HOW TO SUCCESSFULLY DEPLOY AND RUN A PERFORMANCE-BASED LOGISTICS CONTRACT

Service Activities

Risks & Opportunities

Implemented Contracts

Success Factors

Guiding Principles

Logistic Contracts

HOW TO SUCCESSFULLY DEPLOY AND RUN A PERFORMANCE-BASED LOGISTICS CONTRACT

WHAT IS PERFORMANCE-BASED LOGISTICS ABOUT?

Performance-Based Logistic contracts are agreements between:

Customers e.g.,

• government agencies,
• armies or
• infrastructure operator companies

&

Service providers e.g.,

• industrial contractor or
• logistics company

WHAT DO PERFORMANCE-BASED LOGISTIC CONTRACTS COVER?

PBL-contracts provide support & service activities for

• certain systems or equipment (e.g., radars, engine, auxiliary power units)
• whole platforms (e.g., infrastructure, vessel, aircraft, helicopters)

Service activities include the whole supply chain

Maintenance

Repair

Replenishment of spare parts

Transportation & warehousing

PERFORMANCE-BASED LOGISTIC CONTRACTS AIM at improving system availability, reduce life-cycle costs and enhance overall logistics support effectiveness

PERFORMANCE-BASED LOGISTIC CONTRACTS ARE TAILORED TO CUSTOMERS CONTEXT – THEY CAN COVER A LARGE VARIETY OF ACTIVITIES

PERFORMANCE-BASED LOGISTICS AIMS TO EQUALLY SHARE RISKS & OPPORTUNITIES BETWEEN CUSTOMER AND SERVICE PROVIDERS

CUSTOMER OPPORTUNITIES

• Increase operational availability
• Workload reduction to focus on core activities
• Enhanced capabilities to secure parts availability

COSTUMER RISKS

• Loss of skills (e.g., maintenance for foreign operations)
• Loss of synergies with other support activities
• Loss of ability to make decision

SERVICE PROVIDER OPPORTUNITIES

• Autonomy and flexibility to improve product availability
• Incentive to innovate industrial levers to reduce costs
• Long-term visibility to plan investments enhances possibilities to upgrade platform/system

SERVICE PROVIDER RISKS

• Endorsing the responsibility of performance and liability
• Components & material obsolescence
• Financial assumptions vs. actual profitability

WHERE ARE PERFORMANCE-BASED LOGISTIC CONTRACTS ALREADY IMPLEMENTED?

JETFIGHTERS

Rafale (FR/Platform)

Performance-Based Logistics in place since 2019 and contracted for 10 years
Already positive impact on flight availability

Operated by

HELICOPTERS

EC-135 (DE/Platform)

In place for 17 years (5+5+7)
14 training helicopters with a mission readiness of >80%

Operated by

LAND VEHICLES

Leclerc Tank (FR/Platform)

Second 10 years agreement
Improvement of availability rate from 58 % (2018) to 87 % (2021)

Operated by

SHIPS

MK-41 (VLS/USA/System)

Performance-Based Logistics contract of missile vertical launch system
99 % operational availability

Operated by

Conclusion

Overall, Performance-Based Logistic contracts have been used for more than 20 years in the U.S. and for about 10 years in Europe and have proven benefits in terms of availability and reliability, at lower cost.

ARCHERYS 5 SUCCESS FACTORS FOR THE TRANSITION TO A PERFORMANCE-BASED LOGISTICS CONTRACT

1. CONTRACT IMPLEMENTATION

Secure the implementation of Performance-Based Logistics scope of work considering the current organization of the service provider

2. PERFORMANCE MONITORING

Secure the performance commitment with successful execution and high efficiency of the different activities within the scope of work

3. CULTURAL CHANGE

Support Performance-Based Logistics major changes of positioning and mindset compared to legacy culture & behaviors for both service provider and customer

4. FORECASTING COMPLEXITY

Handle the multiple and complex system/ equipment data required for spares & repairs forecasting vs. “new build” forecast based on straight production rate

5. MULTIPLE STAKEHOLDERS & INTERFACES

Consider the workshare complexity and multiple interfaces (i.e., customer, partners, suppliers) of the Systems/equipment in Performance-Based Logistics contract execution

ARCHERYS 5 GUIDING PRINCIPLES TO SUCCESSFULLY ADDRESS MAIN PERFORMANCE-BASED LOGISTICS CHALLENGES

1. Ensure a clear contract scope and structure a transition plan to receive full performance commitment

Define target processes and IT-landscape
Set and formalize a clear scope of work incl. interfaces & responsibility split
Steer actions continuously until full performance

2. Break down contract KPIs to functional performance objectives

Cascade objectives and metrics at activity level
Associate root causes analysis mechanisms to performance metrics

3. Leverage data to manage complexity of forecasting model

Start a deep data analysis to build robust forecasting models
Continuously validate the order forecast and frequency and safety stocks at all logistic levels

4. Create change agenda, mobilize organization, and communicate strategically

Articulate vision, strategy, culture, and behavior
Ensure alignment and commitment of leaders
Enforce the change from part supplier to service provider mindset

5. Involve internal and external stakeholders in transition steering & monitoring

Define clear objectives and dedicated KPIs as a basis for decision taking
Involve internal and external stakeholders in routines

ARCHERY CAN SUPPORT YOU IN ALL PHASES OF PERFORMANCE-BASED LOGISTIC CONTRACTS

Contracting

1. Conduct a contract checklist review

2. Structure contract/program organization

3. Design to-be processes and IT-landscape

4. Support the creation of change agenda

TRANSITION

5. Perform a contract health check

6. Establish/accelerate transition plan

7. Support development of critical actions

RUN MODE

8. Conduct a performance review and identify improvement levers

9. Develop a performance dashboard and monitoring routines

10. Set up/orchestrate taskforces to recover specific topics (e.g., performance, quality)

Our Experts

Matthias Feix

Partner and Managing Director Germany

JOHANNES SCHILLING

Principal

Grégoire de Belenet

Partner

HANNA BRAUKSIEPE

Project Manager

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