A European Defense Ministry Revamps its Logistics Strategy
To ensure successful execution of its five-year strategy, a european defense agency designed and developed a new governance structure and revamps its logistics strategy and operations.
Defense logistics support—the activities involving the movement and maintenance of military forces—accounted for nearly half of a European defense ministry’s annual operating expenditures. The ministry wanted to reduce those costs without sacrificing the quality of the armed forces’ operational capabilities in the air, land, and maritime environments. To that end, ministry leaders asked Burk to help develop and implement a series of recommendations that would streamline its end-to-end logistics processes.
Working closely with a client team consisting of both civilian and military personnel, we began by establishing a cost baseline for the ministry’s logistics operations. We then conducted detailed analyzes of the ministry’s current logistics strategy, processes, and performance management in an effort to diagnose issues related to cost, quality, lead time, and inventory performance.
Based on this analysis, we helped design a new end-to-end logistics process. In total, we proposed more than sixty changes to the current process, with potential savings in the hundreds of millions of dollars. We defined the organizational and quality implications of the new process, identified key challenges that may arise during and after implementation, and developed an implementation plan as well as a tool to help the client track the benefits of the new process. We also quantified the improvement potential in costs, lead times, and availability. This first phase of the project took six months.
We then supported the transition to implementation. To confirm the size of the benefits, test how quickly they could be realized, developed, and build the client’s capabilities for implementing the recommendations independently, we began a series of pilot projects. Our expectation was that the pilots would take eighteen months, but in one-third of that time we were able to confirm our initial estimates. Following the pilot phase, the defense agency began full-scale implementation.
Within a year of implementation, the ministry had captured several hundred million dollars in net efficiency gains, equivalent to two percent of its total spending on logistics support. One year later, the ministry reported that net efficiency gains had increased to more than half a billion dollars. The government’s audit office reviewed the ministry’s work in improving its logistics-support models. The results of that review, which were made public, were highly positive, confirming that the ministry had reduced costs dramatically while maintaining—and even, in certain cases, improving—performance.