An LE OC Perspective on Support Planning and Delivery Briefing to DSSM 17 Apr 13

1. An LE OC Perspective on Support Planning and DeliveryBriefing to DSSM17 Apr 13

2. Aim To give an Operating Centre’s Perspective on the issues impacting Support planning and delivery and what is being done to address them

3. Content • A bit of context • LE OC TLS Team programme of work • Developing TLS as a functional area in LE OC • Meeting demand in a cost effective manner - Chasing the Golden Thread • Project VERITAS • Inventory Management • Questions (Support improvement portfolio, HUMS SIE etc)

4. What are the Big Issues? • Fund a sustainable and effective future force • UORs into Contingency • Cost effective redeployment from HERRICK • Drive to improve ability to cost activity and improve planning and IYM • Focus shift from fielding equipment to optimising Through Life Cost • Optimise the Defence Inventory • Reposition DLE to enable the above • Building the TLS function

5. Key changes will redefine the way we work… Game Changers • The implementation of Army 2020 • Transition from Afghanistan and the bringing of UORs into Contingency • Adopting the ABC13 process Army HQ • Army responsible for its element of the equipment programme (EP) – 1 Apr 13 • Being clear on who does what and how within the new Army Operating Model DE&S • DE&S moving toward a clearer customer/supplier relationship with the Army • Defence Support Group (DSG) New Commercial Agreement • Logistic Commodities and Services Transformation (LCS (t))

6. LE Support Strategy • Drivers • Reduce Defence overhead and transactional activity • Improve efficiency in support; achieve VfM through life • Improve operational effectiveness • Reduce inventory costs • Intent – Transforming Support in LE: • Increased industry role • Fleet Management and Optimisation • Integrated Equipment Support: • Contract for Availability • End to End approach • Strategic Support Suppliers

7. User JBA £ FLC Army Equipment Outputs A Veh PM B Veh MS DCC Infra Trg Platform Management Storage Spares Workshops MRO DE&S Provisioning Distribution Disposal PDS DSG Industry LCS LE Support – As Is • Highly transactional • Frictional costs • Weak incentives

8. User GEM JBA £ Outputs By Activity Package Fleet Integrator Platform Management Storage Spares Workshops MRO DE&S Provisioning Disposal PDS Distribution Support aligned to Supply Base LE Support – To Be • Incentivised • Coherent • Efficient • Fleet management • Incremental

9. LE OC Transition: 1 Apr 13 Post Transition Pre Transition Platforms Programme Management Office Combat Tracks Group (CTG) Armoured Vehicles Programme Armoured Vehicle Programme Scout SV = Artillery Systems Programme Systems Artillery Systems Programme Management Office Combat Mobility Programme Protected Mobility Protected Mobility Programme = Combat Wheels Group (CWG) Manoeuvre Support Programme Manoeuvre Support C-IED Programme Office* Special Logistic Vehicles Programme Management Office Service Provision Operational Support Programme General Support Group (GSG) = Operational Support Vehicle Programme Expeditionary Campaign Infrastructure Operational Infrastructure Programme Deployable Infrastructure Dismounted Soldier Systems Programme Management Office Individual Capability Group (ICG) Soldier Systems Programme Dismounted Close Combat Programme = Light Weapons, Photographic and Batteries SP/SF Programme Personal Combat Equipment Integrated Soldier Systems Executive Joint Battlefield Trainers, Simulation and Synthetic Environments (JBTSE) Training and Simulation Systems Programme Programme Management Office Training and Simulation Systems Programme Training and Simulation Programme = *Post April 13, transferring from ISTAR OC

11. TLS TEAM STRUCTURE

12. TLS DASHBOARD

13. TLS – what is it, and why change? What is it? • Job Code 302: TLS&E - Bring together ILS and ETS/ESM • Job Code 303: SCM DIN issued in Jun 12. Why change? • Need to reflect the closer relationship between ES/ repair and inventory management. • Need to focus on improving our ability to plan and deliver support through life – skills, process and knowledge lost in DE&S. • Limited manpower – need to increase competency/ flexibility and develop functional paths for advice and functional leadership. • Need to identify the cross cutting knowledge that we require to work better as teams

14. LE OC TLS Cross Cutting Functional and Professionalism Transformation Vision/ End State (FOC- 1 Apr 14) Further Tranches TLS Professionals are SQEP IOT fully exploit their expertise in the delivery and support of Projects and Programmes. LE OC TLS Landscape understood Tranche 1 -DE&S Board members fully aware of TLS function and direction of travel - All LE posts cleansed with TLS pers in either Job Code 302 or 303 -TLS Professionalism actively managed -Shared best practice (inter and intra) -Cultural recognition and understanding of what TLS means to the organisation -SQEP in TLS posts Define Measure/Plan Improve Deliver IOC 1 Apr 13 Robust LE OC TLS Governance arrangements Improve quality and efficiency of TLS trg and skill sets Define what TLS means to the LE OC – definition agreed and developed via MB Determine future TLS activity across the OC (IOT better support the business) • 1* Progs have a detailed understanding of their current and future TLS structure LE OC has continuous improvement of TLS performance Linkage with and agreement from TLS Skills Champion / Sponsor (D JSC) Baseline pers in Job Code 302/303 using standard Post Descriptors Identify TLS posts that are currently under a different Job Code LE PB has direct role in TLS Professionalism improvement Organisation of TLS Standard LE Way applied consistently in practice Create TLS Professionalism Matrix (roles, trg competencies, framework) LE OC has an empowered SQEP workforce developed to meet the need – supply meets demand LE PB has an established TLS Governance process that fulfils business need Identify, classify and categorise current and future TLS activity Improve LE OC TLS Governance • Maturity (MOE) is reported at each PD to ensure Functional and Professionalism growth Define what additional skills are required for TLS activity in the future Initiate “Prin TLS Training Exemption Board” in conj with 1* Line Management • 1* Hds Progs understand their TLS Baseline Assess effectiveness of LE OC TLS Governance and areas for improvement SMG in place and being used more consistently (measured as part of PB) • Define and establish LE OC TLS Governance framework: • TLS Focus Forum • Develop Process for determining training exemptions SQEP framework identified (with 1* Prog input and endorsement), who will drive forward TLS upskilling to ensure SQEP in conj with HoP direction Identify requirements to improve maturity in accordance with TLS Transformation plan Improve capability of TLS workforce Determine current vs required TLS maturity level Improve distribution of SQEP TLS Professionals Governance of TLS Activity Improve extent and effectiveness Delivered through the TLS Compendium Develop TLS Transformation Plan (IOC to FOC) Gap Analysis of current v future TLS trg (and associated resources to deliver it). How fit for purpose is the current TLS Compendium? How can it be improved? Define required functional maturity across the business (mindful that each Programme will Transform at different rates) Engagement with TLS Sponsor in order to endorse any policy amendments Determine capability of TLS workforce (i.e.: trg levels) Measure current TLS maturity level Identify TLS individuals - What Job Codes are they in? - What roles they can fill - What roles they could fill (future potential) AOF re-write either for the business as a whole or a bespoke amendment to suit LE Consider Trg Needs Analysis, Gap Analysis, additional and/or amended trg requirements and delivery over time. Improvement of TLS Performance Determine extent and effectiveness of TLS SMG and recommend tailoring to suit LE in the future (i.e. are they used, how effective are they and how effectively are they applied?) Create TLS Maturity Model template Start Point (As at Nov 12) Analyse LE TLS SMG Framework (AOF) Qualification of current and competent (but not qualified) pers Define TLS competencies Define TLS roles Each programme or project in LE OC runs with their own processes ad procedures to a minimum specified standard (but with limited consistency or co-ordination). Standards, Methodologies & Guidance (SMG) (The right ways of working) Skilled People (The right people, numbers, place and time) Capability & Capacity v0.1 16 Jan 13

15. LE OC Safe & Professional Skills Development Process Objective: To achieve a common developmental approach for safe & professional skills across LE OC.

16. Combination of Traffic Light System and Skills Framework

17. Creating the Golden Thread – Demand activity to a risk-aware costed through life support solution

18. Issues to Overcome • Previously, FLC activity plans ignored in DE&S as unworkable – disconnect with “support plans” • JBA needs to form a contract between DE&S and FLC. • Need to update 3OAs to account for A2020 and return to contingency. Need the coverage and granularity to establish a quantifiable relationship between outputs and costing. • Need to be able to agree a supportable plan, understand risk, manage activity/ support costs in year and veer/ haul as necessary. • Level of financial scrutiny required – all need to be capable of working in the financial resource space in order to understand the cost of equipment and its support (TLB(P) and ESP(IS)).

19. Previously – how business was done • 1. Demand • Bottom-up creation of demand • Practical focus on year 1 plan • Late changes to plan without understanding of cost impact • 2. Army Demand Plan • Articulate as total fleet commitment • 3. Cost • Limited consideration of cost during demand planning • Limited confidence in affordability • Limited understanding of should-cost from DE&S 4. Incoherent Output Costs • No direct relationship • between Army Demand Plan and estimated cost Kms Yr1 Yr2 Yr3 Yr4 Km Fleet Demand Plan translated via JBA and DE&S 3OAs DE&S Historic Spend DE&S Forecast Expenditure DE&S Corporate Budgeting Process Planning Round (PR) Lacks a true cost base £ £ Yr1 Yr2 Yr3 Yr4 Yr1 Yr2 Yr3 Yr4 • 5. Budgeting • Forecast spend is based on previous spend and not the cost of demand

20. Quarterly Performance Assurance Deliver Plan Rolling Contract JBA Cycle Quarterly) Contract Assurance leads to quarterly (at least): AWG Performance measurement Quarterly understanding of Output Costs • Need for output costs: • Financial transparency? Financial risk management JBA as a Contract: Annularity of requirement Long term rolling contract Contract management/definition Emphasis on in-year delivery to cost: Pro active In-year management of outputs, costs and performance IYPDG – contract management LESG – contract amendment The customer is right, within the contract Profit from customer error Loss from own error JBA Year Common Metrics / Information Systems (ARAGON/ EACT): Availability Performance Cost Who owns equipment ? Own, lease, hire. Who owns inventory ? What of SOIP? Who does what ?In contract

21. In Future – how we want to do business £ Variable Fixed Committed Fixed Uncommitted Yr1 Yr2 Yr3 Yr4 • 1. Demand • Top Down demand planning • 0–24 months in detail • 25–48 months in outline • Informed by ROM Cost • 3. Cost • Costing of discrete activities • Confirm broad affordability • Balance activities within resources • Enabling targeted cost reduction measures with DE&S • 2. Army Demand Plan • Articulated as series of well defined activities Army HQ Costed Activity Plan Km Yr1 Yr2 Yr3 Yr4 4. Input Coherence Army HQ and DE&S share and consistently use equipment fixed and variable costs 5. Output Coherence Direct relationship between Army Demand and Forecast Supply Expenditure EAD Activity Demand Plan translated into EADs DE&S Corporate Budgeting Process Planning Round (PR) DE&S Forecast Expenditure Based on consistent cost base £ Yr1 Yr2 Yr3 Yr4 Forecast Expenditure is directly based on demand from Army HQ

22. Plan AD Eqpt Plans w w w w £ £ 10 Year Equipment Forecast Variable Variable Resource Yr1 Yr1 Yr2 Yr2 Yr3 Yr3 Yr4 Yr4 Fixed Committed Fixed Committed Fixed Uncommitted Fixed Uncommitted 2/4 Year Detailed Plan JBA JBA Yr1 Yr1 Yr2 Yr2 Yr3 Yr3 Yr4 Yr4 Costed SOIP Plan SOIP Plan Costed Support Plan Resource Direction Fleet Management Transactions Resource In Year Management (AWG – IYPDG - LESG) Equipment Support Planning (Yrs 1-4) or X Activity Outputs and costs Support Plan Costed Army Activity Plan Detail £? Army Activity Plan £? Army DE&S Yr1 Yr1 Yr2 Yr2 Yr3 Yr3 Yr4 Yr4 Recommend Changes AD Eqpt Prog/Res Optimise Assure

23. The Future – how we want to do business Activity Costing Tool (ACT) 10 Year Horizon Monthly Equipment Management Costed by Exception Continuously Costed Equipment Management to meet demand Sequence of Activities Yr3 Yr4 Yr5 Yr6 Yr7 Yr8 Yr9 Yr10 Yr1 Yr2 AWG Rational Demand Plan Demand Plan Iterative process to generate a rational activity plan Reconciliation and forecast improvement Activity Fixed & Variable Costs £ Variable Strategic Planning Fixed Commit Fixed Uncommitted Time Cost per EAD • Rational Activity Plan • Covers first four years as a rational demand plan • Articulated in Usage metrics (EAD) DLOD – Equip & Log £ Log £ Cost per Training Day Risk Equip Time Equipment Cost Usage Cost WR £ CR2 AS90 Time

24. Equipment Cost Inputs Building on a CTG Pilot All Equipments within the Land Environment CTG Demand Plan Fixed Costs PDS, MRO, Safety, Training Equip Support etc CWG Land Equipment SSP OSP Army Equipment Activity Costing Tool GM Weapons Variable Costs RDEL, CDEL Inventory Costs, LDL, etc etc Apache Helicopters e.g. JHC Merlin Lynx Availability Contract Usage/Cost thresholds, etc etc ISTAR WK BOWMAN ISS etc

25. SAPMT Platform Running Costs (£/Km) Platform Cost Per Kilometre Report DMC Contribution to Platform £/km NSN Contribution to Platform £/km Filter 4CRR Filter CR2 • Cost per Kilometre Report Filtered to display DMC and NSN Cost Drivers

26. GEM Programme: EACT~SAPMT~ARP Coherence Sep15 Sep12 Dec12 Mar13 Apr13 Sep13 Apr14 Sep 14 Apr15 --- GEM Baseline Period --- --- GEM Programme Phase 1--- --- Phase 2 --- --- Phase 3 --- Cost/Fin Coherence Pilot Cost/Fin Coherence Adoption All LAND facing Equipments and Commodities EACT 1 Delivered EACT/ SAPMT Merged SACT Development – Commodities and Logistics Cost and Enterprise Reports & Tools Enterprise Information Support JBA Enterprise Information Improvement Support & RFC Fleet Management Information Support Fleet Management Optimisation Pilot Inventory Optimisation (Pilot) Deployed Inventory Optimisation Army HQ Activity Resource Planner (ARP) developed and implemented

27. The Benefit of Equipment Activity Costing • Understanding activity costs enables Army HQ to take informed decisions on future training Activity Options T ‘What If’ Analysis Total Funding Allocation E Sub-units STPA * 5 Sub-units STPA * 3 P BATUK * 6 Cost BATUK * 6 I JMRC * 1 Funding (£M) BATUS * 4 vs D Cost BATUS * 2 O I L Financial Year Financial Year Financial Year • Must have visibility of the committed cost base in relation to the planning cycle and the available decision points. Cost Uncommitted costs Committed costs Planning Period Activity date

28. Inventory Management

29. Inventory Management Issues • Excessively large (and increasing) inventory • Drawdown of assets post SDSR not started • Purchases exceed consumption • Failure to forecast demand (enemy has a vote, STR/ IA/ DOBL all good) • Unstable performance metrics (availability at all costs  minimise volume and GBV)

30. Inventory Management Initiatives • Stock Transition Programme/ morphed into non and slow mover reviews • New Inventory Plan format – “live” • RMC Purchase vs Consumption review – E&Y interventions • RMC budgets/ iCCR regime • DLE Inventory Directive/ objectives at 1 Star level • Increasing confidence in DSG LSBU and Demand Solutions

31. 12/13 GBV Inventory Flow Diagram – LE OC Actuals to AP09 REVALUATIONS -£1M Initial spares provisioning accounts for 5% of RMC and 66% of CS purchases RMC Issues-£271M FLC & DE&S Consumption -£175M net DE&S SoFP Inventory GBV Opening Balance £2,670M Closing Balance £2,778M Initial Spares £10M Returns +£96M RMCs +£199M Cap Spares Embodiment Re-provisioning £189M Total Purchases £228M -£112M DISPOSALS -£108M Initial Spares £20M Capital Spares Purchases WRITE OFFs/ONs -£14M +£30M Re-provisioning £10M TRANSFERS +£169M RE-CATEGORISATION & OTHER +£122M

32. DSIP vs. SS3 Forecast Order Value (LSBU) • Forecasted Consumable Purchase Value from 1st Feb 13 to 31st Mar 14 • SS3 = £179,729,659 (£215,675,590 Vat Inc) • DSIP = £130,643,576 (£156,772,291 Vat Inc) • Delta = £49,086,083 (£58,903,299 Vat Inc) Purchase Avoidance Data Source DSIP & SS3 based on historic usage for stock replenishment

33. Forecast saving of £2.9M / 43% Applying HEF Future Factors to LSBU Purchasing Forecast avoids 43% of Jackal SS3 SOIP purchase

34. FLC Activity Lines - Land FLC Activity Value - Land Total Lines: 68,875 Total Value: £1,154,380K D-NON D-NON 6,274 £165,123K 9% 14% C-SLOW 10,196 C-SLOW 15% £152,737K 13% A-FAST 40,289 A-FAST B-MED B-MED 58% £678,888K 12,116 £157,631K 59% 18% 14% Land Environment Stock Segmentation (less CLS)

35. CTG Over-Stock Assessment CR2 34% of inventory value tied up in top 10 overstock items – value of £9.6m CVR(T) 37% of inventory value tied up in top 10 overstock items – value of £5.9m • Assumptions: • Overstock analysis based on 4 year threshold. • Demand Assumed to be constant at current rate. • Inventory is allocated to platform s based on DMC allocation method. WARRIOR 33% of inventory value tied up in top 10 overstock items – value of £14.8m 35

36. SAPMT Inventory Stock Shortfall Analysis Stock Shortfall report displaying 1095 items associated with ICG that will go into negative stock within their lead-time (1035 Consumables, 60 Repairables)

37. SAPMT Inventory Over-stock Analysis Over-Stock report displaying 2827 items associated with ICG that have more than 5 years stock based on the current rate of consumption

38. SAPMT Platform Inventory Cost Forecast CDEL Cost LWPB Monthly Inventory Cost Report RDEL Cost (not LWPB) Filter SOSP Cost (not LWPB) • 10 year cost forecast for the LWPB platform for buying and repairing spares to satisfy usage provided by Land. N.B. Usage levelled to FF of ~ 1. • Costs reported monthly as RDEL, CDEL and SOSP.

39. SAPMT Monthly Cost Driver Analysis February 2012 LWPB Cost Drivers LWPB Monthly Inventory Cost Report Filter April 2011 • Platform Monthly Cost Report Filtered to display NSN Cost Drivers within February 2012. • 8305-99-942-7267 – Cloth, Flannel – 41% of Costs in February 2012

40. Team/Group Inventory Cost Forecast Group Inventory Cost Forecast broken down by Individual Platforms Group Monthly Inventory Cost Report VIKING Monthly Inventory Cost Report Warrior Monthly Inventory Cost Report

41. SAPMT Platform Running Costs (£/Km) Platform Cost Per Kilometre Report DMC Contribution to Platform £/km NSN Contribution to Platform £/km Filter 4CRR Filter CR2 • Cost per Kilometre Report Filtered to display DMC and NSN Cost Drivers

42. Challenges • Uncertain context • Army 2020 and Return to Contingency • Force structure, size and activity levels • UORs to Contingency • Basing • Equipping the Reserves • Funding • ESP(IS) savings • ABC & AFV Pipeline: new ways of doing business. • Future Industrial Landscape inc DSG sale for late FY 2014 • Manpower reductions from 998 to 719 will affect ability to drive change

43. Summary • LE has a complex and broad portfolio, ME is support to operations – but a significant focus on re-positioning for Contingency. • Business focus needs to shift from procurement to in service support. • Challenge of re-baselining inventory against an unclear requirement. • Taking risk on S&P as pace of outflow exceeds plan, without recruitment. • LE has an active Transformation programme to deliver efficiency. • Uncertainty over programme and UOR to Core is delaying Transformation.

44. Questions?