ISSUE 183 : Nov/Dec - 2010 - Australian Defence Force Journal

Many OEMs of commercial equipment are also OEMs of military hardware and many haveaggressively marketed the potential benefits of global fleet support arrangements. Defencehas become involved in a number of these arrangements, most notably in support of C-17Globemaster aircraft (and similar arrangements are planned in support of the Joint StrikeFighter). The perceived benefits of a direct reduction in ownership costs, access to establishedsupport infrastructure, and interoperability with allied nations are clearly attractive. However,there are concerns that some decisions may have been made without sufficient regard to theindirect costs and the potential impact that future support requirements may have on theDefence supply chain.Where a global fleet support arrangement is proposed, a robust business case analysis (BCA)must support the proposal. This should comprise a full analysis and comparison of the options.It must define the performance requirements that all support solution options must achieveand, as accurately as possible, estimate and compare the total cost of ownership over thecapability life cycle. The BCA should include a full analysis and comparison of explicit andimplied Defence supply chain tasks, including the training requirement, the costs associatedwith equipping personnel to execute those tasks and the costs associated with necessarychanges to the Defence supply chain infrastructure.There are also certain specific risks and concerns that must be considered and, if necessary,mitigated which include:• The perceived limited Defence influence on contractor and other customer behaviour,• Allowable knowledge sharing,• The security and assurance of supply,• Use of proprietary logistics information systems,• Use of an OEM’s proprietary parts inventory codification system, and• The deployability of supply systems.Defence influence on the contractor and other customer behaviourOnce Defence commits itself to a global fleet support arrangement, control over strategicfleet management policy as it affects the Australian portion of the fleet may be compromisedor lost. By definition, a global fleet support arrangement involves other customers who havea stake in goods and services that are part of the arrangement. Of concern is the potentialbehaviour of other customers. Where their interests do not necessarily align, the customercommunity may operate in a condition known as ‘co-opetition’. 13Examples are where customers compete for more than their fair share of the common resource.Some competitors may indulge in selfish behaviour, such as stockpiling and the abuse ofany priority system that may exist. Two potential effects are of concern; loss of control overinventory share (where others deplete the inventory to satisfy their own national interests)and loss of control over inventory apportionment (where the OEM acts to regulate customerbehaviour ‘for the greater good’ as perceived by the OEM). Hence, any partnering arrangementmust include an examination of the strategy to retain control over strategic fleet managementpolicy as it affects the Australian portion of the global fleet. Also scrutinised should be thestrategy to ensure that Australian interests prevail in conditions of ‘co-opetition’, particularlyin relation to pooled inventory share and apportionment.79