Cuts in defense budgets might be thought to provide an obvious spur to closer cooperation within the defense & security industry. Since 2006, NATO spending on defense has fallen in real (inflation-adjusted) terms by around 11%,* with reductions in all the major countries. Clearly, cooperation is well-advanced at the level of military operations, even if armed forces are still far from true interoperability.
But cooperation lags far behind in the provision and support of equipment used in such campaigns. While it seems obvious that such cooperation could produce monetary savings and greater military effectiveness, in practice the number of collaborations has been limited and they have had only mixed success. As governments seek to obtain better value from shrinking budgets, multi country collaborations get under way Alliance leaders have recognized that industrial and technological cooperation is vital for maintaining military capabilities as spending declines.
Some recent examples include the Tornado and Typhoon aircraft, and the NH90 helicopter programs.
This is in addition to the F-35 Lightning fighter, the A400M airlifter, and Meteor missiles projects However it is also true that collaborative programs are typically subject to long delays and cost escalation, and have not been managed cost-effectively. Though produced jointly, equipment is maintained separately by nations.
About a quarter of NATO nations’ defense budgets are spent on the acquisition of military equipment. Add the cost of lifetime maintenance, which can amount to three or four times the purchase price, and the proportion of defense spending taken up by equipment is considerable. Here are three aspects that in my view are the foundation to a modern, flexible and responsive military logistics organization:
1.) Gaining full visibility into military logistics by integrating purchase and supply; where SAP has been able to lower transportation spend for organizations by 9% where forecasts are dynamic and updated frequently.
2.) Driving efficient maintenance and engineering operations by leveraging real time data; where SAP has demonstrated 62% lower unplanned downtime of equipment and 30% lower rework time when the maintenance process is streamlined by the automation of monitoring, notification, and resolution processes.
3.) Enabling full visibility of transactions under the foreign military sales (FMS) program; where our customers have made 31% Higher average annual direct savings and 68% lower procurement cost (as % of total spend).
I believe that the best way to tear down silos in military logistics operations is, to essentially support effective operations of sustainable defense teams, and to increase flexibility in planning of deployments and the support of operations.
Finally, with the budget pressure ongoing and to attack the myth of stand-alone military organizations, I truly believe that the best utilization of available forces and resources in the most effective way possible is a core competence for future military organizations.
Join us at the Defense & Security Expert table at SAPPHIRE 2014 in Orlando