US Navy Marches with the Beat of Demand Driven MRP

Demand Driven Materials Requirements Planning (DDMRP) and Enterprise-Pull supply chain management isn’t only for manufacturing leadership, supply chain professionals, C-suite executives and boardrooms. The United States Naval Aviation (NAVAIR) has been re-designing its logistics and supply chain strategy along the lines of Demand Driven MRP pull-based replenishment for a number of years.

The goal: To build a supply chain system with increasing material and supply agility, flexibility, and responsiveness that also provides a proactive focus and the ability to “surge” material where and when needed in response to actual demand.

Ultimately, the objective is to be able to sustain aircraft readiness by improving the way the supply, maintenance, and logistics organizations conduct and coordinate the business of supply chain management for aircraft, systems and parts across the globe.

The Old World Order of Aviation Logistics

For most of the 20th century, the naval aviation logistics model was biased in favor of the Iron Mountain

approach – better to have much more of what you need than to run out of something.

In the Iron Mountain approach, the supply chain operates as a mammoth push system that deploys a large forward footprint of parts, personnel, and supporting infrastructure to operating areas across the globe. It is a model fit for the large-scale operations, and the set-piece battlefields of World War II with their well-defined front lines, opposing army, and conventional tactics.

The Iron Mountain of course is the reliance on having enormous amounts of equipment and supplies forward positioned, on hand close to the battlefield as the way to avoid unforeseen shortages. Not only is this large footprint expensive to deploy and maintain, once committed forward, it’s nearly impossible to re-deploy it elsewhere to meet an emerging need.

For Want of a Nail

A proverbial rhyme called For Want of a Nail, which dates back several hundred years, explains the risk aversive mindset behind the Iron Mountain approach.

For want of a nail the shoe was lost.

For want of a shoe the horse was lost.

For want of a horse the rider was lost.

For want of a rider the battle was lost.

For want of a battle the kingdom was lost.

And all for the want of a horseshoe nail.

In the complex, interdependent world of military operations, the lack of availability of supply of even the smallest item, such as a nail, can have big consequences.

The Iron Mountain approach takes the posture that over-supply carries less risk than under-supply. Without enough equipment and support gear, a military unit runs the risk of deploying without sufficient supporting material and supplies, or worse the risk of deploying with the wrong kind of support material and equipment.

The World Changes

In the U.S. Marine Corps, the Iron Mountain approach was more formerly known by the logistics doctrine called MALSP, which stands for the Marine Aviation Logistics Support Program.

At the time of the First Gulf War, when Iraq invaded Kuwait, this logistical model was beginning to run out of steam. The world was changing from the large set-piece conflicts of WWII to a more dynamic, smaller scale range of mission types and operations. Marine aviation units now support everything from peace-keeping missions to humanitarian disaster relief, to hostage rescue, to special operations, to fighting terrorism and so on.

The Iron Mountain was proving to be too inflexible, too expensive and not dynamic enough to meet the tempo or range of increasing and emerging demands on Marine aviation units.

In the New World Order facing Marine Corps operating and combat units, a more disturbing trend was also occurring under the Iron Mountain approach. Mission readiness was degrading due to supply chain availability issues, while resource and supply costs were reaching ever higher levels.

MALSP II - Beyond the Iron Mountain

To counter this disturbing trend, logistics professionals in Marine aviation provided a new vision for supply chain management - a “demand driven vision” where parts, supplies, repairs, and equipment moved rapidly through a dynamic, flexible supply chain capable of meeting the small scale, rapidly changing, and quickly emerging short term operational reality.

This fundamentally different demand-driven vision of supply chain management has since completely altered the way Navy and Marine aviation conducts its business.

It’s now called MALSP II.

MALSP II encapsulated the doctrine, strategy and tactics for Marine aviation to evolve their logistics approach and to re-think, re-make and modernize their system of supply, logistics, and maintenance, repair and overhaul of equipment in order to get beyond the concept of the Iron Mountain and achieve what began to be called Cost-wise Readiness in Navy circles.

Flow – The First Demand Driven Principle

Marine Aviation Logistics Support Program II (MALSP II) is an improved and advanced aviation logistics capability solution that is transforming Marine Aviation Logistics from a “push” system to a dynamic “pull” system with the principle of demand-driven FLOW at its core.

In arriving at the vision of MALSP II, achieving Flow was recognized as being a critical underlying principle. Without Flow, it would be impossible to construct the responsive, flexible and scalable logistics system that gave operational commanders the ability to task, organize and deploy resources and forces capable of accomplishing missions across the range of operations now demanded.

The conclusion: Marine aviation arrived at a consensus that may sound familiar - The more flow increases consistent with demand, the more successful the organization will be in achieving its Goal.

Readiness as The Goal

Most industrial enterprises are in the business of turning a profit. Making money is their goal. In Marine aviation, the equivalent of “Money” is termed “Readiness”.

Readiness is essentially a short-hand version of the concept of “Ready for Tasking”, meaning that an aviation unit, such as a squadron or detachment has whatever it needs in order to accomplish whatever mission requirement emerges.

Re-making of the Marine aviation supply system to achieve high readiness in the new, more dynamic world involves much more than the logistical material resupply. MALSP II covers both a material and non‐material family of systems – people, parts, repair capability, and transportation in order to provide aviation logisticians with the ability to sustain and improve aircraft readiness with speed and agility in any environment or location.

A Near Overwhelming Degree of Complexity

Ensuring the readiness or the availability of aircraft, systems, people and parts in Navy aviation is an undertaking to gain control of an environment of almost unfathomable complexity.

For instance, consider just the readiness of a single aircraft, such as the F/A 18 Hornet, at a single geographic location such as at Morón Airbase in Spain, or on a specific aircraft carrier such as the USS George Washington.

The complexity involved in maintaining a high state of readiness for even a single aircraft begins with the complex array of roles that the aircraft is designed to perform. Each mission type usually requires different types of specialized systems like jamming pods, or weapons to be mounted as needed aboard the aircraft. Add to that the personnel requirements like having a pilot currently qualified to perform the needed mission, and the specialized ground support equipment needed to make both aircraft and systems ready.

To begin to understand the degree of complexity, just envision the diagram below where tens of thousands of parts, supplies, personnel qualifications, and other supporting requirements create a picture that very much resembles a large, multi-level Bill-of-Materials. The absence of any single item is all it takes to get the mission scrubbed.

Now multiply that by the hundreds of different types of aircraft dispersed across fleets and bases around the world and just maybe, you’ll start to wrap your head around how achieving and maintaining readiness can get complicated very rapidly.

Achieving the Vision of Demand Driven Aviation Readiness

So how exactly has US Naval Aviation and in particular the U.S. Marine Corps executed on the logistical and maintenance readiness vision captured in initiatives such as MALSP II?

The answer they found to addressing the complexity of supply chain management in a dynamic environment is perfectly expressed by the concept Position and Pull articulated by Demand Driven MRP.

MALSPII mirrors the five elements of Demand Driven MRP, a Position and Pull concept being used across a diverse array of manufacturing and distribution companies in the private sector.

There are 5 major elements to Demand Driven MRP (DDMRP):

1. Strategic Inventory Positioning

2. Buffer Profiles and Levels

3. Dynamic Adjustments

4. Demand Driven Planning

5. Visible and Collaborative Execution

The MALSPII version of Position and Pull described by Demand Driven MRP is especially tailored for the unique demands of sustaining aviation equipment readiness. For instance, unlike most industrial enterprises that operate a one-direction production-oriented supply chain where goods are produced

and shipped to meet market consumption, the Navy aviation supply chain is bi-directional. Parts and assets moving out from industrial operations while retrograde parts and assets – those in need of servicing, maintenance and repair, move in the reverse direction back to industrial operations.

Unlike most supply chain managers who only have to worry about forward facing supply chain logistics, the Marine Corps supply chain complexity includes this reverse chain where damaged, worn or otherwise in need of repair parts and equipment are transported back to centralized repair depots.

Despite these differences, the five major elements of Demand Driven MRP map perfectly to the approach in use that is modernizing the Navy aviation supply chain.

The first three elements of Demand Driven MRP – Strategic Inventory Positioning, Buffer Profiles and Levels, and Dynamic Adjustments are all about re-designing the supply chain so as to strategically decouple the chain from the harmful effects of demand and supply variability, shorten the lead time and increase responsiveness.

The first step, Strategic Inventory Positioning amounts to determining where in the Naval aviation supply chain inventory is best positioned so as to provide increasing flexibility, and responsiveness. It takes a more strategic view of WHERE inventory should be placed in the system to decouple variability and reduce lead times in the supply chain.

Flexible, Dynamic Buffer System that Senses, Flexes & Surges or Retracts to Demand

Once the Marine Corps identified its strategic decoupling points, the sizing and configuration of their dynamic buffer system was designed. Ultimately, the finished design acts like a central nervous system which sends signals throughout the vast array of nodes in the supply chain about how best to respond to changing demands.

The Result: A Demand Driven Pull approach utilizing a system of carefully selected, dynamic buffers that allow the entire supply system to sense, flex, respond, and surge forward or retract as needed to meet emergent demands – demands ranging from humanitarian missions to combat operations.

The focus of Marine logistics is now squarely on the materiel readiness of a weapons system and, accordingly, to that end, the supply chain processes spread a cascading level of information from the point of demand back through the network of supply system nodes to enable a synchronized response to demand changes.

Achieving Synchronization with the Make Function

Look at a high-level supply chain process map of any global industrial enterprise and you’ll find a node called “Make” representing factories and facilities that manufacture the products which are sold to other businesses, end up on store shelves, pass through distribution centers, or go to warehouses in support of mammoth e-retailers such as Amazon.

In Naval aviation that make function includes a vast array of industrial repair, overhaul and maintenance facilities spread across the United States. These repair and overhaul facilities return the fixed and limited assets and equipment of the military to operational service and then re-supply those assets back to operating units.

A three-tiered maintenance system supports the retrograde repair and maintenance process. At the most forward repair level aboard ships and on the flight-line of operating bases is Organizational-Level Repair: think tire replacement, minor maintenance, and replacement of system modules.

More complex repair involving the disassembly, diagnosis and repair of major systems and sub-systems such as avionics units, jet engines, and weapons systems happens in more specialized industrial shops, called Intermediate-Level Repair, mostly on the U.S. mainland.

The most complex level of repair, called Depot Level Repair, where entire aircraft are completely disassembled in order to repair, replace, and upgrade aircraft occurs at only a handful of large-scale operations and Fleet Readiness Centers in the U.S.

Thousands and tens of thousands of individual assets flow back through the retrograde supply chain from various fleets, commands and operating bases. Achieving an effective repair cycle and turnaround process depends a lot on being able to consistently provide clear and relevant priorities to the industrial shops conducting the repair and maintenance.

Prioritization systems such as FIFO (repairing assets in a First-In-First out sequence) or according to the units requested delivery date (due date priority) aren’t dynamic enough. Too much can change during the repair and execution horizon. Correct repair priority can be easily lost. As a result, repairable assets could be re-supplied to units in training cycles rather than to units whose need is greater such as support of combat operations.

Relative priority at the repair, overall and maintenance levels occurs through an extension of the supply chain design into the four walls of the industrial facilities. Time and stock buffers and the management of selected control points (Called Drums) set the beat for the operation and keep the functional and local operations in tune with the demand signals emanating across the world through the supply chain buffer priorities.

While consumable and replacement parts are managed with stock buffers balanced to absorb both supply and demand variability, the repairable units themselves move through the repair cycle according to the tempo or beat of the control points (the Drums).

Reducing the Time to Reliably Replenish (TRR) these Lead Time Managed repairable items, such as jet engines, is a major focus of the demand-driven flow system. The shorter and more reliable the TRR time is then the faster assets are returned to service and the smaller the inventory the supply chain channel needs to carry. A “time buffer” system helps synchronize the flow of the right lead time managed parts according to the global buffer signals at the end of the supply chain, i.e., at the point of demand. The time buffer system is set taking into account both the average lead time and its standard deviation to arrive at a reliable time to replenish (TRR). This baseline design TRR is tied to the tempo of the demand pull at the end of the supply chain – if that demand tempo increases, putting more pressure for a shorter repair cycle, then production shop managers receive color coded alerts focus priorities on the parts, and systems that are falling short of the needed replenishment time.

Supply Chain Partners Re-Supply to the Same Global Demand Signals

The Defense Logistics Agency (DLA) for instance, is a centralized Department of Defense supply agency which is separate from the U.S. Navy. DLA is responsible for supplying consumable parts, supplies, and purchased components to the Organizational, Intermediate and Depot level repair organizations.

In supply chain lingo, DLA represents a Supply Chain Partner organization to the Marine Corps. To achieve collaboration and synchronized re-supply with DLA, the buffer level signals from the maintenance organizations communicate the relative priorities of what material is needed.

Buffer signals provide a clear and relative priority for the re-supply and a metric for best allocation of supply assets across squadrons, regions, etc.

By blowing back the signals about where the risk to mission readiness is higher, then relative priorities are fairly clear. For instance, a red status alert signaling an at risk condition of a part’s availability gets immediate attention from DLA on re-supply. Mission types weigh into the equation as well – a red- condition at a deployed squadron supporting combat operations receives a higher attention than an equally red condition for the same part at a non-deployed squadron.

Focused, Continuous Improvement: Degrader Lists Tied to Buffer Analytics Emanating at the Point of Demand

Like all modern-day organizations, the Marine Corps conducts process improvement activities and deploys experts and teams trained in the use of techniques like Theory of Constraints, Lean, Six Sigma and Quality improvement.

Before the re-design of their system along the lines of Demand Driven MRP, such improvement activities were conducted in a silo environment, with each node or process step in the chain defining “improvement” from its own local perspective. “Waste Walks”, where process improvement experts essentially walk through a facility and identify wasteful practices were one of the most common means to identify improvement opportunities.

The problem, of course, was that oftentimes the improvements had little or nothing to do with the overall global objective of increasing mission readiness.

Now process improvement teams take their cues from the same global signals radiating from the buffers. In addition to radiating a re-supply signal, the buffers also radiate a “history” of how variability is impacting the system. By performing a kind of diagnostic over time, the “most significant” causes that are degrading operational mission readiness are identified. That information is then stratified by aircraft type, by component, by repair organization, etc.

Overall, this provides an information infrastructure for focused process improvement – where process improvement professionals can identify and address the most relevant problem areas that inhibit increasing the global goal of operational mission readiness.

Instead of simply relying on intuition, or business cases presented to local managers or on silo “pain points” within a repair and overhaul operation, now continuous improvement activities focus on removing the causes of disruption and variability affecting the overall supply chain – the areas that matter most to meeting operating demands at the end of the supply chain.

The buffer analytics tool used in the Navy helps to identify the “long tailed” events most responsible for degrading mission readiness – events causing buffers to drop into red and black zones. Red indicates shortage risks. Black often is indicative of a mission that could not be performed due to a lack of availability in a needed component or part from the supply system.

By focusing process improvement efforts, the Marine Corps is shrinking the turnaround of parts and repairable assets in a prioritized manner, weapon system by weapon system according to what is directly connected to end demand.

As process improvement projects are completed on the “long tail” causes, it enables further system- wide improvements, for instance, reducing the supply chain channel inventory enables budgets to be reallocated to other areas. In the battle for cost-wise readiness, the buffer analytics has focused improvement in a way that cost and inventory reduction is happening without risk of losing mission readiness.

Business in a Demand Driven World

Supply chain management (SCM) requirements have changed significantly in recent years. The buzzword nowadays when managing global supply chains is about adaptation to increasing global complexity and variability. Much like the Marine Corps having to adapt away from the Iron Mountain concept, private industry is going through a similar need to adapt.

In THE SMARTER SUPPLY CHAIN OF THE FUTURE - GLOBAL CHIEF SUPPLY CHAIN OFFICER STUDY

conducted by IBM, one word stands out to describe the business environment many industries are experiencing: Volatile.

For the study IBM interviewed 400 senior executives responsible for their organization’s supply chain strategies and operations from North America, Western Europe and the Asia Pacific region. The interviews reveal that worldwide complexity and constant change is putting more pressure than ever to be better connected to customers, to handle and contain costs in a dynamic environment, to achieve better visibility to “see” and act on the “right” information in a data saturated environment, and to better leverage supply chain resources to drive revenue growth rather than cost savings.

As IBM’s findings suggest, private industry’s supply chains are under the same global forces as those affecting the Navy aviation supply chains – conditions of growing volatility, uncertainty, complexity and ambiguity. And under the same pressure to become demand driven.