How applying taxonomy enabled our client to optimise its materiel delivery services

Objective

Our client was facing budget pressures and reduced resources to support an increasing workload from their ageing platforms and significant new acquisitions. To continue to provide sustainment outcomes, our client needed to optimise their materiel delivery services through operating model reform.

Scope

The Sustainment Project Offices (SPOs) represented a mix of service delivery / support needs with a tangled web of relationships between them, their customers and suppliers. Relationship complexity is high and ‘right sizing’ – relevant to their mandates, is low.

Currently, the top 27 System Program Offices (SPOs) by spend (or 35% of all SPOs) account for 80% of our client’s sustainment budget. Operating model reform was targeted at reducing the overheads associated with running many of the other 65% as full SPOs, and streamlining those of the ‘major’ SPOs, by aligning their operations more closely with the products and services required from them, and removing duplication of resources between them.

Approach

Worked with the executive of the organisation to apply commercial approaches to business improvement to develop an organisation-wide operating model that transforms existing SPOs into one of the following three principal types of sustainment / materiel delivery service Business Units (BU), rather than one size suits all:

  1. Platform Program Office (PPO): provides the ‘one-stop-shop’ for acquiring and sustaining a major platform (i.e. end product) for a given customer. Through strong customer orientation, PSPOs will coordinate and integrate all related products and services that form and sustain the platform from other BUs across the organisation.
  2. Major Products and System Program Office (MP&S SPO): sustains high-value, medium-to-long life systems and services that are standalone or integrated within one or more platforms. Through strong product orientation MS&SPOs will assure technical function and performance.
  3. Category Management Business Unit (CBU ): provides a wide variety of commodities or consumables (short-life products or services) to a wide variety of PSPOs and MP&S SPOs, and sometimes also to customers.

Moving to these three types of focussed BUs provided a variety of benefits across the client’s value chain, including customers, end-users, the organisation’s executives, the organisation’s business units and suppliers as follows:

  1. Reduced relationship complexity through the ‘one-stop-shop’ provided by PSPOs, resulting in improved platform/product performance and availability for user and operators.
  2. Clearer decision rights, accountabilities and lines of communication, enabling executives to make better trade-offs for customers, resulting in improved decision making.
  3. Simplified and cleaner lines of communication, management reporting and responsibilities for all BUs, reducing duplication of activities while improving personnel development and leverage.
  4. Coordinated engagement from a whole-of-organisation perspective with suppliers, enabling BUs to more cost-effectively manage contracts from a whole of organisation perspective.
  5. Stronger relationships with suppliers, to build scale, reduce costs, and enable suppliers to better manage the peaks and troughs inherent in the organisation’s demand cycles, and improve visibility of opportunities.
Results

This approach is being implemented and provides:

  1. Bundled materiel delivery services and their supporting supply chains for platforms, common systems or service functions, thereby driving economies of scope and scale across BUs;
  2. Reduction in the complexity and diversity of current BU operating models, thereby driving efficiencies from streamlined customer, supplier and business unit interfaces; and
  3. Rationalisation of personnel, office, technology and other resources to reduce costs.

Applying the taxonomy enabled our client to optimise its materiel delivery services, reduce complexity and lift productivity, enabling them to better cope with the challenging future environment and demands.