The ‘Grey Haze’ of NAVSUP: Examining ERP and the Global Supply Chain

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Rear Admiral Mark Heinrich, Commander, Naval Supply Systems Command, USN, believes the worlds most dynamic, agile, and successful supply chain is managed by the Department of Defense. In the following interview, he explores the current priorities for NAVSUP, and provides comprehensive insightson the Enterprise Resource Management (ERP) solution. Furthermore RADM Heinrich discusses what is required to maintain an effective domestic supply chain in an era of fiscal uncertainty.

Examine the current equipment and technology priorities for NAVSUP and the external factors shaping these priorities.

Just as technology around the world is progressing at an exponential rate, NAVSUP has adapted congruently to ensure our technological capabilities succinctly work to support the needs of our Sailors.  NAVSUP completed its last roll-out of Navy Enterprise Resource Planning (ERP) in August 2012, retiring legacy systems and enabling the management of the most modern, world-class supply chain business system.  Getting to this point took eight years and 1000 personnel across the NAVSUP Enterprise, but the end result is a technological capability that is in 100 percent compliance for the entire NAVSUP portfolio for all DoD and DON IT certification requirements. It represents the culmination of extensive work by NAVSUP in adhering to the rigorous, but necessary, CYBER security regulations.  NAVSUP earns an "A" and is one of the top performing BSOs. 

Thus far, ERP has allowed us to simplify repair/retrograde management and shipboard allowances systems, reduce duplication, ensure business drives requirements, and nurture and grow our relationships with Navy and DoD Partners to deploy seamless integration of solutions across services and agencies.  In the long run, this is a good budget decision, too.  This move keeps our core running and provides the flexibility to develop bridge strategies and design future solutions within the solution so we can maintain operational integrity.   ERP also deployed nearly 250 wireless mobile computing automatic identification technology devices supporting more than 40 different ERP sites.  These devices provide accurate and real-time wireless input capability to Navy ERP in CONUS and internationally in Japan using both cellular and 802.11 capabilities. 
 

What is required to maintain an 'efficient domestic supply chain'?

Naval Material Supply Chain Management (SCM) is NAVSUP's largest Product & Service in terms of resources invested with over 3,000 civilian, military and contractor personnel involved, $21 billion of inventory on hand and an annual material budget of over $3.5 billion. It covers the over 430,000 class IX repair part line items of supply for which the NAVSUP Weapon Systems Support (NAVSUP WSS) is responsible. NAVSUP WSS uses funds from the NWCF (Navy Working Capital Fund) to buy and repair the parts and in turn sells them to Fleet customers. In a nutshell, Naval SCM is the collection of policies and processes that result in Navy customers receiving the parts they need, when and where they need them, anywhere in the world. Using ERP, our sophisticated business management software, Navy and our industry partners at the Defense Logistics Agency (DLA) are able to streamline the Navy's business operations, namely financial, supply system asset visibility and overall supply chain management. This enables NAVSUP to lead the DON towards being diligent stewards of taxpayer dollars while supporting the Navy's mission to "maintain, train and equip combat-ready naval forces capable of winning wars, deterring aggression and maintaining freedom of the seas."
 

Evaluate the initiatives that maintain supply operations across the globe.  What are these initiatives teaching us domestically?

Despite all the tired clichés about the ineffectiveness of government bureaucracy, I would argue that the world's most dynamic, agile, and successful supply chain is managed by the Department of Defense! 

Regardless of the slight differences between how the different Services manage their logistics, and the fact that we cross over into both the government agency realm (The Defense Logistics Agency (DLA) and the General Services Administration (GSA)) and a myriad of joint and commercial providers, the Navy maintains an almost seamless end-to-end supply operation.  While every "world class" business manages an intermodal supply chain that crosses continents and oceans, the vast majority can be described as hard point-to-point operations.  You have a production supply chain the results in a finished good or product, a transportation supply chain that moves the item from that plant to either another plant, a distribution node, or a retail outlet, and then final sale.  I've simplified it, but you get the idea of a rather static process.  Within the Navy, the start of your supply chain might resemble this, but the distribution of our product or service to that point of "final sale," is anything but static!

If you can imagine a small warship, tossing about in heavy seas, 1200 nautical miles from nowhere, between Africa and Australia, with a civilian manned government vessel - a ship from the Military Sealift Command - hovering alongside, as a helicopter ferries pallets of supplies over to a very small landing area on that warship...you get an idea of what we do every day.  To do this, we need to ensure that our joint partners, such as the United States Transportation Command (USTC), are managing their responsibility to establish commercial and military air and sea-channels for distribution globally.  Their initiative - the Global Campaign Plan for Distribution (GCP-D) - is a key part in help to focus their efforts for the changing nature of global operations.  The Defense Logistics Agency, which I touched on above, is responsible for forward stocking of critical material closer to the consumer.  Their Integrated Distribution Plan (IDP), is about how to ensure that global operations are best supported with supplies that are pushed to their warehouses around the world, so that customer wait time and distribution costs are both reduced.  These two initiatives - which are just the tip of the iceberg for global initiatives, but are indicative - are critical for us. 

On the Navy side, I am responsible for ensuring that Navy owned material, and Navy-managed contracts and husbanding services are in place to support our global operations as well.  Naval supply operations are more than just joint - they are very "haze grey."  From forward basing in Rota, Spain or Bahrain or Singapore, to Special Operations operating in anti-piracy operations from the Horn of Africa, we at the Naval Supply Systems Command and our claimancy, help ensure that logistics is a force multiplier.

As for what these initiatives are teaching us domestically, I think one of the key lessons for us, is how to leverage the subject matter expertise, and even the Unified Command Plan (UCP) mission of the United States Transportation Command, to drive best business for Navy.  As the advocate for Navy equities in this very joint and commercial global supply chain, it is imperative that we monitor their processes to ensure the ability to achieve the Navy's "Warfighting First; Operate Forward; Be Ready" at best value across all the support networks the Navy depends on...fuel, food, parts, etc.
 

Do you have a main challenge you face in the coming year? What do you anticipate will need doing to overcome this issue?

I think the biggest challenge that we all have facing us in this coming year, is the financial one.  As we reevaluate our global military position - planning the withdrawal of troops from Afghanistan for example and the expansion of our global naval presence - all the Services are faced with a readiness-resource-risk troika that must be balanced.  Again, with the Navy, we are all about "Warfighting First; Operate Forward; Be Ready."  This means that our focus will be on helping Navy make that transition and working with our joint partners to ensure that while some Services are moving back to the United States, the U.S. Navy is continuing and even expanding our operations overseas, and support must continue and even expand in areas where our presence these past ten years or so, had been limited. 

In an era where budgets will be scrutinized more than ever, ensuring that our Navy equities are properly adjudicated and supported, while these same joint and commercial partners may be retrenching elsewhere, is the biggest challenge we will face.  Our direct involvement within the joint governance structures, our daily communications with our providers and the fleet, will help to ensure that we meet this challenge, and ensure optimal support.  We just finished our Strategic Offsite, and the entire NAVSUP claimancy came away with a refreshed purpose statement that I think addresses this; "We exist to optimize the support network to meet the readiness requirements of our maritime forces..."
 

Can you please give me some insight on the Enterprise Resource Management or ERP?

ERP was a multi-year effort implementing an end-to-end business management system that will allow Navy to unify, standardize and streamline mission support activities into a secure, reliable and accessible system.  ERP established sophisticated inventory and resource management capabilities to provide unprecedented global visibility and management of inventory, demand and customer requirements.  Deployment of ERP transforms Navy Supply Chain Management and sustains Fleet readiness at its highest levels, in support of the Chief of Naval Operations' Maritime Strategy of maintaining global presence.

The 265 COBOL and FORTRAN-based legacy IT supply systems that supported the warfighter could not meet this 21st century demand.  These systems were antiquated, unsustainable, and functioned as a mix of non-integrated global and local planning tools.  Navy Enterprise Resource Planning (ERP), which was developed and deployed by Department of Navy (DON), is an integrated business management system that modernizes and standardizes Navy business operations.  NAVSUP leverages Navy ERP to provide unprecedented management visibility, champion transformational change to increase supply chain effectiveness and efficiency, and solidify NAVSUP's position as the preeminent source for sustained global logistics support to the Naval and Joint warfighter.

The implementation of the Navy ERP solution at NAVSUP unifies, standardizes, and streamlines nearly all its financial and supply chain business activities into one system to achieve the highest standards for information that is secure, reliable, accessible and current; just about every employee involved in conducting the Command's business will now work using the same structures. Processes are updated and simplified; redundancies are eliminated; business operations optimized.

In addition to providing better information management to Navy's leaders and more timely support to the warfighter, Navy ERP implementation saves hundreds of millions of dollars Navy-wide in inventory and IT costs.   The implementation of Navy ERP will save the Navy $285.9 million in IT costs over five years.  Moreover, 100% of the NAVSUP Total Obligation Authority (TOA) and 50% of Navy's TOA is managed in ERP.

Beyond the tangible cost savings, Navy ERP applies greater financial transparency to the supply system.  NAVSUP processes and executes all of its contracts (a purchase order value of $495M) in ERP, and 100% of costed work ($7.7B) is being billed in ERP as well.  Also, official reporting requirements are being met for the first time in Navy history with on-time closings each month.   These momentous shifts in NAVSUP's ability to operate with financial transparency allows for integrated financial program management and alignment of financial resources to the Commander's vision.  Navy ERP also provides the Navy the ability to achieve congressionally mandated goals, including The Chief Financial Officers Act of 1990 and Secretary Panetta's DoD-wide 13 Oct 2011 memorandum calling for financial audit readiness of the Statement of Budgetary Resources (SBR) by the end of calendar year 2014.  The Navy is leading all Services in achieving this goal.