GETTING MORE BANG FOR THE DEFENCE DOLLAR
Practical applications of System Dynamics
Sqn LdrJ. W. Kearney: Visiting Military Fellow, Australian Defence
Force Academy, Canberra, Australia;
Mr. J. M. McLuckie: Director International System Dynamics Pty Ltd.
Major R. Ethridge: USAF Exchange Officer, Directorate of Logistics
Development, Support Command Australia
Abstract
Governments around the world spend vast sums of money procuring defence assets.
In times of changing global circumstances and tight fiscal policies, getting more for less
is the ongoing challenge. A need has been identified for systems that:
a. minimise the risk of over or under procuring additional defence assets;
b. maximise the value obtained from existing defence assets; and
C: balance the level of logistical support required to support the assets.
If an asset is under procured, or lacks the appropriate level of logistical support, it may
fail to provide the capability or level of deterrent required and thereby be of little or no
value. If an asset is over procured, or has a greater level of logistical support than is
required, then funds that could have been utilised by Governments in other areas are
trapped in fixed assets and ongoing support expenditure.
This paper deals with how systems based on the practical application of SD modelling
can be used and have been used to help improve defence capability. Case studies
include improving the efficiency of fleets of strike reconnaissance aircraft, army
helicopters and radios. It also outlines how this modelling can be extended to give a
whole of system perspective.
Introduction
National security and prosperity are increasingly entwined. Maintaining an
effective defence capability is integral to stability within the South East Asian Region.
This situation is now more fluid, complex and uncertain following the so called ‘Asian
Meltdown’. Given the tight fiscal policies being applied, the effective utilisation of
defence resources is even more critical to maintaining a credible defence posture. These
security risks are managed by establishing and maintaining the right force structure,
with the right capability, ready to perform the right task with adequate skill. This gives
rise to the concept of preparedness.
System dynamics can be effectively applied to get better defence capability for
the dollars spent. A fully integrated systems management methodology has evolved that
includes SD modelling to aid in fleet management. This paper will outline the
successes we have had in applying System Dynamics techniques to optimising defence
capabilities.
Defence Logistics
During the late 1980s, logistics organisations within A ustralian Defence started
to produce business orientated strategic plans. The plans typically include mission and
vision statements, statements about values and objectives and reference to key result
areas. Adopting best business practices introduced concepts like Program Management
and Budgeting (PMB), organisational redesign based on empowerment, devolution and
outsourcing. Emphasis was placed on Integrated Logistics Support (ILS) and the use of
Logistics Support Analysis (LSA) for in-service weapon system management. A pre-
occupation with the inputs and processes however detracted from focusing on the
outputs that enhance defence capability.
The challenge was to adapt the classic strategic planning process (Viljoen,
Chapter 2) to the business of defence. This process is illustrated in Figure 1. To
forecast the likely progress towards the objectives and targets under rapidly changing
environmental circumstances ideally suits the application of system dynamics. This
approach has provided knowledge and insight into the causality of inputs to achieving
capability outputs.
STRATEGIC INPUTS
Military Logistic (Operational Strategic Best Practise
Doctrine Logistics History] | Guidance Benchmarks
Vv
STRATEGIC PLANNING PROCESS
Set objectives and targets
Se eee ee -p Prepare forecasts and determine gaps
Strengths Opportunities
and Weaknesses > ~< and Threats
v
Formulate, evaluate
and select preffered
strategies
Performance
Monitoring
Feedback
Targets and Actions
Figure 1. Planning and Control for Defence Logistics.(Coles, 1996)
System Dynamics Applications
The management of defence capability is now the process of gaining maximum
utility from each defence asset. The effective utility of any weapon system is its current
capability in light of acquisition cost, logistics cost and potential life expectancy. In
times of changing global circumstances and tight fiscal policies getting more capability
for less life cycle cost is an ongoing challenge rather than a once off procurement
decision.
A causality diagram that illustrates the inter-dependency within a fleet of
military assets is shown in Figure 2. If an asset is under procured, or lacks the
appropriate level of logistic support, it may fail to provide the desired Defence
Capability (level of deterrent). It will be of little value in spite of high cost of
acquisition. Conversely if assets are procured but not fully utilised then a nation is not
receiving the full benefit from the investment. If a nation is to maintain its Defence
Capability then ongoing weapon system upgrades will be required to enhance and
update the assets capabilities. Enough flexibility is required within the system to be
able to adjust for changes in operational effort, changes in upgrade requirements and
changes in logistics.
Maintenance Logistics
Training -
bi é + Life of Type y + ‘
ispose o isi ,
P Recision + Strategic
Assets +__
Maintenance Defence Environment
SO
Procure + Serviceable + " ad
Assets ——® Assets > Operations —______ Defence
‘ + Capability
Ops Training Trained
Fy Na Operators
/ +
Upgrade
Capability
wy Defence
Acquision 4
Capability Gap
Figure 2. Causality Diagram for Defence Capability
Defence Fleet Management Techniques
A survey carried out by the Royal Australian Air Force (RAAF) and later
confirmed by Logistic Command Australia has shown that complex fleet management
is not performed effectively by many agencies in Australia. A manual spreadsheet
based technique was being used within the RAAF to schedule maintenance and
modifications by manual sequencing. A similar technique is also employed by Qantas
and other organisations that utilize assets of high value. An opportunity existed to
apply system dynamics techniques to this fleet management problem in order to try to
optimise the balance between operations, maintenance, logistics and capability upgrade
(modification).
The development of system dynamics models for optimising this balance
between the number of assets, maintenance capability, logistics and capability upgrade
has been achieved using the ithink® modelling environment. Strategic models, with
significant simplifications were developed for the F-111 strategic bomber weapon
system and the BlackHawk / Chinook helicopter weapon system. More detailed
tactical, or execution models, have been developed for the F-111 weapon system and
the Army Raven radio systems. Common to all these models is the organisational
need for iterative and interactive strategy development in order to optimise fleet
management.
The use of iterative and interactive strategy development (McLucas, 1998)
builds on the work of Ackermann, Eden and Williams and is at the heart of the system
dynamics modelling approaches proposed by Forrester (1961). The Defence
applications described in this paper have used the methodology illustrated in Figure 3.
Information
Experience Perception
Knowledge \ a Motivation
Inputs from Na x !
Environment Iterative and
Interactive
. Strategy
Desired
Ouicomed Development
a Ne
Strategy y .
\ Learning
Consensus
Commitment
to Action
Figure 3. Iterative and Interactive Strategy Development
The success of the applications of system dynamics in the Defence arena has
been built on the recognition that more than just a model is required. Ata strategic
level the modelling facilitates the generation of mental models that use strategic
guidance and doctrine to develop consensus and commitment to action. The tactical or
execution models have been used to cultivate the information feedback and decision
making processes associated with achieving fleet management. Furthermore, a table
based game, called “A irpower 2100”, has been developed that enabled players to
experience, and attempt to manage, the long term dynamics of the system over an
accelerated time frame. The ‘double loop learning’ process, coined by Argyris (1994),
is fundamental to the approach used in Defence. It promotes the development of
strategy, structure and decision rules for dynamic control.
Current Practice and Case Studies
The ability of system dynamics models to be adapted and to react to changing
environment circumstance has made their application in Defence effective. A key
benefit derived from the ithink® modelling experience is the ability to test strategy
before implementation. The ability to predict the outcome within a dynamic
environment is cost effective when compared to classical weapon system management
based on manual projection methods and application of experience.
F-111 Experience. The F-111 fleet management problem was characterised by
significant changes to logistics support and major capability enhancement. This
combined with the acquisition of additional F-111 assets caused declining asset
availability. The strategic model was developed in a three day workshop and was able
to identify key leverage points for strategy implementation. The tactical model was
then developed to forecast the maintenance and upgrade schedule based on the strategy
developed using the strategic model. The results achieved include:
a. improved utilisation of aircraft;
b. prediction of effective fleet life;
Cs better integration of systems upgrades; and
d. ability to rapidly respond to changing circumstances.
BlackHawk / Chinook. The BlackHawk / Chinook assets are a rotary wing fleet
of aircraft used by the Australian Army for tactical air support. The fleet has suffered
logistics supply problems which have impacted on aircraft availability. The strategic
model was developed concurrently with the use of some of the helicopter assets in
humanitarian food delivery in Papua New Guinea at very high rate of effort. The
strategic model highlighted adjustments that were needed to the maintenance and
logistics support processes in order to sustain operations. The model is being used to
determine fleet recovery strategies and as the basis for development of a tactical model.
Raven Radios. The Army have procured a large pool of Raven VHF combat
radios as a new asset. The Army commissioned the development of a strategy model of
the radio assets in order to determine appropriate maintenance and logistic support
strategies to obtain maximum operational benefit. The model was used to establish
maintenance support requirements as well as procurement quantities in order to achieve
a specified level of preparedness. The model has continued to provide fleet managers
with insight into asset distribution and the effects of logistics supply disruptions
Conclusions
Systems thinking, system dynamics and traditional OR literature contains a
myriad of examples of discrete applications of specialist tools and techniques together
with arguments about their veracity. There have been few serious attempts to integrate
these tools and techniques to make them broadly applicable. Iterative and interactive
frameworks in which soft systems and system dynamics modelling have been integrated
are the key reasons for our success in relation to the Defence capability management.
The approach involves capturing then analysing the mental models of those with
relevant knowledge, experience and perception of the problem.
The Defence world is littered with examples of expensive weapons systems or
support systems that have failed to achieve the required outcomes. This has often
resulted from a failure to understand, manage or respond to the dynamic environment
within which the assets are required to operate. The application of System Dynamics to
the management of defence assets can and has achieved real and tangible benefits that
ultimately result in more efficient use of scarce taxpayer funds.
References
Ackermann, F., Eden, C., and Williams, T. (1997) Modelling for Litigation: Mixing
Qualitative and Quantitative Approaches., Institute for Operations Research and the
Management Sciences.
Argyris, C. (1994), On Organisational Learning. , Blackwell
Forrester, J.W. (1961), Industrial Dynamic , Portland Oregon: Productivity Press
McLucas A.C., Integrating Soft and Hard Systems Analysis: Seeking a Practical
Framework for Addressing Strategic Issues, 24 Mar 98, To be Published, University
College, UNSW, Canberra, Australia.
Viljoen, J., Strategic Management , 2nd ed. Addison Wesley Longman Australia 1994.
Authors may be contacted by email to: ithink@ mpx.com.au
