By David McGahey
The Defence Logistics Transformation Program is the key reform activity under the logistics stream of the Strategic Reform Program.
The need for reform of Defence Logistics - primarily the capability that is provided by Joint Logistics Command (JLC) - was identified in the Defence White Paper 2009 "Defending Australia in the Asia Pacific Century: Force 2030".
In implementing these improvements, the Defence Logistics Transformation Program aims to modernise Defence logistics facilities and introduce new technologies and improved business processes across the logistics network within Australia, as well as reduce the footprint of the current logistics network.
The benefits to be delivered by the Program are twofold. First, the reduced footprint and improved efficiency is necessary to deliver $350.4 million in savings by 2018/19. Efficiencies will be achieved through:
site consolidation and operating the future network from Commonwealth-owned land, reducing lease costs;
improved stock management practices and implementation of warehousing optimisation and streamlined governance and reporting;
implementation of a new business model, eliminating duplicate management tasks occurring between the Commonwealth and contracted staff; and
standardisation of business support services and reduced overheads.
Second, the Program will deliver non-financial benefits. These will be in the form of expected improvements in the standard of logistics services to Defence customers, providing a more responsive business model, operating from new and refurbished facilities, and using commercial industry standard technologies and practices.
Expected benefits include:
modern, commercial-standard facilities leveraging industry 'best practice' process, systems and technologies;
improved warehouse inventory accuracy through better business processes and warehouse technologies;
greater capability to support operations through redirection of efficiencies back into Defence; and
greater logistics transparency and accountability, with a focus on driving outcomes and performance-based contracts.
Infrastructure
The current logistics network operates from aging infrastructure spread across 201 warehouses in 24 locations - in some cases the warehouses date back to World War II. These facilities do not easily allow for use of industry-standard technology and automation. They are expensive to operate and maintain, and would require major investment to keep them up to the standard required for supporting contracted commercial operators.
More than $750 million will be invested in new and refurbished purpose-built infrastructure that will enable Defence to exit leases in Moorebank in Sydney and Winnellie in Darwin. This will generate the required contribution to the strategic reform savings target, while providing enhanced support to operations. The future network will consolidate and rationalise the logistics network from 24 sites to seven primary wholesale sites supported by specialty and retail centres.
Logistics services retender
The new logistics services business model to be introduced by the Transformation Program will see the appointment of commercial providers for warehousing and distribution and land materiel maintenance services under separate contracts. These new arrangements will replace the existing Defence Integrated Distribution System contract and similar contracts due to expire in June 2013.
Timeframe
The construction of infrastructure is scheduled to begin in June 2013. Infrastructure Division is leading this part of the Program, with new facilities scheduled to come on line in early 2014.
Transition
The transition element of the Program encompasses the planning, coordination and management of all the changes that will need to occur to adopt the new contractual arrangements under the enhanced Logistics Services Business Model. While the new facilities and new contractual arrangements are major enabling activities for the success of the Program, transition will actually implement the significant operational, commercial and cultural changes required to fulfil the White Paper expectations.
Workforce
JLC workforce changes will be phased over the next six years.
Phase one: June 2013 to June 2014. Phase one will realign the workforce to the new business model as transition to the new logistics services contracts occurs. While the changes include proposed new structures for Supply Chain Branch Headquarters and each Joint Logistics Unit, staff will not be relocated to new sites in phase one.
Phase two: June 2014 to June 2016. This second tranche of organisational change will be a result of site consolidation, with new facilities and improvements to Defence policy and processes streamlining governance and reporting requirements.
Phase three: June 2016 onwards. The last phase will factor in workforce changes resulting from increased efficiencies in stocktaking, reporting, contract management and corporate support as the network reaches its new and improved 'steady state'.
Warehousing and distribution
The aim of delivering new facilities and contracts is to offer optimum support to warehousing and distribution functions and processes. In anticipation of the new arrangements, the Program, along with the Defence Materiel Organisation and the Services, is involved in major preparatory activities to overhaul the current inventory and remove, relocate and reduce excess stock.
Land materiel maintenance
The Program will provide an integrated maintenance solution for all land-based systems into the future. Through designing a new land materiel maintenance network in which Defence will take a more active management role with the contracted service provider, the Program is planning for the future management of technical integrity within the Joint Logistic Units, placement of personnel on Defence-specific training courses during the transition period, and site-specific requirements for Commonwealth equipment and items that will be provided to the future land materiel maintenance service contractor.