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Case Study: Building a Road Map to Performance Based Logistics Success

Performance based logistics capability road map

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Abstract

A global helicopter supplier lacked vision for a successful road map to performance based logistics (PBL). To have a significant increase in cost savings, it needed to implement a plan that would address its challenges.

The Challenge

Key PBL challenges of this company included:

  1. Aggressive growth plan – The company had projected an aggressive aftermarket growth plan driven largely by significant near-term PBL opportunities; however, there was little understanding of how PBL requirements would be met over the long-term.
  2. Limited understanding of where to invest – The company was  faced with trying to identify and prioritize the key PBL capabilities while taking stock of its own internal competencies, which were either nonexistent, buried in core functions, (e.g., supply chain) or distributed among the various programs.
  3. Unclear road map to PBL success – Given the breadth of the PBL requirements and the significant gaps that stood in the way of achieving full-scale PBL capability, it was evident that a phased approach would be necessary. The company needed a way of articulating which capability it would have at which point in the process.
  4. Unarticulated business case – It was necessary to develop a business case that would support the initiatives identified by the PBL capability road map and secure funding to build out the capabilities.

How We Helped

To build the road map to PBL success, we developed a method using three phases, which included: requirements, road map development and case study development. The results of our efforts were as follows:

  1. Defined 26 major capabilities needed to deliver on and compete for PBL contracts Examples:
    • Fleet data management
    • Warranty management
    • Repair and overhaul services
    • Portfolio management
    • Material forecasting
  2. Broke each element into 220 capability elements  Examples:
    • Ability to ascertain profitability in fixed dollars per flight hour contracts
    • Ability to accurately plan and allocate repair of rotables (ROR) resources and capacity based upon fleet data
    • Ability to pool data from different customer fleets of similar aircraft and part types
  3. Identified a series of 13 core initiatives necessary to achieve full PBL capability and created a capability maturity road map  Examples:
    • Develop risk-based pricing modeling tool
    • Develop customer portal
    • Lean ROR operations

Solution

The business case projected a cost savings of $37 million and a return on investment of 12 percent. This was accomplished by following these steps:

  1. Develop a leadership vision and sponsorship
    • Institute an operating model that requires the extended organization (engineering, supply PBL is a fundamental change in chain, finance, etc.) and key business partners to integrate horizontally.
    • Shift the culture from being an engineer-to-order business to one of engineer-to-sustain.
    • Understand that it is the role and responsibility of leadership to support the change, develop a business vision and become active sponsors of organizational process by working with customers, vendors and internal partners.
  2. Focus on what is important now
    • It is easy to want to be everything to everybody. 
    • Focus core capability development on those needed to win high probability opportunities and incrementally build out from there.
    • Capability does not equal technology.
    • Having true PBL capability requires people, process, policies and infrastructure, as well as technology.
    • It is important to consider all facets to fully understand the gaps and to have a truly effective PBL capability.

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