DoD Parts Management Reengineering

1. DoD Parts Management Reengineering Status Briefing Defense Standardization Conference 25 May 2006 Donna McMurry, DSPO Good morning. I�m here to provide you an update of the Parts Management Reengineering effort. I will give a quick history of what�s been done on that so far, and fill you in on progress made since I briefed you at last year�s conference. And then take a look at where we plan to go from here. Good morning. I�m here to provide you an update of the Parts Management Reengineering effort. I will give a quick history of what�s been done on that so far, and fill you in on progress made since I briefed you at last year�s conference. And then take a look at where we plan to go from here.

2. 2 Outline Recap Parts Management Reengineering Tasking of the effort Definition / description of Parts Management History of Parts Management Review PMRWG Recommendations Discuss TLCSM EC Support Preview Implementation (This is an outline of what I plan to cover.) Recap Parts Management Reengineering effort - Tasking of the effort� where our direction came from - Define/describe parts management (and talk about its benefits) - History of parts management program (very briefly) Review PMRWG Recommendations (I showed you last year) Discuss TLCSM EC support--and their involvement in this endeavor Preview Implementation � talk about where we go from here (Next we�ll talk about the tasking of the parts mgmt reengineering effort.) (This is an outline of what I plan to cover.) Recap Parts Management Reengineering effort - Tasking of the effort� where our direction came from - Define/describe parts management (and talk about its benefits) - History of parts management program (very briefly) Review PMRWG Recommendations (I showed you last year) Discuss TLCSM EC support--and their involvement in this endeavor Preview Implementation � talk about where we go from here (Next we�ll talk about the tasking of the parts mgmt reengineering effort.)

3. 3 Tasking of theReengineering Effort (Next we�ll talk about the tasking of the parts mgmt reengineering effort.) Parts Management Declined After Acquisition Reform (1995 � 2002) It became voluntary on the part of companies, and basically, it didn�t get done, at least not on a broad scale. Some companies set up their own internal parts management process because they recognized the value of it. But DoD no longer had insight into parts management. DLA Requested Relief From Parts Management Mandate (2003) because of competing mission requirements, and trying to best support the war effort. ADUSD (LPP) & Director DSPO Agreed that PM Should be Reengineered (2003) The tasking of the reengineering effort came in the form of OSD direction from the former Assistant Deputy Under Secretary for Logistics Plans & Programs, Lou Kratz, in his position as the Defense Standardization Executive. Our keynote speaker, Mr. Jim Hall, now has that position. LPP also chairs the Total Life Cycle Systems Management Executive Council, and I�ll talk more about them later. The Parts Management Reengineering Working Group or PMRWG has been chaired by DSPO. Mike Goy and I have been partners in that endeavor. Now Tasha Beckman is getting involved in this project, too. Also, John Becker, the OSD project leader for DMSMS, now works in DSPO and he is collaborating with us on this effort. (What is Parts Management?) (Next we�ll talk about the tasking of the parts mgmt reengineering effort.) Parts Management Declined After Acquisition Reform (1995 � 2002) It became voluntary on the part of companies, and basically, it didn�t get done, at least not on a broad scale. Some companies set up their own internal parts management process because they recognized the value of it. But DoD no longer had insight into parts management. DLA Requested Relief From Parts Management Mandate (2003) because of competing mission requirements, and trying to best support the war effort. ADUSD (LPP) & Director DSPO Agreed that PM Should be Reengineered (2003) The tasking of the reengineering effort came in the form of OSD direction from the former Assistant Deputy Under Secretary for Logistics Plans & Programs, Lou Kratz, in his position as the Defense Standardization Executive. Our keynote speaker, Mr. Jim Hall, now has that position. LPP also chairs the Total Life Cycle Systems Management Executive Council, and I�ll talk more about them later. The Parts Management Reengineering Working Group or PMRWG has been chaired by DSPO. Mike Goy and I have been partners in that endeavor. Now Tasha Beckman is getting involved in this project, too. Also, John Becker, the OSD project leader for DMSMS, now works in DSPO and he is collaborating with us on this effort. (What is Parts Management?)

4. 4 What Is Parts Management? A multi-disciplined process designed to improve system supportability : Reduce Life Cycle Cost Improve reliability Improve readiness (logistics/operational) Improve interoperability Control growth of Logistics Footprint Mitigate DMSMS issues Promote standardization across platforms Collaboration between primes, subs, and the Government (What is Parts Management?) Parts Management is a process and discipline with multiple elements designed to: Reduce Life Cycle Cost Quote from the PSMC business case, �The average total cost for adding a new part into a system is about $20,000� (and that�s a conservative figure�we�ve since heard that it�s closer to $100,000). �An effective parts management program will avoid this cost every time it precludes introducing an unnecessary new part into the system. A program with 10,000 parts can easily save $5 million through parts management. Cost avoidance represents money not spent, materials not handled, facilities not required, labor not expended, and time not used.� Improve reliability Improve readiness (logistics readiness, and, by extension, operational readiness) - Control growth of Logistics Footprint - Mitigate DMSMS issues - Improve Interoperability - Promote standardization across multiple weapon system platforms Parts Management is a way to improve overall system supportability The key is that collaboration among prime contractors, subcontractors and the government is essential to making this happen (More about what Parts Management is.) (What is Parts Management?) Parts Management is a process and discipline with multiple elements designed to: Reduce Life Cycle Cost Quote from the PSMC business case, �The average total cost for adding a new part into a system is about $20,000� (and that�s a conservative figure�we�ve since heard that it�s closer to $100,000). �An effective parts management program will avoid this cost every time it precludes introducing an unnecessary new part into the system. A program with 10,000 parts can easily save $5 million through parts management. Cost avoidance represents money not spent, materials not handled, facilities not required, labor not expended, and time not used.� Improve reliability Improve readiness (logistics readiness, and, by extension, operational readiness) - Control growth of Logistics Footprint - Mitigate DMSMS issues - Improve Interoperability - Promote standardization across multiple weapon system platforms Parts Management is a way to improve overall system supportability The key is that collaboration among prime contractors, subcontractors and the government is essential to making this happen (More about what Parts Management is.)

5. 5 What Is Parts Management? Selecting parts during weapon system design Analyzing parts for reliability, availability, and quality Mitigating DMSMS is critical Screening for common usage Reducing the number of unique parts Qualifying products (More about Parts Management and what it is.) Parts management is about selecting the best possible parts during the design of a weapon system and using those parts across multiple platforms. The best parts are those that are reliable and that are going to remain available for the foreseeable future, and that are of good quality. (DMSMS is a key consideration) Parts need to be screened for common usage in an effort to try to reduce the number of unique parts. And I just talked about how we qualify products and processes iaw mil specs. (Brief history of the overall parts program and how it�s changed over time.) (More about Parts Management and what it is.) Parts management is about selecting the best possible parts during the design of a weapon system and using those parts across multiple platforms. The best parts are those that are reliable and that are going to remain available for the foreseeable future, and that are of good quality. (DMSMS is a key consideration) Parts need to be screened for common usage in an effort to try to reduce the number of unique parts. And I just talked about how we qualify products and processes iaw mil specs. (Brief history of the overall parts program and how it�s changed over time.)

6. 6 History of Parts Management 1977: MIL-STD-965, Parts Control Program 1983: SECDEF Weinberger Spare Parts Acq memo 1984: DEPSECDEF Taft DoD Parts Control Program memo 1994: SECDEF Perry Acquisition Reform memo 1996: MIL-STD-965, Parts Control Program cancelled/replaced by MIL-HDBK-965 2000: MIL-HDBK-965 cancelled/replaced by MIL-HDBK-512, Parts Management (Brief history of the overall program and how it�s changed over time.) Apr 15, 1977: MIL-STD-965, entitled Parts Control Program, was issued. This specification �implemented the guidelines and requirements established by DODI 4120.19, Department of Defense Parts Control System.� This was the first specification to describe the Parts Control Program. Aug 29, 1983: Then Secretary of Defense Weinberger released the Spare Parts Acquisition memorandum, addressing issues and problems relating to acquisition of spare parts, with one solution being the emphasis of the DoD Parts Control Program. Dec 12, 1984: Then Deputy Secretary of Defense Taft released the DoD Parts Control Program memorandum. which set the basic policies for the PCP including mandating that it be �applied on all applicable weapons systems.� This ushered in the largest workload for the PCP, requiring DLA to maintain a relatively large workforce to work the PCP through the late 80�s and into the mid 90�s. At this time most weapon systems contractually required the use of the PCP so DLA received large quantities of evaluations from all services. Jun 29, 1994: (10 years later), Secy of Defense Perry released the Acquisition Reform Memorandum, encouraging use of best practices when contracting and acquiring weapon systems and components. One result of this was to deemphasize the mandatory use of detailed mil specs and standards in favor of performance-based specs and standards. The SECDEF�s Specs and Standards Reform Initiative released a list of 10 mil standards identified as non-value added, called the �Willoughby 10��the list included MIL-STD-965. Sep 16, 1996: MIL-STD-965 was cancelled in reaction to the Willoughby 10 and replaced by MIL-HDBK-965, Acquisition Practices for Parts Management. (Handbooks are guidance documents, not directive in nature.) This handbook allowed for the continued existence of a Parts Control Program, renamed the Parts Management Program, but also allowed contractors and Program Offices to decide how to implement their program. DLA�s Parts Management Program was one of the options included in MIL-HDBK-965. This began the gradual decline in workload experienced by the DLA PMP and a subsequent decline in the DLA Parts Management workforce. Some OEMs instituted their own internal parts management programs, because they recognized their value, but DoD lost overall visibility of the parts management work being done. Oct 4, 2000: MIL-HDBK-965 was cancelled and replaced by MIL-HDBK-512, Parts Management, which is our current Parts Management guidance. (Now let�s review the background for the reengineering effort.) (Brief history of the overall program and how it�s changed over time.) Apr 15, 1977: MIL-STD-965, entitled Parts Control Program, was issued. This specification �implemented the guidelines and requirements established by DODI 4120.19, Department of Defense Parts Control System.� This was the first specification to describe the Parts Control Program. Aug 29, 1983: Then Secretary of Defense Weinberger released the Spare Parts Acquisition memorandum, addressing issues and problems relating to acquisition of spare parts, with one solution being the emphasis of the DoD Parts Control Program. Dec 12, 1984: Then Deputy Secretary of Defense Taft released the DoD Parts Control Program memorandum. which set the basic policies for the PCP including mandating that it be �applied on all applicable weapons systems.� This ushered in the largest workload for the PCP, requiring DLA to maintain a relatively large workforce to work the PCP through the late 80�s and into the mid 90�s. At this time most weapon systems contractually required the use of the PCP so DLA received large quantities of evaluations from all services. Jun 29, 1994: (10 years later), Secy of Defense Perry released the Acquisition Reform Memorandum, encouraging use of best practices when contracting and acquiring weapon systems and components. One result of this was to deemphasize the mandatory use of detailed mil specs and standards in favor of performance-based specs and standards. The SECDEF�s Specs and Standards Reform Initiative released a list of 10 mil standards identified as non-value added, called the �Willoughby 10��the list included MIL-STD-965. Sep 16, 1996: MIL-STD-965 was cancelled in reaction to the Willoughby 10 and replaced by MIL-HDBK-965, Acquisition Practices for Parts Management. (Handbooks are guidance documents, not directive in nature.) This handbook allowed for the continued existence of a Parts Control Program, renamed the Parts Management Program, but also allowed contractors and Program Offices to decide how to implement their program. DLA�s Parts Management Program was one of the options included in MIL-HDBK-965. This began the gradual decline in workload experienced by the DLA PMP and a subsequent decline in the DLA Parts Management workforce. Some OEMs instituted their own internal parts management programs, because they recognized their value, but DoD lost overall visibility of the parts management work being done. Oct 4, 2000: MIL-HDBK-965 was cancelled and replaced by MIL-HDBK-512, Parts Management, which is our current Parts Management guidance. (Now let�s review the background for the reengineering effort.)

7. 7 Reengineering All Services, DLA, OSD, Industry, Trade Associations Fact Finding Study Industry Best Practices Evaluate � Analyze � Explore Alternatives Examine Parallel Efforts (PBL, SE, CSI) Develop Findings, Conclusions, Recommendations (Let�s review the reengineering effort.) The working group is composed of: Representatives from the services and DLA, OSD Invited industry participants Trade association input The working group has also leveraged the efforts of other organizations, like the DMSMS Working Group and the Parts Standardization & Management Committee (PSMC). Fact Finding Study Industry Best Practices Evaluate � Analyze � Explore Alternatives Examine Parallel Efforts (PBL, SE, CSI) Develop Findings, Conclusions, Recommendations The results of the working group�s efforts were published in a report in Oct 05. the report is available on our DSP web site. If you�d like a hard copy, we�d be glad to provide one. (Vision for supporting the Warfighter) (Let�s review the reengineering effort.) The working group is composed of: Representatives from the services and DLA, OSD Invited industry participants Trade association input The working group has also leveraged the efforts of other organizations, like the DMSMS Working Group and the Parts Standardization & Management Committee (PSMC). Fact Finding Study Industry Best Practices Evaluate � Analyze � Explore Alternatives Examine Parallel Efforts (PBL, SE, CSI) Develop Findings, Conclusions, Recommendations The results of the working group�s efforts were published in a report in Oct 05. the report is available on our DSP web site. If you�d like a hard copy, we�d be glad to provide one. (Vision for supporting the Warfighter)

8. 8 Warfighter Support Parts Management: Ensures optimum part is used in a design quality, reliability, availability, logistical, and cost Provides Warfighter a more reliable, available, and maintainable weapon system Ensures the logistics community has a better understanding of the part and its application Provides metrics that relate parts management decisions to increases in readiness and ROI (Throughout the effort, we�ve held in mind the ideal of how we might best contribute to supporting the Warfighter.) (This slide emphasizes who the DoD customer is, and why reengineering parts management is important.) 1. Parts Management provides the design community with tools for ensuring the optimum part is used in a given design. When a robust parts management system is used by the designer, the weapon system will be more reliable and easier to maintain. Parts management ensures the most appropriate quality and reliability level of part is used. Since the overall quality and reliability of the system is a function of the quality and reliability of each component and how those components interact, the better the quality and reliability of the components, the better the quality and reliability of the system. 2. As the quality and reliability of the system improves, less maintenance is necessary, and the weapon system should respond as intended when it is needed by the warfighter. This is really what the warfighter wants, a reliable and ready weapon system backed up by a responsive logistics support system. When maintenance is necessary, the parts making up the system are optimal parts from a logistics and cost standpoint. This results in a more responsive logistics pipeline and a more efficient and timely availability of the needed parts. 3. The envisioned future state of the (reengineered) Parts Management Program will provide life-cycle availability of parts information and tracking (including DMS data through the DMS-COE) which will provide a better informed logistical community, more capable of anticipating and meeting warfighter needs. 4. We plan to provide metrics that measure ROI as well as improvements in readiness (i.e., the PBL outcomes) that directly impact the warfighter in a positive manner. (This is a summary of the PMRWG�s major findings..) (Throughout the effort, we�ve held in mind the ideal of how we might best contribute to supporting the Warfighter.) (This slide emphasizes who the DoD customer is, and why reengineering parts management is important.) 1. Parts Management provides the design community with tools for ensuring the optimum part is used in a given design. When a robust parts management system is used by the designer, the weapon system will be more reliable and easier to maintain. Parts management ensures the most appropriate quality and reliability level of part is used. Since the overall quality and reliability of the system is a function of the quality and reliability of each component and how those components interact, the better the quality and reliability of the components, the better the quality and reliability of the system. 2. As the quality and reliability of the system improves, less maintenance is necessary, and the weapon system should respond as intended when it is needed by the warfighter. This is really what the warfighter wants, a reliable and ready weapon system backed up by a responsive logistics support system. When maintenance is necessary, the parts making up the system are optimal parts from a logistics and cost standpoint. This results in a more responsive logistics pipeline and a more efficient and timely availability of the needed parts. 3. The envisioned future state of the (reengineered) Parts Management Program will provide life-cycle availability of parts information and tracking (including DMS data through the DMS-COE) which will provide a better informed logistical community, more capable of anticipating and meeting warfighter needs. 4. We plan to provide metrics that measure ROI as well as improvements in readiness (i.e., the PBL outcomes) that directly impact the warfighter in a positive manner. (This is a summary of the PMRWG�s major findings..)

9. 9 Findings Footprint is growing Parts management/standardization can moderate growth Acquisition environment lacks adequate emphasis on parts management/standardization at the DoD level discipline, motivation, incentives, and requirements Systems Engineering discipline currently lacks parts management/standardization focus Most DoD programs do not address DoD level parts management/standardization A performance-based mechanism to restore balance already exists MIL-HDBK-512, SD-19 (This is a summary of the PMRWG�s major findings.) (1) Footprint is growing. (Amount of support required for one ton of lethality is increasing significantly.) This growth is driven by the nature of today�s systems and warfighting doctrine: (a) non-linear/noncontiguous battle space; (b) Supporting new and existing systems simultaneously; (c) complexity, emphasis on extreme performance, (d) leading edge technologies. Parts management/standardization can moderate growth. Since proliferation of parts is contributing to the growth of the logistics footprint�improving parts management would help to constrain footprint growth. (3) While individual systems are better and more lethal, in today�s acquisition environment there is no system requirement to consider parts management/standardization at the DoD level, from an overall DoD resource management, acquisition, and logistics support standpoint. What�s lacking is the: - discipline, motivation, incentives, and requirements to provide adequate emphasis. (4) Although we think systems engineering is where parts management and standardization begins, currently, the Systems Engineering discipline lacks a parts management/ standardization focus. In the past parts management and standardization were perceived as constraints. In reality, parts management and standardization can provide some needed discipline�and yield positive contributions to cost, performance, footprint management, and interoperability. (5) Most programs don�t address DoD level parts management/standardization Programs tend not to ask or pay for anything that�s outside their view due to a lack of incentives, appropriate policy guidance and specific contract language, and tools Currently there is no policy or Program Manager incentive to support cross-service/-platform standardization During acquisition reform, some needed discipline slipped away. We feel that a performance-based mechanism to restore balance already exists in the form of MIL-HDBK-512, the current guidance document for parts management, and Standardization Document 19�SD-19--entitled, Life Cycle Cost Savings Through Parts Management. We need to update -512 and consider making it into a standard. (Next we�ll look at the main conclusions we�ve drawn to date.) (This is a summary of the PMRWG�s major findings.) (1) Footprint is growing. (Amount of support required for one ton of lethality is increasing significantly.) This growth is driven by the nature of today�s systems and warfighting doctrine: (a) non-linear/noncontiguous battle space; (b) Supporting new and existing systems simultaneously; (c) complexity, emphasis on extreme performance, (d) leading edge technologies. Parts management/standardization can moderate growth. Since proliferation of parts is contributing to the growth of the logistics footprint�improving parts management would help to constrain footprint growth. (3) While individual systems are better and more lethal, in today�s acquisition environment there is no system requirement to consider parts management/standardization at the DoD level, from an overall DoD resource management, acquisition, and logistics support standpoint. What�s lacking is the: - discipline, motivation, incentives, and requirements to provide adequate emphasis. (4) Although we think systems engineering is where parts management and standardization begins, currently, the Systems Engineering discipline lacks a parts management/ standardization focus. In the past parts management and standardization were perceived as constraints. In reality, parts management and standardization can provide some needed discipline�and yield positive contributions to cost, performance, footprint management, and interoperability. (5) Most programs don�t address DoD level parts management/standardization Programs tend not to ask or pay for anything that�s outside their view due to a lack of incentives, appropriate policy guidance and specific contract language, and tools Currently there is no policy or Program Manager incentive to support cross-service/-platform standardization During acquisition reform, some needed discipline slipped away. We feel that a performance-based mechanism to restore balance already exists in the form of MIL-HDBK-512, the current guidance document for parts management, and Standardization Document 19�SD-19--entitled, Life Cycle Cost Savings Through Parts Management. We need to update -512 and consider making it into a standard. (Next we�ll look at the main conclusions we�ve drawn to date.)

10. 10 Conclusions Parts Management needs to be a requirement Parts Management needs a total system approach Parts Management decision-makers need better tools Parts Management can be fully accomplished within a performance-based environment (Next we�ll look at the main conclusions drawn by the PMRWG.) (1) Parts Management needs to be a requirement: We�ve seen what happens when parts mgmt is optional. Basically, it doesn�t get done on most programs. And nonstandard parts proliferation results. We need new policy that promotes parts standardization and new contract language to make it happen. - To reduce logistics footprint, we need DoD policy that promotes parts management. - Contract language should address parts management/standardization: We get what we ask/pay for. The working group is drafting boilerplate contract language for requiring a parts management plan. - We need technical system reviews to address parts management/ standardization as a required element of successfully managing a program. (2) Parts Management needs a total systems approach. - Systems Engineering should address parts management from a total systems perspective. Program by program is better than nothing, but an overall view is best. - To reduce logistics footprint and support the need for interoperability (driven by Joint and Coalition Warfare), we should increase commonality across Services and platforms. To really have an impact on the footprint we need discipline that ensures more parts commonality across services and platforms. Parts selection should favor parts that are already in the logistics inventory. Each nonstandard part costs the Government at least $20,000 to manage it for the life of a program (and that�s a very conservative figure from a business case sponsored by the PSMC a few years ago.) We recently heard an estimate of $100,000. (3) Parts Management decision-makers need better tools. They need accurate, current parts information that�s readily accessible in a user-friendly, web-based format. (4) We concluded that Parts Management CAN be fully accomplished within a performance-based environment. With the strong emphasis on performance-based logistics in the Department today, it only makes sense to implement a parts management program that supports that environment. (Now we�ll review the eight major recommendations of the PMRWG) (Next we�ll look at the main conclusions drawn by the PMRWG.) (1) Parts Management needs to be a requirement: We�ve seen what happens when parts mgmt is optional. Basically, it doesn�t get done on most programs. And nonstandard parts proliferation results. We need new policy that promotes parts standardization and new contract language to make it happen. - To reduce logistics footprint, we need DoD policy that promotes parts management. - Contract language should address parts management/standardization: We get what we ask/pay for. The working group is drafting boilerplate contract language for requiring a parts management plan. - We need technical system reviews to address parts management/ standardization as a required element of successfully managing a program. (2) Parts Management needs a total systems approach. - Systems Engineering should address parts management from a total systems perspective. Program by program is better than nothing, but an overall view is best. - To reduce logistics footprint and support the need for interoperability (driven by Joint and Coalition Warfare), we should increase commonality across Services and platforms. To really have an impact on the footprint we need discipline that ensures more parts commonality across services and platforms. Parts selection should favor parts that are already in the logistics inventory. Each nonstandard part costs the Government at least $20,000 to manage it for the life of a program (and that�s a very conservative figure from a business case sponsored by the PSMC a few years ago.) We recently heard an estimate of $100,000. (3) Parts Management decision-makers need better tools. They need accurate, current parts information that�s readily accessible in a user-friendly, web-based format. (4) We concluded that Parts Management CAN be fully accomplished within a performance-based environment. With the strong emphasis on performance-based logistics in the Department today, it only makes sense to implement a parts management program that supports that environment. (Now we�ll review the eight major recommendations of the PMRWG)

11. 11 Major Recommendations Restore parts management as an engineering discipline Make parts management a contractual requirement Identify effective incentives Create a Parts Management Knowledge Sharing Portal Improve DOD organization for parts management Build key partnerships and relationships Educate and train Develop parts management tools and metrics Develop new marketing products Understand parts management�s contribution to logistics footprint (These are our eight major recommendations) I briefed this slide to you last year. At that time, these were proposed recommendations only. Since that time, we have gotten them approved by the Total Life Cycle Systems Management (TLCSM) Executive Council, chaired by Mr. Jim Hall. On April 6, 2006, the TLCSM gave us the green light to go forward to implement our recommendations. I�m only going to address the first three today, which are the most key. (1) Restore parts management as an engineering discipline where we feel it belongs. We�re working with OSD Systems Engineering. We�ve met with Mr. Bob Skalamera, and he supports this recommendation. (2) Make parts management a contractual requirement. - Identifying effective incentives (3) Create a Parts Management Knowledge Sharing Portal. We plan to leverage the DMSMS effort. They�ve developed a Knowledge Sharing Portal. - - - - - - - - - - - (4) Improve DoD organization for parts management as needed. (5) Build key partnerships and relationships. We�re working with GIDEP, DMS COE folks, and industry. - Educate and train. We�re working with Defense Acquisition University (DAU) to develop a continuous learning module on Parts Management. Also, to inject language on parts management into their existing courses where appropriate. (6) Develop parts management tools and metrics, to provide parts management decision-makers with current accurate data. (7) Develop new marketing products to publicize the new paradigm. (8) Understand parts management�s contribution to logistics footprint to the extent that we possibly can. (Now let�s talk about the first major recommendation�restoring parts management as an engineering discipline.) (These are our eight major recommendations) I briefed this slide to you last year. At that time, these were proposed recommendations only. Since that time, we have gotten them approved by the Total Life Cycle Systems Management (TLCSM) Executive Council, chaired by Mr. Jim Hall. On April 6, 2006, the TLCSM gave us the green light to go forward to implement our recommendations. I�m only going to address the first three today, which are the most key. (1) Restore parts management as an engineering discipline where we feel it belongs. We�re working with OSD Systems Engineering. We�ve met with Mr. Bob Skalamera, and he supports this recommendation. (2) Make parts management a contractual requirement. - Identifying effective incentives (3) Create a Parts Management Knowledge Sharing Portal. We plan to leverage the DMSMS effort. They�ve developed a Knowledge Sharing Portal. - - - - - - - - - - - (4) Improve DoD organization for parts management as needed. (5) Build key partnerships and relationships. We�re working with GIDEP, DMS COE folks, and industry. - Educate and train. We�re working with Defense Acquisition University (DAU) to develop a continuous learning module on Parts Management. Also, to inject language on parts management into their existing courses where appropriate. (6) Develop parts management tools and metrics, to provide parts management decision-makers with current accurate data. (7) Develop new marketing products to publicize the new paradigm. (8) Understand parts management�s contribution to logistics footprint to the extent that we possibly can. (Now let�s talk about the first major recommendation�restoring parts management as an engineering discipline.)

12. 12 Parts Management is First and Foremost an Engineering Discipline Part selection is an engineering responsibility Selecting the right parts drives downstream outcomes Today, engineering parts management practice is inadequate OEM parts management often unfunded, therefore, not done Our recommendations address these issues (Now let�s talk about the first major recommendation�restoring parts management as an engineering discipline.) Parts management begins with selecting the optimum parts during design. In addition, the benefits multiply by using those same parts across multiple platforms. The optimum part is generally one of proven high quality and demonstrated reliability, already in use on other systems and with a high probability that it will remain available for the foreseeable future. Avoiding parts that will have DMSMS issues is key Using parts with current common usage will reduce the number of unique parts, (increase availability, reduce cost, and shorten development cycle time). Selecting the (right parts) during weapon system design (is key) (This decision will influence all downstream outcomes (cost, availability, reliability, readiness, interoperability, etc.) Today, the parts management practice in engineering is inconsistent and often inadequate For most OEM�s, parts management is not part of the contract and is therefore unfunded, therefore, it is not done. Our reengineering efforts will address these issues. (Second recommendation and what we mean by making parts management a �requirement�) (Now let�s talk about the first major recommendation�restoring parts management as an engineering discipline.) Parts management begins with selecting the optimum parts during design. In addition, the benefits multiply by using those same parts across multiple platforms. The optimum part is generally one of proven high quality and demonstrated reliability, already in use on other systems and with a high probability that it will remain available for the foreseeable future. Avoiding parts that will have DMSMS issues is key Using parts with current common usage will reduce the number of unique parts, (increase availability, reduce cost, and shorten development cycle time). Selecting the (right parts) during weapon system design (is key) (This decision will influence all downstream outcomes (cost, availability, reliability, readiness, interoperability, etc.) Today, the parts management practice in engineering is inconsistent and often inadequate For most OEM�s, parts management is not part of the contract and is therefore unfunded, therefore, it is not done. Our reengineering efforts will address these issues. (Second recommendation and what we mean by making parts management a �requirement�)

13. 13 What We Mean by Making Parts Management A �Requirement� Not a return to past �prescriptive� practices Proposal to add some needed discipline Action: Parts Management during design phase Result: A more supportable system during sustainment Require a Parts Management Plan that addresses: DMSMS Parts Selection Address Parts Management in program reviews Key element of a well-executed program DoD provide mechanism / shared data warehouse (Second recommendation and what we mean by making parts management a �requirement�) Not a return to past �prescriptive� practices Proposal to add some much-needed discipline that got thrown out with the bathwater of acq reform Action: By injecting Parts Management during the design phase The Result is: A more supportable system during the sustainment phase Require Contractors to have a Parts Management Plan/process in place that addresses at a minimum: DMSMS or obsolescence planning Parts Selection Address Parts Management in program reviews Make parts management a key element of a well-executed program DoD provide mechanism / shared data warehouse (Recommendation #3 addresses a critical need � current, accurate parts data)(Second recommendation and what we mean by making parts management a �requirement�) Not a return to past �prescriptive� practices Proposal to add some much-needed discipline that got thrown out with the bathwater of acq reform Action: By injecting Parts Management during the design phase The Result is: A more supportable system during the sustainment phase Require Contractors to have a Parts Management Plan/process in place that addresses at a minimum: DMSMS or obsolescence planning Parts Selection Address Parts Management in program reviews Make parts management a key element of a well-executed program DoD provide mechanism / shared data warehouse (Recommendation #3 addresses a critical need � current, accurate parts data)

14. 14 The Critical Need �Current, Accurate Parts Data Existing parts data is inadequate, inaccurate, incomplete, inconsistent Parts data is spread across hundreds of sources DoD is now reengineering many of its parts-related information systems Now is the time to act We must integrate parts management requirements with current initiatives The first element is the DMSMS KSP (Recommendation #3 addresses a critical need � current, accurate parts data) OEMs, design engineers, and the logistics support community currently lack adequate, accurate, complete, and consistent parts-related data Parts data is spread across hundreds of sources, most of which cannot exchange information DoD is currently engaged in reengineering many of these systems and in developing new capabilities (e.g. BSM, DMSMS KSP) Now is the time when we must participate in and leverage these changes to achieve efficient and cost effective parts management capabilities We propose to integrate parts management requirements into the evolving information management infrastructure rather than reinventing the wheel The first element in that process is the DMSMS KSP ---------- Comprehensively track parts from their first introduction into a design to eventual removal from the market Provide updates to part users, based on information collected by the standardization community and the DMSMS community Win-win outcome for DoD/industry This is what we�re aiming for in a reengineered process: Current, accurate parts data for all parts decision-makers, both in government and in industry. (Next we�ll look at a notional depiction of the DMSMS KSP) (Recommendation #3 addresses a critical need � current, accurate parts data) OEMs, design engineers, and the logistics support community currently lack adequate, accurate, complete, and consistent parts-related data Parts data is spread across hundreds of sources, most of which cannot exchange information DoD is currently engaged in reengineering many of these systems and in developing new capabilities (e.g. BSM, DMSMS KSP) Now is the time when we must participate in and leverage these changes to achieve efficient and cost effective parts management capabilities We propose to integrate parts management requirements into the evolving information management infrastructure rather than reinventing the wheel The first element in that process is the DMSMS KSP ---------- Comprehensively track parts from their first introduction into a design to eventual removal from the market Provide updates to part users, based on information collected by the standardization community and the DMSMS community Win-win outcome for DoD/industry This is what we�re aiming for in a reengineered process: Current, accurate parts data for all parts decision-makers, both in government and in industry. (Next we�ll look at a notional depiction of the DMSMS KSP)

15. 15 DMSMS KSP Capabilities (This is a notional depiction of the DMSMS Knowledge Sharing Portal) This chart is a notional depiction of the kind of capability we�re aiming for. Diminishing Manufacturing Sources/Materiel Shortages and Parts Management are so strongly connected, we plan to leverage the DMSMS Knowledge Sharing Portal as we establish the Parts Management Knowledge Sharing Portal. We are collaborating with the DMSMS community and working together as we go forward. (TLCSM Support.) (This is a notional depiction of the DMSMS Knowledge Sharing Portal) This chart is a notional depiction of the kind of capability we�re aiming for. Diminishing Manufacturing Sources/Materiel Shortages and Parts Management are so strongly connected, we plan to leverage the DMSMS Knowledge Sharing Portal as we establish the Parts Management Knowledge Sharing Portal. We are collaborating with the DMSMS community and working together as we go forward. (TLCSM Support.)

16. TLCSM EC Support On April 6, 2006, DSPO Director briefed TLCSM EC Granted �green light� to proceed into implementation Confirmed support during implementation phase Systems Engineering Acquisition policy Defense Acquisition University Industry participation/buy-in Advocacy for DoD Policy Changes (TLCSM EC Support.) On April 6, 2006, the DSPO Director, Greg Saunders, briefed the TLCSM EC Granted �green light� to proceed into implementation Confirmed support during implementation phase in these areas especially Systems Engineering Acquisition policy Defense Acquisition University Industry participation/buy-in Advocacy for DoD Policy Changes The TLCSM was so vocal in their support, it was hard for Greg to get through the briefing. We could not have asked for a more positive response. (Implementation Preview) (TLCSM EC Support.) On April 6, 2006, the DSPO Director, Greg Saunders, briefed the TLCSM EC Granted �green light� to proceed into implementation Confirmed support during implementation phase in these areas especially Systems Engineering Acquisition policy Defense Acquisition University Industry participation/buy-in Advocacy for DoD Policy Changes The TLCSM was so vocal in their support, it was hard for Greg to get through the briefing. We could not have asked for a more positive response. (Implementation Preview)

17. 17 Implementation Preview (Implementation Preview) While we expect full implementation to take years, we think the initial thrust will require Implementation phase (12-18 months) (Approximately) DSPO will chair implementation effort Continue working recommendations Continue collaborating with key players TLCSM EC is providing an oversight role They�ve asked to receive periodic updates from DSPO Provide access to industry via PPP (Public Private Partnering) Tiger Team Serve as advocacy group for DoD policy changes Implementation Working Group Complete implementation planning Coordinate implementation process In fact, the implementation kick-off meeting is today, after the conference ends. (Closing slide � questions.) (Implementation Preview) While we expect full implementation to take years, we think the initial thrust will require Implementation phase (12-18 months) (Approximately) DSPO will chair implementation effort Continue working recommendations Continue collaborating with key players TLCSM EC is providing an oversight role They�ve asked to receive periodic updates from DSPO Provide access to industry via PPP (Public Private Partnering) Tiger Team Serve as advocacy group for DoD policy changes Implementation Working Group Complete implementation planning Coordinate implementation process In fact, the implementation kick-off meeting is today, after the conference ends. (Closing slide � questions.)

18. Closing Any Questions? (Closing slide - questions) That ends my Parts Management Reengineering update briefing. And now I�d be glad to entertain any questions. Thank you for your attention. (Closing slide - questions) That ends my Parts Management Reengineering update briefing. And now I�d be glad to entertain any questions. Thank you for your attention.

19. 19

20. 20 Some Facets of Parts Management Part selection Part qualification Part analysis Part availability and source management Part information services and management DMSMS management Part inventory management Part engineering and technical support Part specifications and standards Part management best practices Part management policy, process, discipline, Parts related liaison with industry Part related warfighter support Part selection (design discipline, data, standard, preferred, proven, reliable, available) Part qualification (part, manufacturer, supplier) Part analysis (reliability, availability, quality, cost) Part availability and source assurance (higher manufacturing quantity for longer period) Part information services and management (data bases and tools) Part DMSMS management (active resolution, knowledge sharing) Part inventory management (item reduction, commonality) Part engineering and technical support Part-related specifications, standards, ISAs Part management best practices, policy, processes, Parts-related liaison with industry (problem solving, consensus building) Part related warfighter support (availability, response time, data) (Brief history of the overall parts program and how it�s changed over time.) Part selection (design discipline, data, standard, preferred, proven, reliable, available) Part qualification (part, manufacturer, supplier) Part analysis (reliability, availability, quality, cost) Part availability and source assurance (higher manufacturing quantity for longer period) Part information services and management (data bases and tools) Part DMSMS management (active resolution, knowledge sharing) Part inventory management (item reduction, commonality) Part engineering and technical support Part-related specifications, standards, ISAs Part management best practices, policy, processes, Parts-related liaison with industry (problem solving, consensus building) Part related warfighter support (availability, response time, data) (Brief history of the overall parts program and how it�s changed over time.)

21. 21 Challenges Reengineer process with a clean slate Reduce the Logistics Footprint Focus on desired results Operational availability Operational reliability Cost per unit of usage Logistics Response Time (While trying to get our arms around the tasking, we encountered some challenges.) Reengineer process with a clean sheet First, we recognized that reengineering parts management requires starting with a clean slate, not reverting back to the old process, and not trying to put a band-aid or even a tourniquet on the current process. Reduce the Logistics Footprint We determined that in order to contribute to reducing the logistics footprint, we needed a clear understanding of it, and we needed to address both theatre footprint and overall footprint. (Joint Pub 1-02, the DoD Dictionary of Military and Associated Terms, defines footprint as: the amount of personnel, spares, resources, and capabilities physically present / occupying space at a deployed location) (Logistics Footprint: size of �in theater� logistics support needed to move and sustain a warfighting force�parts, people, support equipment, transportation, fuels (L&MR website)) [Unfortunately, as the DoD Balanced Score Card Group found out, the organizations within DoD do not define and measure logistics footprint in the same way.] We determined that Parts management can influence the deployed footprint, but it has a more profound impact on total footprint (which includes the deployed footprint and the overall DoD inventory). Focus on the desired results. Another important challenge we�re facing is to reengineer parts management in light of the Department�s current desired results for performance-based support like those listed here. So we can�t go back to the way parts management was done in the days of MIL-STD-965, before acquisition reform. The environment has changed dramatically since then. We must come up with a new process that (1) meets current Department guidance and (2) is appropriate for the current acquisition environment. (Next we�ll look at a couple more challenges.) (While trying to get our arms around the tasking, we encountered some challenges.) Reengineer process with a clean sheet First, we recognized that reengineering parts management requires starting with a clean slate, not reverting back to the old process, and not trying to put a band-aid or even a tourniquet on the current process. Reduce the Logistics Footprint We determined that in order to contribute to reducing the logistics footprint, we needed a clear understanding of it, and we needed to address both theatre footprint and overall footprint. (Joint Pub 1-02, the DoD Dictionary of Military and Associated Terms, defines footprint as: the amount of personnel, spares, resources, and capabilities physically present / occupying space at a deployed location) (Logistics Footprint: size of �in theater� logistics support needed to move and sustain a warfighting force�parts, people, support equipment, transportation, fuels (L&MR website)) [Unfortunately, as the DoD Balanced Score Card Group found out, the organizations within DoD do not define and measure logistics footprint in the same way.] We determined that Parts management can influence the deployed footprint, but it has a more profound impact on total footprint (which includes the deployed footprint and the overall DoD inventory). Focus on the desired results. Another important challenge we�re facing is to reengineer parts management in light of the Department�s current desired results for performance-based support like those listed here. So we can�t go back to the way parts management was done in the days of MIL-STD-965, before acquisition reform. The environment has changed dramatically since then. We must come up with a new process that (1) meets current Department guidance and (2) is appropriate for the current acquisition environment. (Next we�ll look at a couple more challenges.)

22. 22 Challenges Systems Engineering Approach Parts Selection Process DMS/MS Planning Parts Management Plan Milestone Reviews Ensure Compliance Measure Effectiveness (Next we�ll look at a couple more challenges.) We determined early on that we needed to consider parts management from a Systems Engineering standpoint, including the (a) parts selection process, the most important element of parts management (b) obsolescence planning, and (c) the development of parts management plans to make parts management happen. (DMS/MS = Diminishing Manufacturing Sources/Materiel Shortages) (2) We determined that the reengineered parts process would need to use Milestone Reviews as a vehicle to (a) ensure compliance with the revised parts management policies we hope to bring about, and (2) for gauging the effectiveness of parts management programs. (Next we�ll take a look at our findings.)(Next we�ll look at a couple more challenges.) We determined early on that we needed to consider parts management from a Systems Engineering standpoint, including the (a) parts selection process, the most important element of parts management (b) obsolescence planning, and (c) the development of parts management plans to make parts management happen. (DMS/MS = Diminishing Manufacturing Sources/Materiel Shortages) (2) We determined that the reengineered parts process would need to use Milestone Reviews as a vehicle to (a) ensure compliance with the revised parts management policies we hope to bring about, and (2) for gauging the effectiveness of parts management programs. (Next we�ll take a look at our findings.)

23. 23 Logistics Footprint The size of the presence of logistics support required to deploy, sustain, and move a weapon system, including: Inventory/equipment/parts Personnel Facilities Transportation Real Estate One of the biggest challenges we encountered was trying to understand logistics footprint and the potential impact of parts management on footprint. To effectively contribute to reducing the logistics footprint, we need a clearer understanding of its many complexities, and we need to address both theatre footprint and the overall footprint. [Unfortunately, as the DoD Balanced Score Card Group found out, organizations within DoD do not define and measure logistics footprint in a standard way.] We determined that Parts management can influence the deployed footprint, but it has a more profound impact on total footprint (which includes the deployed footprint and the overall DoD inventory). One of the biggest challenges we encountered was trying to understand logistics footprint and the potential impact of parts management on footprint. To effectively contribute to reducing the logistics footprint, we need a clearer understanding of its many complexities, and we need to address both theatre footprint and the overall footprint. [Unfortunately, as the DoD Balanced Score Card Group found out, organizations within DoD do not define and measure logistics footprint in a standard way.] We determined that Parts management can influence the deployed footprint, but it has a more profound impact on total footprint (which includes the deployed footprint and the overall DoD inventory).