Presentation is loading. Please wait.

Presentation is loading. Please wait.

Paul Gvoth EBA-Norfolk, VA November 18, 2009 Hampton Roads Area INCOSE/SCEA Decision Analysis Conference Economic Benefits Analysis The “Other-Side” of.

Similar presentations


Presentation on theme: "Paul Gvoth EBA-Norfolk, VA November 18, 2009 Hampton Roads Area INCOSE/SCEA Decision Analysis Conference Economic Benefits Analysis The “Other-Side” of."— Presentation transcript:

1 Paul Gvoth EBA-Norfolk, VA November 18, 2009 Hampton Roads Area INCOSE/SCEA Decision Analysis Conference Economic Benefits Analysis The “Other-Side” of Cost This document is confidential and is intended solely for the use and information of the client to whom it is addressed. Economic & Business Analysis - Norfolk Pre-Decisional Analysis and Data

2 1 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE Agenda  Introduction  Similarities/Differences in Benefits Analysis Approach vs. Cost Analysis  Tiered Approach  Example  References Pre-Decisional Analysis and Data

3 2 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE Introduction  Why this is important?  Acquisition Requirements –Nunn-McCurdy (15%, 25%, ‘82) –Clinger-Cohen (ITMRA –’96, CIO)  GAO Audits and Tracked Recommendations (IG reporting to Congress)  Internal Competition for Resources (POM and FYDP, POPS)  Justification to External Entities  Decision Analysis – Selection of Preferred Alternative among all Viable Alternatives (AoA)  Integral part of an overall Economic Analysis (EA), ROI Pre-Decisional Analysis and Data

4 3 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE Agenda  Introduction  Similarities/Differences in Benefits Analysis Approach vs. Cost Analysis  Tiered Approach  Example  References Pre-Decisional Analysis and Data

5 4 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE Cost Analysis and Benefits Analysis Share Some Technical Points  Cost Analysis –Analogy –Parametric –Engineering Build-Up –Expert Opinion –Extrapolation from Actual –Cost Element Structure (CES)  Benefits Analysis –Analogy –Parametric –Engineering Build-Up –Expert Opinion –Extrapolation from Actual –Benefits Elements Structure (BEM) Both analyses sensitive to up-front important analytical decisions about allocations and application of economic concepts (NPV, ROI, BE) Benefits Element Structure R&D and T&E Military Personnel Operations and Maintenance Procurement Construction Pre-Decisional Analysis and Data

6 5 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE However, there are important differences…  Cost Analysis –Well recognized published sources of cost information –Risk is better understood (CSPT) –Common Accepted Terms- of-Reference Across Field –Less Reliance on Expert Opinion –Certification for Analysts –Navy Center for Cost Analysis (NCCA) –Cost Analysis Improvement Group (CAIG)  Benefits Analysis –Analogies for new programs do not exist and little published benefits data –Parameters are often unknown –Terms-of-Reference –Heavy use of Expert Opinion –Risk not well defined –No organized Benefits Analysis Community –Quality of Benefits Analysis dependent upon client environment –Less scrutiny then costs but high impact on Decision Metrics Pre-Decisional Analysis and Data

7 6 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE Agenda  Introduction  Similarities/Differences in Benefits Analysis Approach vs. Cost Analysis  Tiered Approach  Example  References Pre-Decisional Analysis and Data

8 7 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE Benefits Analysis Methodology - Four Steps:  Identify the functional capabilities of the Preferred Alternative (PA) and the Status Quo (SQ).  Develop the benefits model by allocating benefits to the four tiers of the framework described below.  Estimate the monetary value of the quantitative benefits by combining the LCCE, cost savings, and operational efficiencies. This will yield an ROI, NPV, and Payback Period calculations.  Address the improved operational capabilities resulting from the preferred alternative’s implementation within the context of risk. Produce LCCE Develop Benefits Framework Estimate Benefits Evaluate Risks Pre-Decisional Analysis and Data

9 8 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE Benefits are Classified According to a 4-tier Approach*  Tier 0 consists of monetary cost savings determined by subtracting the costs associated with the PA from the current cost to maintain the SQ.  Tier 1 includes mission critical operational efficiencies directly related to the drawdown of inventory in terms of cost avoidances.  Tier 2 includes achievable operational efficiencies subordinate to the efficiencies received in Tier 1, but which still provide cost avoidances to the Marine Corps.  Tier 3 consists of qualitative benefits associated with the implementation of the Preferred Alternative. Cost avoidances account for the bulk of GCSS benefits and is the focus today *Based on Guidance from OSD PAE: Methodology captures inherent subjectivity and relative risk. Cost savings increase incrementally and cumulatively from “initial outlay” benefits to the inclusion “must have” benefits to the inclusion of “nice to have” benefits. Cost Savings/Avoidance Pre-Decisional Analysis and Data

10 9 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE Pre-Decisional Analysis and Data

11 10 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE Agenda  Introduction  Similarities/Differences in Benefits Analysis Approach vs. Cost Analysis  Tiered Approach  Example  References Pre-Decisional Analysis and Data

12 11 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE GCSS-MC EA Up-Front Summary  Preliminary ROI calculations demonstrate that sufficient Operational Efficiencies are achievable in GCSS-MC to generate a positive ROI for Block I, and its increments, providing support to proceed with program development  GCSS-MC business value resulting from the investment in new system capabilities is expressed as Operational Efficiencies that can be evaluated using USMC Logistics Chain Management (LCM) Balanced Scorecard Metrics and Joint Staff LCM Metrics  Reconciled NCCA LCCE amounts will be included in future ROI analyses  Benefits Analysis and LCCE will be finalized prior to the MS C decision  Analyzed all that we could gather data on, but not as much as we wanted Pre-Decisional Analysis and Data

13 12 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE Global Combat Support System (GCSS) Marine Corps (MC) Benefits Analysis – Purpose:  Review Preliminary Financial Results of GCSS-MC Economic Benefits Analysis relative to the Marine Corp’s investment in the capabilities set out in the Capabilities Production Document (CPD)  Discuss GCSS-MC Economic Benefits resulting from program investment in Logistics Chain Management (LCM) Capabilities  Review Economic Metrics expressed as monetized business value returning to the USMC from GCSS-MC program investment Pre-Decisional Analysis and Data

14 13 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE Data Sources, Tools, Applied Analysis Pre-Decisional Analysis and Data  Collected Marine Corps data from:  USMC LOGCOM – Albany,  GA, USMC HQ I&L, DC, and from  USMC Maintenance and Supply Records.  Applied business analytics tools such as:  Expert Choice (AHP),  SPSS,  Excel …to collect capability attribute weights, calculate averages, and graphically display data.

15 14 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE Economic Analysis Products  Performance Improvement Metrics Table (PIMT) Effort (Briefed April 2009) –Identified the functional/operational capabilities of the GCSS-MC/LCM Block 1 Alternative and the SQ sourced from the Capabilities Production Document (CPD) –Developed metrics that are linked to each operational capability  Economic Viability to Support IRB Certification (August/September 2009) –Develop the benefits model by extracting benefits to the benefits analysis framework –Allocate benefits into the four tier break-out of Tier-0, Tier-1, Tier-2, Tier-3 –Estimate the monetary value of the quantitative benefits by combining the Program Office LCCE (PLCCE), cost savings, metrics results, and operational efficiencies –Calculate the NPV, ROI, and Payback Period calculations using PLCCE data  Milestone C (Through January 2010) –Update the Benefits Analysis, NPV, ROI, and Payback Period calculations with the NCCA- reconciled LCCE –Achieve OSD PA&E review and approval Pre-Decisional Analysis and Data

16 15 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE Economic Analysis Process Establish Ground Rules & Assumptions Establish Economic Analysis Approach Cost Analysis Requirements Description (CARD) Economic Analysis Development Plan (EADP) Conduct Benefits Analysis Develop Status Quo LCCE Develop Preferred Alternative LCCE Block 1 Economic Analysis Process NCCA Reconciliation Risk & Sensitivity Analysis Benefits Analysis Economic Analysis Document Outputs PA LCCE SQ LCCE Return on Investment (ROI) Payback Net Present Value (NPV) Data Collection Update and Finalize Cost and Benefit Analyses Develop Performance Improvement Metrics Table Current Pre-Decisional Analysis and Data

17 16 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE Capabilities Linked to Joint and USMC LCM Balanced Score Card Metrics  Capabilities Produced by Investment in GCSS-MC –Investment in GCSS-MC produces capabilities in the following Logistics Chain Management (LCM) Areas: Request Management (22.5%) Supply (30.6%) Maintenance (30%) Finance (5.2 %) System Administration (11.%)  New and improved capabilities create performance improvements or operational efficiencies  Performance of capabilities are evaluated using Joint and USMC Balanced Score Card Metrics –GCSS-MC tracks and balances capability performance relative to the scorecard metrics, creating Operational Efficiencies –The amount of Monetized Economic Benefit derived from the implementation of GCSS-MC Block 1 is directly related to the degree of Operational Efficiencies generated by the new or improved capability Pre-Decisional Analysis and Data

18 17 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE Capabilities Linked to Balanced Score Card GCSS-MC Capabilities 2 Impact (Weight) Joint Chiefs of Staff Joint Integrated Capabilities (JIC) Joint Attributes 1 SustainabilityResponsivenessSurvivabilityFlexibilityEconomyAttainability USMC Balanced Scorecard Attributes (Weight) Readiness (25%) Responsiveness (20%) Reliability (20%) Flexibility (15%) Expenses (10%) Assets (10%) Request Management The system provides the capability to create, update, validate, approve and manage customer requests for logistics support including supply, service, maintenance, and returns or combinations of these requests. 22.5% XXXXX Supply The system provides the capability to plan and execute the functions necessary for supply operations. This includes functions related to capacity, operations and fulfillment as it pertains to inventory, warehousing, and asset management. 30.6% XXXXXX Maintenance The system provides the capability to plan and execute the functions necessary for maintenance operations. This includes functions to conduct capacity and production management of maintenance resources and to plan and control maintenance execution. 30% XX Finance The system provides the capability to conduct financial accounting for assets and inventory. This includes functions to capture costs and other financial data related to inventory and asset values required for Clean Audit compliance. 5.2% X System Administration The system provides the capability to support the on-going system setup, configuration, and maintenance required for the GCSS-MC/LCM BLOCK 1 enterprise and deployed environments. 11.7% X Total 100.0% 1 The “Simplicity” Joint Attribute has been omitted because it does not map to a specific USMC Balanced Scorecard Attribute 2 GCSS-MC Capability Production Document (CPD) Draft October 2008 Pre-Decisional Analysis and Data

19 18 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE Performance Improvement Metrics Table (PIMT) –“The Performance Improvements Metrics Table must reflect metrics which quantify the performance improvements that will result from the modernization as justification for the investment.” – DITPR-DON Tier 1-3* Certification Reporting Requirements –Shows the performance metrics associated with operational efficiencies (OE) gained by implementing the new system increment Purely operational improvements – no costs or monetized benefits are associated with the PIMT Compares operationally the differences between the legacy and future system Provides the expected time for the improvement *DoD and DoN Business System Investment Tiers based on total development costs. Tier 1-3 are greater than $1million. Pre-Decisional Analysis and Data

20 19 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE Performance Improvement Metrics Table Tier Description of Performance Improvements GCSS-MC Capability Affected Current System Performance (As-is) Post GCSS-MC Performance (To-Be) Performance Improvement 1 Supply response time The speed at which the logistics chain provides products to supported units.  Supply  Request Management  Maintenance Order to Ship Time (OST) measures this process. Requests take 24 to 48 hours to process GCSS-MC will reduce OST to approximately 2 hours Decrease the response time by 96% Operational Availability Captures how often equipment is mission ready.  Supply  Maintenance Mean Logistics Delay Time (MLDT) factors into this metric. It is not currently measured GCSS-MC will be able to monitor and reduce MLDT GCSS-MC can potentially reduce MLDT by 50% Inventory Reduction Inventory carrying requirements, order timing, and costs  Request Management  Supply  Maintenance Replenishment action initiated whenever on-hand quantity plus the dues, less back orders, is equal to or less than the reorder point. Inflates Inventory GCSS-MC will use advanced supply chain planning engine at retail level and Oracle min/max planning tool Potential decrease in inventory by 25% Demand Planning and Forecasting The process of determining the type, location and quantity of products needed to support the warfighter.  Supply Inventory Carrying Costs can be 20% or higher of inventory value and are directly linked to inventory size which may be larger than needed due to poor visibility, obsolescence, and replenishment business rules Inventory Carrying Costs will be reduced in direct proportion to the reduction in inventory size Potential 25% reduction in inventory X 20% Inventory Carrying Costs = 5% overall reduction in Inventory Carrying Costs Maintenance, Repair & Overhaul (MRO) Process, support, and downtime for repairable parts operations Maintenance Long order-to-ship times, incomplete parts kits, erroneous orders, and stock-outs all delay maintenance throughput and increase equipment downtime Increase maintenance throughput, maintain personnel utilization, reduce unneeded parts in pipeline or in storage Potential 15% Cost Reduction (unneeded Parts) Pre-Decisional Analysis and Data

21 20 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE Performance Improvement Metrics Table Tier Description of Performance Improvements GCSS-MC Capability Affected Current System Performance (As-is) Post GCSS-MC Performance (To-Be) Performance Improvement 1 Inventory Cycle Time The total time required to complete the process of receiving and issuing inventory.  Supply  Maintenance Inventory Cycle Time is not optimal because USMC systems cannot directly access vendors, track orders, or efficiently process requests 2 hour order processing time vs 48 hour processing time, order tracking, asset visibility, direct reach to supplier Potential 25% reduction in inventory, 5% reduction in inventory carrying costs, and items in the pipeline Order Management Addresses the ability to streamline and automate the entire inventory management process from order capture to transportation and shipment.  Request Management Order Management is measured through fill rates, which are currently inconsistent, sometimes incomplete, and untraceable Traceable, measurable fill rates that increase supply chain velocity and cash-to- cash transactions Potential 25% reduction in inventory, 5% reduction in inventory carrying costs, and items in the pipeline Resource Management Ensures the timely management and processing of orders  Request Management  Flexibility The timeliness with which orders are processed is not optimal (24-48 hrs) because there are multiple points of access increasing the probability of errors in completion of customer orders Orders are processed in a timely manner (2 hrs) through a single point of access, which allows for the accurate completion of customer orders Reduction in erroneous orders, double orders, an order cycle time 2 Realignment of Maintenance Personnel Encompasses the decrease in staff or FTE support and the increase in employee utility and productivity  System Administration FTE’s are being used for reconciliation of StovedPiped systems FTE’s released from system reconciliation duties and realigned to their job resulting in an increase in operational availability Potential one time 10% realignment of Marine Corps Support FTEs Procurement Improvement Includes the purchase of equipment, materials, software or hardware to support the logistics process  Supply  Finance Four legacy systems, many ‘ungoverned’ systems, material handling equipment Reduction in system and material handling equipment costs as a result of GCSS-MC implementation Potential additional 5% Reduction in Material Handling Equipment Cost, and Systems Costs Pre-Decisional Analysis and Data

22 21 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE Performance Improvement Metrics Table Tier Description of the Performance Improvements GCSS-MC Capability Affected Current System Performance (As-is) Post GCSS-MC Performance (To-Be) Performance Improvement 3 Shipping Status Refers to tracking down the status of an item  Request Management  Supply  Maintenance System does not provide an estimated time. Requires phone call to supplier in order to obtain information GCSS-MC will provide status to end customer/requisition from intermediate supply activities Increases confidence in the USMC managed logistics chain Improved lifecycle management Provides Total Asset Visibility  Request Management  Supply  Maintenance There are no enterprise level metrics available to capture this information Improved enterprise level visibility of assets throughout enterprise including warranty status, and serial number tracking of secondary repairables and end items Enables and Improves USMC logistics chain management and decision making Logistics plans Creating, saving and reutilizing logistics plans.  Supply  Maintenance There are currently no enterprise level ability to capture an archive metrics available to capture this information GCSS-MC will include a process for archiving these documents into a database Enables and Improves USMC logistics chain management and decision making Interface with Total Force Structure Management System (TFSMS) Streamlines table of allowance and equipment item update/management daily.  Supply  Maintenance Currently no interface with TFSMS Streamlined and timely table of allowance and equipment (T/O and T/E) item update/management through daily interface with TFSMS Enables and Improves USMC force structure management and decision making Budgeting Ensures the system provides updated figures.  Finance Information is retained locally and manually computed in Excel spreadsheet Automated processes will handle most functions Improved visibility of maintenance and supply costs Requirements USMC is subject to numerous DOD wide requirements which GCSS-MC will satisfy System Administration Finance USMC currently adapting to compliance requirements within current system constraints Enhances USMC Compliance with: JFIMP SFIS IUID Improves processes Increases USMC credibility with internal and external resource reporting requirements Pre-Decisional Analysis and Data

23 22 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE Performance Improvement Metrics Table Tier Additional Tier 3 Metrics 3 Ability to report more accurate and timely operational availability of all equipment/weapon systems Establishes automation of maintenance history including major sub-component (SL-4) configuration of end items Ability to task organize units with their associated equipment, supplies, and personnel within the GCSS-MC. Marines, Sailors, contractors, and government civilians Ability to create and submit service requests for logistics support in forward operating areas through mobile field service (MFS) and centrally manage requests through fulfillment Pre-Decisional Analysis and Data

24 23 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE EA Results - Block I  ROI calculated using the Program’s LCCE  Benefits Based on Total Block I (Release Release 1.2) –PV of Benefits:$1,219.07M –PV of Costs:$603.87M –Benefit Cost Ratio:2.02 –ROI:3.40 Break Even at 2014 Pre-Decisional Analysis and Data

25 24 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE Top Ten Benefits  $53M IT Direct Cost Savings  $273.4M Inventory Reduction  $797.4M Inventory Carrying Cost (ICC) Reduction  $191.6M Repair Part Reduction  $196.9M MLDT Reduction (Asset Value Recapture & Availability)  Expanded User Base - GCSS will expand user base to approximately 40 percent of 57,000 potential users  Improved readiness  Enables compliance  Expanded Capability  USMC Integration with Joint Chiefs of Staff Joint Integrated Capabilities (JIC) Joint Attributes for Logistics Chain Management (LCM) Pre-Decisional Analysis and Data

26 25 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE EA Results - Release 1.1  ROI for Release 1.1 is a sub-set discount analysis of Block I  Benefits Analysis for Release 1.1 –PV of Benefits:$896.69M –PV of Costs:$309.51M –Benefit Cost Ratio2.90 –ROI5.32 Pre-Decisional Analysis and Data

27 26 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE EA Results - Release 1.2  ROI for Release 1.2 is a sub-set discount analysis of Block I  Benefits Analysis for Release 1.2 –PV of Benefits:$317.50M –PV of Costs:$293.94M –Benefit Cost Ratio1.08 –ROI1.20 Pre-Decisional Analysis and Data

28 27 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE Direct Cost Savings  $53M IT Cost Savings –After Release 1.2 FOC (FY13), the four legacy systems will be phased out –Approximately $4.5 Million per year after legacy system phase-out –Assume legacy costs will not increase annually due to long term maintainability issues –Researching potential SQ investment and increased sustainment costs due to SW and HW obsolescence –Initial cost savings are typically negative Pre-Decisional Analysis and Data

29 28 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE Inventory Reduction  $273.4M Inventory Reduction –USMC Class IX inventory estimated at $1.2 Billion –Block I one-time inventory reduction (IR) draw-down estimated between 15% and 25%* –Used 20% figure in PIMT analysis –One time drawdown of inventory for this analysis is spread across the first 5 years after FOC –Inventory is shown to be 90% within the Enterprise, and 10% Deployed –Release 1.1 IR estimate for the ROI is $ Million; Release 1.2 IR Estimate $53.54 Million *Based on proprietary BAH industry studies and USMC I&L Business Case Pre-Decisional Analysis and Data

30 29 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE Inventory Reduction *Based on proprietary BAH industry studies and USMC I&L Business Case Pre-Decisional Analysis and Data

31 30 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE Inventory Reduction by Release Pre-Decisional Analysis and Data

32 31 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE Inventory Carrying Costs Reduction  $797.4M Inventory Carrying Cost (ICC) Reduction –Inventory Carrying Cost (ICC) factor is 25% of inventory reduction value. ICC is a recurring cost avoidance that will be used to write down the future investment –Release 1.1 ICC estimate $47.6M; Release 1.2 ICC Estimate $13.39M –ICC avoidance will occur every year after FOC Pre-Decisional Analysis and Data

33 32 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE Inventory Carrying Costs Reduction Pre-Decisional Analysis and Data

34 33 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE Repair Part Reduction  $191.6M Repair Part Reduction –Analyzed SOE maintenance transactions for the period FY 2007 thru April 2009 –37,480 unique consumable NSNs from maintenance transactions representing 335,648 appearances in 87,500 Equipment Repair Orders (ERO) –626,677 parts were required, but 948,020 were ordered valued at approximately $551.7 Million –Difference of 321,343 “over-ordered” parts for the period of analysis is valued at approximately $36.5 Million –Annualized adjustment for the period of analysis indicates that approximately 128,537 extra parts were ordered, valued at $14.6 Million per year, every year –Annual Benefit for Release 1.1 is $11.4M and Release 1.2 is $3.22M –Cost avoidance will occur every year after FOC Pre-Decisional Analysis and Data

35 34 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE Repair Part Reduction Pre-Decisional Analysis and Data

36 35 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE MLDT Reduction  $196.9M MLDT Reduction (Asset Value Recapture & Availability) –For our period of analysis, (FY 07 thru April 3 FY 09), $23.1B dollars of USMC assets were sitting idle due to a total Maintenance Down Time (MDT) of 3.8M days, representing 87,427 Equipment Repair Orders (ERO) –The average MDT per ERO is approximately 41 days, which is comprised of Labor Hours, Average Logistics Delay Time (ALDT), and other MDT attributes –ALDT is approximately 21 days –Modest 10% reduction in ALDT to 19 days results in a one-time benefit of $175.31M in Asset Value and Equipment Availability –Benefit allocated to Release 1.1 is $136.74, and to Release 1.2 is $38.57 –Prorated across five years starting at FOC Pre-Decisional Analysis and Data

37 36 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE MLDT Reduction Pre-Decisional Analysis and Data

38 37 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE User Base Expansion  Expanded user base should increase supply chain velocity through greater user access, increased order accuracy and increased transaction speed.  Current legacy system user base is approximately 13,000  GCSS will potentially expand user base to approximately 56,965  There is no reduction in FTEs resulting from implementation of GCSS-MC. Pre-Decisional Analysis and Data

39 38 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE Readiness and Compliance  Readiness –Improved visibility of assets throughout enterprise including warranty status, and serial number tracking of secondary repairables and end items –Inventory posture and readiness is visible throughout enterprise allowing for improved resource allocation and optimal stockage at wholesale, retail and consumer level –Establishes automation of maintenance history including major sub-component (SL-4) configuration of end items  Compliance –Enables USMC to comply with Joint Financial Management Improvement Program requirements –Enables USMC to comply with SFIS requirements –Enables USMC to comply with IUID requirements Pre-Decisional Analysis and Data

40 39 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE Legacy System Risks  Cost Avoidance –Annual increased legacy systems costs due to long-term maintainability issues –Legacy systems are currently grandfathered and do not have to comply with SFIS and IUID due to the imminent replacement of the legacy systems –If GCSS-MC is not implemented, support for the legacy systems in their current configuration would become untenable. USMC would need to commission a revision to modernize the code and functionality. Due to the revision, the legacy systems would then be forced to comply with Standard Financial Information Structure (SFIS) and Unique Identification (IUID). –Need to develop costs for SFIS and IUID compliance Pre-Decisional Analysis and Data

41 40 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE Additional Capability  Expanded Capability –Ability to report more accurate and timely operational availability of all equipment/weapon systems –Ability to create, save, and reutilize logistics plans and bills of material for TEEP events and real world operations –Ability to task organize units with their associated equipment, supplies, and personnel within the GCSS-MC –Streamlined and timely table of allowance and equipment (T/O and T/E) item update/management through daily interface with TFSMS –Streamlined budgeting, improved visibility of maintenance costs, ability to establish financial responsibility at any echelon Pre-Decisional Analysis and Data

42 41 Economic & Business Analysis - Norfolk 41 Balance Scorecard Attributes (% = Attribute Weight) 25% 10% 20% 15% 10%

43 42 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE 42 Attribute: Readiness  The Tier 1 performance metric for Readiness is Operational Availability, measured through lower-tier metrics with the following formula and illustrated in the figure below: Operational Availability = ___________Uptime__________ Uptime + TTR + SRT + DART

44 43 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE 43 Attribute: Responsiveness  The Tier 1 performance metric for Responsiveness is Total Fulfillment Cycle Time, measured through lower-tier metrics with the following formula and illustrated in the figure below: Total Fulfillment Cycle Time = Request Cycle Time + Order Fulfillment Cycle Time

45 44 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE 44 Attribute: Reliability  The Tier 1 performance metric for Reliability is Quality Order Fulfillment, measured through lower-tier metrics with the following formula and illustrated in the figure below: Quality Order Fulfillment = [# Repair Orders X %QOF (Maintenance)] + [# Requisitions X %QOF (Supply)] (# Repair Orders) + (# Requisitions)

46 45 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE 45 Attribute: Flexibility  Flexibility is measured with the Tier 2 metric Fulfillment Capacity, which is the highest-level metric used to measure logistics chain capacity. Fulfillment capacity is measured through lower-tier metrics through the following equation and as illustrated in the figure below: Fulfillment Capacity = Upside Make Capacity + Upside Warehouse Capacity + Upside Purchase Capacity + Upside Transportation Capacity

47 46 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE 46 Attribute: Expense  The Tier 1 performance metric for Expense is Total Logistics Expense, measured through lower-tier metrics with the following formula and illustrated in the figure below: Total Logistics Expense = Total Maintenance Expense + Total Supply Expense + Total Distribution Expense

48 47 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE 47 Attribute: Asset Utilization  The Tier 1 performance metric for Asset Utilization is Asset Utilization, measured through lower-tier metrics with the following formula and illustrated in the figure below: Asset Utilization = (Maintenance Asset Utilization, Supply Asset Utilization, Transportation Asset Utilization)

49 48 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE Way Forward  Expanded Risk Analysis  Life Cycle Return on Investment Analysis  Optimized Benefits Relative to Cost  Post Investment Analysis Pre-Decisional Analysis and Data

50 49 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE Agenda  Introduction  Similarities/Differences in Benefits Analysis Approach vs. Cost Analysis  Tiered Approach  Example  References Pre-Decisional Analysis and Data

51 50 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE References  DFAS ROI Calculator;  Department of the Army - Economic Analysis Manual;  DoD Automated Information Systems Economic Analysis Guide – 1995;  Analysis of Alternatives (AoA) Handbook: Practical Guide to Analyses of Alternatives, July 2008, Office of Aerospace Studies, Air Force Materiel Command (AFMC) OAS/A9,1655 1st Street SE, Kirtland AFB, NM ;  Benchmarking Cost Savings & Cost Avoidance - NASPO BENCHMARKING WORKGROUP Research Brief September 2007; dance.pdf dance.pdf  There are many more resources, but these are a good start. Pre-Decisional Analysis and Data

52 51 Economic & Business Analysis - Norfolk Benefits Analysis Brief HRA SCEA/INCOSE Paul Gvoth Associate Booz | Allen | Hamilton Suite Lake Wright Drive Norfolk, VA Mobile (757) Paul Gvoth Associate Booz | Allen | Hamilton Suite Lake Wright Drive Norfolk, VA Mobile (757) Pre-Decisional Analysis and Data


Download ppt "Paul Gvoth EBA-Norfolk, VA November 18, 2009 Hampton Roads Area INCOSE/SCEA Decision Analysis Conference Economic Benefits Analysis The “Other-Side” of."

Similar presentations


Ads by Google