Defense Transportation System and Supply Chain Management

Introduction

The security and conflict situation in the Middle East has been omnipresent for decades. Whether it be the decade-plus wars in Iraq and Afghanistan, multiple government overthrows in Egypt, the toppling of Gadhafi in Libya, the civil war in Syria, or the rise of ISIS in Syria and Iraq, the totality of these events has generated novel institutional, ethical, and political challenges. States therefore face external threats necessitating the production and preservation of national security (SIPRI, 2012). Subsequent tasks include war fighting, noncombatant evacuation plans, peacekeeping and peace enforcement, as well as humanitarian operations such as disaster relief and aid. According to German constitutional law (Article 87a Grundgesetz), this complex range of responsibilities is mandatory for militaries and may be considered a service obligation within defense portfolios (Essig, Mohr & Tandler, 2014). Since armed forces are public sector organizations, national governments finance them.

European Defense Agency estimates revealed that, in 2009, the EU's 26 member nations spent a total of 194 billion Euros on defense—a large share of EU national budgets. Of that amount, 16.77% (32.53 billion Euros) was devoted to defense procurement. In view of this colossal expenditure on national security, national armies have for many years faced increased pressure to reduce expenses (SIPRI, 2011; Essig et al., 2014) while simultaneously utilizing resources more efficiently.

To simultaneously safeguard operational effectiveness and ensure efficiency, defense forces must focus on their respective core competencies while employing contemporary forms of financing and cooperation. This trend is manifested through the realization of a number of private-public partnerships (PPPs) and Public Finance programs, which have grown in number in recent years (Hartley, 2002). The market for defense equipment carries considerable potential. In spite of relevant cost-cutting opportunities, militaries lack suitable management tools to guide the acquisition of long-term links that traditionally characterize the defense equipment market.

Problem Statement

An analysis of literature pertaining to traditional supply chain management (SCM) reveals a few steering tools, offered chiefly for private sector organizations. However, given the specific characteristics of militaries, one cannot simply apply existing management tools designed for business supply chains without modification (Essig et al., 2014). Therefore, this paper's key aim is to bridge the theoretical gap in performance and outcomes by creating a suitable management tool for defense transport supply chains, enabling militaries to successfully guide the long-term links that dominate the defense equipment marketplace. To serve this purpose, an exposure-capacity-portfolio approach is selected, which permits thorough defense supply chain analysis and offers suitable recommendations regarding strategic action.

Literature Review

Melnyk and colleagues (2010) argue that a successful SCM system ought to comprise at least one of the following strategic outcomes: cost, responsiveness, resilience, security, innovation, and sustainability. Companies' investments are driven by the outcomes they desire. These outcomes operate across multiple supply chain levels. Defense organizations' supply chains are unique compared to those of general organizations; their primary outcomes are generally centered on responsiveness—the supply chain's ability to react effectively to alterations in customer location, product mix, and demand. This effectively maps onto defense units' main objective: readiness.

Van Wassenhove and Guide (2009) note that analysis in closed-loop supply chain systems employs one of two critical approaches: waste-stream compliance and cost reduction, or market-driven profit maximization. These views reflect the economic and regulatory realities of the majority of European nations and the United States, respectively. It has also been noted that companies focused solely on profits develop different supply relationships and sourcing patterns (Fleischmann et al., 2001), differing from companies that also comply with environmental regulatory constraints.

This paper introduces and examines a third goal of closed-loop supply chain systems, as defined by military organizations—namely, readiness. From the military perspective, readiness denotes the ability to satisfy national military strategy demands and to fight effectively (U.S. Department of Defense, 2010). This requires improved manpower capabilities, training, weapon systems, and sustainable equipment.

Considerable data on closed-loop supply chains arises from military practices requiring the stocking of aircraft-related items. Some of these items are repairable in the field, while others must be forwarded to the central military depot for repair or disposal (Guide & Srivastava, 1997). Sherbrooke (1968) developed the METRIC system for maintaining air force repair parts inventory. Subsequent research refined these calculations for a multiple-level echelon system enabling transshipments. Brennan and Fisher's (1986) research considered equipment cannibalization for limited spare parts acceptable under particular conditions, though total cannibalization was deemed unacceptable.

Presutti and Demmy's (1981) analysis of a multiple-echelon inventory model with limited repair finances was inspired by the Air Force Logistical Command. Additionally, broader research has informed closed-loop supply chain issues in private markets. Bjorkman, Ostlin, and Sundin (2008) performed broader research on return policies and their effect on overall performance. Vandaele and Lieckens (2012) studied complex supply-chain planning elements with regard to collection, production, uncertain supply, and transportation, finding that unclear or unexpected process times result in quality decline.

Radio Frequency Identification (RFID) technology has now become a reality for numerous sectors, including the public sector, retail, and manufacturing. RFID data warehouses must possess sufficient data to influence the decision-making process. Any supply chain is a dynamic business unit; therefore, historical information is valuable, even though it does not always contain optimal data. Characteristic variables include product demand, product characteristics, existing machine characteristics, production plans, and supply levels (Velasquez et al., 2015). Developing suitable business rules is a central element in ensuring this type of system is implemented effectively. RFID provides data input automation options within existing business processes and also enables the creation of innovative business models. Common supply chain activities combined with the capacity to establish location, time, and item-level data provide opportunities for identifying obstacles and flaws.

This kind of information is especially valuable in guiding delivery priorities when resources are limited. If one can establish a product's exact location at a particular time, numerous issues can be resolved, including shortening product recall time and retracting outdated items. Furthermore, the ability to locate product inventories helps shorten transit time between the factory floor, warehousing unit, and distribution point. RFID also proves valuable in clustering small consignment data from multiple sources guided along the same path in the initial distribution stages, or in automating rerouting when travel-condition data changes (Liqin, 2014).

A clear challenge remains the management of system changes. Planning and organizing RFID messaging while simultaneously reviewing IT support systems and business processes is complex. Balancing innovation and effort, and seeking strategies for attaining a competitive edge, is a central management issue. The costs linked to handling RFID-generated information will be substantial, while gains depend on data collection quality. These gains will mostly be intangible but are later recovered within the defense business cycle. Organizations that are aggressive about business process analysis often find that attempted improvements are extremely difficult to execute (Liqin, 2014).

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