Friday, 1 March 2013

Just In Time... for an AMRAAM

As so often happens with this blog, I keep getting distracted from planned work by things that pop up on the fly. One of those - and the subject of today's article - is the revelation that a US Air Force cadet has figured out how to save the USAF $4.9 billion over the next five years by altering the way it purchases some of its air to air and air to surface missiles.
The article on which can be found here suggests that the cadet (on a summer internship) calculated that the air force could reap the significant savings buy purchasing items in bulk orders, utilising the full production capability of the manufacturer, instead of the drip feed of orders that is common to defence all across the world.

As the editor of the piece points out in his snippet at the end, bulk purchasing is hardly a revolutionary concept. And he's right, it's not. The trouble is that today's world is pervaded by a management culture that is detached from reality and that insists on grabbing little bits of other organisations operating methods and trying to implement them, without understanding the whole picture (can you guess my opinion on managers and management culture in general?).

A classic example of this has been the number of organisations that tried to cut costs by moving their helpline services out of street level offices and into centralised call centres (a favourite of banks). The theory was that what worked for sales calls could work for customer service, and relied on the number of calls remaining roughly the same which a centralised office could handle much more cheaply.

The trouble is that every time a big organisation does this, the number of phone calls to the call centre invariably explodes exponentially compared to initial predictions. This is because of a phenomenon first identified in the 1980's by Professor John Seddon, known as Failure Demand

Essentially customers used to ring their local bank and get a satisfactory answer and/or resolution to their complaint first time from an experienced professional. Now they were having to speak to the poorly trained equivalent of a glorified answer phone, which resulted in multiple calls to the call centre in order to get their complaints sorted properly, producing a several fold increase in the number of inbound calls; a problem which was only magnified further by the long waiting times for calls and tight management control over call times and number of calls answered.

(If you work in a call centre, ask your line manager if they know what Failure Demand is. If they don't (they wont), start looking for a new job, for your own sanity).

Another, far more common management process that pervades many aspects of western business culture these days is the principle of lean manufacturing/lean services, and that is what is of interest to us today (so bear with me on this).

The whole "lean process" malarkey (a polite way of saying "bullshit") started in Japan with the Toyota Motor Corporation and their "Toyota Way". This process was designed to reduce waste and inefficiency in their large manufacturing processes, allowing Toyota to grow from a small company into one of the worlds top automotive manufacturers.

That's brilliant and it worked wonderfully for Toyota. The problems really started when a variety of intellectually vapid morons - otherwise known as managers - decided to study Toyota in the hope of copying their methods and applying them to other businesses in order to achieve similar efficiency gains. These are the same sort of people who think McDonalds became the brand that it is today because of superior management processes and a unique business culture, as opposed to the fact that it sells 10p slices of beef, topped with a 1p slice of cheese, in a 2p bun, for £1.99.

Inevitably the result has been a string of disasters and near disasters as businesses all across the world attempt to recreate the Toyota way in their own business. The fact that many of these businesses have been retail orientated should give you your first clue as to what went wrong.

Because the Toyota way is not just one idea, one bit that you can pinch and then apply elsewhere. It's a complete model for running a production line, that requires multiple steps to achieve the final aim, and which requires the acceptance of the model at every level of the business. Unfortunately this point seems to have been lost on a lot of people, who only saw the word "lean" in amongst the myriad of concepts that make up what Toyota does.

Indeed, the "lean" aspect of Toyota's business actually consists of a significant number of steps and concepts (the Japanese are big on capturing an entire idea in one word), many of which break down into a number of sub-steps, with most of the sub-steps breaking down yet further into another layer of steps, right down to how to layout a work station and cleaning your workspace. The fact that most of the Toyota recalls in recent years have been attributed to insufficient implementation of these methods by their various manufacturing partners in other countries, shows you that sometimes the Toyota Way doesn't even work smoothly for the company that invented it in the first place.

Yet despite the complexity, we can roughly boil down the Toyota Way into one very basic and broad rule, which is the idea of only keeping enough stock of various items (like sub components for a car) on site to fulfil the immediate production needs; so called "Just In Time Logistics". This in turn works because of two key factors; 1) Toyotas' obsession with quality control and 2) their obsession with having a very specifically timed production line, that runs neither too fast nor too slow.

It's into these factors that all the various concepts play. The whole sub set of detailed instructions about the layout and size of workstations, and the almost OCD like obsession with putting tools back in the proper place is designed to minimise the amount of time wasted by staff looking for items. This in turn helps Toyota to carefully measure out the time it takes to perform various action on the production line, such that it should take a roughly uniform amount of time for any worker to perform that same part of the production.

What you get then is a very steady, very reliable, very predictable flow of work. The manager at a factory should be able to tell you with almost complete precision how many cars his factory will produce between the hours of say 10 in the morning and six in the evening. This ultra predictable flow of work thus allows Toyota to manage its sub component supply chain in a similarly ultra predictable manner, and in turn it can manage its storage and delivery systems in an ultra predictable, bare minimum manner, eliminating unnecessary costs at each stage.

The main problem for people outside of Toyota has been that they turn up, review how Toyota manages their whole system, and then decide "hmm, that idea of minimising excess stock levels is quite appealing, I think we should introduce 'Just In Time Logistics' too", which they then take off and try to implement into their own field, while completely missing the whole bloody point.

This has led to bizarre situations where, for example, retail companies will turn down good deals on wholesale stock because they don't have sufficient storage space at their "efficient" depots to handle the extra goods, meanwhile they have stores whose warehouse shelves are often barren because they don't want to hold any more stock than they absolutely have to, for reasons that none of their managers ever seems able to explain, other than "it's not good to have stock inefficiently lying around".

Except that these are businesses that don't have the same luxury that Toyota has of being able to predict the consumption of stock in an ultra accurate and reliable manner. One week a certain product might be highly in demand and if you don't have enough stock handy then you can't cash in on that demand. For perishable items there's a method in that madness, as perishable stock will go off if not sold, but for things like electronics, furnishings and household products there is no excuse. These businesses also become vulnerable to supply shocks, as even a short term disruption to their supply chain can leave a business that insists on low stock levels in the lurch. 

Perhaps most critically is that it overlooks the advantage that many retail businesses have, in that they can discount stock that is taking up too much room, not selling well, or is coming near to the end of its life. Buy cheap, in bulk, and sell with a small margin. It's one of the principles that has helped bargain retail stores like B&M to not only survive the recession, but massively grow during it, as shoppers are pulled in by the low prices.

So, you're probably wondering by this point "What the hell is he talking about? I thought this was a defence blog? Why is he talking about car production lines and bargain retailers?".

Those are good questions and the answer to all of them is simple; because the USAF - as astutely observed by that young air force cadet - is trying to use "lean" methods in an organisation that doesn't run on a nice, ultra predictable timetable of work flow. Some months the USAF may need to use a lot of precision attack munitions. A month later it might not use any precision munitions. The demands of war and the unpredictability of when conflicts will spark up defies the use of measured, lean processes.

This problem has been prevalent in the UK and other nations militaries as well, as operations over Libya showed when many nations reportedly began running low on ordnance. According to the Royal United Services Institute (RUSI) the stock of Brimstone missiles available for the RAF campaign at one point fell to dangerously low levels.

This helps to demonstrate the danger of low volume orders for organisations that do business in a volatile market (so to speak). And yet amazingly some people who should know better are encouraging the MoD to do more of precisely the thing that got them into trouble less than two years ago. 

Defence Management is reporting that the Public Accounts Committee (a select committee that is supposed to keep an eye on government spending) has chastised the MoD for wasting money on unused materials such as ammunition and uniforms, while also storing large quantities of other materials and supplies described as "non-explosive" (which frankly could be any number of assets, from unused vehicles to spare parts), which it claims could be sold off to ease pressure on the budget.

And it's precisely this kind of idiotic advice that has left so many businesses in the - if you'll excuse my French - shit. Let me just quote one line for you that I think is interesting; "The report found that the MoD's purchasing system focused on ensuring it had enough supplies to meet demand, rather than preventing excess ordering."

Now don't get me wrong, there's a lot of things the MoD does that don't seem to make sense to a rational human being, and there is probably more scope for budget reductions and greater efficiency in the department if that were to be required. But to lambast the MoD for ordering enough supplies in order to meet demand, as opposed to preventing "excess ordering" is absolutely bloody ridiculous. If I were a more uncouth and uncivilised individual, I'd be tempted to say it's bordering on the fucking scandalous.

This, ladies and gentlemen, is the kind of enlightened economic wisdom that is being shared with the MoD. An organisation that is inherently prone to sudden spikes in its operating tempo, is being told not to hold onto too much stock, because that's bad for the books.

It's ludicrous. Absolutely and utterly ludicrous. Like the young USAF cadet had noticed with his parent organisation, the MoD is being told to order just enough to handle daily/weekly usage, the old "Just In Time Logistics" again. Instead of being able to take advantage of bulk purchase prices and keeping healthy stores of commonly used (or useful) items as a hedge against future problems, the MoD is being told to conform to a business model that at times can't even cope with the demands of its original business, let alone the fast moving, highly variable business of warfare.

It is categorically the most stupid thing I've ever heard a politician, or group of politicians*, say. 

*(What do you call a group of politicians? A gaggle? A herd? A clusterfuck?)

This obsession with maintaining low stock levels based on the incredibly dubious assumption that all immediately unused stock is a waste of resources is not just going to cost the MoD in terms of order discounts, but potentially could leave the forces short of kit or supplies needed at a critical moment.

Yes, storing equipment and supplies costs money, but given the significant size of the MoD estate I suspect there is more than enough unused room kicking around to house it all. Storage space on existing MoD sites costs (or should cost) the same amount regardless of whether it's nearly empty or full to the brim (ask all the hospital trusts lumbered with PFI facilities for a primer on that one). And any supplies that have a fixed shelf life can always be - heaven forbid - expended in live training. Gosh, service personnel getting to occasionally drop actual bombs and fire real bullets! How uneconomic.

I'm reminded of a guest post that was sent to Think Defence a while back (linky, linky) describing some of the problems that a "fictional" RAF squadron had to face on a day to day basis. If I may I'd like to quote a small section, for which Think Defence can sue me later, as I think it quite relevant;

 "Aircraft Spares; Clearly if the spare part you need to fix your aircraft is not on the shelf you have to order it and wait for it to be supplied.  The RAF uses some clever software to analyse wear and tear on aircraft which then dictates what, and how many spares you have on the shelf on station, those spares that are available off the shelf from suppliers and so on.  This reduces costs considerably but aircraft simply do not break as and when they are supposed to so spares delays are common.  Often the part you need is “robbed” (removed) off another aircraft that is broken for anther reason.  This presents various issues outside the scope of this article (if it ain’t broken, don’t fix (touch) it!!) but the important factor is robbing a part takes more time than taking the same part off the shelf (removing it then possible cleaning/prepping, function testing etc) hitting your manpower further."

I've underlined the section I think is most relevant and it's a problem that's been highlighted in the past with the RAF's Typhoons (lack of spares). The quote says that this reduces costs, but that's really a relative measure. It would reduce costs in the short term by pushing the purchase of spare items into future years, along with some potential savings from not buying spare parts that are never used throughout the life of the aircraft, but that has to be offset by the additional item cost caused by a drip feed of purchases, plus the transportation costs every time one of those items has to be sent (one presumes - because one is in posh mode again - that important aircraft components would not be sent by Royal Mail second class). The poster of that guest article also highlights the wasted man hours that occur when parts are laboriously scavenged from one aircraft to put onto another, creating both more work in the short term and more work to be done in the long term.

It's what might be referred to by some as a "false economy". That being the generous term for it. I've already sworn enough in this post that I've probably set off every ones child and work filter settings, so I'll leave it at that.

It just baffles me that this is the kind of advice being given to the MoD by supposed experts in finance. Or that it takes a young, optimistic air cadet to explain to people in the Pentagon that if you buy items in bulk you can reap significant savings on the purchase price, whilst also building up your stock levels.

There's a limit to how far you can go with economising in certain areas of defence, especially when you're chasing some fabricated Key Performance Indicator (KPI) dreamt up by someone who has more experience of eating sandwiches at management conferences than they do of actually working on the front line of any business, all because they've been told that that's how Toyota managed to eliminate waste.

Well, Toyota is not the MoD. Nor is it the USAF. Or even the DoD. Nor is its business model anything close to being approximate to the needs and practices of defence. 

And it makes shit cars too.

So you can take your Toyota method and shove it up your... [this section of the article has been censored by your network administrator for safety reasons. Please contact your network administrator for further details on why this has happened and what measures you should take if he/she permits you to view the content].


  1. "Can you guess my opinion on managers and management culture in general?"

    I know a very good supplier of choir robes, and have a respectable bass-baritone. Just hand me the hymnal :)

    And wrt "Toyota method," this reminds me (as someone who's lived an often transatlantic life) of the brilliant observation by Messrs. Pratchett and Gaiman in their now-old book Good Omens, about British managers "taking an American idea, removing the one thing that was good about it, and using the rest anyway."

    "Lean manning/process" is, I'd argue, in fact inimical to the very working of nation-states (an ancient example: the emperor Vespasian, a field officer who'd worked his way up to an unexpected Principate after three other emperors got themselves whacked in one year, and a man who actually treated the "res publica" as some sort of collective thing in its own right rather than the collective estates of powerful patricians, rejecting a working steam shovel because it would throw the city of Rome's unemployment into double digits. Doesn't mean we should do without steam shovels now, but it does mean there is more both to economics and to politics than managing widgets so as to extract maximum purely-financial profit.) But that's a whole 'nother rant about the defence-industrial process these days. And I probably don't have time to type it now. But the toxic mix of running defence budgets around the world as one part spoils system, one part management-process orgy, is about to have the same experience Mr. James Dean encountered when mixing sportscars, recreational pharmeceuticals, and a large telephone pole.

  2. Jackstaff,

    Today we're going to sing "Ode to Joy"...

    I hear that Mr. Dean got on rather well with the Telegrapgh pole. They couldn't separate the two.

  3. Chris,

    Ref: telegraph pole, yes, it did end up rather a sticky wicket....

    1. Live Fast. Die Young. Don't keep too much inventory on the shelf please...

  4. Good post Chris, its amazing that quote form Hodge and Co isn't it?

    However, I would say there is probably more to this than meets the eye because it mentions stuff like Nimrod MR2 spares, and plenty of them, still being in the system.

    There is no excuse for not getting rid of old shit

    1. Depends on what the spares were. If they were exclusive to the MR2 frame then yes, you could dispose of them. If they have a dual use on other systems then might be worth holding onto them. I also wonder how many of those spares were things that might have a future use, like removed/spare refuelling booms which potentially could be fitted to other aircraft like the Voyagers or Sentinel (or some bizarre C-17 conversion), or on board electronic wizardry (maritime or ISTAR) that might be saved for use on Merlins, Sentinel or an MPA replacement?

  5. Hi Chris, good post.

    Having been through several 'lean events'* I can say first hand it was a frustating experience. Everything was treated as though it were a widget factory. Pointing out we didn't actually make anything and were operating and repairing equipment, that was a) far more complex and b) overhauled many times before, and had a great many difference with assemblying new cars always fell on deaf ears. The places I worked were all full of 'change co-ordinators' ie contractors brought in on a very high daily rate for months at a time.It was very much the order from the top to push this through and that it would work regardless. The amount of money chucked at anything 'lean' was eyewatering.

    Not to the throw the baby out with the bath water, there were some lessons to be learnt but it was the way it was rigidly inforced. It was more of a cover for cutting manpower across the stations rather than a true change exercise.

    Some of the requirements to get rid of kit came about from GB when at No 11, he brought in a system where by we were charged annually for various pieces of equipment if they were in storage/depot, I think the figure was ~7% of the value of the item. Although that system has gone now.

    *It was all the rage in the RAF, and no doubt the other two mobs as well, about 6-7 years ago.

    1. Cheers Topman,

      Those events sound like hilariously good fun, on a par with having your toenails removed without anaesthetic.

      You hit really on the critical point, that different businesses operate in different ways, and one model does not always transfer well across the board.

      And to think, the money saved on contractors probably could have covered the storage costs of many of the spares...

  6. There are truly many stupid managers in the world. A friend of mine reported his employer had introduced Six Sigma methods. The employer was an insurance company...

    On the other hand, there are also lots of smart managers (or else we wouldn't live so physically well).

    1. Haha!

      I guess there's the element of quality control in that, as mentioned above, in regards to solving problems first time.

      I've found over time that most of the decent managers get pushed to one side because they don't spend enough time ticking the boxes and are too busy trying to contribute to the business. There's normally some elements of management culture that have value, trouble is lot of managers do what Jackstaff pointed out; come along and throw away all the useful bits of an idea, then try to implement what's left.

  7. Whoops! Just did a piece for LDV about funding defence citing the report... In my defence, I was going to add caveats to my points, including having stocks of certain things, but I was already over the recommended word limit...

    Anyway, link if you're interested...

    1. I'll have a read at some point tonight Gareth and get back to you.

    2. Right Gareth, had a read. A good summary post on some main issues.

    3. Cheers. Obviously a political aspect but also an attempt to widen the debate/knowledge of defence issues. Couldn't go into too much detail as you have to tailor the pitch to the audience.

    4. What is the general Lib Dem defence policy? As in, if they could get control of the whole thing.

    5. Gareth - I've posted a comment on the libdem site which I copy below:


      I picked up the link to this piece via the Defence with a C blog - its an interesting article and I agree with much of what you say. I'd suggest the ARGUS replacement is unlikely to get joint funding as her role sits beyond that of PCRS (hospital ship) and also encompasses aviation training and some other roles too. The hospital ship programme was a flagship announcement of the SDR in 1998 and died a quiet death some time ago for many and various reasons. Its unlikely that it would resurface for the ARGUS replacement.

      In terms of both future procurement, plus Mali and future co-operation, this is something I've covered extensively over at my own blog ( and your readers may be interested in a couple of posts from there:


  8. A bloody good question. To be honest I can't find much apart from scrapping Trident, better pay/conditions and general statements about international law.

    1. Some old links:

    2. Well I had a read of the Lib Dem manifesto for the 2010 election (like most manifesto's, I can agree with bits of it, but not enough) and all they mentioned was scrap Trident, scrap Typhoon Tranche 3, better pay for starting soldiers, and more money for housing. Bit vague for my liking.

    3. And mine. In our partial defence, the other parties aren't much better; if they have serious ideas they tend to keep them quiet and emphasie popular policies such as save cap badge x or save base y. (of course, we do too...)

    4. Politics. The greatest game of them all.

      I guess the mitigating factor is that your average bod on the street doesn't really know much about the ins and outs, so aside from the defence vote, there simply isn't the incentive to delve too deep into defence issues, unless your campaign is built around the principle of showing voters that you've really thought hard about most issues, unlike everybody else.

    5. Bit more digging and came across 2 Lib Dem speeches to RUSI from 2005 and 2010 which put more meat on the bones:

      Large emphasis on defence cooperation, which nicely links into your possible future post...

      "Politics. The greatest game of all." - I think its a vicious circle; the electorate don't rank it as a high priority so politicians don't discuss it so the electorate don't rank it as a high priority.

    6. Just having a read through now. One section that did catch my eye and I can agree with (albeit with a redaction) is this;

      "...that the UK government should support, fully engage in and possibly lead moves to create [redacted] defence cooperation among a pioneer group of EU countries.

      In recent months I've heard politicians from Bob Ainsworth to Malcolm Rifkind talk about Britain's particular commitment to global trade, and our particular dependence on global sea lanes to maintain the sinews of British global commerce. That's part of the nostalgic myth of our imperial past. We share an interest in secure sea lanes with other major economies, and we should work with them to keep them open. Germany, after all, is a larger exporter than the UK - as of course is China. It's not evident that it should continue to be a disproportionate UK responsibility to protect Chinese goods on Korean ships, crewed by Filipinos, as they pass through the Indian Ocean and the Red Sea".

  9. There is nothing wrong with Lean, Kaizen, JIT, six-sigma etc etc etc but the only universal truth, is that there are no universal truths !

    You don't have to be Sun Tzu to figure out that the concept of operations for various civilian business areas does not map across to the military.

    There was considerable discussion of this subject at the beginning of GW2 / OIF when an British Tank Sergeant was shot dead at a check point; he was a tanker, taken out of his turret by expediency and did not have the latest body armour with ceramic inserts. At the time the HMG response was the JIT logistics meant that if we had placed a big order for new body armour before joining the U.S. invasion of Iraq, it would have tipped the wink to the enemy.....

    So we hit the dichotomy of "peace time" military budgets, and the cost of keeping "war stocks" - NATO famously almost ran out of precision munitions for its limited fast jet fleet employed in Libya. Personally I am of the opinion that well stocked armouries, spares depots etc are a strategic requirement, especially for a country who's governments seem addicted to "getting involved" - as such we should find the cash. But that's an IMHMO, and I am not PM.....

    1. If we weren't so geared to intervention and maintained a much lower pace of peace operations (lower training demands, less exercises, less deployments) then there might, might just be an argument for JITL.

      We don't though, that's the problem. Maybe we can invent a new logistic paradigm, basically just the system we need to suit us, and then flog seminars to private companies in order to raise extra cash in budget constrained times!


    1. The private sector running procurement just has "BAD IDEA" written all over it in big flashing lights.

  11. Interesting topic... The earlier controversy was about stuff that goes 'bang' when it is needed - and that there was 32 bn worth of it on the books. Would guess it is a good thing, rather than the whole of NATO Europe running out of stocks in a minor engagement called Libya - as only certain categories came into use, mainly due to the politics, and hence RoE, in that particular situation

    Cheers, ACC

    1. Hey ACC,

      The fact that we almost ran out of (apparently) dual mode Brimstone is very worrying. I think I also found the answer recently to a quations I've long since wondered and that's why our Subs don't fire many TLAM, despite being capable of carrying perhaps 20 or so while still retaining a decent quantity of torpedos.

      The answer being that we hold only very low stocks of TLAM, certainly not enough for each sub to carry a decent load.