The Department of Defense has used the Supply Chain Operations Model
to develop a method for coordinating and managing supply chain practices
across the Department and the services.
On 30 March 2010, the Executive Advisory Committee for the Joint Supply Chain Architecture
(JSCA) approved the commencement of phase III of JSCA, a revolutionary program providing enterprise-wide value to the warfighter. The Executive Advisory Committee is chaired by the Principal Deputy Assistant Secretary of Defense for Logistics and Materiel Readiness (L&MR) and the Director for Logistics, J−4, the Joint Staff, and includes representatives of the Office of the Secretary of Defense (OSD), the services, the combatant commands (COCOMs), the Defense agencies, and weapon system program executive offices.
The creation of JSCA resulted from the recognition that the Department of Defense (DOD) needs to improve supply chain effectiveness and efficiencies within the services, COCOMs, and Defense agencies. Senior logistics leaders across the stakeholder community have identified three common issues affecting the supply chain. First, the DOD supply chain is not configured (and the players in the supply chain are not aligned) to achieve “enterprise wide” optimization of the supply chain process. Second, the DOD supply chain lacks common performance metrics that can drive better coordination and alignment. Third, increased emphasis on the DOD supply chain and the need for effectiveness and efficiencies make the timing of JSCA’s implementation of great importance.
Organization and funding boundaries are currently hampering the DOD supply chain process. JSCA offers a means to knock down the stovepipes that interfere with effectiveness and efficiency. It attempts to increase visibility of items in transit and in inventory. In short, JSCA is a methodology for logistics that provides DOD with an enterprise-wide, end-to-end perspective for optimizing supply chain processes to maintain and improve materiel readiness at the best value. JSCA has gained the support of the Army’s senior logistics leaders.
Origins of JSCA
JSCA is an OSD and J−4 initiative that traces its origins to a major innovation in commercial industry: the Supply Chain Operations Reference (SCOR) Model created by the Supply Chain Council. The SCOR is a process reference model that provides a structured approach to documenting supply chain processes. Its function is to ultimately identify best practices and apply risk management to logistics procedures. The Supply Chain Council, formed in 1996, continues to update and revise the SCOR, now in version 9.0, and provide the widest possible dissemination of the model.
In May 2003, DOD published a revised regulation, DOD 4140.1−R, DOD Supply Chain Materiel Management Regulation, to govern the conduct of joint logistics for the future. DOD Directive 4140.1, Supply Chain Materiel Management Policy, mandated that the regulation would be used to establish the processes for all logistics activity in DOD. The directive and its supporting regulation reflected the thinking of senior leaders that DOD logistics processes had to adapt to changes in the evolving global environment as well as to budget priorities.
Performance (in terms of materiel readiness) and cost are the two recurring themes throughout DOD supply chain publications. They are the indices by which success will be measured in implementing processes and improving supply chain materiel management systems. The goal is to have a responsive, consistent, and reliable supply chain that provides the highest level of materiel readiness at the best value.
In 2007, the J−4 and the OSD L&MR initiated the development of JSCA as a supply chain management framework. They recognized that many benefits could be achieved by successfully coordinating and managing supply chain practices across the department.
The JSCA project was broken down into three phases. Phase I was the development of the architecture itself, in particular the supply chain processes and metrics, and the “buy-in” of the key stakeholders. This phase basically built JSCA based on a consideration of existing processes since the Army, Navy, and Air Force had already implemented some of the existing logistics and financial systems outlined in the SCOR process.
Phase II was the proof of concept, under which one weapon system was evaluated using JSCA processes and performance measures to validate the efficacy of the JSCA methodology. Phase III is the institutionalization phase: Weapon system diagnostics will be conducted to identify opportunities and courses of action to capitalize on opportunities identified in phase II, along with newly acquired opportunities. The outcome of this phase will determine the future of JSCA across DOD.
The Six Key Tenets for the DOD Supply Chain
The JSCA process is guided by six major tenets:
- Institutionalize the SCOR Model throughout DOD by means of JSCA.
- Establish outcome-based, end-to-end performance measures.
- Approach decisions in a way that optimizes the total DOD budget while improving readiness.
- Do not optimize the functional outputs of the supply chain at the expense of total system effectiveness.
- Create a governance process that can meet the need to facilitate, align, and coordinate the joint, end-to-end supply chain.
- Design policy to establish accountability, responsibility, consistency, and appropriate resources to ensure better decisionmaking for the end-to-end supply chain.
JSCA provides DOD with a process by which to model and adopt as normal practice the performance elements of the supply chain. Using the SCOR Model, JSCA is broken down into five level 1 processes: plan, source, maintain and repair, deliver, and return. Each level 1 process has associated process elements that further describe the supply chain in a structured manner.
Plan. Five process elements constitute the plan process of JSCA: forecasting supply and demand, identifying repair and maintenance requirements, planning retrograde and redeployment requirements, defining supply chain resources and outputs, and planning for inventory, warehousing, distribution, and deployment.
Source. The source process is broken down into four process elements: identification of sources of supply, negotiation and selection of suppliers, receipt and verification of materiel and services, and release of payment for materiel and services.
Maintain and repair. This process is defined as “the process of maintaining assets and effecting component repairs at the intermediate and depot levels of the supply chain. [It] includes the utilization and management of contracted repair services.” The process is divided into five process elements: finalization of engineering, development of the repair and maintenance schedule, issue of materiel, performance of repair activity, and release of repaired materiel to a user or to a stocking location.
Deliver. The deliver process is considered throughout DOD to be part of the source process for materiel delivery from private vendors for stockage in storage depots to be distributed later to DOD customers. However, the requisition and order entry process initiates the issue and delivery process for the supply chain.
Return. In this process, the customer uses the planned policies, business rules, and inspection of product operating conditions as criteria for identifying and confirming that materiel is excess to requirements or defective at specific locations. It also is the process of identifying the appropriate source contact for a return authorization.
Metrics for measuring performance in the respective processes and process elements are essential to the JSCA process. JSCA started with the three categorical imperatives for the Defense Logistics Enterprise: reliability, speed, and efficiency. Supporting metrics were outlined for each of these three top-level metrics. These groups of metrics evolved into a metrics “hierarchy” that encompasses relevant metrics in a comprehensive manner. The purpose of this metrics hierarchy is to measure process outcomes and enable benchmarking within DOD and between DOD and commercial industry. Cross-cutting metrics were also identified to clarify the measurements of performance.
The top three end-to-end metrics are reliability, also called perfect order fulfillment (POF); speed, or customer wait time (CWT); and efficiency, which is equated with total supply chain management costs (TSCMC). All three metrics must be considered in balance when leaders evaluate supply chain performance. They are designed, ultimately, to achieve materiel readiness at the best value.
The effort to develop and validate the metrics was spearheaded by the JSCA team, led by the OSD L&MR and the J−4, and included representatives from each service’s materiel command and subject-matter experts from academia and private industry.
Reliability (POF). An order is considered “perfect” if it is delivered in time to meet the “customer commit date,” in the full quantity, in the correct condition, and with the correct documentation. POF has several level 2 and level 3 metrics: orders are delivered in full, including item and quantity accuracy; delivery performance meets the customer commit date; documentation is accurate; and delivered items are in perfect condition. POF determines how reliably a customer’s order is filled. In SCOR terms, it is a “customer-facing” metric. It provides insight into whether or not the supply chain can fulfill customer needs consistently.
Speed (CWT). The JSCA team selected CWT as the primary metric to measure the DOD supply chain’s speed in fulfilling orders. CWT measures the supply chain’s ability to quickly respond to customer demand. CWT starts when a customer places a requisition and ends when the customer’s requisition is closed. This attribute of responsiveness is also “customer-facing” in SCOR methodology.
CWT determines how quickly the end customer is served. Analysis of CWT is broken into subsegments that enable identification of problem areas. Using CWT enables DOD to benchmark (compare its performance) against industry.
Efficiency (TSCMC). The JSCA team selected TSCMC as the primary efficiency metric. By structuring the supporting metrics to align with the processes, DOD will be able to benchmark both TSCMC and the supporting metrics with commercial results, when applicable. TSCMC includes total acquisition cost, total delivery cost, total maintenance cost, and total return cost. These costs include both personnel costs in each function and materiel costs in each metric. TSCMC enables program managers and other decisionmakers to understand the extent to which adjustments to the supply chain affect costs. Unlike POF and CWT, this attribute is considered to be “internal-facing” in SCOR methodology.
Cross-cutting metrics. To accompany the three proposed top-level performance metrics, the JSCA team identified five cross-cutting metrics: fill rate, percentage of retail orders filled locally, percentage of wholesale orders filled locally, forecast accuracy, and inventory days of supply. The cross-cutting metrics are interconnected and work across the reliability, speed, and efficiency metrics to help identify the root causes of DOD supply chain problems.
JSCA Proof of Concept
The processes, process elements, and metrics constitute the framework for JSCA. During phase I, the team successfully validated JSCA as a valuable methodology for making supply chain decisions with a holistic view of supply chain operations. The EAC supported the results of phase I and gave the go-ahead for phase II, the JSCA proof of concept.
The objective of phase II was to apply JSCA weapon system diagnostics to a cross-service weapon system to see what economies and efficiencies could be gained. These potential improvements were identified as operational opportunities for JSCA.
The H−60 helicopter was chosen for the proof of concept because it is a mature and complex weapon system that is used across the services. The hypothesis of the project is that JSCA provides DOD with an enterprise-wide, end-to-end perspective for optimizing DOD supply chain processes that maintain and improve readiness at the best value.
In addition to being a joint system, multiple variants of the H−60 have a long history of being used for sustainment over several years. As a weapon system with proven success in the supply chain, the H−60 was well suited to evaluate the end-to-end DOD supply chain for the Army and the Navy and the deliver process for the Air Force H−60 programs.
The Army was chosen as the lead agency because it has the overwhelming majority of the H−60 fleet. The Navy has employed a performance-based logistics (PBL) strategy for its sustainment support, so phase II had a limited impact on the Navy because of the duration and structure of the contract.
The phase II process was divided into two segments. The first was the Army detailed assessment, consisting of stakeholder interviews, data collection, process mappings, and inventory of relevant policies. The second, known as the opportunity analysis, was the identification of major opportunities based on evaluation of JSCA metrics. The plan was to look at the Army first and then at the combined services.
Recommendations for Improvements
The opportunity analysis led the JSCA team to make several recommendations for operational improvements. The first is to improve differentiation throughout the supply chain. Initial data collection showed JSCA’s potential for identifying certain secondary items as “NMCS [not mission capable supply] driver” items. [These are items in short supply that stop maintenance work and thus prevent systems from performing assigned missions.] The overall objective is to reduce CWT for these NMCS drivers.
The second operational recommendation of JSCA phase II is to improve the class IX (repair parts) national-echelon demand planning forecast. This will result in a more efficient distribution of inventory and will improve materiel availability. As part of this effort, the Army Materiel Systems Analysis Agency is studying commercial demand-forecasting models for potential adaptation by DOD components.
A third recommendation, related to the second, is to improve collaborative demand planning. The Army Materiel Command (AMC) is actively engaged with the Defense Logistics Agency (DLA) in implementing this opportunity. The focus is on improving the accuracy of depot parts support forecasts exchanged through new enterprise resource planning systems deployed within each component.
The fourth and fifth recommendations are to balance repair capacity with the rest of the supply chain and to develop a joint approach to the commercial industrial base. The Army Contracting Command and the AMC G−3 reviewed past procurement and repair programs and identified commercial vendors for potential future strategic-sourcing alliances with the Army. This process is being expanded to include Air Force and Navy H−60 spending data. Processes developed for these two recommendations are being coordinated with DLA, which has centralized class IX procurement responsibility for all DOD components.
The last operational recommendation is to actively manage the return process. The Army has made a dedicated effort to reduce the turnaround time for unserviceable retrograde items from theater to continental United States repair depots. The Army Logistics Support Activity has been essential in developing and tracking enhanced management metrics for this effort.
One challenge faced during phase II was the quality and consistency of the data obtained. Phase III required one set of authoritative data.
The major output of phase II was to demonstrate that JSCA data collection and evaluation is an approach that can be repeated for other DOD weapon systems.
The findings on the H−60 helicopter highlighted the usefulness and strong potential benefits of the JSCA methodology to DOD. Having implemented JSCA on a broad scale with the first weapon system, it was decided that it would be beneficial to go ahead with the third phase of the project.
Phase III—the institutionalization phase—of JSCA is now well underway. Three multiservice weapon systems were chosen for the phase III project: the close-in weapon system (CIWS), the C−130 aircraft, and the Hellfire missile launcher. During this phase, DOD expects to find continued opportunities for improving the supply chain and achieving greater value in the sustainment process.
Three major outcomes were expected during the first year of the institutionalization of JSCA—
- Create a foundation by defining end-to-end performance measures, developing benchmarking methodology and tools, identifying authoritative data sources, and constructing a benchmarking database.
- Establish a collaborative process for the H−60 supply chain and optimize H−60 network inventory levels.
- Identify opportunities and recommend changes to improve supply chain performance and readiness for the Hellfire launcher, CIWS, and C−130.
During phase III, the performance metrics that will be used to measure, benchmark, and analyze the end-to-end DOD supply chain were updated, refined, and validated. The objectives of the validation were to—
- Select the appropriate measures for the near- and mid-term implementation of JSCA.
- Define, with a great deal of specificity, how the measures will be calculated.
- Identify the authoritative data source and specific data elements needed from each organization to calculate the performance measures.
The final actions of this validation workstream include finalizing metrics and definitions, socializing with Executive Advisory Committee members, and preparing metrics for incorporation into the Benchmarking Guide.
Benchmarking supply chain performance is a key function in phase III and a critical step in continuously driving improvements to DOD’s joint supply chain.
Benchmarking is the process of collecting specific supply chain performance data and using them to compare the performance of a supply chain against relatively similar and best-in-class supply chains. To gain an understanding of where the supply chain is achieving excellent results and where improvement opportunities exist, performance data will be collected based on the supply chain’s speed, reliability, and efficiency. Data validation is key to the effort.
Standard performance metrics were carefully selected during phase III to enable comparisons among DOD’s weapon systems. Performance is benchmarked qualitatively, quantitatively by performance metrics, and by complexity. This three-pronged benchmarking approach enables the collection and analysis of performance information at the business level, detailed level, and operations level. (The operations level analysis will assess factors such as distribution, transportation, and management processes.) This benchmarking approach assists in setting goals and targets as well as developing a “scorecard.”
The JSCA metrics underwent a pilot test during the weapon system diagnostic phase of phase III. The measures were refined from April to August 2010, recommendations for end-to-end DOD supply chain measures were provided during June to September, and institutionalization of the performance measures is occurring from September 2010 until a time to be determined.
The Performance Measurement Framework (PMF) Plan consisted of three steps. First was the data collection process, during which a benchmarking questionnaire was also circulated. Second was the analysis process, during which data were normalized and compared with the sample population. Third was the refinement process, in which the JSCA team identified lessons learned and the PMF was revised accordingly.
Ultimately, DOD will be benchmarking against civilian industry. This will also require identification of specific targets for specific items and processes. Does the performance of a given item need to be “adequate,” in the top 10 percent, or “best in class?” D-cell batteries, for example, may have different targets than helicopter rotor blades.
Some of the current limiting factors are imperfect benchmarking with commercial entities and lack of authoritative data sources. In the cross-service realm, management processes differ across the services (for example, PBL versus non-PBL), and metrics and data availability also differ. One of the purposes of phase III is to remove these limiting factors.
Joint Approach for the Industrial Base
Another project that emerged from phase II and is being implemented during phase III is the “Joint Approach for the Industrial Base.” This innovation has powerful implications for materiel readiness and cost savings in DOD contracting. The key element for success is collaboration among the services, defense agencies, and other supply chain components, including the Supply Chain Executive Steering Committee. Activities underway include an agreement between DLA and the Army to collaborate on the workstream and define the outcomes of this effort. One focus of this effort will be demand planning accuracy.
Joint Sourcing Working Group
The Joint Sourcing Working Group will collaborate to improve weapon system readiness through information sharing, planning, and governance on end-to-end life-cycle sustainment activities. Thus far, the group’s member organizations include the Deputy Assistant Secretary of Defense for Supply Chain Integration (SCI); the J−4; the DLA J−3/4; Marine Corps Headquarters Installations and Logistics Department; the Army Contracting Command; AMC’s Aviation and Missile Command and Corpus Christi Army Depot; the Army G−4; and Defense Logistics Agency Aviation.
The JSCA Working Group is the supporting and implementing organization. It is cochaired by the SCI and the J−4, and its members are the services, combatant commands, defense agencies, OSD, and systems program management offices, as well as other functional and domain experts.
It is important to note the stakeholder bodies consulted on the JSCA efforts: the Supply Chain Executive Steering Committee, the Product Support Executive Committee, the Distribution Process Owner Governance, and the logistics component organizations of the H−60, C−130, Hellfire launcher, and CIWS.
JSCA adapts a commercially developed and accepted operations reference model for operational use within DOD. Although some significant policy and statutory challenges currently exist in operating a single, joint supply chain across DOD, JSCA helps leaders and practitioners to better define the “trade space” when evaluating the costs and benefits of process or configuration changes.
Phase I of JSCA saw the creation of JSCA and the process model. It also accomplished socialization and buy-in across DOD. Phase II validated the benefits of JSCA and an understanding of some of its limitations. It resulted in development of an approach that can be repeated for weapon system diagnostics. Finally, it provided a summary of recommendations and end-to-end supply-chain tenets.
The weapon system diagnostic phase of phase III will further demonstrate the value of the JSCA methodology and institutionalize processes as well as socialize and validate primary, supporting, and cross-cutting metrics. The goal is to develop a long-term strategy for creating governance of the system.
The JSCA team proved the utility of JSCA by using it to identify areas of inefficiency and opportunities to create an effective supply chain (efficiency, speed, and supply chain reliability). While additional work needs to be done to prescribe specific solutions for the identified issues, JSCA has proven useful in identifying and prioritizing opportunities for improvement. Increased emphasis on the DOD supply chain and the services’ need for efficiencies and effectiveness make the timing of JSCA greatly important. Finally, JSCA is directed toward changing the mindset of DOD logisticians.
A proposed end state for the DOD supply chain is an estimated delivery date to the customer within 24 hours of request and delivery of issue priority group (IPG) 1 requisitions anywhere in the world in 5 days with 95-percent reliability, IPG 2 requisitions anywhere in the world in 15 days with 95-percent reliability, and IPG 3 requisitions anywhere in the world in 30 days with 95-percent reliability. JSCA can help make this a reality.
The support of the services, combatant commands, and defense agencies are needed to make the JSCA methodology a reality for DOD. The results of improved materiel readiness at greater value are an imperative effort in the fast-moving, rapidly changing global environment. Best practices are the aim. We owe nothing less to the force.