Nick Kunesh Deputy Assistant Secretary of the

Navy (Logistics)

2005 SpringProduct Support Conference

Naval Logistics TransformationClearwater Beach, FL

May 10, 2005

“We simply have to transform this place. It is every bit as important to the success of the global war on terrorism as the other things we're doing.”

Donald B. RumsfeldSecretary of Defense

“…transforming the military. What is different today is this sense of urgency: The need to build this future force while fighting this present war. It is like overhauling a car engine while you are going 80 miles an hour.”

George W. Bush President of the United States

“…we will create an enterprise culture and achieve Operational Excellence….like most major corporations, we need to build a process centered organization that eliminates the variation between goals and results through Six Sigma improvements.”

Gordon

R. England Secretary of the Navy

The Need to TransformWhat Are Our Leaders Saying?

“…I am the one Chief that is asking for fewer people. This year 7,900, without getting into details I believe I can expect that curb to continue because what I'm trying to do is to figure out how to learn from industry and lean manufacturing techniques and the things that will allow us to provide the greatest opportunity to the people who decide they are going to commit themselves in our profession.”

ADM Vern Clark Chief of Naval

Operations

Secretary of the Navy’s Near Term Priorities

• Combat Capability– Win the War on Terrorism

• People– Ensure quality of service

• Technologies– Recapitalize our Forces

• Improving Business Practices– Transform the Business of Defense

Process characteristics needed to support SECNAV’s priorities:

» Speed» Agility» Flexibility» Sustainment (TAV, ITV)

DoN Total Obligation Authority (TOA)

$119.4B 65% is people cost

FY04 TOA$115.1B

Navigation to TAV/ITV Analogy Lead-time Reduction

Open Ocean fix accuracy

30-50 NM

4 NM

1 NM

xxxx yds

Electronic Age 1911

2200 BCERP AIT-UID/RFID eProcurement

2005

Line of Sight COASTLINE

Latitude1 LOP

2 fixes/daySEXTANT

6-8 fixes/day SATNAV

On Demand GPS

2050

Polaris Celestial Reference Point

SEXTANT

SATNAV

LOS

GPS

FORCEnetOmni-Object Intelligence

JCS/ OSD and Services Logistics Transformation Roadmap Destination

Focused Logistics Capability Areas:1. Joint Deployment / Rapid Distribution

2. Agile Sustainment

3. Operational Engineering

4. Multi-National Logistics

5. Force Health Protection

6. Information Fusion

7. Joint Theater Logistics Management

Today

R O A D M A PFocused Logistics

|

Sea Power 21

Key is cost

Transformation Enablers

Sea TrialSea Trial

Sea WarriorSea Warrior

Sea EnterpriseSea Enterprise

• Lean /Six SigmaLean /Six Sigma• AIRSpeedAIRSpeed• Task Force LeanTask Force Lean• Enterprise Resource Planning Enterprise Resource Planning • Human Capital StrategyHuman Capital Strategy• SYSCOM AlignmentSYSCOM Alignment• Productive RatiosProductive Ratios• Performance Based Logistics Performance Based Logistics • Naval Logistics IntegrationNaval Logistics Integration• Navy Readiness Integrated Navy Readiness Integrated Improvement ProgramImprovement Program• Ship Maintenance ProgramShip Maintenance Program• Task Force EXCELTask Force EXCEL• Strategic Sourcing Strategic Sourcing • Navy-Marine Corps IntranetNavy-Marine Corps Intranet• Commander, Navy InstallationsCommander, Navy Installations• ACNO-ITACNO-IT

EXAMPLES

Joint Operations AreaNot to Scale

SPOD

APOD

Strategic Airlift

Strategic Sealift

Strategic Airlift

Strategic Sealift

High Speed Sealift

High Speed Connectors (HSC)

Shuttle Ships

AustereSPODs

AdvancedBase

Military/CommercialRe-supply

CONUS

Sea Base

IntermediateLog Source

Intra-theater Aircraft

SurfaceAir

Future-TBD

The sea base is an inherently maneuverable, scalable aggregation of distributed, networked platforms that enable the global power projection of offensive and defensive forces from the sea, and includes the ability to assemble, equip, project, support, and sustain those forces without reliance on land bases within the Joint Operations Area.

Sea Base Vision

Commercial Resupply

Air/Surface

Future Capability to Project Power is Joint Sea Basing

Sea-Base: Open Ocean Environment

Sea State 4

• Whitecaps are everywhere with spray• Average waves are 8´ high • Significant waves are 12´ • Average highest waves are 16´• Beaufort Wind Force is 6 (22–27 knots)• Sea condition described as rough

Sea State 4

• Whitecaps are everywhere with spray• Average waves are 8´ high • Significant waves are 12´ • Average highest waves are 16´• Beaufort Wind Force is 6 (22–27 knots)• Sea condition described as rough

Required Enabling Capabilities

Interface & Transfer Capabilities

• Skin-Skin Transfers• At-Sea Container Transfer• Heavy Unrep• Integrated Logistics Platform

Capabilities required to provide interface between connectors to facilitate the transfer of containers, quadcons, pallets, personnel, ordnance, and equipment.

Intra-Ship Capabilities

• Modular Packaging Designs• Selective Offload• Improved Internal Cargo Handling• Total Asset Visibility

Without them …

limited to current methods

of resupply.

Lean

Standardization

Reduce logistics footprint, decrease demand, increase commonality, joint interoperability

Critical Seabase CapabilitiesLynchpin is Logistics

• Fully joint capable• Maneuverable, dispersed – able to coalesce rapidly as needed• Integrated command and control• At-sea arrival, assembly, and transfer of material and

personnel• Selective, robust offload• Conduct and sustain forcible entry and subsequent operations• Facilitate movement ashore• Force protection• Re-suppliable throughout the follow-on force build-up period

in adverse weather• Ability to reconstitute and redeploy the force• Robust in challenging seas

Optimization Synchronization

Common Theme of Sea Base

• Success depends on an end-to-end supply chain with a complete IT solution that provides TAV and ITV crucial for time-phased replenishment and retrograde.

• Our mandate requires an order of magnitude improvement in our processes to yield speed, agility, flexibility, and sustainment in an environment of constant change (battlefield) with the difficulty of conducting distribution operations in the open ocean (sea state 4).

Deputy Assistant Secretary of the Navy for Logistics View

Efficiency Methodologies and Tools for Continued Improvement

• Enablers for speed, agility, flexibility & sustainment in an affordable manner. – Information Technology

• Global Combat Support System (GCSS)– US Army, USAF, USMC

• Navy Enterprise Resource Planning (ERP)

– Efficiency Methodologies• Theory of Constraints (TOC)• Lean• Six Sigma• Others : ISO 9000, Malcolm Baldridge Award, CMMI

– Automation Identification Technologies (AIT)• Unique Identification (UID) • Radio Frequency Identification (RFID)

All provide an environment for lead time reduction in the Value Chain.

Push to a Common Environment

CDL IP TDL

ISR C2

ISRJC2DJC2DCGSNCES

OARAPIDS/C2ERA

Clients

B2B

Distributed Services

C2 CombatSystems

B2B

B2

C

B2

C

B2

C

B2

C

C2C C2C C2C

GIG JTRS TCSIntegrated Networks & CommunicationsGIG-BE

Key Enablers•XML•IP•End-to-End Information Assurance

•Open Systems

B2B = Business to BusinessB2C = Business to ConsumerC2C = Consumer to Consumer(Enabling Publish/Subscribe Solutions)

FORCEnet TargetAs - Is

Consumers

Servers Combat Systems

Security Security

Stovepipe Communications

Security

Representative Building Blocks

Current Environmental Landscape:E-2C Gyroscope Repair Example

• 35 • 25 • 10

• 52 • 11 • 7

DRAFT

Quick Statistics:

Physical Moves: 35

Building Moves: 25

Site Moves: 10

# of Nodes: 29

VAW-120Pilot

VAW-120 WorkCenter

VAW-120Maintenance Control

VAW-120 Supply

VAW-120 QA

SRS MDU

SRSContractor

DCU (Supply)

AMSU (AIMD)

AIMD 62A Work Center

AIMD 600 Production Control

ATAC Norfolk CFSATAC NorfolkGovernmentCFS Houston

ATACNorth

Island CFS

Building 3304

DDDC

FISC

Instruments ShopPre-stage Area

Instruments ShopPlanner

Instruments ShopProduction Control

Instruments Shop WorkCenter

ContainerReclamation

FISC Building 36

Pack and Preservation

472 ProductionControl

472 Work Center

SRS Materiel

NAVICPItem

Manager

Gyroscope Organization Space

• Although thisgyroscope is a one-for-one exchange,the repairable sentto NADEP NorthIsland may not besent back to Norfolk

• Over 400 of thistype of gyroscopeare in inventory

12

Intra-site Physical Flow

Information Flow

Inter-site Physical Flow

Site Marker

Building Marker

LeanMapsLeanMaps

13

DRAFT

Manua l Ha nd-off

El ect ronic Tra nsmi ssion

Manua l/ Elect ronic Transmi ssion

Si te Ma rke r

B ui lding Marker

VAW-120 Pilot VAW-120 Work

CenterVAW-120

Maintenance Control

VAW-120 Supply

VAW-120 QA

SRS MDU

SRSContractor

DCU (Supply)

AMSU (AIMD)

AIMD 62A Work Center

AIMD 600 ProductionControl

ATAC Norfolk CFS

ATAC NorfolkGovernmentCFS

HoustonATACNorth

Island CFS

Building 3304

DDDC

FISC

Instruments ShopPre-stage Area

InstrumentsShop Planner

InstrumentsShop Production

Control

Instruments ShopWork Center

ContainerReclamation

FISC Building 36

Pack and Preservation

472 ProductionControl

472 Work Center

SRS Materiel

NAVICPItem

Manager

NALCOMISOMA NALCOMIS OMA

NALCOMIS OMA

NALCOMIS OMA

NALCOMIS IMA

NALCOMIS IMA

NALCOMIS IMA

NALCOMIS IMA

Manual Logbook #2NALCOMIS IMA

Manual Paperwork

NALCOMIS IMA

ADB

Manual Logbook #1

Manual Logbook #3

Manual Logbook #5

ATAC DatabaseCustody Control Manifes tMRIL

FEDLOG

DSS

BREES

MAPPEROPDOCS

UADPS Cards

UADPS Cards

UADPS Cards

UADPS Cards

UADPS Cards

UADPS Cards

BREES

WIPICS

UADPS Cards

FEEDBACK

FEEDBACK

WIPICS

DSS

Manual Logbook #4

Manual Logbook #6

Manual Logbook #7

Gyroscope Systems Map

NOTE: this map issomewhatincomplete sincenot all nodes wereinterviewed

Quick Statistics:

InformationTransac tions: 52

# of InformationSystems: 11

# of Logbooks: 7

LeanMaps

LeanMaps

• No End-to-End Management

• Lack of Visibility• Long-Cycle Times• Increased Inventory Levels• Limited Ability to Forecast

Physical MovesBuilding MovesSite Moves

IT TransactionsInfo SystemsLogbooks

ERP Foundation

A0 Speed Cycle Time Productivity

• Inherently within SAP are over 20 generations of best commercial practices

• Lean & Six Sigma will no doubt require alignment with IT (ERP and DIMHRS) to be successful

• Closeness of our common reengineered processes will give us the order of magnitude improvements we seek

ERP enables

Navy ERP Functional Scope Release 1.1

Release 1.X

Release 1.0

FMSD

MM

PM

HR

IM

FI

CO

AM

PS

IS-PS

SAP

WF

BW

DMS

PPWMS

EH&S

mySAPNetWeaver

QM

• Workforce Management– Time Management– Certification & Assignment Control– Training and Event Management

• Program Management– Project Management

• Financial Management– Financial Accounting– Revenue and Cost Controlling– Asset Accounting– Public Sector Management

• Plant Maintenance– Plant Maintenance – Quality Management– Environment, Health, and

Safety

• Wholesale Supply/APS– Production Planning and

Procurement Planning– Advanced Planning

System (APS) Processing– Business-to-Business Procurement

• Materials Management– Procurement– Sales and Distribution– Inventory Management, Warehouse

Management– Environment, Health, and Safety– Material Requirements Planning

(Regional Level)

Functional Design Specifications (FDSs)Breakdown by Process Area

Financial Supply Maintenance Acq WFM Total

Mandated Interfaces(e.g.,WAWF/DTS/DCPS/DCPDS/

DAAS/SPS/DDRS/WINS)32 16 0 2 19 69

Legacy TradingPartners

(e.g., NALDA/NTCSS/ U2/OOMA/CDMD-OA)

1 67 21 2 0 91

SAP Gap 0 0 1 3 1 5

Reports 18 11 15 23 8 75

Conversions 3 11 8 1 1 24

Other 18 18 26 20 6 88

Total (352) 72 123 71 51 35 352

Lean-Lean-PathwaysPathways/AirSpeed/AirSpeedAccelerated Improvement WorkshopAccelerated Improvement Workshop

OnboardOnboardUSS Harry S. Truman (CVN-75)USS Harry S. Truman (CVN-75)

2 April 20042 April 2004

700 Division700 DivisionBRU-32BRU-32

AIRAIRSpeedSpeedThe Way AheadThe Way Ahead

Process Name: Standard Work Sheet

Model Number:

Model Name:

Date:

From: Dept. Head SupervisorScope of Operations

To:

QualityCheck

SafetyPrecaution

Standard Workin-process

#. of pieces of std.work in-process

TAKT Time

OperatorNumber

Sink Work BenchL

ocke

rC

ompu

ter

Par

ts

Loc

ker

Com

pute

rLocker

Wor

k B

ench

Too

l Box

Test Bench

BR

U B

ench Pallet

Computer Printer

To GSE to Clean Parts

To Hazmat Locker

BRU 210 Day Inspection Cycle

People distance: 3,232 feetParts distance: 281 feet

Lean Process Improvement BRU 210 Day Inspection Cycle “As is”

Process Name: Standard Work Sheet

Model Number:

Model Name:

Date:

From: Dept. Head SupervisorScope of Operations

To:

QualityCheck

SafetyPrecaution

Standard Workin-process

#. of pieces of std.work in-process

TAKT Time

OperatorNumber

SinkL

ocke

rC

ompu

ter

Par

ts

Loc

ker

Com

pute

rLocker

Wor

k B

ench

Too

l Box

Par

ts

Was

her

Pallet

Computer Printer

BRU 210 Day Inspection Cycle

1st Stage Disassembly

kanb

an2nd Stage Disassembly

2nd Stage Re-assembly

Final Assembly and Test

Lean Process Improvement BRU 210 Day Inspection Cycle “To be”

People distance: 85 feet (before LEAN 3,232 ft)Parts distance: 67 feet (before LEAN 281 ft)

Business Financial Management Community (BFMC) Lean Pilot

Project

BFMC Lean Pilot Solution OutcomeReimbursable Funding Documents

to NAVAIR Field Activities

Current State Analysis– 30 plus steps (all serial)– 16 queues– 8 work-arounds – Multiple hard copies– 12 review and approval steps– An average of 28 days

processing time

Future State Solution– 15 steps (4 performed concurrently)– 4 queues– No work-arounds– Fewer hard copies– 5 review and approval steps– An average of 4 days processing time

Lean Tools

Moved downstream activities up front

• Brought all parties to table – expanded IPT

• Removed WAIT time (queues)

• Ensured complete and accurate product early

• Reduced rework/rejects

• Leveraged ERP ensuring all financial links match project plan to performing activity

NAVICP Lean/Six Sigma ProjectPerformance Based Logistics (PBL)

Contract Development

Current State Analysis– Cycle time – 29 mo avg. – Touch time – 1.8 MY per PBL– SOW development – 21 events

avg. – J&A manual process– Rerun BCA – 7 times avg.

• Moved to an “Event Driven” ProcessMoved to an “Event Driven” Process

• Removed variation in the processRemoved variation in the process

• Standardized the SOWStandardized the SOW

• Reduced reviews/reworkReduced reviews/rework

• Reduced learning curveReduced learning curve

Future State Solution– Cycle time – 14 mo avg.

– Touch time – 1 MY avg.

– SOW development – 2 events

– Automating J&A process

– Rerun of BCA – 3 times avg.

Lean/Six SigmaConclusion

• Continuous Improvement (CI), with Lean/Six Sigma as the cornerstone, has been endorsed by the highest leadership

• Lean/Six Sigma applied in the industrial base is providing “order of magnitude” throughput improvements returning Aircraft, Submarines and Marine Corps assets faster to our warfighters

• Squadrons of Aircraft and Helicopters have been more effectively utilized – Squadrons did not need to be purchased

• Intensive Lean/Six Sigma education and training focused on Value Streams including non-industrial activities – From leadership to sailors, marines, and civilians at all levels