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3 Wrap-Up Discussion The final day was devoted primarily to general discussion and an attempt to distill the main points that had been presented by those who spoke at the workshop. The discussion involved the following topic areas: (1) leadership and management; (2) mission statement and metrics; (3) setting budget priorities and funding; (4) relationships with the contractor community; and (5) culture issues and training. LEADERSHIP AND MANAGEMENT Some workshop participants noted that the Air Force has recognized that the trend of year-over-year increases in sustainment costs cannot continue, especially with the prospect of budget reductions throughout DoD as the United States attempts to get its fiscal house in order. One participant asserted that unless the approach to sustainment changes, this will lead to a “death spiral” for the Air Force. However, another participant noted that the discipline of the anticipated budget cuts could be viewed as an opportunity to make fundamental changes in the Air Force’s approach to sustainment. Several questioned, however, whether there was leadership buy-in at the highest levels of the Air Force. Many observed that enterprise-level thinking does not occur in the Air Force. Some participants noted that policies must be articulated by the Air Force chief of staff and be internalized down to the wing level. Echoing the conclusions of a previous study, several workshop participants noted that there is no single person responsible for sustainment throughout the Air Force. 1 Rather, sustainment decisions are made within the individual program “stovepipes,” with no one having visibility across programs. One example cited was the issue of corrosion of parts and structures, which has been estimated to be responsible for up to 30 percent of sustainment costs across the Air Force. Each program wrestles with its own corrosion problems individually, whereas such a large, common problem would be better addressed holistically at the enterprise 1 NRC. 2011. Examination of the U.S. Air Force’s Aircraft Sustainment Needs in the Future and Its Strategy to Meet These Needs. Washington, D.C.: The National Academies Press. Available at http://www.nap.edu/ catalog.php?record_id=13177. 24
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level. In the commercial airline industry, for example, there are policies in place that address the minimization of corrosion across all types of aircraft in the fleet. The recent reorganization within AFMC with the consolidation of 12 product centers down to 5 was seen by some who spoke at the workshop as an opportunity for taking a more holistic approach to sustainment. The leader of the new AFLCMC, for example, deals with all program stovepipes and, in principle, has the ability to influence (although not to make) sustainment decisions across programs. Similarly, the leader of AFSC has control of the workflow at maintenance depots and test centers. Some participants pointed out that a challenge for AFMC is to determine what it is trying to achieve as an outcome and to get all of its components to work together to achieve that outcome. While the reorganization within AFMC was noted as a positive development by some workshop participants, it was not seen as a panacea. Indeed, reorganization per se was not seen as the solution to sustainment issues across the Air Force. Rather, a key point made by the some workshop participants involved the need to articulate at the highest levels the user-driven enterprise outcome desired and the need to give key individuals the authority and accountability for achieving that outcome. Some workshop participants noted that the success achieved in NAVAIR, which was driven primarily by customer-focused metrics tied to fully burdened costs and through the application of “Lean” management principles, provides an “existence proof” and template for what can be accomplished in the Air Force. However, participants who commented did not minimize the challenges involved in implementing these management principles. They noted that the NAVAIR example was not implemented across the Navy as a whole, but only within a specific part. Accordingly, some participants expressed the view that implementation within the Air Force should start with a pilot or prototype project focusing on one weapon system (e.g., C- 130 or F-15) and involving AFMC working with another MAJCOM, though there was disagreement about which one would make the best partner. Some workshop participants stated that AMC would be the most appropriate partner given its combat support mission, which is similar to that of AFMC. Others felt that Air Combat Command (ACC) would be the right choice, given the importance of getting the operators involved. There was also discussion of who might champion such a pilot program. By analogy with the chief of naval operations’ role in the NAVAIR example, some participants who commented felt that the champion should be the Air Force chief of staff. However, it was noted that there needs to be another individual authorized to be the “campaign manager” who would facilitate training and changing peoples’ behavior. Some participants suggested that this person should be a four-star general, perhaps the leader of AFMC. The chief would give this individual the goal and associated metrics and hold him or her accountable for achieving them. It was pointed out that the transformation that took place at NAVAIR was difficult and took place over a period of at least 4 years. Thus, the continuity of leadership is a critical issue. A participant noted that regular rotations of command personnel make it imperative that changes be institutionalized so that they do not depend on individuals who may only be in the job for 18 months. 25
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MISSION STATEMENT AND METRICS A central tenet of Lean is that the entire organization needs to focus on what creates value for the end customer, and the use of resources for any other goal is a waste. Implicit in this formulation is that sufficient effort should be expended to preserve customer value, but no more. Continuing with the Lean theme, the overall goal needs to be supported by high-level metrics that are tied to the end user—in the Air Force case, the person who pulls the trigger. These metrics need not be complicated. One participant noted that in the commercial airline industry he focused every day on three metrics: (1) safety; (2) regulatory compliance; and (3) basic operational numbers, such as number of aircraft out of service. Throughout the workshop, examples were given of Air Force metrics that reflect consumption of resources (e.g., number of sorties or flight hours), with the implicit assumption that more consumption is better, rather than focusing on value for the mission or the end user. The focus is more often on output than outcome. In the NAVAIR example, the metric became “aircraft ready for tasking based on missions completed.” This metric, which evolved over time, focused not just on the readiness of aircraft flying missions at a given time, but also on the number available for training and for future missions. It thus minimized the practice of cannibalizing inactive aircraft in order to keep deployed aircraft flying. Finally, several participants noted that metrics need to be established for comptrollers that go beyond dollars obligated. 2 SETTING BUDGET PRIORITIES AND FUNDING One consequence of the program-oriented, stovepiped structure of the Air Force is the inability to set budget priorities based on cost to the enterprise as a whole; i.e., to answer the question, If the Air Force has only one additional dollar to spend, where should it be spent? The Air Force has no way of understanding and tracking total cost. The canonical example discussed at the workshop was the issue of corrosion. If, indeed, corrosion accounts for 30 percent of the Air Force sustainment budget, as some studies have suggested, a strong case can be made that the next dollar should be spent on a program to address it. With respect to sustainment, there is no mechanism for looking at budgets across programs, and, indeed, AFMC does not have visibility into ACC’s sustainment budget. During the workshop, it was noted that a number of budget metrics are being tracked because of legislative or other requirements, such as non- mission-capable hours and contractor logistics support, but it was pointed out that these are irrelevant to the question of how best to reduce total sustainment cost to the Air Force. Some participants expressed that a broader view of costs is required to encompass costs to accomplish the mission of the joint force and total sustainment cost. One concern expressed by a workshop participant related to the fragmented approach to costs in the Air Force is the difficulty of translating legitimate needs into a convincing business case for funding. One participant expressed the need for a standard tool for doing this, stressing that it would be only a tool and need not be complicated. An important corollary is the need to track actual costs and compare them with projected costs to verify that the 2 The transformation of the Naval Aviation Enterprise went well beyond solely the application of Lean principals and into wide ranging organizational and cultural changes. 26
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projected gains are in fact realized. While several presenters showed projected cost savings associated with specific sustainment programs, there were little data presented on actual costs incurred. Finally, some participants expressed the view that restrictions on how money can be spent from the various accounts associated with sustainment (“color of money”) were a barrier to reducing total sustainment costs. For example, in the case of substituting a new part for an old part, if a new part has the same form, fit, and function as the old part, the substitute can be funded from the operations and maintenance account; if not, it is considered a modification, and must be funded from the acquisitions and modifications account. A case was cited in which an internal engine part that would improve performance was proposed to replace an older part. However, substitution of the new part could not be funded because it did not have exactly the same form, fit, and function as the old part and was, therefore, considered to be a modification, even though the outside profile of the engine remained the same. RELATIONSHIPS WITH THE CONTRACTOR COMMUNITY Although it was not a major theme of the workshop, a company representative raised a “red flag” regarding what he perceived to be deteriorating relationships between government managers and the contractor community and what this could mean to Air Force sustainment in the future. This participant noted that it is difficult to get a feel for the Air Force contracting process, due in part to the distributed authority. He stated that many companies having both commercial and government businesses are rethinking their involvement with the government because of all of the audits and red tape they have to deal with. He cited one case in which a government request for information had to be changed because small businesses could not compete. In the past, he asserted that communications between the Air Force and industry were much better than today. Government personnel used to be mentored on how to work with industry, but in his view this has all gone away. This situation contrasts sharply with the strong relationships that exist between his company and its suppliers in the commercial world. All are working together to improve safety and compliance, and it is rarely necessary to negotiate contracts to improve an engine. There is much more freedom to act. As a result, this company much prefers working with other companies and is having difficulty staffing positions relating to military programs. There are no engineers waiting “pencils in hand” to contribute. In his view, the warfighters are getting less. While the evidence provided by this participant was anecdotal, the passion with which these views were expressed was notable. CULTURE ISSUES AND TRAINING According to one participant with experience in the NAVAIR Lean management experiment, the biggest barrier to changing Air Force culture and breaking through the stovepiped organization is likely to be the egos of the managers involved. The current incentives reward the best stovepipe, except during wartime. He argued that to adopt Lean management, the culture will have to change—subordination to the goal of the enterprise 27
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rather than pursuit of personal priorities. The objective should be to manage costs, not budgets. The “use it or lose it” mentality on budgets will have to be changed. It should be encouraged to return unspent money to the enterprise at the end of the fiscal year. This participant asserted that Lean management also requires that all members of the organization understand the business and its objectives through training. In the Air Force case, this includes both warfighters and civilians. Various educational institutions were suggested as providers of this training, including the Air War College, although this would not be available to civilians. However, Lean management is not just to be pursued at the enterprise level. The same participant stressed that the goal should be to give every first line supervisor Lean management training. In his experience, Lean management works well on the shop floor, and in his business, it led to reductions in both overhead and paperwork. Another participant with a background in the Army testified that Lean management implementation tools and performance metrics are available and helped to facilitate Army policy updates and to rationalize supply regulations. 28