Sustainment Partnering: A Value Added Strategy

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Sustainment Partnering A Value Added Strategy

• Bill Anderson
• Vice President, Customer Support
• Lockheed Martin Aeronautics Company
• March 2, 2004

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Partnering A Key Element of Lockheed Martins
Sustainment Business Strategy
Approaching 6000 LM Aircraft in Service Worldwide
U-2
F-16
C-130
P-3
F/A-22
C-141
Plus Strategic Alliance Aircraft
F-117
F-111
S-3
IDF
C-27J
F-2
T-50

• Aircraft in all product life-cycle phases
• Strategic partnerships and teammates on almost
  all programs
• Fine tuning sustainment strategies with our
  customers on F/A-22, F-35, and C-130J
• Opportunity to exploit cross-vehicle synergies,
  e.g., F/A-22 and F-35

Success and Customer Satisfaction Heavily
Influenced by Definition and Implementation of
Effective Product Sustainment Strategies
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Product Sustainment IntegrationThe New Paradigm

• Internal study conducted recently to assess
  emerging sustainment situation and directionfrom
  an enterprise perspective
• Customer expectations
• Competitive environment
• Program requirements
• Financial opportunities
• Concluded that a consistent sustainment strategy
  applicable to multiple programs provides
• Flexible, affordable support for the warfighter
• Optimized investments
• Integrated solutions across platforms
• Business value
• The future of product sustainment is not a
  continuation of the past new Performance Based
  Logistics (PBL) concept being demonstrated on
  leading edge programs like F-117, C-17 and B-2
  this is the new norm for product sustainment

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DoD Mandating Its Program Managers to Implement
Performance Based Logistics
PBL is the Departments near-term strategy to
increase weapon system readiness through
integrated logistics chains and public/private
partnerships. - 23 January 2004 Memo from
Acting USD, ATL Michael Wynne
PMs shall develop and implement
performance-based logistics strategies that
optimize total system availability while
minimizing cost and logistics footprint. - DoD
Directive 5000.1 dated May 12, 2003
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Critical Elements for Successful PBL
Implementation

• Improve sustainment performance
• As measured by warfighter metrics, e.g.,
  operational availability, mission capability
• Decrease total customer ownership cost
• Significant reduction compared with traditional
  approach expected
• Accept responsibility for product sustainment
  integration
• Be empowered to make decisions to optimize
  performance and cost reduction
• Reduce costs by eliminating/reducing sustainment
  transactions
• Establish and maintain network of value added
  partnerships with customer organizations and
  industry
• Receive financial rewards for risks associated
  with being the product sustainment integrator
• Double digit return-on-sales objective must be
  competitive with development and production
  margins

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Critical Elements for Successful PBL
Implementation

• Improve sustainment performance
• As measured by warfighter metrics, e.g.,
  operational availability, mission capability
• Decrease total customer ownership cost
• Significant reduction compared with traditional
  approach expected
• Accept responsibility for product sustainment
  integration
• Be empowered to make decisions to optimize
  performance and cost reduction
• Reduce costs by eliminating/reducing sustainment
  transactions
• Establish and maintain network of value added
  partnerships with customer organizations and
  industry
• Receive financial rewards for risks associated
  with being the product sustainment integrator
• Double digit return-on-sales objective must be
  competitive with development and production
  margins

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Critical Elements of Successful PBL
Implementations

INCREASED PERFORMANCE
INCREASED RISKS/REWARDS
INCREASED INTEGRATION
DECREASED TRANSACTIONS
DECREASED TOTAL COST
Specific Sustainment Applications Should Be
Analyzed For Presence Of All Five Of The Critical
Elements
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Critical Elements of Successful PBL
Implementations

INCREASED PERFORMANCE
INCREASED RISKS/REWARDS
INCREASED INTEGRATION
DECREASED TRANSACTIONS
DECREASED TOTAL COST
Specific Sustainment Applications Should Be
Analyzed For Presence Of All Five Of The Critical
Elements
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Sustainment Integration Is
Contract from SPO
Prime Contractor
Direct Fleet Mgmt Interface to Users

• Shared Risk/Rewards for System Cost Performance
• Multi-Year (5 10)
• Minimum CLINs (4 10)
• Short, Performance-Based SOW (vs Task-Based)

Sustainment Integration

• Proactive Leadership Of
• Sustaining Engineering
• Engineering Source Data Tech Orders
• Configuration Management
• Fleet Health Management
• Supply Chain Management

International Partners
Strategic Partners
USG Depots
Others . . .
Supplier Base
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Sustainment Integration Is
Contract from SPO
Prime Contractor
Direct Fleet Mgmt Interface to Users

• Shared Risk/Rewards for System Cost Performance
• Multi-Year (5 10)
• Minimum CLINs (4 10)
• Short, Performance-Based SOW (vs Task-Based)

Sustainment Integration

• Proactive Leadership Of
• Sustaining Engineering
• Engineering Source Data Tech Orders
• Configuration Management
• Fleet Health Management
• Supply Chain Management

Strategic Partnership Network
Strategic Partnership Network
International Partners
Strategic Partners
USG Depots
Others . . .
Supplier Base
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Partnerships Sustainment Integration Strategy

• Best-in-class solutions required to meet
  customers cost/value requirements
• A single entity can not currently provide or
  sustain best-in-class performance in all
  Sustainment discipline areas
• Carefully selected strategic partners provide
• Demonstrated levels of performance
• Willingness and commitment to provide funding to
  enhance their disciplines
• Senior management focus on the discipline
• Strategic partners includes partnerships with
  customer organizations

Sustainment Focus Must Be On Meeting Warfighter
Expectations At Greatly Reduced Total Ownership
Costs Through Performance Based Logistics
Contracts in Partnered Environments.
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Sustainment Partnerships Emerging at Different
Organizational Levels

• A range of relationships have been noted from
  corporation to government department down to
  intra-program (contractor-to-customer program
  offices) agreements
• Partnerships also emerging within corporations
  and between and among industry entities
• All partnerships can be value added, but rhetoric
  does not automatically translate to sustainment
  results
• Lessons learned from partnership experiences can
  and should be studied and reapplied across
  applications

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Sustainment Partnerships Take Many Forms
F/A-22 Weapon System Partnering Charter
Strategic Supplier Alliance
Strategic Supplier Alliance
F-117 Total Sustainment Performance Responsibility
LM Boeing PW
A Network of Partnering Agreements
C-130J Long Term Support
00-ALC LM Aero MOU
Internal Partnering Agreements
C-130J Direct Sales Agreement
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Strategic Supplier Alliance
Participants USAF (AFMC), Army (AMC), DLA, LM
Duration Not time limited

• Objectives
• Improve support to our nations warfighters
  through
• Relationship of collaborative decision making
• Leveraging member organization capabilities
• Support transformation initiatives including
  PSCM,
• Logistics modernization, business system
  modernization

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F/A-22 Weapon System Partnering Charter
Participants F/A22 SPO, Propulsion SPO,
WR-ALC, OO-ALC, OC-ALC, Boeing, PW, LM
F/A-22 Weapon System Partnering Charter
Duration Not time limited

• Objectives
• Actively seek out opportunities for mutually
  beneficialcooperative public-private partnering
  initiatives
• Provide a framework for implementing documents

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C-130J Long Term Support
Participants WR-ALC, PEO (A, T and M S),
C-130J SPO, And LM Aero
C-130J Long Term Support
Duration Until October 2005

• Objectives
• Integrate efforts and capabilities to
• Meet warfighter requirements
• Support government transformation goals
• Achieve collective objectives

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C-130J Direct Sales Agreement
Participants WR-ALC LM (C-130J Program)
Duration Not time limited

• Objectives
• Provide exceptional support to C-130J operational
  customers
• Provide best value to the USAF
• Comply with public law

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Summary

• Partnering a critical element of emerging
  performance based logistics sustainment
  strategies
• Existing and evolving partnerships may have
  different forms and formats
• Sustainment partnerships being created to take
  advantage of best value capabilities of involved
  organizationsin order to provide affordable
  sustainment for our nations warfighters