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Peter Griffiths, KPMG - Independent View on the whole of defence logistics
 

Peter Griffiths, KPMG - Independent View on the whole of defence logistics

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Peter Griffiths, Partner, KPMG delivered this presentation at the Defence Supply Chains Summit. This Summit focuses on supply chain perspectives from Defence primes, leaders within the DMO, case ...

Peter Griffiths, Partner, KPMG delivered this presentation at the Defence Supply Chains Summit. This Summit focuses on supply chain perspectives from Defence primes, leaders within the DMO, case studies from SMEs, risk and cost mitigation strategies, preparation strategies, and network with an array of Defence stakeholders.

Find out more at http://www.admevents.com.au/DSC2013

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    Peter Griffiths, KPMG - Independent View on the whole of defence logistics Peter Griffiths, KPMG - Independent View on the whole of defence logistics Presentation Transcript

    • ADM Supply Chain Summit Opportunities for the Next Generation of Logistics Evolution in the Australian Defence Peter Griffiths December 2013
    • Overview • KPMG’s Global Defence Network • Defence Logistics Baseline Observations • Focus on Global Defence Transformation/Reform programs: o Canadian Defence Renewal Program 2012 o UK’s reform of Defence Equipment & Support (DE&S) o US Defence Logistic Agency (DLA) – Business Transformation o Royal Netherlands Air Force – LEAN • Opportunities for the ADF • Lessons and insights from major Transformation and Reform Program Experience © 2013 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. 1
    • KPMG’s Defence Network David Bluck NATO 20 Countries 700 + Professionals 100 + Former Military Asa Hannson Sweden Bart Walterus Belgium Luuk Aarts Netherlands Ken Cochrane Canada David Scott Czech Republic Lars Gonnsen Denmark Bernard Brown United Kingdom Yoshihide Takehisa Japan Chrystelle Roger France Bill Phillips & Miles McNamee USA Satya Ramamurthy Singapore Tore Eriksen Norway Alejandro Villarreal Mexico Peter Chew New Zealand Mauricio Endo Brazil Steve Clark Australia © 2013 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. Heinrich Rentmeister Germany Pierluigi Lonero Italy Amber Dubey India Makgotso Letsitsi South Africa Mercedes Sanches Varela European Union 2
    • Baseline Defence Logistic Transformation Program The program • 2009 White Paper (“Force 2030”) to be delivered in 2019 • Consolidation: 24 wholesale sites to 7 primary sites • Enhanced warehouse management technology (AIT and WMS) • Adoption of new logistics service delivery contracts , succeeding the DIDS contracts • Improved inventory accuracy and visibility • Reform of Land Materiel Maintenance • Organisation-wide process and operating model reform © 2013 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. 3
    • Baseline Defence Logistic Transformation Program PRIMARY TRANSPORT SUPPLY WHOLESALE SECONDARY TRANSPORT FOREIGN MILITARY SALES RETAIL RETAIL LEVEL WAREHOUSES WHOLESALE LEVEL WAREHOUSES SUPPLIERS & MANUFACTURERS KPMG has TERTIARY/ CUSTOMERS provided support LOCAL TRANSPORT to Defence in CUSTOMERS 4 of the 9 countries AIR FORCE SQUADRONS who are jointly funding the program. NAVAL UNITS & SHIPS ARMY UNITS REGIONAL VENDORS DISPOSAL DISPOSAL ADF Defence Logistic Transformation Program (Storage & Distribution) Network consolidation Facilities rationalisation Service delivery model Channel strategies Modernisation of the network: • New facilities and equipment • Consolidated footprint enables improved facility performance Use of technology: • Warehouse management systems • Distribution systems • Integration with suppliers DISPOSAL User outcomes: • Projected savings of A$350m over 10 years • Improved services delivery from new, purpose built facilities • Improved visibility over demands and demand satisfaction • Optimal inventory holdings • Facilitates better collaboration with suppliers, and increase understanding of end-user requirements • Lower total logistic costs (including supply chain and inventory holding costs) © 2013 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. 4
    • In fact the Defence Supply Chain is complex and multi faceted operating across different lines to reach end customers who may be static or dispersed © 2013 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. 5
    • Managing Across this Supply Chain Provides Multiple Opportunities for Optimisation Tier 3 to Initial suppliers Tier 2 Suppliers Tier 1 Customers Tier 1 Suppliers OEMs MCs FMS Navy Army Air Force JOC 1 1 2 2 n Tier 2 Customers Ships Units Aircraft n 1 1 2 n 2 1 Initial Suppliers 3 2 1 3 n 3 n n 1 n Consumers/End-users 1 2 1 1 n n Managed Process Links Monitored Process Links Not-Managed Process Links Non-Member Process Links n DMO JLC At each level of the network there are synergies and opportunities to consolidate buying and logistics from common suppliers DSRG © 2013 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. Source: Douglas M. Lambert, Editor, Supply Chain Management: 6
    • Baseline Defence Logistic Transformation Program • • Acquisition of a proven, scalable Warehouse Management System (WMS) - integrated to MILIS which drives significant productivity improvements in the wholesale warehouses, supported by effective bar coding of inventory, capture of volumetric information. aRFID asset tags aRFID security Adoption of Automated Identification Technology (AIT) – this tags investment is well under way has been employed to: – Barcoding - Retrospectively bar code the wholesale inventory to enable scanners to read individual and packaged inventory. – Improved Stock Management (ISM) – Improved and method of reading, tracking and assuring slow moving inventory using AIT. – Consolidation of Stock - in primary locations (ie one location only within the wholesale site versus multiple in many cases today). • Automated Data Capture (ADC) to Units – this investment extends either wireless mobile data readers or “tethered” data readers which upload through a docking station to major units to enable efficiencies in workforce. This investment are is planned for roll out in 2012/13 and 2013/14 and largely involves the provision of hardware and mobility capability, coupled with retrospective barcoding at the unit level. © 2013 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. 7
    • Baseline Non-Materiel Procurement Reform Program Defence Support & Reform Group (DSRG) – Procurement Reform • Strategic Review recommended creation of Shared Services Functions for Finance, HR and Non-Equipment Procurement (NEP) • Creation of procurement functions with a AU$9B p/a spend within DSRG • Non-Equipment procurement includes all non-operational expenditure including corporate support, estate management, IT, travel and 18 other national categories of spend. • DSRG have undertaken the design, consultation, development and implementation of; o Wholly new Operating Model, (incl. Strategy, governance, policy and procedures) o Organisation design, (incl. Roles, responsibilities, performance management) o New Procurement methodology, tools, processes and analytic capability • Fundamental change of the services provided: Small team of “internal procurement process advisors” Centralised and “customer” service led procurement and contracting organisation Provider of advice and guidance to procurement activities led by individual Defence Groups and Services +200 strong central capability leading and accountable for delivering procurement and contracting benefit programs Consistent application of leading processes and market approach delivering leverage and economies of scale Inconsistent interfaces and process duplication across Defence procurement activities © 2013 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. 8
    • Baseline Inventory and Maintenance Reform in DMO DMO SMART Sustainment Program seeking to deliver: • Transformational Change – focused on either the demand side (capability manager) or supply side (DMO and industry) of the way sustainment work, or ithe capability itself, is managed. • LEAN Deeper Level Maintenance - applying proven process improvement techniques to identify the critical needs of the customer, improve processes by eliminating waste from maintenance processes and supply chains. • Planning - better forecasting of availability requirements to allow for appropriate maintenance intervals, smarter purchasing decisions and fewer ‘reactive’ and typically more expensive support demands. Supports Lean maintenance improvements. • Asset Withdrawal - linked to demand and inventory management. Identification of areas where too many serviceable items are being held and maintained in stock, or where fleet elements could be retired and the existing workload transferred to other ADF assets that operate more cost-effectively. • Contract Renegotiation and/or Retendering - establishing savings through competition, renegotiating contracts to include incentives for suppliers to make efficiency improvements. • Inventory Management - better modelling and forecasting of inventory requirements to optimise inventory holdings and encourage smarter purchasing decisions. © 2013 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. 9
    • Baseline Status as at 2013 Status Summary What Has Not Been Achieved • The reform initiatives have created an environment of improved visibility and understanding of Defence’s supply chain, which has driven and will continue to deliver efficiencies and service level improvement. • Silos. Reform has been furthered in the traditional Defence siloes – DMO have sought to address inventory and maintenance reform (SMART programs), DSG have led non equipment procurement, JLC have addressed wholesale logistics, the Services are each seeking efficiencies in delivery of support functions to sailors, soldiers and air crew. • Creates a platform for further reform and development, to meet likely Government direction from both the Commission of Audit and subsequent Defence White Paper. • Acknowledging its flaws, the success of SRP from a supply chain perspective was the ability to argue whole of logistics reform elements supported by rigorous analysis. This yielded significant reform investments enabling once in a generation improvement. • Governance. Fragmented accountability arrangements mean that no one has responsibility for whole of supply chain performance and outcomes. • Logistics IT Systems. It remains the case that Defence has major proliferation of Logistics systems, which are not all integrated, operating from common data sources and are expensive to run and maintain. © 2013 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International. 10
    • Defence Reform Canadian Defence Renewal Program Canada’s Defence Renewal Program is about operational refocus, innovation and cost efficiency: sustained improvement is underwritten by a regime for deep cultural change • • • Defence Renewal Team established, 2012 • Staged implementation of changes, with the following key outcomes desired by 2018: Projected reinvestment opportunity: $750M-1.2B annually, by 2017/18 9 renewal actions around Performance and Organisational Practices o Focus on front-line capabilities & readiness: reduced overheads and process inefficiencies o o Technology and innovation to enable process improvements o • Regime for performance metrics and targets in place Culture of continuous improvement Projected Performance reinvestments (P/A by 2017/18): Operations & Training $100-190M Information Maintenance & Management & Materiel Technology $280-450M $35-70M Infrastructure Personnel Management Systems $110-185M $50-85M $175-220M © 2013 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International. 11
    • Defence Reform UK - Defence Equipment and Support (DE&S) Reform to materiel management in the UK: • DE&S strength 17,000 people, 173 sites, annual budget of £40B • Outcome of the 2009 Gray Report. Key recommendations: o Relationship between HO and DE&S o Commercialisation of the operating model • Reform within CAAS, and GOCO: o Strong interdependency o CAAS’ role effected by developments within CAAS • CAAS. Addressed primary reform of project assurance within DE&S, by: o Improvement of cost accuracy o Rejuvenation of the assurance organisation o Skilling of the workforce • GOCO. Financial and commercial advisory (‘Procurement’ and ‘Materiel Strategy’) o Fundamentally challenges delivery of procurement & support for Defence Materiel: “privatisation” © 2013 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International. 12
    • Defence Reform Defence Logistic Agency (DLA) The DLA’s financial accounts could not be relied upon • Manages approximately US$45B, p/a • Supplies (consumables, non-equipment) and services to US forces, worldwide • 26,000 employees, in 48 US States and 28 countries • 8 supply chain operations: Aviation, Maritime, Land, Subsistence, Medical, Clothing/Textile, Construction and Energy • 5 year transformation program: •Achieved Federal Financial Management Compliance (FFMIA) •Accomplished successful rollout to more than 4,400 users •Achieved 99.7 percent system availability •Achieved $72 million in cost savings over legacy systems •Provided 100 percent supply chain interoperability with services •Reduced Logistics Response Time (21 days to 15 days) •Reduced order status notification (over 24 hours to 4 hours) •Achieved $180 million in cost avoidance by reductions in forecasts •Delivered Sales & Operations Planning to optimize service and cost. © 2013 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International. 13
    • Defence Reform Royal Netherlands Air Force Key challenges facing the Royal Netherlands Air Force • Budget cuts, rising costs, improving safety and operational capability • Sustain positive changes for the long term • Required a platform for continuous improvement Approach • Empowerment of the workforce to make changes • Delivery of internal LEAN proficiency through ‘train the trainer’ approach • Establishment of a LEAN Centre of Excellence “ Almost on a daily basis, the LEAN program helps us make decisions and reform processes in our organisation. Generaal-majoor Hans Wehren Deputy Commander, Royal Netherlands Airforce © 2013 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International. “ Benefits • Over 250 people (from Chief of Air Force to Mechanics) trained in LEAN • More than 60 process improvements which reduced cost and increased efficiency delivered in the first 9 months (maintenance lead time: 19 weeks to 11) • Other benefits (i.e. Military Air Traffic processes) • LEAN adopted across RNLAF 14
    • Opportunity – Managing the Retail Network as an integrated component of the Defence Network The Defence Logistics Companion Review to the White Paper in 2009 identified significant opportunities to deliver efficiencies, effectiveness and maturity in the Retail network and improve further Defence’s operating costs. Specifically: • synchronise delivery of Retail logistics services with Wholesale services in JLC and DMO presence in the retail network across services. The prize here is significant further rationalisation of Defence Inventory holdings building upon the achievements of the DMO Inventory Reform Program; • improve the planning and execution of the tasks from fleet managers and SPO’s to JLC whole sale logistics finishing in retail holdings supporting war fighters, and use common operating pictures to drive decision making; and • optimise the DSRG components of the Retail network in accordance with their reform objectives savings targets, and enhance end-user Retail and Wholesale support requirements including migrating former RAAF and Navy warehouses to Wholesale. Unit Stores 2nd Line DC Wholesale DC JLC OEM/FMS Plants © 2013 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. Defence Industry Supplier networks 15
    • Opportunity – Improved Cradle to Grave Planning and Management It remains true that 60 to 80% of whole of life costs are incurred in the sustainment of a capability, including mid life upgrades, yet most active management effort is spent during the acquisition phase, and too little consistent attention is put upon managing the through life cost profile of capability. • This was one of the driving forces behind the creation of the DMO bringing together the DAO and sustainment elements from the Services to drive whole of life awareness, data capture and management. This was to be achieved through the establishment of SPO’s who would drive this view of capability management. • Much has been done to improve this planning in differing divisions within DMO and yet there remains significant variability in the maturity of these management approaches, including involvement of industry partners, OEMs and other contractors to deliver this support. • Sustainment is also particularly susceptible to Government funding pressures, including quite arbitrary cuts in some celebrated cases and is afforded less attention than more high profile acquisition programs. • SPO’s and Fleet managers are not always well supported by the Services ability to describe demand in any phase of the force generation cycle and therefore commit to baseline activity programs, which can be built upon over time. • Lastly there are systems constraints to achieving the information all parties require to make more informed and cost aware decisions. © 2013 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. 16
    • Opportunity – Improved Cradle to Grave Planning and Management Such as approach need to be supported by: reliable information on forecasting, new capability introductions, contracts and financial performance. It supports all areas of the operations including finance, merchandising, and supply chain. © 2013 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. 17
    • Opportunity – Enhanced Use of Pools to Support the Raise, Train and Sustain Functions Central Opportunity. Establishing logistics nodes at, or near, the major training areas such as Cultana, Shoalwater Bay and Bradshaw would achieve the purpose of bringing the Brigade to the equipment, not with the equipment (the ‘Hertz’ concept). Development at a major regional centre nearby (Port Augusta, Rockhampton, Katherine) should have additional benefits over locating the node on the training area with respect to land use, services costs and workforce availability. Key elements: • Logistics nodes would provide a vehicle for combined arms formations or elements to mount to and from an exercise, return loan equipment and acquire required support functions. • This is similar to the mounting base concept implemented at JLU(SQ), JLU(NQ) and JLU(N) under DLTP. • Nodes could also provide the opportunity to incorporate warehousing and maintenance facilities, possibly along with EO storage and fuel storage. • Implementation of this concept would afford Defence the opportunity to take a portfolio view of potential savings to fund establishment investments. • Doctrine, policy and process to adapt to the new operating model, including alternate employment concepts to maintain technical mastery for ADF logistics personnel. © 2013 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. 18
    • Opportunity – Adopt and Proliferate the Managing Contractor Model on a Program Basis Central Opportunity. Establish Managing Contractors to take accountability for the delivery of DMO Programs with the specific objectives to accelerating the effective acquisition or upgrade of new and existing capabilities. Such a model would need to comply with Defence Governance and approval requirements but would be specifically incented to reduce total acquisition costs and to propose methods of streamlining unnecessary bureaucracy. Key benefits of such an approach: • This is different to the GOCO model under review in the UK and proposes more contained application of industry parties to deliver measurable results within clear areas of expertise. • Takes maximum advantage of industry strengths currently underutilised in Defence in complex program management, cost containment linked to schedule incentives, the need for demonstrable quality standards and breaking down bureaucratic constraints to achieving the desired outcomes. • Allows for clearly defined KPI’s supporting a DMO which is managing a series of MC’s and other contracts to deliver new capability and sustainment. • Leverages a proven model within DSRG where Defence has been engaging MC’s on infrastructure projects for many years to great effect. • It is step beyond appointing commercial, legal and technical advisers under the current model which produces variable results to truly embrace outsourced service provision models. © 2013 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. 19
    • Key observations from major reform programs Large-scale transformation must be supported with the appropriate program infrastructure to support sustainable change and measured benefits realisation 1 BASELINE FIRST “The devil’s in the detail.” 2 PROGRAM MANAGEMENT “Plan well, centrally coordinate and implement aggressively!” “Interdependency management between programs is essential.” 3 “Seed funding must be supported by a business case, every time.” FUNDING ARRANGEMENTS 4 BENEFITS “We took the benefits from the hollow logs rather than implementing real reform.” 5 THE RIGHT PEOPLE “We know that the program will take hits and shocks: this will detract from the program unless there’s strong and positive leadership at all levels.” © 2013 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. 20
    • Key observations from major reform programs “The devil’s in the detail.” 1 BASELINE FIRST • Lack of detail → unachievable targets • Baseline provides understanding of what’s potentially achievable • Integral requirement for the benefits realisation • Baseline must include the detail: o Costs o Number of staff o Extant contract/supplier arrangements (committed funds & delivery mechanisms) • Sufficient detail to be a good management tool • Apply consistent approach • Centrally consolidate, understand and own © 2013 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. IMPACT: • “Potential v Feasible” • Intended benefits only partially realised 21
    • Key observations from major reform programs “ Plan well, centrally coordinate and implement aggressively!” “Interdependency management between programs is essential.” 2 PROGRAM MANAGEMENT • Central Program Management Office (PMO) • Governance: structured and transparent • Reporting: o o Decentralised reporting leads to leakage (benefits, milestones and budget) Centralised, standardised reporting mechanisms → accurate and timely benefit realisation and control of program costs • Planning: o Thorough and detailed planning required: everything takes longer (IT enablement, unions, political environment, operational tempo) • Maintenance of momentum: o Challenging (appointment/posting terms, operational, political) o Aggressive implementation © 2013 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. IMPACT: Delegation of responsibility of the benefit leads to “leakage” 22
    • Key observations from major reform programs 3 “ Seed funding must be supported by a business case, every time.” FUNDING ARRANGEMENTS • Seed funding: o Centrally managed to prevent overruns and waste • Business cases: o Required for every bit of seed funding o Centrally coordinated • Program integrity: o Morphing with other extant initiatives diminishes visibility and focus IMPACT: To save money, you have to invest © 2013 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. 23
    • Key observations from major reform programs 4 “We took the benefits from the hollow logs rather than implementing real reform.” BENEFITS • Baselining: essential ingredient • Benefits realisation: o Robust and consistent mechanism for measurement o Must understand the business o Establish, test/review and apply early o Routinely report • Centrally coordinated and managed • Management of the interdependencies (don’t push cost elsewhere) © 2013 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. IMPACT: Failure to manage interdependencies leads to cost transfer. 24
    • Key observations from major reform programs 5 “We know that the program will take hits and shocks: this will detract from the program unless there’s strong and positive leadership at all levels.” THE RIGHT PEOPLE • Senior leadership: o Commitment and enforcement through KPIs • The people: o KPIs filter down to lowest level of the organisations o Each person understands the purpose, timelines and role in the reform • Industry partners: o Greater collaboration from Primes o External support for implementation teams • Robust Change Management regime with strong communications, engagement and training © 2013 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. IMPACT: It takes a small group of nay-sayers and non-performers to undermine the program. 25
    • Access further information and case studies on the KPMG Global Defence internet site: http://www.kpmg.com/global/en/industry/governmentpublic-sector/defense/pages/default.aspx or Google: “KPMG GLOBAL DEFENSE” © 2013 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation. Contacts: Peter Griffiths Lead Partner Supply Chain KPMG +61 3 9288 5319 pwgriffiths@kpmg.com.au