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Research Questions

  1. What are the Air Force's current practices for and guidance on supply chain risk management?
  2. What are the emerging commercial best practices for supply chain risk management?
  3. What steps should the Air Force take as part of an enterprise-wide strategy for proactively managing supply chain risks?

In recent years, the Air Force and its suppliers have adopted a variety of practices that have improved efficiency and effectiveness but have also made supply chains more brittle and increased risks of supply disruption. This document seeks to help the Air Force develop a strategy for managing supply chain risks during sustainment. In it, the authors review literature on supply chain risk management (SCRM), examine current Air Force practices for and guidance on SCRM, and describe emerging commercial best practices for SCRM. They find that many supply chain risks are not considered directly within the Air Force sustainment community and that, while others are acknowledged, there is little or no strategy in place to mitigate them. They recommend that the Air Force establish an enterprise-level organization to proactively manage supply chain risks.

Key Findings

Best Practices for Supply Chain Risk Management

  • Proactive supply chain risk management requires the development of guidance and policies, practices, processes, and organizations for identifying and managing supply chain risks.
  • Knowledge of the upstream supply base and requiring suppliers to commit to a time to recovery in the event of a disruption are key to successfully managing supply chain risks.

Many Supply Chain Risks Are Not Addressed by the Air Force Sustainment Community

  • Air Force and Department of Defense (DoD) guidance on supply chain risk identification and mitigation address some, but not all, of the risks identified in the business literature.
  • The Air Force commodity councils have a process for managing risk, but it is geared toward managing contract risk, not supply chain risk.
  • One prominent category of supply chain risks identified in the business literature but not DoD guidance is natural disasters. The Federal Acquisition Regulation's force majeure clause transfers risks associated with natural disasters from suppliers to the Air Force.
  • Interviews with Air Force supply management personnel suggest that they rarely or never consider risks whose investigation would require investment in developing a supply chain risk management plan or risks from force majeure events for which the Federal Acquisition Regulation absolves suppliers.

Recommendations

  • Even if the Air Force cannot change the likelihood of a risk (as is often the case with risks associated with natural disasters or with sole source suppliers), it should take steps to minimize its duration and consequences.
  • The Air Force should establish an enterprise-level supply chain risk management (SCRM) organization. The new organizational structure should provide a mechanism to integrate supplier relationship management and SCRM across the planned Air Force Life Cycle Management Center and Air Force Sustainment Center.

Table of Contents

  • Section One

    Motivation and Methodology

  • Section Two

    Introduction and Background

  • Section Three

    Evolving Commercial Practices in Supply Chain Risk Management

  • Section Four

    Department of Defense and Air Force Guidance for Supply Chain Risk Management

  • Section Five

    Summary of Air Force Supply Chain Risk Management Case Studies

  • Section Six

    Summary and Recommendations

  • Appendix A

    Interview Protocol for F-16 and C-17 Interviews

  • Appendix B

    Interview Protocol for Company Interviews

  • Appendix C

    Description of Department of Defense and Air Force Guidance on Acquisition and Supply Chain Risk

  • Appendix D

    Commodity Council Eight-Step Process

  • Appendix E

    Categories of Supply Chain Risks

Research conducted by

The research described in this report was sponsored by the United States Air Force and conducted by RAND Project AIR FORCE.

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