The 20 points required for every military outcome based product support business model.

1. White Paper: The 20 Elements Of An
Outcome-Based Product Support Business Model
The target audience of this white paper is Program Management Offices, Life Cycle
Management Commands and commercial contractors who interact in the development
of business models designed to deliver outcome-based solutions for the support of a
product. A product can be a:
• Weapon system of systems
• Weapon system
• Weapon subsystem
• Non-embedded software
• Weapon support system
The objective of product support is to:
• Assure the materiel readiness level of the product; when I need it, I can operate
it
• Grow the reliability level of the product; when I operate it, it works during my
time of use
• Retain the capability level of the product; when I operate it, it delivers what I
need it to deliver
• Reduce its impact upon Total Ownership Cost (TOC); I need to apply Continuous
Process Improvements (CPI) in managing costs
• Evolve the technology level of the product; I need to stay current with the value
that the product’s technology adds to the process in which it is employed
• Minimize its impact upon the field resource footprint; I need just enough people
and things to deliver a solution
The purpose of the white paper is to provide the reader with an overview of the 20
elements that are required to configure an Outcome-Based Product Support Business
Model.
This whitepaper is segmented into the following four areas:
1. Overview of the investment and economic value of products
2. What is product support
3. The 20 elements of an Outcome-Based Product Support Business Model
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2. White Paper: The 20 Elements Of An
Outcome-Based Product Support Business Model
4. Conclusions and recommendations
Overview of the Investment and Economic Value of Products
As of the beginning of 2010, the Department of Defense (DoD) investment in products,
at Current Replacement Value (CRV), is an estimated $1,500 billion. Military products
are employed in processes such as transporting troops (wheeled armored vehicle),
creating electricity (field generator), or destroying entities (howitzer). This investment
constitutes an estimated 50% of the world’s military products; it has been a primary
enabler for the US being the most powerful military force in history.
The economic value of a product to a military organization is its impact upon the
outcome of a process in which it is employed. The product will impact the outcome-
efficiency (TOC-per-unit-of-output) of the process, as well as impact the outcome-
effectiveness (benefits of the quantity of output) of the process. Below is a schematic of
the inputs and outputs of a process employing a product.
The following are examples of the outcomes of a process resulting from the
employment of a product:
• An aircraft is acquired by US Air Force in order to increase the outcome-
efficiency of the long-range soldier air transport process by decreasing the TOC-
per-mile of flying a soldier from $.060 ($6,000,000 cost/100,000,000 soldier
miles) to $.055 ($5,500,000 cost/100,000,000 soldier miles)
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3. White Paper: The 20 Elements Of An
Outcome-Based Product Support Business Model
• A bulldozer is acquired by the Army Corps of Engineers in order to increase the
outcome-efficiency of the road construction excavation process by decreasing
the TOC-per-ton of dirt extracted from $73.35 ($7,335,000 cost/100,000 tons
excavated) to $68.11($6,811,000 cost/100,000 tons excavated)
• A sonar is acquired by the Navy in order to impact the outcome-effectiveness of
the process of tracking the movement of vessels by increasing the range a
vessel is detected from the sonar device by 45% and increasing the accuracy of
the vessel’s signature by 20%
• A computer is obtained by the US Marine Corps for its field commanders in order
to impact the outcome-effectiveness of the process of simulating enemy
movements at a Combat Operational Center by reducing the computation time
from 6.3 minutes to 3.7 minutes for a full image display, as well as increasing
the pixel detail by a magnitude of 1.5 times
What Is Product Support
The annual cost for the support of these air, sea and ground based products is an
estimated $130 billion, cited by the 11/2009 DoD Weapon System Acquisition Reform
Product Support Assessment (WSARPSA), with an estimated 30% expended by the Air
Force, 35% expended by the Navy, 25% expended by the Army and the remaining
10% expended by the Marine Corps.
The lifecycle stages of a product are represented in the figure below:
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4. White Paper: The 20 Elements Of An
Outcome-Based Product Support Business Model
The following is a brief description of the processes employed in the Product Support
lifecycle stage:
• Correct a product that is in an unplanned-impaired condition (cannot fully or
partially achieve its value for the process in which it is employed; can occur
before, during or after use. This process is typically performed at the site where
the product is operated. It is driven by the following events:
o Failure due to quality issues
o Past-due time/use-based scheduled activity
o Recall due to safety/quality issues (i.e. battery installed for electronic
component explodes under certain condition, requiring there rapid
removal
o Non-catastrophic damage (i.e. product housing dented and requires
replacement due to cosmetic purposes)
• Prevent a non-impaired product from evolving into an unplanned-impaired
product. This process is typically performed at the site where the product is
operated. It is driven by the following events:
o Time/use-based activity schedule (i.e. part ABC removal required for
safety purposes every 1000 hours, and last removal occurred 950 hours
ago; non-expired part ABC removed)
o Condition-based monitoring trigger (i.e. part reaches predetermined
threshold of wear-and-tear parameters requiring removal
• Reset product condition, driven by a planned program, to the same condition
which existed before an event. It is driven by the following:
o After every use (i.e. after each war game exercise product is thoroughly
inspected and repaired).
o After extraordinary period of use (i.e. weapon system deployed in theatre
for 12 months and returned to U.S. where it is disassembled and
reassembled and the condition of the product is returned to where it was
before it was deployed)
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5. White Paper: The 20 Elements Of An
Outcome-Based Product Support Business Model
• Change product condition or configuration, but not increased capabilities,
through:
o Remanufacturing/overhaul; bring product back to original capability and
reliability, as well as insert any technology upgrades
o Insert technology upgrade
o Insert reliability improvements
• Repair catastrophic damage resulting from accident or battle incident
• Store product short/long-term retaining current condition
The 20 Elements of an Outcome-Based Product Support Business
Model
“The business model is a collection of elements that represents one way in which an
organization obtains monies. It is a combination of factors, not a single element, that
together represent each of the key interactions that the enterprise will have with its
environment. An Enterprise is a collection of one or more business models that
describe how various entities come together to provide value and make money. An
enterprise is basically an abstract notion that describes a set of business models that
come together,” A.Nicklas Malik, “Enterprise Business Motivation Model.”
All the elements below are required to be reviewed in crafting an Outcome-Based
Product Support Business Model. Note that for each segmentation of each of the
Product Support processes discussed above, a business model must be crafted (i.e.
LRUs: reparable/non-reparable, mission critical/non-critical, COTS/Developmental Item).
The totality of the business models creates an Outcome-Based Product Support
Enterprise.
1. Product employed in process (i.e. satellite-based communication product)
2. Event driving demand for a solution (i.e. unplanned field failure of a mission
critical reparable COTS component)
3. The specific organization that is demanding a solution (i.e. U.S. Army field
maintainer organization)
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6. White Paper: The 20 Elements Of An
Outcome-Based Product Support Business Model
4. OPTEMPO of organization employing product (i.e. combat theatre reconnaissance
mission)
5. Specifications of solution demanded (i.e. enable an Army commander to re-
employ a communications product after the unplanned field failure of one of the
product’s mission critical components is resolved)
6. Outcome of the solution (i.e. non-impaired component to be provided for
installation to Army unit within no more than 8 hours, based on 24/7 clock-time)
7. Organization that “owns” relationship with customer of the delivery of the
solution (i.e. PM Office PSM)
8. Organization that delivers solution to customer (i.e. Army Life Cycle Management
Command-LCMC)
9. Solution delivered to customer (i.e. operator/maintainer removable/installable
mission-critical reparable Line Replacement Units-LRUs that are available from a
supplier-forward like-kind exchange program distributed from Regional Support
Centers/Intermediate Wholesale Levels located in combat theatre)
10. Processes employed to deliver solution (i.e. create/add reparable components to
exchange program, maintain reparable components in program and remove
reparable components in program)
11. Resources employed for each process (i.e. personnel, materiel, facilities,
equipment, software)
12. Risk management of unfavorable outcomes (i.e. not being able to adapt to
OPTEMPO changes in a timely manner)
13. Relationship with customer (i.e. how will customer order parts and how will the
customer be informed as to the status of their order)
14.Relationship with suppliers (i.e. Vendor Managed Inventory programs provided
for all parts at organic depots employed for repairing reparable components)
15. Payables structure (i.e. pay supplier fixed cost per period, such as extended
warranty, with award fee for reaching or surpassing outcomes)
16. Receivables structure (i.e. obtain payment from customer on a fixed price per
transaction basis)
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7. White Paper: The 20 Elements Of An
Outcome-Based Product Support Business Model
17. Managerial cost accounting (i.e. construct allowing the comparison of actual
expenditures and planned expenditures)
18. Required subject matter expertise (i.e. Lead logistician with 20 years experience)
19. Geography and location (i.e. global support with centralized planning and control
in CONUS)
20. Constraints (i.e. Title X, POM budget)
Conclusions and Recommendations
Crafting a comprehensive Outcome-Based Product Support Business Model is an
extremely challenging task. The use of an IPT, reporting directly to the Product Support
Manager (PSM) within the PM Office, is critical to the success in the delivery all the
different business models required to create a Product Support enterprise.
The Product Support Enterprise models are to be revisited throughout the life of the
product driven by the comparison of what was planned and the realities of actual
events. Without such adjustments, a model is strictly an intellectual exercise of minor
value.
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