DefenseMRO

Where from Here?

April 2014John Johns

Deputy Assistant Secretary of Defense(Maintenance)@nowhiteflagz

Where we are

• Reset of equipment from Iraq and Afghanistan

• Shift in strategic focus and use of forces

• Continued instability throughout the world

• Continued pressure on the budget

2

$-

$100

$200

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FY48

FY51

FY54

FY57

FY60

FY63

FY66

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FY72

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FY78

FY81

FY84

FY87

FY90

FY93

FY96

FY99

FY02

FY05

FY08

FY11

FY14

DoD Budget Authority(in FY14 Dollars)

FY 2014 $496B Base$85B OCO

Total:  $581B

Historic Trends in Defense Spending

Iraq/Afghanistan

Korea

Nuclear Triad

OCO

-51%

Vietnam

“Hollow” Army

-25%

80s Buildup

“Peace Dividend”

-35%

2001Workforce

61K

2011/13Workforce82K / 75K

-25%

3

• ARMY• 3rd / 4th quarter inductions

cancelled – all depots affected • TOCs, Firefinder,

PATRIOT, Blackhawk, aviation components, M1s, M88s, Howitzers, small arms

• Arsenal manufacturing

• MARINE CORPS• Ground – resourced at 30%

of Base requirement• M1s, MRAPs, AAVs,

LAVs, Tactical Trucks• Air

• > 100 Marine aircraft

• NAVY• 3rd / 4th quarter inductions

cancelled - all FRCs affected • > 200 Navy Aircraft• > 1200 engines/modules

• 70% of ship’s mxin private yards

• 25 availabilities• 2 Refueling/complex overhauls

• AIR FORCE• All ALCs affected

• 150 aircraft• 85 engines• Sustaining engineering deferred• Software engineering deferred

• CLS reduce at multiple sites

CR/Sequestration/OCO Shortfall Effects

4

CAPABILITY

Quickly confront and defeat aggression from any adversary,anywhere, anytime

PROTECT & PRIORITIZE

Key investments in technology and new capabilities

DIPLOMACY Strengthen

key alliances & partnerships

Build innovative partnerships

MILITARY

Smaller

Leaner

Technologically Advanced

REBALANCE GLOBAL POSTURE

Asia-Pacific

Middle East

Where We are Going

5

Guiding Principles and Opportunities

• Maintain/Strengthen National “Core” capabilities• Establish new capability in most efficient and effective

manner possible• Protect surge capability/capacity

• Flexibility• Agility

• Strengthen “expeditionary” and “integrated” capabilities• Aggressively increase effectiveness and efficiency

in existing operations• Cycle-times• Quality• Cost

6

Actions Transition “enduring” requirements from OCO to Base

Link metrics and ensure connectivity between warfightingcapability, readiness, and logistics requirements and budgets

Synchronize statutes, policy, strategic planning, and governance

Leverage strengths of both public and private sectors through partnerships

Synchronize, and soundly structure, contracts, partnership agreements, and implementation agreements

Develop and transition technologies that advance MRO capability, effectiveness and efficiency and embed ultra-high reliability in weapon system design 7

Warfighter Support

8

Provide authorities for Retrograde and Disposition / Demilitarization of equipment to meet operational timeline 17K pieces of rolling stock 4K containers of equipment & supplies 18K containers of contractor materiel

Support post-2014 Afghanistan Resolute Support Mission footprint

Further develop and enable operational concept for managing contractors in contingency operations

Mature Inter-Agency logistics support concepts and operations

Mature Non-Standard Urgent Needs support

Increase focus on sustainment in SFA

Affordability and Lifecycle Management

Published BBP PBL Comprehensive Guidance

Completed F-35 O&S Cost Reduction Study

Improve content of Life Cycle Sustainment Plans to include:

O&S Affordability

O&S Should Cost initiatives

Use of PBL arrangements

Publish O&S Cost Management Handbook

Publish PBL Best Practices Guidebook

Integrate PBL best practices with DAU course curricula

Establish Senior Logistics Public-Private Partnership Council to facilitate cost reduction strategies across industry and DoD

9

Supply Chain Efficiency Implementing Comprehensive Inventory Plan On-hand excess inventory reduced by $8B

Excess inventory orders reduced from $1.1B to $564M

Backorders and planned procurements reduced by $218M

Developed Distribution Network re-engineering Phase I… $402M in transportation savings

Validate SNO Phase I savings of $402M in POM15 anddevelop Phase II inventory optimization business model

Institutionalize enterprise supply chain metrics and performance reviews

Leverage International / Joint Logistics Forums in support of global supply chain operations

Published the DoD Counterfeit Prevention Policy10

Inventory Management

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FY09 FY10 FY11 MarchFY12 FY12 March

FY13 FY13 FY14 FY15 FY16

Excess On‐Hand $8.8 $8.5 $9.5 $10.3 $7.5 $6.9

Percentage 9.4% 8.4% 9.2% 9.9% 7.8% 7.2%

Target 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 9.0% 8.0%

0%

3%

6%

9%

12%

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$3

$6

$9

$12

$15

Billion

s of D

ollars

FY09 FY10 FY11 MarchFY12 FY12 March

FY13 FY13 FY14 FY15 FY16

Total On-Order Excess Dollars $1,302 $892 $609 $631 $666 $754

Total On-Order Dollars $13,647 $12,032 $10,885 $9,397 $11,003 $9,929

% of On-Order 9.5% 7.4% 5.6% 6.7% 6.1% 7.6%

Target % 7.0% 7.0% 6.6% 6.6% 6.3% 6.0% 5.0% 4.0%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

Mill

ions

of D

olla

rs

On-Hand ExcessOn‐Order Excess

7.6% 

On‐Hand Excess 6.4% 

“Don’t buy what we won’t need”

“Don’t keep what we don’t use”

On-Order Excess

Reduced on‐hand inventory by $8B … first decrease since 1998 In‐Storage Visibility increased participation from 243 to 508 sites 

and saved $218M in lateral redistribution & procurement offsets Consolidating wholesale inventory and distributing retail support inventory  Increasing accountability for inventory held by contractors Restructured Supply Chain policy and review practices Institutionalize balanced readiness‐ and cost‐driven metrics

Path Ahead

12

Support operations in Iraq and Afghanistan

Continue to adjust for new steady-state funding

Identify and protect critical capabilities Government depots, shipyards, and arsenals

Contract maintenance

Issue Arsenal and Depot Source of Repair Instructions

Institutionalize supply chain metrics-driven performance reviews

Improve Life Cycle Sustainment Plans

Publish PBL Guidebook and O&S Cost Management Handbook

Establish Logistics Public-Private Partnership Council

Create opportunities to generate efficiencies and partnerships

2013 SecDef Mx Award Winners• Field Maintenance:

• Phoenix Trophy - D Company, 3rd Battalion, 82nd Aviation Regiment, Task Force Talon,82nd Airborne Division, USA

• Marine Heavy Helicopter Squadron 361, USMC

• Submarine Performance Monitoring Program, Naval Sea Systems Command, USN

• USS EMORY LAND (AS 39), USN

• USS JOHN C. STENNIS (CVN 74), USN

• 27th Special Operations Maintenance Group, USAF

• Depot Maintenance – Robert T. Mason Trophy

• UH-60 Black Hawk Recapitalization Program, USA@nowhiteflagz