Will the DoD Ever Manage Parts More Efficiently?

Jun 27
2010

The estimated current inventory investment by DoD for the organizational level parts employed during the Product Support processes of correct/prevent unplanned weapon system failure is $40 billion. An estimated 35%-50% of this investment is materially excess or obsolete (will never be used). Another issue is that the financial accounting accuracy of these parts would never meet the “smell test” by any private sector auditing firm; people would go to jail for this type of accounting…but that is another story.

GAO has had many studies dealing with the efficiency and effectiveness of the management of parts by the Services; none have been very flattering: Study 1, Study 2, Study 3

DoD accountants are not “bad people;” they do the best with the procedures provided to them. The real issue is that DoD, nor the Federal Government, develops a balance sheet that has any merit; politicians like it that way because accountability for “mistakes” can often be hidden from view…nothing better for a politician than to be opaque!

As more and more parts are COTS, and CLS, coupled with PBL/Outcome-Based Product Support constructs become more common, some of these inventory investment issues will become less glaring.

The Dark Side of Remanufacturing

Jun 23
2010

The Product Support process of remanufacturing can be employed for good…or for evil. Remanufacturing is a process that extends the economic life of a used-condition system by: growing its reliability, evolving its technology, assuring its design capability and improving the efficiency of Product Support processes employed.

Many firms acquire used systems and induct them into a remanufacturing process that delivers a product that has many of the attributes of a new system, but at 50% to 70% of the price; the customer wins and the entrepreneur wins by taking an “ugly duckling” and making an attractive profit from the make-over.

But there is one organization that can view remanufacturing unfavorably; OEMs who believe that the remanufactured product has “stolen” sales from their new-condition products. One approach an OEM could take is to begin a remanufacturing business and at least grab some of the used product market…but an “evil” approach would be to purchase as much used products as possible and then destroy the products so they could never be remanufactured…forcing customers to buy the OEM’s new-condition products.

One of America’s business leader icons, Thomas Watson, Sr., founder of IBM, used exactly this “evil” practice and was found guilty of anticompetitive practices. In 1903 Watson, working for National Cash Register (NCR) created a bogus firm to monopolize the used cash register business and systemically destroyed the machines, thus driving increased demand for new-condition cash registers.   

The above event and much more about Thomas Watson can be found in the book, “The Maverick and His Machine: Thomas Watson Sr., and the Making of IBM”.

Product Support Productivity: What Matters Most

Jun 21
2010

Many organizations believe that they can improve the productivity of the various processes employed during the Product Support stage of the lifecycle of a product by just working harder and smarter; this can often be seen in Product Support organizations in which “heroic” efforts are made to satisfy a customer’s requirements. A recent MIT study concluded that this heroic effort does not provide an organization with the long-lasting results it needs to be both efficient and effective in managing processes; true productivity improvements are the result of strategic thinking about how an organization is to be managed, as well as the operational steps that are designed to get work done.  It is this investment, which can be a 5-10 year intensive journey, which truly favorably impacts the performance of an organization.

The Frugal Engineering Paradigm Shift For Product Support

Jun 18
2010

Strategy + Business recently published an article on frugal engineering, discussing how providing new goods and services to “bottom of the pyramid” customers requires a radical rethinking of product development.

As the domestic economic growth of industrial nations remains at 0% to 3% over the long term due to demographic issues, OEMs will be more aggressive in seeking revenue growth opportunities in Developing Nations. The Developing Nations buyers of products cannot afford the sophisticated products that the Industrial Nations currently acquire, but they are beginning to be able to purchase “stripped down” products that cost 10-25% and perform 85% of the capabilities of that of a product sold by OEMs based in Industrial Nations. In order to develop products to meet this new demand, OEMs will have to focus upon “frugal engineering,” a design concept that develops a product that is simple, low-cost and delivers a highly focused solution that appeals to Developing Nation buyers.

A product that is frugally engineered will have a huge impact upon an OEM’s Product Support business strategy. Many of these products will be platforms in which as the end-users increase their economic prosperity, they will demand additional capabilities delivered as upgrades throughout the life of the product. Understanding Product Support lifecycle management will be critical for successfully deriving the profit margins required for the risk exposure in entering these markets.

The Illegal COTS E-Waste Trade

Jun 15
2010

As DoD employs more COTS electronic components, it will face challenges in the future to dispose of these components when performing technology refresh processes. Assuring where these obsolete components find their final resting place will become an important activity for Product Support management, be it the PM Office, the Life Cycle management Command (LCMC) or contractors. There is currently an effort by the US Government and INTERPOL’s Global E-Waste Crime Group, to track these obsolete products to ensure that they are disposed of properly. Criminal organizations are involved in diverting these products and dumping them into illegal waste sites in underdeveloped nations at a fraction of the cost of disposing of them in a developed nation. End Of Life (EOL) management will require serial number tracking and an audit trail all the way to the final disposal process to mitigate the risk of these obsolete products taking a wrong turn and harming the environment, as well as posing dangers to the workers illegally handling these materials.

US Second-To-None For Product Support Prowess

Jun 14
2010

Americans have been bombarded by the Main Stream Media (MSM) touting the demise of US manufacturing base, and in turn the demise of the demand for the resources (parts, maintainers, tech support, and others) employed during the processes of the Product Support stage of the lifecycle of a capital good….but the MSM is a foolish bunch that is clueless regarding our true manufacturing might, and in turn our true Product Support prowess which is second-to-none in the world and will remain so for the foreseeable future.

Here are some facts about the US manufacturing sector from a recent article from Barrons:

“The U.S. economy is the largest and most productive on the planet. With just 4.6% of the global population, the U.S. accounts for roughly one-quarter of global output, generating more output in a year than the next three largest economies (Japan, China and Germany) combined. America’s economy is three times the size of China’s; the per capita income of China is only about 10% of that of the U.S.

The United States is a manufacturing superpower; we’re still in the business of making stuff, despite incessant reports to the contrary. We shouldn’t equate the demise of Detroit with the death of U.S. manufacturing. The U.S. makes more goods in a year than any other country, although America’s share of global manufacturing output was roughly 17.5% in 2008, down from 22.4% in 1990 and about 20.5% in 1980.

Many U.S. manufacturers have held their own the past few decades, even in the face of stiff competition from Japan, Germany and China. China’s share of global manufacturing has increased sharply over the past decades, hitting 17.2% in 2008, close to the U.S. number. However, the Chinese figure includes mining and quarrying, and electricity, gas, and water supply, in addition to manufacturing, and most of China’s gains came at the expense of Japan, South Korea, Mexico and others — not the U.S.

The largest exporter in the world is neither Germany nor China. It’s the U.S., despite annual trade deficits and all the chatter about U.S. companies not making anything the world wants to buy.”

Product Support Supplier Buys An OEM

Jun 10
2010

In a twist to the normal M&A activity of the capital goods sector, a Product Support organization, Progress Rail Services (a Caterpillar subsidiary) is to acquire Electro-Motive Diesel (EMD), a locomotive OEM (formally owned by GM). This is a case where an independent Product Support organization became larger than the primary OEM in which its offerings were employed. This is a cautionary tale for OEMs who “don’t get” the importance of revenues and profits that can be generated from Product Support offerings; over time the OEM may end up missing out on where the “real” profits are found in Product Support.

The announcement can be found here.

Giuntini & Co. Featured Content on IDGA

Jun 09
2010

Ron Giuntini’s latest industry-shaping white paper, ‘The 20 Elements of an Outcome-Based Product Support Business Model for the Military Sector’ is the current ‘featured content’ on IDGA.org. Check it out to learn about the 20 mandatory points that the DoD requires every model to include. Visit the IDGA at www.idga.org.

Follow Giuntini & Co. on Twitter!

Jun 09
2010

http://twitter.com/giuntinicompany

Tweaking COTS Products To Become MOTS Products

Jun 07
2010

A Commercial Off The Shelf (COTS) product employed in a weapon system for economic or acquisition cycle time reasons, may not meet some of the more demanding requirements of the traditional military Developmental Item. Military Off The Shelf (MOTS) products are COTS products that meet the rigors of a Development Item. There are opportunities in which COTS products can become MOTS products as discussed below by Brig. Gen. Michael Brogan, Commander of the Marine Corps System Command (PEO for MRAP) during a NDIA conference.

“Acceleration is the most significant casualty-producing mechanism in our combat vehicles when hitting IEDs. Vehicles caught in a bomb blast experience two acceleration events: one is in an upward direction after the blast goes off. Its duration is between 40 to 50 milliseconds. The second event, when the vehicle returns to the ground and stops abruptly, is analogous to an automobile accident and last roughly 200 milliseconds.

That first 40-millisecond event is causing the majority of the casualties. People say automotive airbags can’t do that because they operate in that second event, that 200-millisecond event. Does it, or is that the way we’ve done that? In our litigious society, have we dumbed-down our airbags, have we slowed their speed of deployment to prevent the vehicle occupant from having his nose broken or glasses broken? Could we tune these up to get closer to that 40-millisecond event, recognizing that we would be accepting of minor injury to prevent much more serious injuries.”

The question is how many COTS products could be tweaked to become MOTS products….and can our enemies figure that out before we can…and as a result cause our warfighters harm?

info@giuntinicompany.com

Tel: 570-713-4795