Industry Trade Associations Committee of Six Update

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Industry Trade AssociationsCommittee of
SixUpdate

• The American Apparel and Footwear Association
  (AAFA)
• The National Textile Association (NTA)
• The Parachute Industry Association (PIA)
• Clemson University
• APBI Meeting 5/10/07

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Background The Perfect Storm

• Following 9-11 industry encountered its perfect
  storm
• Product complexity increased as all Services
  transitioned from standard to unique uniform
  systems and new technologies.
• Existing and new manufacturers invested heavily
  to support increased demand and to fill the
  pipelines with many new products.
• New and unknown customers appeared as the new
  Army PEO Soldier organization began to develop
  new items and procure some of them directly.
• As demand was satisfied there was too much
  capacity, over procurements, lack of funding, no
  commercial work to fall back on, and the large
  capital investments had not been recouped.

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Background Industry Change Efforts

• 21 months ago key members of these 3 major trade
  associations joined efforts to work with DLA and
  the Army to minimize the resulting negative
  impact on military readiness and the industry
• Over 30 meetings conducted with limited
  actionable results.
• Vastly increased knowledge and understanding
  between industry and military.
• Optimistic about path forward because of support
  of all Services, DLA, and Congress.

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Research, Development and Technical Support
Life Cycle Management
Buy, Store, and Distribute
Logistical Support
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Problem Overview

• Core problem
• Lack of supply chain (SC) wide product flow.
• Root cause problems
• Lack of enterprise-wide full communication and
  collaboration.
• Procurement funding gaps.
• Procurement practices that cause SC gaps and
  prevent contractors from planning.
• Business processes and systems that cause SC gaps.

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Problem Overview

• Core problems
• Lack of supply chain (SC) wide product flow.
• Military view of Clothing and Textiles (CT) as
  commodity products.
• Root cause problems
• Lack of enterprise-wide full communication and
  collaboration.
• Procurement funding gaps.
• Procurement practices that cause SC gaps and
  prevent contractors from planning.
• Business processes and systems that cause SC gaps.

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Baseline Supply Chain Throughput
Start fiber production
Bought by 41 weeks
Fiber becomes slacks in 29 weeks
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Baseline Supply Chain Throughput
If acceptable slacks are available from end-item
manufacturers because of SC-wide forecasting and
launching at acceptable risk, a retailer only has
to wait the order transport time. This defines
commodity products.
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Baseline Supply Chain Throughput
Since (1) military products are unique from fiber
forward, (2) there are no secondary markets for
military unique products, (3) commodity buying
practices minimize prices, and (4) military
funding, buying actions, and technology changes
are not reliable, the risk is too high for
industry to pre-position non-commodity end-items
or components for the military.
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Baseline Supply Chain Throughput
Thus, the commodity approach forces the military
to stock sufficient inventories to meet peacetime
and surge demand for the longest possible SC-wide
throughput time or live with stock outs. This
approach is very costly to everyone and these
large inventories block the transition to new
technologies. There is a
better way!
Bought by 41 weeks
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ACU Coat Suppliers Throughput Times

• 1 military unique nylon fiber manufacturer.
• 2 military unique NyCo yarn manufacturers.
• 4 (was 6) fabric weavers.
• 5 dyers and finishers.
• 1 to 3 manufacturers for secondary components.
• 20 Coat manufacturers.
• 52 critical path dependent production processes.
• ECWCS fabric visual.
• 13 to 43 or more weeks from fiber to garment
  depending on the flow of military orders. (Not a
  commodity system)

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Core Problem Summary

• Overall lack of understanding that military
  unique clothing and textiles are not commodities
  
• Must be actively managed throughout entire life
  cycle.
• Cannot rely on commercial market to ensure
  availability.
• Industry/Government collaboration is vital.
• New product development generally addresses
  military uniqueness of components SC-wide.
• No provisions in life cycle management system or
  procurement process to address SC-wide product
  flow.

Military Unique Item Development, BUT Procured as
if an Off-the-Shelf Commodity
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Core Root Cause Problem Review

• Core problems Lack of SC-wide product flow and
  military view of CT items as commodities.
• Root cause problems
• Lack of collaboration.
• Funding gaps.
• Procurement practices that cause SC gaps and
  prevent contractor planning.
• Business practices, processes and systems that
  cause SC gaps.

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Root Cause Problem DiscussionLack of
Collaboration

• Industry-wide collaboration is vital to new
  product development.
• Full collaboration minimizes upstream risks.
• Both the industry and military have many touch
  points. SC collaboration is a best practice that
  optimizes performance with minimum resources.
• Full collaboration is vital for implementing
  other best supply chain management practices.

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Root Cause Problem DiscussionFunding Gaps

• Funding is consistent with commodity practices.
• But a funding flow must exist at the minimum
  sustaining requirement level for each critical
  SC.
• DLA monthly obligation authority allocation
• Works fine for commodities used by the military
  that also have a commercial market.
• Is problematic for military unique CT products
  because there are no provisions for placing
  delivery orders solely to keep critical supply
  chains operating at minimum rates.
• Congressional, DoD, DLA, DSCP fixes required.
• War reserve and warstopper funds can leverage
  flow and surge strategies and multiply
  performance.

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Root Cause Problem DiscussionProcurement Issues

• Eliminate unrealistic IDIQ Min-Max ranges.
• Provide Forecasting to Industry.
• Implement Supply Chain Managers.
• Timely awards of contracts and delivery orders.
• Honor minimums on multi-year contracts.
• Stop re-bidding option years.
• Provide protection against uncontrollable cost
  increases in current and future Multi-year
  contracts.
• Raise Safety Levels carried by DSCP.
• Improve Source Sampling and Shade Evaluation
  Processes that cause delays.
• Improve System for Better Prompt Payment.
• Reduce industry and mandatory work equally across
  the board.
• Use all available non-commodity procurement tools
  to maintain a minimum level of product flow down
  the supply network.
• Fully enforce existing domestic manufacturing
  laws and support extending to Homeland Security.

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Solution Overview Collaboration

• Full internal military and industry-military
  collaboration to educate and eliminate core and
  root cause problems
• Executive level
• Sets policies and ensures DoD-wide leveraging of
  resources and results.
• Managerial level
• Implements communications and collaboration by
  supply chain management best practices.
• Manages product flow SC-wide.
• Ensures seamless hand-off of new products to
  sustained procurement.
• Technical level.
• Centers on Service/DLA/industry best practice
  technical data management by SC-wide
  collaboration.

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Solution Overview Modern Practices

• Use modern process improvement approaches such as
  the Lean Initiative the Air Force has underway
  enterprise wide
• Top down Leaning of internal Air Force system
  through external procurement agencies and
  industry.
• Lean supply chain management best practices such
  as pulling what is needed most rather than
  pushing what is forecasted to be short.

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Proposed Action Details

• At the DoD executive and managerial levels change
  fundamental policies and procedures to eliminate
  SC gaps.
• Create a single DoD-wide SC manager to optimize
  SC-wide funding and product flow
• for each major CT SC
• by coordinating RD and sustainment procurement
  needs within the military
• and by providing a single, primary point for
  communications and collaboration between the
  military and industry.

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Proposed Action Visual
Military Services DLA
Industrial Base
1. At the executive managerial levels change
the policies and procedures and eliminate the
issues that cause SC Gaps.
2. DoD-wide Supply Chain Managers Maintain
Product Flow Full Collaboration NPD Sustainment
Buying Modern Technical Data Management
Executive
Raw Materials
Managerial
Components
Technical
End Items
Questions?
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Next Steps

• Receive and incorporate additional industry-wide
  improvement suggestions.
• Meet jointly with DLA and all Services to
  formulate joint vision, objectives, and action
  plan.
• Nomex meeting in June is first major opportunity
  to optimize the performance of a supply chain.