In my first blog on the transformation facing military in-service support, I looked at how next generation defense equipment – ranging from simple assets to the more complex – is changing the way military support is delivered and managed.
But carefully structured support models will be essential to meet the unique demands of different forces as modern defense organizations become more dependent on third party suppliers to produce, deliver and maintain new equipment. Here, I explain why success will depend on how well OEMs can adapt to a less transactional role and how prepared contractors will be to adapt and remain competitive as markets emerge, shift and develop over the next decade.
Different countries, different requirements, different relationships
Defense budgets as a percentage of GDP in the West have been shrinking in recent years, but new markets and opportunities are being found in maturing defense forces in the Middle and Far East.
A 2017 PwC report stated that defense organizations are starting to relax foreign investment constraints and are asking contractors from outside of their geographical borders for commitments and contracts that go beyond the ones of old. As the report suggests, “Ministries now want broad-based, explicit, and often extensive skills and knowledge transfer to build up their own industrial and military capabilities and diversify their economies.”
This approach – working closely across different geographies – requires an improved relationship between the OEM and local contractor or military organization. OEMs or foreign contractors need an understanding of security and governance issues country-by-country as well as political transitions which may affect defense policy. The social payback of defense spending must also be considered, with different public attitudes to military expenditure in every geography.
Bringing all stakeholders closer together
The increasing dependence of defense organizations on suppliers to generate military capability requires two essential ingredients for success: carefully structured acquisitions or through-life support contracts and the ability to develop and maintain harmonious relationships between buyers and suppliers.
The current procurement process, with its collaborative focus on risk sharing but not necessarily cost-reduction, isn’t sustainable in the long-term. Those responsible for the command of these public/private support networks need a better way to manage through-life costs to help support asset logistics.
Cross-organization visibility
What’s needed is a support system that provides a holistic view of an asset’s health, availability and supply chain, rather than fragmented information from multiple sources. To achieve this, information needs to be shared across buyer, supplier and maintainer partnerships, which often contain organizations from multiple countries.
Blockchain is one of several technologies that could have a serious impact on this cross-organizational visibility. Although new and relatively untested in the defense environment, the technology has the potential to provide a 100 percent verifiable and traceable history of an asset’s lifecycle in real-time. This is particularly important for assets managed through a multi-organization support chain with the complex accountability contracts of modern acquisition programs.
IT – the support chain backbone
In defense acquisitions, IT support for complex assets is sometimes an afterthought when it should be a priority. Examples across the commercial transport and energy sectors, which also involve complex assets with global supply chains, have proved that strategic implementation of IT is critical to operational success.
When implemented quickly and effectively, a change of IT support models has the potential to deliver greater efficiencies throughout entire asset-lifecycles. For example, only 20 percent of the total cost of a military jet is the initial procurement. IT-support can focus on making the remaining 80 percent much more efficient, but it needs to be elevated from being a transactional tool to a strategic enabler and help military, contractors and suppliers function more efficiently.
For a more in-depth look at the transformational changes facing in-service support, and how providers can stay ahead as the landscape shifts take a look at the latest IFS white paper: http://www.ifsworld.com/corp/sitecore/media-library/assets/2017/09/19/the-transformation-of-in-service-support/
