Integrating the Department of Defense Supply Chain: Techincial Report

By Eric Peltz; Marc Robbins | Go to book overview

CHAPTER FIVE
Enabling Mechanisms

Enabling mechanisms are management and other approaches that engender execution in accordance with policy and planning intent. They include incentives to act in a way that is best for the total supply chain, metrics to understand individual process and functional effects on the total supply chain and other processes and functions, budget accounts and lines that enable and encourage people to take the best actions for the total supply chain, decision rights that create spans of control or influence that support integrated action, tools that enable people to understand the total system effects of their decisions, information systems that ensure that the requisite data for these tools are available, and career development that imbues people with the knowledge and capabilities to act in the best interests of the total supply chain both in formal planning and in ad hoc decisionmaking.


Incentives: Metrics and Budgets

A key management approach and broad category of enabling mechanism is the use of incentives. In the government, these are limited primarily to evaluations that affect promotions, awards, and the use of metrics to spur competition and influence behavior, with limited ability to use direct financial incentives. With respect to supply chain design and management, this starts with assigning responsibilities to each organization or manager and having the means to assess performance with respect to those responsibilities. If these responsibilities and associated metrics are not fully aligned with intended policy (assuming it reflects supply chain integration), then gaps in supply chain integration may occur.

Virtually all supply chain functions and processes affect others. If these interaction effects are not monitored through metrics used for feedback and accountability, then the way the processes and functions are executed may not be aligned with the overall supply chain intent and effective integration. Such gaps appear to have been a significant contributor to DoD supply chain “siloization,” in which organizations optimize their own functional responsibilities, tied to narrow metrics and incentives, at the expense of other processes and the total supply chain. In short, there are a number of cases in which people and organizations in the DoD supply chain have been affecting downstream processes without feedback via metrics and without accountability and responsibility for these effects. These cases tend to also be associated with people and organizations driving downstream costs they do not have to “pay,” because the costs are not in their budgets. Their actions, instead, affect the budgets of other organizations.

In the realm of inventory, currently in DoD procurement, lead times and order quantities drive inventory levels. Supply organization planners tend to be responsible for inventory

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