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2001 Speeches

E. David Spong

President, Military Aerospace Support

The Boeing Company

"Logistics - Is it working?""

International Society of Logistics

Annual Symosium

Dayton, Ohio

March 08, 2001

Thank you, and good morning everyone. It's great to be here with you today, and a pleasure to be able to engage in the very valuable dialogue this symposium offers.

I've been asked to discuss the theme question of this symposium - "Logistics - Is it working?" - from our perspective within The Boeing Company.

As some of you know, I've recently moved from Long Beach, where I had led our C-17 program, to St. Louis to assume the position of President of Military Aerospace Support.

Aerospace Support has until relatively recently been considered a "non-traditional" business for Boeing. But incidentally, it currently is the fastest growing component of Boeing's military business - employing more than 14,000 people around the world - so it is not surprising that logistics transformation is of great interest to us as well as our government customers.

As I think of that basic question - "Logistics - Is it working?" - it strikes me that there are a couple of associated and equally important questions to consider.

The first question is: "For whom is it working?" Who is the customer of logistics, and who is the benefactor of the innovation we collectively can bring to it?

Is it the various logistics infrastructures, such as DLA, the ALCs, NADEPs and Army Depots? The MajCom infrastructure? The infrastructures that industry creates?

Is it for the acquisition executives in the Pentagon that must balance budgetary needs for development, production and sustainment for all of the services.

Or is it the front-line maintainers, who clamor for parts when something breaks out on the flightline?

Or is it the warfighter. The men and women who fly and crew the aircraft. Those who man stations on ships. Who man artillery and who deploy to the frontlines.

I think all of us here today would agree that our collective mission is to provide faster, better, more affordable support to our warfighters, who are our ultimate customers.

The second question I derived from our symposium's theme is this:

What is the definition of "working"?

Back on the C-17 program, we worked very hard to institute Process-Based Management, and I carry the "scar tissue" of those efforts around with me every day! But one of the principle lessons we learned, which is in fact one of the principle tenets of PBM, is this:

"Each process is perfectly designed to deliver just what it is delivering."

On the C-17 program, we initially found that we had many perfectly designed processes for delivering poor quality, poor cost and poor schedule performance, and they were doing a perfectly good job at doing just that!

In the same manner, today's logistics processes are working perfectly to deliver just what we have -logistics support that is often far too expensive and unresponsive to meet the needs of our warfighters.

To a large degree, it's because the infrastructure of our logistics systems maintains the operating processes and related technologies, and the overall scale, of what was available and required in the Cold War era.

My PBM experience tells me that you need to change the process to get something different out of it. That, I believe, is our true mission, and what we collectively need to do to serve our ultimate customers - the warfighters.

Let's talk a little about those warfighting customers. Since we are here in Dayton, the birthplace of aviation in the United States, let me talk in terms of pilots and aircrews, but know it's equally applicable to soldiers, sailors and Marines.

Our nation's pilots and aircrews have a simple but all-important need. They need a safe aircraft that is ready to fly, with sufficient reliability and effectiveness to complete its mission and return them home safely.

The warfighters and those who plan for war need these aircraft in sufficient numbers to complete the larger mission, whether it is battle, humanitarian relief or a sustained show of force.

Although this is not new to anyone here, notice that I have not spoken about the elements of logistics, such as parts, technical orders, support equipment, tools, etc.

The basic unit of logistics in this case is the aircraft. Nothing else matters!

Let's now talk about how our current logistics process supports that basic logistics unit.

Today's process, quite frankly, is designed to produce elements of logistics. The primary goal of the vast majority of people in government and industry who are involved in the logistics process is to produce a commodity or a service.

Few people in the large process, on the other hand, have the task of producing a ready, reliable and safe aircraft.

So it should be no surprise that the process we have designed over the past 50 years produces pieces of readiness and reliability, but not the real thing.

So now that I've run out of breath, let me finally answer our initial question.

Is logistics working?

It most certainly is working, and it will continue to work in this fashion unless we change the process.

I submit to you, we must improve the process, and we must do it soon.

So then, what does the future hold for us and for the warfighter?

An assumption that too many of us make is that the future will be like the past. Those who are in the business of prediction, such as meteorologists, stock analysts, and the like, try to find the forces that might shape the future.

So what forces do we see being applied to logistics today?

Clearly there is the drive for efficiency. Demands for better, faster and cheaper will not fade, and there have been numerous forums and articles devoted to this subject.

There is the uncertainty factor. Gone are the days when hundreds of our young airmen sat in alert facilities, ready to fight a well choreographed war. Now, we have to be ready for anything, and we have to get there fast.

We face a changing labor market, largely driven by service industries as well as information technologies and the dot-com companies. Businesses will compete for people with high-technology skills, and workers in general will be much more mobile than in the past. They will be far less loyal to a single company or single geographic area.

We'll see emerging technologies. Many will be driven by information technology needs, such as system-of-system approaches that offer command, control and information capabilities on vast scales. We'll see even more open-system architectures with greater processing power and even further miniaturization.

We'll see new materials based on nano-technologies, where materials are developed from the molecular level to provide specific capabilities such as strength, weight and heat resistance.

And we'll see large structures that are able to be produced affordably and quickly, using far fewer parts, fasteners and tooling than ever before.

So we are part of a dynamically changing world. I submit we cannot allow our logistics processes to continue to perfectly operate as they have been.

Here's our challenge: Government and industry logistics teams must together improve the process so that we can deliver a capability to the flightline, not just the elements of logistics.

We must accept accountability for mission capable and full-mission capable rates. For on-time launch success. For mission completion probability success. For cost as an independent variable.

We must take accountability for the capabilities that our warfighters depend on, not those that have been built into our infrastructures for delivering individual elements of logistics.

I'm sure I'm not the first one to hold these views, so clearly the transformation of our logistics processes is a tough challenge. So how do we make progress?

Let me offer four ideas, or perhaps "imperatives for change":

First, in my opinion, we must re-engineer our logistics sustainment template for the weapon system platforms we have in service. I believe this starts by defining what I characterize as the essential "mission retention" competencies which must be retained within the military infrastructure for security reasons or operational effectiveness.

We need to deal with the issue of "core" and define the essential mission competencies, whether they are in logistics systems, depot maintenance, or operational support areas.

Clearly there are areas where the military services need dedicated people, facilities, processes and tools focused on critical defense mission needs! The support and manning of our nation's strategic systems is an obvious example. However, I maintain repair of landing gear and composite structures is not inherently a competency that the services need to maintain, and invest in, to achieve their missions.

Some tough questions need to be asked, and some tough decisions made!

A visionary roadmap must be structured of the support infrastructure of the future so we can collaborate on where we in industry appropriately play a complementary role in supporting the government - and the warfighter!

This will enable the collective energies, competencies and resources of industry and the Department of Defense to be focused and complementary, rather than duplicative and, in many cases, competitive!

Industry should not be competing with government. We in industry want to invest our resources and our critical personnel skills in those areas in which we can be preeminent, and partner with our government colleagues to assure the warfighter is provided what is required, when it is required!

This leads to my second imperative. We must optimize public/private partnerships and focus our respective competencies on collaborating to meet mission sustainment requirements and eliminating costly redundancies.

Here's another reality to think about: There are over 3 million people in our country's active duty and reserve armed forces, and in civilian DoD jobs. The DoD estimates there are twice as many people in uniform involved in logistics as there are warfighters in command or combat roles.

Further, there are about 100 separate DoD operating facilities focused on supporting the warfighter and defense systems.

Now, add the more than 2 million employees working in the defense-related industry deployed amongst, as well, some 100 operating facilities.

I don't think it takes a leap of faith to believe that amongst 5 million government and industry people and some 200 operating sites, there are bound to be redundancies, and in turn opportunities for synergy!

We have a choice to make: We can continue to operate as we are and ignore current levels of total ownership costs, or we can collaborate to define and implement ways to capture efficiencies and reduce total ownership cost!

We should apply a simple criteria... required competencies should reside with the government or industry provider who is committed to preeminence in that competency ... committed to investing in the critical skills in personnel, including training, and providing the requisite financial resources necessary to be preeminent! Second best isn't good enough!

Public/private partnerships are powerful tools, but implementing them requires from all of us in the public and private sectors a willingness to shift paradigms.

As an example, the Air Force estimates taxpayers will save about $650 million as a result of industry's partnership with the Ogden Air Logistics Center for the workload transferred from McClellan Air Force Base in Sacramento, California. That public/private partnership brought complementary interests of both parties together, resulting in a 30 percent reduction in the customer cost of ownership!

Now lets turn to my third "imperative for change":

Once we are clear on the role industry can play, I believe we must transition to innovative performance-based contracting. We must transition to contracting for the "what," not the "how." In return, industry must provide weapon-system performance guarantees and tie financial rewards to performance.

When performance-based contracting is coupled with the flexibility provided by seamless funding - which allows, for example, the trading of repair and spares costs against engineering changes that produce long-term reliability and cost benefits, the end result is improved readiness with significant cost-of-ownership reductions.

Fourth on the list, we have to change the mind set from commodity management to integrated weapon system management. And again, we have to do this both within Government and within industry.

There are a lot of names for it. Within Boeing, we call it Life Cycle Customer Support. Total Life Cycle Customer Support puts singular accountability on one organization for system sustainment. One entity has the accountability and responsibility to get the warfighter what is needed, when it is needed!

This contrasts with the traditional, silo'd approach to support that has been offered in the past, which is largely transaction based with multiple points of accountability.

Let me draw an analogy between moving to Life Cycle Customer Support solutions and the way design, development and production of new aircraft has transitioned. Until not too many years ago, the aerospace industry generally began the aircraft development process with engineers producing a design optimized for system performance.

Again, working in silos, production operations became involved after the designers had done their work. Their challenge was to figure out how to build what the designer had come up with.

And generally further down the development phase, the logisticians had the challenge of developing the means to maintain and support whatever came out of not only the design decision, but the manufacturing decisions as well!

Today there are some very high-performing systems out there that are very hard to build and are difficult to maintain!

It is a very different world now. We transitioned to Integrated Product Development because we realized the process was not integrated, thus cycle time, cost and even quality were jeopardized. In the new designs such as the Joint Strike Fighter, integrated product teams address producibility, maintainability and supportability from the very earliest stages of development.

Philosophically, I believe this transition to an integrated process is what we need to do in supporting all products - both existing and new. In addition to Integrated Product Development, we need Integrated Product Supportibility, and I would suggest that is what life-cycle customer support truly is.

It is an integrated process with singular accountability.

We have seen some successes in adopting LCCS concepts in the U.S. military infrastructure, such as:

However it's interesting how much more proactive many international defense forces are in implementing LCCS type programs for their weapon systems. There are many progressive programs underway in the United Kingdom, Canada, Australia and in other countries, were major transformations of logistics infrastructures are being made with the primary objective of reducing total ownership costs.

So let me sum up my thoughts so we can all get on to the all-important task of eating lunch!

Today, logistics is working to a number of different agendas and metrics. Meanwhile, readiness is a struggle and costs are rising.

To change that situation, industry and government must focus on the true customer of our efforts: the pilots, aircrew, soldiers and sailors who are our warfighters, and the commanders who must aggregate the efforts of the forces.

Our warfighting customers need capability, in addition to the traditional commodities we separately deliver to them.

And finally, experiments and our early efforts over the previous decade have shown that we can deliver capability at the weapon system level. We need to work as a team to refine and employ those concepts to every weapon system in the hands of our warfighters ... better, faster, cheaper.

Thanks very much for listening.