In a forthcoming note on the Defense Industrialist blog at the Atlantic Council, I repeat a remark of a longtime defense industrialist, that the Defense Department’s inability to deal comprehensively with its own excess industrial capacity is leading in steps to a private-sector BRAC. Because the DoD lacks the BRAC authority it needs, defense contractors are downsizing their industrial operations first. Federal industrial workers may rejoice, but the lack of competition isn’t likely beneficial for the government as a customer.
But suppose that you’re with a contractor. You’re seeing your manufacturing lines of business inexorably decline. You want to stay in the market, so you want to give the through-life market a shot anyway. What matters in lifecycle support? Based on consulting work that I’ve undertaken over some years, and conversations with past colleagues at Booz & Company, I have four answers:
— Supply chain excellence throughout the lifecycle. Note how that differs considerably from supply chain excellence in manufacturing. The stocking solutions, reorder points, staffing models, information systems, and very rhythms of the business differ considerably. It’s sufficiently different that you’ll gravitate towards at least considering organizing a separate subsidiary to handle the business.
— Strong customer relationships with equipment operators around the world. Around the world means less today than it did in 2007, and it will mean less yet in 2017. But the US military still seems to run exercises or sentries around something like 140 of the 200-odd countries on the planet. Going where they go means selling to them where they are, and that’s a lot different than darkening doors in the Pentagon, the systems commands, and at a few select bases. That’s obvious to anybody already in the business, but it can be a breathtaking commitment to those unfamiliar with the industry.
— Ability to sell a business solution to a customer who is also a competitor. The US military services have varying degrees of loyalty to their various depots and yards, but the managers of the materiel commands operate under professional incentives to keep them busy. Unless and until the infamous 50-50 rule (10 U.S.C. 2466) is repealed, outrightly competing against the depots only works up to a point. Garnering more business requires a hand-in-glove relationship with the organic workforce and management. They must want you around, for your skills and technology transfer, if the relationship is to work. And building that kind of relationship requires skills quite different from those required to sell tanks, planes, and ships.
— Devolved authority, with lots of people making decent decisions daily. On the production line, this is now common in North America, where quality problems are everybody’s problem. But it’s not the rhythm of program management, where design changes are hardly the purview of line managers. In through-life support, doing what needs to be done on the front lines is essential to the business and the mission. Those decisions don’t need to have the same quality as production decisions that affect large serials of units. Veterans of the Army and the Marines who work in your line of work will recognize the commercial auftragstaktik. All the same, that doesn’t mean that it will fit with the rest of the culture of your company.
All along, admit that this isn’t easy. It’s remarkable that few companies are good at both manufacturing and service. Note the fiasco of Ford Motor Company’s attempted entry in the British car repair market, which lasted from just 1999 through 2002. Note the repeated dalliances of automotive manufacturers as owners of car rental companies. Note that neither Airbus nor Boeing owns ILFC. While there are exceptions, efficient shipbuilders generally aren’t efficient ship repairers. None of these business models are guaranteed winners. Parts is one thing, service is another, and asset management is usually something wholly foreign to OEMs. So if you’re aiming to double-down on the depot, recognize the risks.
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