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Counting the Links in the Supply Chain
As published in NASA's Rendezvous Magazine, Jan. 2009
When the shuttle retires, there's a real possibility that some of its parts suppliers may retire, too. After all, there are only three orbiters and once they're grounded for good, the need for critical spares will go away. In the years between the retirement of the shuttle and the beginning of flight operations for Constellation, how will the space program's industrial supply base survive? And what will happen when Constellation needs parts, subsystems and critical spares but many of the qualified suppliers of space hardware are long gone? Imagine the cost of building a new supply base.
That's where Supply Chain Management comes in.
Supply Chain Management, or SCM, is a complicated area of expertise in any industry. In manufacturing for automotive or commercial aerospace, for example, the myriad components, elements, systems and spares that come together just in time for a car or a plane to roll off the end of an assembly line represent massive procurement, inventory and distribution systems.
In human space flight, SCM becomes a different kind of animal. No less complex, certainly, but defined by different parameters that spring from the very nature of the space program. Orbiters, space stations and other man-rated spacecraft aren't products of assembly lines. They are not manufactured in quantity. The frequency of their missions is extremely low, and their architecture and configuration are incredibly complex.
According to Galluzzi, a common misconception about SCM is that it is, in effect, a commercial business model that only focuses on managing suppliers. Galluzzi rejects this notion. Instead, he believes that SCM is an evolved logistics philosophy that enables both NASA project elements and prime contractors to reduce non-recurring operations and sustainment cost impacts, while improving hardware availability throughout the life of a program. But managing suppliers is only part of the equation. He also maintains that when properly implementing SCM principles, insertion of new technology becomes a part of the process rather than the exception. This allows for a more robust level of technology readiness that, in turn, shapes product demand.
"When I refer to the life of the program, I mean from the very start — from design, development, test and evaluation – or DDT&E – to validation, to production, and all the way to systems termination and disposition," Galluzzi explained. "This is because SCM architecture is designed with product lifecycle management as its main focus, which requires integration of program functions from start to finish. In short, SCM is a critical part of the design process. At the end of the day, approximately 80 percent of recurring operations costs is influenced during DDT&E."
A clear case in point here is the historical cost of shuttle operations — a result of initial design and development that focused primarily on extraordinary performance parameters, and not as much on an extended life of processing operations, design standardization and project collaboration.
An "-ility-centric" philosophy
"SCM has a philosophy that is focused on agile operations and flexible manufacturing, just-in-time production and vendor-managed inventories at strategic locations called logistic nodal points," Galluzzi explained. "It's what I call '-ility-centric' — sustainability, reliability, maintainability and affordability, which leaves the program with the ultimate '-ility' — accountability."
Agile operations are then able to meet program requirements without adding significant funding requirements. But in space, logistic nodal points and spares programs take on entirely new meanings. They become interplanetary.
"As we leave low Earth orbit, we won't have much up-mass flexibility, and when we start lunar base operations, we're not talking about a week-long camping trip any more," Galluzzi explained, in a reference to the Apollo lunar missions of almost 40 years ago.
As we move into lunar and Mars objectives, the supply chain movement of materials, people and information from Earth-based sources to interplanetary destinations becomes highly complex. Any slip in schedule due to unavailability of parts, spares or hardware components becomes exponentially more expensive and increasingly risky as the supply chain increases in distance and complexity.
Much more than stocking the shelves
Bujewski explained that up until now, there have been two standard approaches to managing operations and sustainment within NASA — neither of which are known to be as agile or lean as SCM, nor as adaptable to financial and political pressures or flight manifest changes.
The first approach is Integrated Logistics Support, or ILS, which was implemented by the U.S. Army in the early 1970s and served, for the most part, as the foundation for shuttle logistics. This paradigm focuses on stocking the shelves with inventory based on such metrics as mean time between failure, mean time to repair, probability of sufficiency and repair generation rate forecasts, among other things. However, a problem with this approach is that in a dynamic engineering environment that realizes frequent design changes, chances are good that there will be some obsolete inventory on the shelves.
The second approach is a more evolved ILS process known as Performance-Based Logistics, or PBL. It relies on the prime contractor to support operations and sustainment on a fixed-cost basis. PBL was introduced around 1994, at roughly the same time that the Commercial Off-The-Shelf or COTS initiative was introduced at the Department of Defense. Today, without the proper contract language in place, this approach is also dated. But more importantly, it offers limited government oversight.
PBL's weaknesses are well documented in a 2006 GAO report entitled: "Space Acquisitions: DoD Needs to Take More Action to Address Unrealistic Initial Cost Estimates of Space Systems." The report details specific areas in which program officials were overly optimistic in their assumptions — most notably in that the industrial base would remain constant and available.
"What may be missing in the PBL paradigm is the requirement for a cross-element and cross-program information-sharing environment," Galluzzi said. "That would provide transparency to the programs so they could understand the demand pressures and other influences on the liquidity and profitability of the space industrial base."
To further complicate the issue, the key to it all hinges on the SCM architecture, which integrates a lot of different information sources. According to Galluzzi, this encompasses a rather wide variety of software applications including shared master data files, CAD systems, materials requirements planning and supplier relationship management applications. The latter focuses on managing supplier and product line viability and other variables that can negatively impact a healthy supply base. [Editor's Note: Confused, yet? Galluzzi and Bujewski were just getting warmed up!]
Changing requirements between programs
Now imagine SCM from a transition perspective where the focus has to be on what the changing requirements are from both shuttle and Constellation, and also on cross-mapping all those suppliers. Understanding what supplier supports which subsystem, as well as the relationships between them, will help quantify risks during the gap between programs. After all, a problem with one supplier can have unforeseen repercussions throughout an element or program.
For instance, what happens if, because of the low level of demand for a part, the supplier no longer has the tooling or the expertise to manufacture that part that's needed for shuttle or Constellation? Or the business case to support NASA contracts no longer makes financial sense five years later? It's an expensive and time-consuming problem.
"NASA is only 4 percent of the aerospace industry and approximately 30 percent of the domestic space market," Galluzzi said. "So when you compare the $8 billion or so of appropriated funds for human space flight to the aggregate $200 billion in aerospace industry revenue, you realize that NASA really has very little influence over the major supplier's profitability on space products."
The bottom line is that suppliers may not be going out of business so much as realizing little or no profit margin in manufacturing NASA space-qualified hardware.
Applicability to NASA
As the crosscutting SCM lead to transition, Galluzzi routinely hears two comments that he believes are false. First, that SCM does not apply to NASA and its space systems. And second, that the prime contractors supporting the projects are responsible for material shortages and industrial base management, so there is no need for NASA to manage the supply chain.
"SCM is a true end-to-end process," Galluzzi stated. "But more importantly, it's a means of reducing the indirect core procurement activity costs that are associated with operability and sustainment. So I can't think of a better industry where SCM does apply."
The fact is: SCM enables the optimization of cost efficiencies and hardware availability for the life of a program for both NASA project elements and prime contractors.
"We have such low flight rates and low product demand," he explained. "All the more reason to understand how to shape product demand while being closely engaged with our projects."
It's important that components are delivered on time, every time, because if a delivery of a part that's critical for launch is missed, then the launch is delayed.
That's bad enough for shuttle missions, where delays add up rapidly in terms of schedule and financial costs. Scrubbed launches mean pushing mission schedules back not just a day or two, but sometimes months —which, in turn, impact how the International Space Station is provisioned and re-crewed, not to mention constructed. Leaving low Earth orbit can only make it more complicated.
"If there's someone on the moon waiting for a shipment from earth and we've got a glitch, how do we ensure we get it to the moon on time?" Bujewski wondered.
Galluzzi and Bujewski, in addition to other contractor participants in the Innovative Partners Program, have been working diligently through 2008 to develop software tools and other initiatives that will assist the agency in preserving and protecting the industrial base. Among SCM initiatives that include several studies and efforts to build relationships across a number of government agencies, two software tools and the establishment of a space commerce network are particularly noteworthy.
First, Prime Supplier™ (patent pending), developed by Galluzzi, is a tool that uses programmatic data and other influences on the liquidity of single source suppliers to determine a supplier's economic stability and better understand demand pressures on their product line. Specifically, it was developed to manage diminishing manufacturing sources and material shortages and identify areas for potential pooling of non-recurring program funds required for obsolescence mitigation. Prime Supplier successfully identified cross-program capabilities and showed potential supplier contract gaps between the shuttle program and Constellation. To date, six Fortune 500 companies have expressed strong interest in licensing this emerging technology.
MASCI Map, a supplier mapping software application initially designed for the Missile Defense Agency, was acquired for the purpose of identifying cross-element and cross-program utility and impacts. The application provides:
In short, MASCI Map provides the agency with an SCM big picture.
Finally, the implementation of a Space Commerce Network known as Network Centric Manufacturing or "Supplier City," could conceivably provide an opportunity to 'rescue' resources in danger of being terminated. In effect, Supplier City would be an interagency collaboration between NASA's Exploration Systems Mission Directorate, the Office of the Under Secretary of Defense for Acquisition and Logistics, Missile Defense Agency, and other third-party system integrators. It is envisioned to be a solution to potential national security threats associated with industrial base and skills loss through attrition and product obsolescence. The end result would be deployed at various locations throughout the country, with the NASA Shuttle Logistics Depot on Florida's Space Coast as a potential pilot site.
Mandated from the top
Even given everything Galluzzi and Bujewski have accomplished thus far, some still ask the question why not just let the prime contractors worry about SCM and the viability of the industrial base?
The answer is simple: It's a presidential directive.
President Bush issued National Space Policy Directive 49 on Aug. 31, 2006. In it, an overarching national policy that governs the conduct of United States space activities was established. It includes specific language regarding the agency's responsibility for maintaining the country's space-related science, technology and industrial base.
For Galluzzi, Bujewski and their space counterparts across government, those last 15 words are their marching orders.