This document seeks to help the Air Force develop a strategy for managing supply chain risks during weapon system acquisition and sustainment. The authors review the literature on supply chain risk management and report on a series of interviews they conducted within acquisition, sustainment, and commercial communities. They also describe a prototype methodology that the Air Force may wish to use to identify and manage supply chain risks.

Identifying and Managing Acquisition and Sustainment Supply Chain Risks

Nancy Young Moore, Elvira N. Loredo, Amy G. Cox, Clifford A. Grammich

ResearchPublished Mar 4, 2015

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 acquisition and sustainment. The authors review the literature on supply chain risk management and report on a series of interviews they conducted with acquisition and sustainment personnel and supply chain experts from commercial enterprises, including representatives of Air Force commodity councils, and the Defense Logistics Agency. They find that many supply chain risks are not considered directly by the Air Force acquisition and sustainment community and that, while some risks are acknowledged, there is little or no strategy in place to mitigate them. They describe a prototype methodology that the Air Force may wish to use in identifying and managing supply chain risks.

Key Takeaways

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 recover 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 Acquisition and Sustainment Communities

  • Air Force and Department of Defense (DoD) guidance on supply chain risk identification and mitigation address some, but not all, of the supply chain 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 and some other risks 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.
  • The Air Force needs to develop a methodology for identifying and managing supply chain risks.

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Moore, Nancy Young, Elvira N. Loredo, Amy G. Cox, and Clifford A. Grammich, Identifying and Managing Acquisition and Sustainment Supply Chain Risks. Santa Monica, CA: RAND Corporation, 2015. https://www.rand.org/pubs/research_reports/RR549.html.
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This research was performed as part of a project titled "Identifying and Managing Risks Associated with Agile Supply Chains," conducted in RAND Project AIR FORCE's Resource Management Program.

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