War, terrorist attacks, disease and industrial action are just four examples of disruptive events that can, and indeed have, transformed perceptions of supply chain security and have highlighted their vulnerability (Juttner, 2005). Additionally, with increasing global sourcing, supply chains have become increasingly complex and have therefore increased the risk associated with them. The serious of this vulnerability has been recognised by the government and in 2003 the Department for Transport issued a report whose aim was to assist managers in improving the resilience of their supply chain networks (Peck, 2003).Resilience, in terms of the supply chain, is the ability of a system to return to its original (or desired) state after being disturbed (Christopher, Rutherford, 2004). Until recently organisations have paid little attention to supply chain resilience but this view is rapidly changing due to the massive financial penalties that can be incurred by the failure to understand and manage this risk. Many businesses are using process control methodologies to manage their supply chain processes and, in turn, reduce the risk within their supply chain.
Risk, in the context of the supply chain, has been defined as the potential occurrence of an incident with inbound supply in which the result is the inability of the purchasing organisation to meet customer demand (Zsidisin, 2003). Process control methodologies such as enterprise resource planning (ERP), total quality management (TQM) and Six Sigma are all initiatives, implemented by businesses worldwide, to improve performance and, ultimately lead to competitive advantage.Whilst these initiatives have been reasonably successful in improving business performance and have been used effectively to improve the physical security of the supply chain (Lee, Whang, 2005) it is the efficacy of them to overcome problems of supply in the defence environment that will be examined in this paper; in particular the use of Six Sigma.
For the United Kingdom’s Armed Forces the supply chain is managed by the Defence Logistics Organisation (DLO). The DLO is an extremely large and diverse organisation consisting of a mixed military/civilian staff of approximately 36,000 personnel and an annual budget of around i??8bn (MOD, 2001). The Defence environment is a complex, continually changing organisation and in recent years has had to adapt to a multitude of changes brought about by the end of the Cold War, the Strategic Defence Review (SDR), Smart Acquisition, the new Defence Industrial Policy, the changing threat of international terrorism and the continuing emergence of new technologies (Hartley, 2004). On top of this there is little room for error; failure in the supply chain will not necessarily incur large financial penalties but will result in a lack of capability and on operations could well result in the loss of life (Bruce, 2004). Six SigmaSix Sigma is a process control methodology that was originally developed at Motorola. Since then it has been refined and developed by a number of companies and has been hailed as a great success by major companies such as General Electric (GE) (Bartlett, 1999).
Six Sigma equipped GE’s managers with the tools to tackle tough issues and to improve its people who would in turn produce better products and services (Byrne, 2003). Six Sigma methodologies provide a systematic way to define problems from both a process and financial perspective, identify problem factors and establish measures to apply continuous performance improvements.Due to its disciplined process improvement techniques which address process capability rather than functional improvements it would seem that Six Sigma would be ideally suited to address Supply Chain issues, particularly as the supply chain cuts across these functional areas. Six Sigma nowadays is often implemented in conjunction with LEAN techniques and includes the reduction of costly ‘safety stock’. This in itself reduces resilience and increases supply chain vulnerability to even minor external disruptive events.Many of the supply chain risks, however, lie within the supply chain itself and it is these risks that Six Sigma may be able to reduce, mitigate or even remove.
Six Sigma techniques can be used to reduce variability in time thus reducing lead times and allowing for reduced stock levels without introducing extra risk. Whilst this in itself creates a form of resilience it would not stand up to disruptive events or even sudden unforeseen surges in customer demands; for this we need spare stock and spare process capacity both of which are costly.For the MOD a balance needs to be found between providing ‘value for money’ and the cost of recovery from the consequence of the risk (Christopher, Rutherford, 2004). In the MOD this cost cannot always be defined in monetary terms but could be loss of capability or simply the political costs associated with failure. Defence Supply Chain For the purposes of this paper the Defence Supply Chain can be defined as ‘the network of organisations involved, through upstream and downstream linkages, in the different processes and activities that produce value in the form of products and services in the hands of the ultimate customer’ (Peck , 2005).The Defence Supply Chain grouping is a sizeable and diverse organisation that is responsible for the operation of this large and complex end-to-end process in addition to providing an array of other services across defence. The effectiveness of the Defence Supply Chain on operations has been questioned many times as it has relied on an ad hoc rearrangement and regrouping of peacetime assets, causing inefficiency, delayed responses and ultimately a lack of confidence from Front line Commands in its abilities and provisions (Booton, 2006).
Indeed the End-to-End (E2E) Study has identified the requirement for an effective supply chain that satisfies both the operational and non-operational requirement of all three services. As with all other public sector areas there is a relentless governmental drive to provide greater value for money yet, set against this, is the increased involvement in international conflicts and peace keeping operations necessitating the need to maintain and improve military capability.It is evident that, in order to achieve this balance, efficiencies need to be made in all areas and the supply chain is seen as a costly area in which savings could be made. One of the current problems that the MOD is facing in trying to improve the complex defence supply chain systems is the mistrust that still exists between the MOD and industry (Humphries, Wilding, 2004).
There is much work, on both sides, currently being undertaken to address this issue; indeed the new Defence Industrial Strategy is seen as a major step in the right direction and directly addresses supply chain issues (MOD, 2005).Such are the complexities of the defence supply chain it is often difficult to identify the first, second and third tier suppliers; in fact some suppliers are involved at different levels for different products (DTI, 2005). Figure 1 illustrates a supply chain’s component parts, all of which are inextricably linked. It is necessary to view the chain in this manner as it is apparent that the different levels require differing tools and techniques to manage the risks (Peck, 2005).
Many of the level one problems have already been identified by The Cleansing Project team (TCP) headed by Colonel Tony Anthistle in 2000.The team identified problems ranging from the incorrect codification of thousands of stock numbers to inconsistencies between the three services systems that would inevitably cause problems when operating in a tri-service environment. Within the MOD it is currently difficult to quantify many of the supply chain issues associated within level one due to the lack of available data; legacy IT systems failed to capture the data required for extensive analysis (Chapell, Peck, 2005). Clearly Information Systems (IS) are required that automate processes, enable fast and accurate data capture and give both visibility and accountability.