Introduction to Activity Based Concepts
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Transcript of Introduction to Activity Based Concepts
1
October 2004
S P IS P IS P IS P IS P IS P I
PURPOSE & VISIONPURPOSE & VISION
Strategic Purchasing Initiative (SPI)
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October 2004
S P IS P IS P IS P IS P IS P I
Business Transformation: Bottom LineBusiness Transformation: Bottom Line
“The willingness to focus at the decisive place and time necessitates strict economy and the acceptance of risk
elsewhere and at other times.
To devote means to unnecessary efforts or excessive means to necessary secondary efforts violates the principle of focus
and is counterproductive to the true objective.
Focus applies not only to the conduct of war but also to the preparation for war.”
Economy of Effort
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October 2004
S P IS P IS P IS P IS P IS P I
THE BURNING PLATFORMS or
WHY WE NEED TO CHANGE or
How Parochialism Hurts the Corps
THE BURNING PLATFORMS or
WHY WE NEED TO CHANGE or
How Parochialism Hurts the Corps
S P IS P IS P IS P IS P IS P I 4
Internal and External Budget Pressures
(By calendar year, as a percentage of GDP)
Source: Congressional Budget Office based on Social Security Administration, The 2002 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds (March 26, 2002); and Department of Health and Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, 2002 Annual Report of the Board of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds (March 26, 2002).
Projected Outlays for Social Security and Medicare Outstrip the Programs' Revenues Sooner Than the Trust Funds Reflect
USMC pressures include:ModernizationAging equipmentAging facilitiesIncreased QOLGWOT
S P IS P IS P IS P IS P IS P I 5
Politically Radioactive Solutions
Alternative Corrective Action
- Raise taxes
- Reduce benefits
- Reduce discretionary spending
Defense as a share of total discretionary spending
More extremecorrective
action required as time passes
S P IS P IS P IS P IS P IS P I 6
Strategic Business Plan Goals
• Aggressively improve business processes based on: — 5 MROC decisions— CMC POM06 guidance
• Bottom line metrics:— Realign 1,700 Marines to operating forces (by FY12)— Realign $600M ($40/$120/$200M annually by FY 08/10/12)— Clean Financial Audit (FY 07)
• Key secondary metrics:— ABRM Policy published— Satisfaction/performance measurements— Competitive sourcing meets MROC decision metrics (900 Marines)— Business information standards and architecture— Percent of OPBUD’s organized with essential info elements
The “incentive” is to assist The “incentive” is to assist CMC afford the MAGTF CMC afford the MAGTF 2015 capabilities we need.2015 capabilities we need.
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October 2004
S P IS P IS P IS P IS P IS P I
STRATEGIC PURCHASING INITIATIVESTRATEGIC PURCHASING INITIATIVE
S P IS P IS P IS P IS P IS P I 8
Service Acquisition Burning Platform
• Resources— Over half of our purchasing is acquisition— $2.9B non weapons system
• Training— Little or no systematic training— Ultimate customers lack confidence in contract support
• Organization— Little understanding of the process and who owns it— Process is slow and unfriendly - driving customers out
of USMC at 3-5% premium for contract support
S P IS P IS P IS P IS P IS P I 9
Why SPI?
Purchasing Best Practices & Best ChoicesPurchasing Best Practices & Best ChoicesPurchasing Best Practices & Best ChoicesPurchasing Best Practices & Best Choices
IMPROVEDIMPROVEDSUPPORT TOSUPPORT TO
THE WARFIGHTERTHE WARFIGHTER
S P IS P IS P IS P IS P IS P I 10
What is Strategic Purchasing Initiative (SPI)
• A strategic approach to purchasing goods and services
• Covers:— Resources— Training— Organization and structure
• Based on significant analysis— Spend analysis— LR/LB research— Other organizations
• Linked to PPBE to assist CMC afford MAGTF 2015 capabilities
S P IS P IS P IS P IS P IS P I 11
Private Sector SPI Actions and Successes
• Actions— Conduct firm-wide spend analysis— Rationalize supply base, consolidate contracts— Establish long-term partnerships with best suppliers— Help key suppliers improve quality, cost, service— Integrate key suppliers into organization
• Results— Ford Motors saved 3% a year of purchases— AMR saved 20% over 5 years— Honda saved 17% over 4 years— Chrysler saved 4% a year for six years— Many firms realize reductions in inspections and improved
delivery or service/product
Source: Source: RAND Project Air Force Report RAND Project Air Force Report Implementing Best Purchasing and Supply Management Practices - 2002Implementing Best Purchasing and Supply Management Practices - 2002
S P IS P IS P IS P IS P IS P I 12
More SPI Success By Others
• DoN Administrative Services— Minimalist scenario 1% Savings vs Aggressive scenario (3.5%)— Benefits include socio-economic primes becoming more competitive
• USAF - Commodity Councils— Wave I - Aircraft Accessories/Landing Gear/Ground Equipment— Wave II – Engines/Electronics/Secondary Power— Wave III – Aircraft Structural/Instruments
• Private Industry— Aberdeen Group low balls saving at 30% & exceeds client
expectations— Numerous financial success stories & improved support to operators
S P IS P IS P IS P IS P IS P I 13
Leveraging the Total Force
S P IS P IS P IS P IS P IS P I 14
Conduct an end-to-end review of Marine Corps’ product and service acquisition practices in order to identify opportunities for improvement.
Coordinate the development, approval, and implementation of action plans based on the following approaches:
(1) Coordination of Marine Corps purchasing related initiatives(2) Process mapping, analyses, and best practices(3) Spend analyses, commodity councils, and benchmarking
SPI IPT Mission
S P IS P IS P IS P IS P IS P I 15
SPI is More Than Contracting
Requirement Generation
ContractingActions
Execution Management
Who Owns the overall Process??
Who are the Stakeholders??
What skills do we need to develop??
How do we deliver effective
training??
How can we improve the
overall process??
S P IS P IS P IS P IS P IS P I 16
Service Acquisition Service Acquisition Product Acquisition Product Acquisition
Spend Analysis
ProcessMapping & Analysis
InitiativeCoordination
Spend Analysis
ProcessMapping & Analysis
InitiativeCoordination
SPI Dual Approach How can we improve Marine Corps purchasing of products and services?
S P IS P IS P IS P IS P IS P I 17
The Battlefield
Skill ShortfallSkill Shortfall
In-EfficiencyIn-Efficiency
In-EffectivenessIn-Effectiveness
Simple WasteSimple Waste
PBSAPBSA
Acquisition Training Initiatives
Acquisition Training Initiatives
Spend AnalysisSpend
Analysis
RCO CEOssRCO CEOss
End-to-End AnalysesEnd-to-End Analyses
E-ProcurementE-Procurement
Informed Purchase Strategy
Informed Purchase Strategy
Excessive AutonomyExcessive Autonomy
Small Business Strategy
Small Business Strategy
Fragmented PurchasingFragmented Purchasing
GCSS-MCGCSS-MCClass IXClass IX
NIMSNIMS
3PL3PLFISC/USMC
stockFISC/USMC
stock
Other ServicesOther
Services
Cherry PointCherry Point
Weak Common Situational Awareness
Weak Common Situational Awareness
External DatabasesExternal Databases
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DoD e-MallDoD e-MallGSA AdvantageGSA Advantage
Prime VendorPrime Vendor
Community ManagementCommunity Management
RIMMRIMM
DWSSDWSS
Areas ofConcern/Interest
Sample of Initiatives &
ImprovementsIn Progress
Decentralized ProcessesDecentralized Processes
Duplicate ProcessesDuplicate Processes
Roles & ResponsibilitiesRoles & Responsibilities
S P IS P IS P IS P IS P IS P I 18
Small Business Strategy: Balancing Needs
Small Business Strategy
Small Business Strategy
Consolidation/ Consolidation/ BundlingBundling
PrimePrimeContractorContractor
TargetsTargets
Small Business Small Business Subcontract EvaluationSubcontract Evaluation
Factor TargetsFactor Targets
SmallSmallBusinessBusiness
UtilizationUtilization
SubcontractorSubcontractorTargetsTargets
Coordination Coordination With With
OSN SADBU/SBAOSN SADBU/SBA
S P IS P IS P IS P IS P IS P I 19
Expected Results from SPI
• Purchasing consolidation
• Supplier partnering & DoD partnering
• Purchasing consolidation
• Supplier partnering & DoD partneringSpend Analysis
• Process standardization
• Process best practices
• Acquisition training
• Roles and responsibilities defined
• End-to-end synchronization
• Process standardization
• Process best practices
• Acquisition training
• Roles and responsibilities defined
• End-to-end synchronization
ProcessMapping & Analysis
• Existing initiative deliverables for use with SPI
• Eliminate duplication of effort
• Identify areas requiring further attention
• Existing initiative deliverables for use with SPI
• Eliminate duplication of effort
• Identify areas requiring further attention
InitiativeCoordination
Tangible Savings Results and Required Investments
• 1% per year for PR07 (commitment in Nov 04)
• TBD % per year for POM08 (commitment in Nov 05)
Tangible Savings Results and Required Investments
• 1% per year for PR07 (commitment in Nov 04)
• TBD % per year for POM08 (commitment in Nov 05)
SPI OverallSPI Overall
S P IS P IS P IS P IS P IS P I 20
SPI Vision and Relationships
Strategic Purchasing Initiative (SPI) Strategic Purchasing Initiative (SPI)
PBSA TrainingInitiative
PBSA TrainingInitiative
Base SupplyStudy
Base SupplyStudy
InitiativeCoordination
InitiativeCoordination
Process Map& Analysis
Process Map& Analysis
SpendAnalysisSpend
Analysis
BusinessTrainingBusinessTraining
ImprovementEnabler
ImprovementEnabler
ImprovementEnabler
ImprovementEnabler
ImprovementEnabler
ImprovementEnabler
ImprovementEnabler
ImprovementEnabler
TrainedAcquisition
Team
TrainedAcquisition
TeamSavingsSavings Returned
WarfightersReturned
WarfightersBetter
Cycle TimeBetter
Cycle TimeOther
OutputsOther
Outputs
Better / Cheaper / FasterWarfighter Support
Better / Cheaper / FasterWarfighter Support
DoD AcquisitionGoals Met
DoD AcquisitionGoals Met
Whichincludes:
To develop:
Resulting in(output):
Resulting in(outcome):
IMPROVE BUSINESS PROCESSESIMPROVE BUSINESS PROCESSESIMPROVE BUSINESS PROCESSESIMPROVE BUSINESS PROCESSES
ImprovementEnablers
ImprovementEnablers
S P IS P IS P IS P IS P IS P I 21
Summary
• Significant resources are spent in purchasing— Significant amount is for services— Significant amount going outside USMC contracting
• Other organizations have dramatically improved purchasing
• Need better skills— To frame and maintain relations to external providers key issue
• Need to support small business goals
• Deliberate program to improve process/reduce costs over POM08 is needed to help CMC finance critical MAGTF investment – without impacting local programs
S P IS P IS P IS P IS P IS P I 22
Bottom Line
The Marine Corps is a combat force -- not a business. To be successful, however, we need to support warfighting
excellence with well-managed business processes that are both effective and efficient.
- M.W. Hagee
Commandant of the Marine Corps
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October 2004
S P IS P IS P IS P IS P IS P I
BACKUP SLIDESBACKUP SLIDES
S P IS P IS P IS P IS P IS P I 24
7 Business Processes
• Installation Support (DC, I&L)
• CSS/Logistics (DC, I&L)
• Acquisition (SysCom; DC, I&L)
• Information Technology (C4I)
• Training (DC/CD/MCCDC)
• Financial Management (DC, P&R)
• Human Resource Management (DC, M&RA)