

– Contractor Logistics Support (CLS)

• Adopting some best practices in purchasing and supply management

Logistics 08 15

Outline

• Overview of RAND

• DoD’s supply chain challenges

• RAND’s supply chain research

Logistics 08 16

Our DoD Research Has Spanned the Breadth of Supply Chain Management

• Inventory management

• Distribution network design and management

• Database integration and metrics development

• Process improvement

• Purchasing and supply management

• Demand surge planning

• Transfer pricing and financial management

• Product design for supply chain

• Fleet management

• Outsourcing analyses

Logistics 08 17

Examples of Logistics Research

• Helped military adopt lean thinking and dramatically improve the order fulfillment process

• Developed integrated global distribution database and metrics now used to control and improve the system

• Helped minimize total costs through improved global inventory positioning based upon the tradeoffs among inventory, transportation, and material handling costs

• New inventory approaches to better handle the Army’s low, sporadic demand problem

• New strategies to better leverage global distribution network capacity in contingency operations

• Methods for determining what to position where to improve responsiveness to global contingencies

Logistics 08 18

• Began with a request to help the Air Force develop a strategic approach to competitive sourcing

• Looked to the commercial sector for lessons• Account for differences in missions, personnel rules, and

legislative and regulatory constraints

• Broadened research focus to support efforts to improve “recontracting” activities

• Emphasis on services acquisitions

• Tracked revolution in commercial sector purchasing and supply management practices

• Brought lessons to the Air Force and participated extensively in implementation activities

• Pioneered the use of spend analysis in the Air Force• Provided important contributions to the area of performance

based services acquisition

• Expanded to other Services and agencies

Purchasing and Supply Management (PSM) Research

Logistics 08 19

Supply Chain Policy Center

• New research center focused on the challenges facing the global supply chain to include

• Effects of supply chain disruptions and shifting trade patterns

• Identifying physical, operational, regulatory, and legal freight transport system vulnerabilities

• Public and private sector implementation strategies to improve the freight transport system

• Opportunities for advanced technologies to play a role in addressing critical issues, such as security, enhanced productivity, and environmental mitigation

Logistics 08 20

What RAND Brings to the SCRLC

• Knowledge of DoD’s supply chains– Legacy processes, practices, systems

• Advanced operations research/analytics

• Multidisciplinary skills/approach

• Expertise in – Product/aftermarket support

– Influencing policy makers

– Synthesizing best practices and adapting/adopting them in a government setting

Logistics 08 22

Key Milestones in RAND PAF PSCM Research

1997 - Began SAF/AQC sponsored study of best PSCM practices

1999 – Pioneered spend analyses in AF and DoD

2001 – Briefed Dr. Roche, SAF, & Gen Ryan, CSAF

2001 – Began support of F100 PSM Pilot

2004 – Briefed Gen Martin, AFMC/CC - directed PSCM implementation across AFMC Commodity Council’s, Supplier Relationship Management (SRM) established

Case for change, market research, supply strategy development, services contracting, low demand items, measuring PSCM benefits, performance-based supplier relationships, Supplier Relationship Management (SRM), Supply Chain Risks,…

2005 – Briefed Gen Carlson, AFMC/CC, Commander’s Conference on Leading Successful Change

Gained seniorleadership

support

Logistics 08 23

Supply Chain Risk Leadership Council (SCRLC)

“Bring industry luminaries together to advance the discipline of Supply Chain Risk Management

through best practice sharing and collaboration around specific objectives such as supplier

relationships, risk metrics, and risk methodology”

“Driving thought leadership and best practices”

No industry-standard metrics exist for measuring supply chain risk, including supply chain resiliency. Cisco is working with leading companies in an effort to develop

standard metrics and best practices.

Logistics 08 24

SCRLC Members

• Cisco

• Toyota

• Boeing

• FedEx

• P&G

• Nokia

• Jabil

• Zurich

• tsmc

• Bank of America

• Department of Homeland Security

• Stanford University

• Michigan Ross School of Business

Logistics 08 25

About RAND

• RAND: A private, non-profit research institution founded in 1947 by the Air Force to preserve the war effort of scholars

• Mission: Helping to improve policy and decision-making through research and analysis

• Values: Quality, objectivity, independence

• Strengths– Multi-disciplinary teams

– Large, complex problems

– Number crunching

Logistics 08 26

Principal Research Areas

• Providing practical solutions to complex problems

• Supporting evaluation and implementation

• Enhancing policy debates• Training future policy

analysts• Improving knowledge

and analytic methods

• Providing practical solutions to complex problems

• Supporting evaluation and implementation

• Enhancing policy debates• Training future policy

analysts• Improving knowledge

and analytic methods

CivilJustice

EducationSubstanceAbuse

U.S.NationalSecurity

Energyand

Environment

Health andHealth Care

Transportationand

Infrastructure

InternationalAffairs

Scienceand

Technology

Populationand

Aging

Terrorismand

HomelandSecurity

Childrenand

Adolescents

PublicSafety

Logistics 08 27

Research Areas Related to Supply Chain Risk

• Providing practical solutions to complex problems

• Supporting evaluation and implementation

• Enhancing policy debates• Training future policy

analysts• Improving knowledge

and analytic methods

• Providing practical solutions to complex problems

• Supporting evaluation and implementation

• Enhancing policy debates• Training future policy

analysts• Improving knowledge

and analytic methods

CivilJustice

EducationSubstanceAbuse

U.S.NationalSecurity

Energyand

Environment

Health andHealth Care

Transportationand

Infrastructure

InternationalAffairs

Scienceand

Technology

Populationand

Aging

Terrorismand

HomelandSecurity

Childrenand

Adolescents

PublicSafety

Logistics 08 28

A Matrix Organization Supports DisciplinaryAffiliations and Cross-RAND Research

• Behavioral and Social Sciences

• Economics and Statistics

• International and Security Policy

• Management Sciences

• Policy Sciences

• Technology and Applied Science

Research Staff Management

Board of Trustees

President and Chief Executive OfficerExecutive Vice President

RAND-Qatar Policy Institute

RANDHealth

PardeeRAND

Graduate School

RANDProject

AIRFORCE

RAND National Security Research

DivisionNational Defense Research Institute

RANDInstitute for Civil Justice

ArmyResearch DivisionRAND

Arroyo Center

RANDEducation

RAND Europe

RAND Labor

andPopulation

RAND Infrastructure,

Safety, andEnvironment

RAND Gulf States Policy

Institute

Logistics 08 29

RAND's Training Programs AreIntegral to Our Research

• Military Fellows

• Graduate student summer associates program

• Pre-and post-doctoral programs

• Professional development programs for minority scholars

Logistics 08 30

Where:RAND's Presence is Increasingly Global

Where:RAND's Presence is Increasingly Global

MoscowMoscow

Langley AFBLangley AFBWashington DCWashington DC

Santa MonicaSanta Monica

Headquarters

Other offices

Field sites

CambridgeCambridge

DohaDoha

PittsburghPittsburghJacksonJackson

New OrleansNew Orleans

Logistics 08 31

RAND Conducts DoD Supply Chain Researchas Part of Broad Research Programs (1 of 2)

• Arroyo Center– Strategy, Doctrine, & Resources – Force Development & Technology – Logistics – Manpower & Training

• Project AIR FORCE– Aerospace Force Development – Manpower, Personnel and Training – Resource Management – Strategy and Doctrine

Logistics 08 32

RAND Conducts DoD Supply Chain Researchas Part of Broad Research Programs (2 of 2)

• National Security Research Division (also includes non-DoD research outside of NDRI)

– National Defense Research Institute (NDRI): OSD, Joint Staff, Combatant Commands, the defense agencies, and the Navy

– Research Centers• International Security and Defense Policy • Acquisition and Technology Policy • Forces and Resources Policy • Intelligence Policy

– International Programs: Asia-Pacific, Middle East, Russia and Eurasia, Long-Range Global Policy

– Programs: Maritime, Military Health, Counterterrorism

Logistics 08 33

DoD Has Large, Complex Supply Chain Challenges

• Breadth of goods purchased– Boots, bullets, fuel, food, weapons

• Many different types of weapons– Guns, trucks, tanks, helicopters, missiles, fighters, bombers, tankers,

unmanned aerial vehicles

• Broad range of technology– Very old, low technology to very new, high technology

• Highly variable/sporadic parts and repair demands

• Customers deploy and move

• Supply chain a target in contingencies

• Changing geopolitical environment

• Political constraints on funding, purchasing, outsourcing, reallocating resources