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Organizational-Based Cost-Management in a

Deployed-Tactical Environment:A Case Study

316th Expeditionary Sustainment Command (ESC) Deployed in Iraq from

November 2007 - May 2008

Author: Dr. Peter H. Antoniou, MIBAMajor Mike Williams, USA and Major Matt Mixa, USMC

Excerpts from MBA Thesis at the Naval Postgraduate School

Terminal Learning ObjectiveTerminal Learning Objective

• Task: Identify Relevant Components of Information from a Real World Scenario

• Condition: You are training to become an ACE with access to ICAM course handouts, readings, and spreadsheet tools and awareness of Operational Environment (OE)/Contemporary Operational Environment (COE) variables and actors.

• Standard: with minimum 80% accuracy• Use information from case study to answer questions

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316th ESC Case Study Briefing Outline

Case Study Background– Case Purpose– Leadership– Mission

Iraq Deployment– Background

Issues– Meals, Ready-To-Eat

(MREs)– Supply Support Activity

(SSA)

Assignment– MREs, Groups (1,2,3)– SSA, Groups (4,5,6)

Background

This case is based on actual operational experience and accomplishments of a US Army Reserve Unit, the 316th ESC, under the command of BG Couch during their Iraq deployment in 2007-2008.

Corrective measures were taken to rectify all issues indentified in this case study.

The research for this case was originally done by MAJ Mike Williams USA and MAJ Matt Mixa USMC as their thesis at the Naval Postgraduate School.

Some of the numbers have been simplified to aid instruction. 4

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316th Case - Purpose

Purpose Statement: Discuss two 316th ESC deployment “lessons learned” and demonstrate how the ESC learned about its financial cost and documented the effects of that learning.

Command level questions:Did the 316th ESC improve efficiency and effectiveness through the implementation of the components of a Cost Management Enterprise?How did they do it? Who did it? Why did they do it? What were the results?

United States Army Reserve - Leadership

A 3- star General leads the United States Army Reserve and holds the following two titles:

1. Chief, Army Reserve (CAR). The CAR reports to the Chief of Staff of the Army and represents the Army Reserve in policy and planning discussions with the Army, the Department of Defense and Congress.

2. Commanding General (CG) of the U.S. Army Reserve Command (USARC). The CG of USARC reports to Army Forces Command and is responsible for the staffing, training and readiness of most Army Reserve units in the continental United States and Puerto Rico.

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316th ESC - Mission

Mission: To provide command and control of all sustainment forces in an operational theater.

The ESC plans, coordinates, synchronizes, monitors, and controls operational-level logistics operations for the Army component commander, joint task force, or joint task for headquarters for the area.

The 316th ESC has 13 units with eight subordinate brigades comprised of more than 10,000 soldiers in approximately 110 battalions, companies and detachment-sized units.

The 316th ESC is a subordinate command of the 377th Theater Sustainment Command (TSC) located at Belle Chase, Louisiana (near New Orleans).

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316th ESC Deployment in IraqBackground

The 316th deployed from Pennsylvania to Baghdad in 2007.

Assigned to Multi-National Corps Iraq (MNC-1), it owned 8 Support Brigades in support of Multi-National Divisions.

It consisted of: - A single general support transportation battalion - Six sustainment brigades aligned with each Multi-National

Division (MND.

It was responsible for coordinating over 20,000 soldiers supporting 165,000 coalition and Iraqi forces.

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316th ESC - Issue:Meals, Ready-To-Eat (MREs)

Responsible for the supply of MREs to forces in Iraq.

• MRE’s shelf life is 3 years at 80 Degrees F• In Iraq, stored “in the sun”; no cover, shade• Environmental containers not cost effective• Iraq’s environmental conditions resulted in

MRE’s shelf life = Two months• Found that over $31 million in MREs were

condemned since 20039

316th ESC - Issue:Supply Support Activity (SSA)

Standard operating procedures are often a “bad fit” initially in a combat zone due to:

- Shortage of transportation assets- Lack of supply infrastructure- Segmented or separated SSAs- Communication incompatibilities- Close sense of ownership for on-hand supplies.

• Upon arrival in Iraq, 316th ESC did not refer SSAs between supply points, resulting in:

- Excessive Customer Wait Time (CWT), and - Excessive cost incurred by filling SSAs CONUS

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316th ESC - MRE Issue

Group one

Issue:  Army policy requires that veterinarians periodically inspect MREs at operating bases to determine their fitness for use.  A study initiated by the 316th ESC’s staff found that $31M of MREs were thrown away in the previous 6 years.

Question:  What additional cost categories would you assume or investigate if you were evaluating the total cost to the Army of the loss? 

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316th ESC - MRE Issue

Group Two

Issue:  A study found that millions of dollars of MREs are being thrown away in forward operating bases because they were not used before their

expiration dates.

Question:  What would the MRE Control report look like that you would recommend that the CG require of Brigades?

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316th ESC - MRE Issue

Group Three

Issue: The attached summary on MRE usage was briefed to the CG by one of the Brigades.              Days Prior Current SoldiersArea on hand       period usage    period usage A          60                  300                   300     5,000    B          30               3,000                3,500  5,000

Question:  What questions would you suggest the CG ask and why?

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316th ESC - Referral Issue

Group Four

Issue:  Numerous warehouses in the area of operations stock the same parts.

Question:  What are the advantages and disadvantages of allowing one warehouse with a stockout to order a part from another warehouse with a surplus (a referral) versus ordering from CONUS in the US?

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316th ESC - Referral Issue

Group Five

Issue:  Sharing of critical parts between warehouses appears to be minimal requiring warehouses with shortages to order from CONUS in the US at increased cost or air shipment and increases time to service.

Question:  What would the Referral Control report look like that you would recommend that the CG require of Brigades?

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316th ESC - Referral Issue

Group Six

Issue:  The attached summary was briefed to the CG by one of the Brigades. Warehouse    Referrals Referrals Referrals made     completed in a incomplete in week in week A            60                  60                0    B             30                    5             25

Question:  What questions would you suggest the CG ask and why?

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316th ESC - Instructor’s Support Material

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316th ESC - Instructor’s Support Material

• Length Time: 2h – Briefing 15-20 min, break out 40-50 min, presentation 3-5

min per group, wrap up 15-20 min• Process – Introduce the case– Break out the class into 6 groups– Notice - there are 2 issues at hand:

– Groups 1-3 MREs and 4-6 Referrals– Each group needs to prepare 2-3 slides for presentation

• Presentation– Discuss findings with participants– Introduce results and ‘What Happened’

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316th ESC

Discussion

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316th ESC - MRE Issue

Group one

Issue:  Army policy requires that veterinarians periodically inspect MREs at operating bases to determine their fitness for use.  A study initiated by the 316th ESC’s staff found that $31M of MREs were thrown away in the previous 6 years.

Question:  What additional cost categories would you assume or investigate if you were evaluating the total cost to the Army of the loss? 

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316th ESC - MRE Issue

Over $31 million in MREs condemned since 2003Other costs not included in the $31 million:– Shipping costs– Storage costs– Manpower costs

• Tracking• Ordering• Inventorying

– Most importantly…

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Convoy costs:- Soldiers were put at risk protecting $31 million in “garbage”- Vehicles damaged/destroyed

316th ESC - MRE Issue

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316th ESC - MRE Issue

Group Two

Issue:  A study found that millions of dollars of MREs are being thrown away in forward operating bases because they were not used before their

expiration dates.

Question:  What would the MRE Control report look like that you would recommend that the CG require of Brigades?

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316th ESC - Cost Measurement

- Excel worksheets and graphs- Daily / weekly metrics- Tracked and projected demand- Did not calculate unit costs based on purely

financial costs - Substituted other cost drivers, i.e. time, inventory

size, storage overhead, disposal costs, convoys, aircraft utilization, etc.

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316th ESC - MRE Issue

Group Three

Issue: The attached summary on MRE usage was briefed to the CG by one of the Brigades.              Days Prior Current SoldiersArea on hand       period usage    period usage A          60                  300                   300     5,000    B          30               3,000                3,500  5,000

Question:  What questions would you suggest the CG ask and why?

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316th ESC - MRE Issue

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316th ESC - Referral Issue

Group Four

Issue:  Numerous warehouses in the area of operations stock the same parts.

Question:  What are the advantages and disadvantages of allowing one warehouse with a stock out to order a part from another warehouse with a surplus (a referral) versus ordering from CONUS in the US.

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316th ESC - Referral Issue

• Advantages:– Parts received more quickly– With a lower shipping cost

• Disadvantages– In-country transportation carries risk to soldiers

and equipment– “We may need that item at some point in the

future”

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316th ESC - Referral Issue

Group Five

Issue:  Sharing of critical parts between warehouses appears to be minimal requiring warehouses with shortages to order from CONUS in the US at increased cost or air shipment and increases time to service.

Question:  What would the Referral Control report look like that you would recommend that the CG require of Brigades?

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316th ESC - Process

- Weekly Review and Analysis meetings- SPO set the Review and Analysis agenda- CG only wanted to see abnormal variances and

trends- Managers briefed the cause of variances- Managers briefed recommendations for action- Subordinate units participated indirectly- Subordinate units saw slides ahead of time

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316th ESC - Referral Issue

Group Six

Issue:  The attached summary was briefed to the CG by one of the Brigades. Warehouse    Referrals Referrals Referrals made     completed in a incomplete in week in week A            60                  60                0    B             30                    5            25

Question:  What questions would you suggest the CG ask and why?

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316th ESC

Summary and Results

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316th ESC - Four Key Ingredients of an Effective

Cost Management Program

STAFFACE

(Source: Geiger, 2009, p.48)

LEAD

ERSH

IP PROCESS

MEASUREMENT

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316th ESC - The ‘Cost Management’ Learning Process

Plan Costs

Execute Costs

Measure Costs

Review Costs

(Source: Geiger, 2009, p.77)

Target ActivitiesSet Goals

Conduct Ops Allocate Costs Conduct AAR

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316th ESC -Leadership Driven Management

- Experience in Iraq as a Brigade Commander influenced his desire to seek improvements

- Believed in de-centralized control; let subordinates track what was necessary

- Leadership Methodology:“Drove us hard-brutal in his standards. Also, provided top cover.”“Did not accept ‘I don’t know’.”“Almost a sixth sense to detect problem areas.”

BG Couch“…kind of the way I’ve done business whenever I’ve been in command is that I really felt like I owe it to my leadership and

to the American public to meet my mission but still be cognizant of the funds that are given to me to do that job.”

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316th ESC - MRE Problem - Implementation

Briefed both subordinate brigades and MNC-I and 1st TSC– Push back from Brigades initially– Fear of not being able to provide support when needed– BG Couch pushed the issue and told the BDEs they were

going to do itInitial problem with Iraqi Theatre going “Amber” and

“Black” on Day Of Supply (DOS)– DLA was not aware of new standards– Had to change tracking metric and re-calibrate what

“Green”, “Amber”, etc. meantWith data, planned usage for theatre– Used a moving average– Head count was cost driver to forecast future usage

Reviewed plan every 30 days 36

316th ESC - MRE IssueRedefined what a Day-of-Supply (DOS) meant– Old way: 3 MREs per day per Soldier– New way: Looked at actual MREs issued, factored

in DFACs to develop new DOS number

Reduced required DOS from 30 to 25

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316th ESC - MRE Issue - Results

Reduced O/H stocks by 55,000 CasesSaved Soldier lives by reducing convoys, etc.Minimum cost savings of $4.85 million– Reduced convoys (BG Couch focused on getting

soldiers off of the roads)– Reduced storage costs in Iraq and Kuwait

Continued to meet missionDiscovered Georgian “Spike”

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316th ESC - Referrals Issue - Results

Reduced 7 days in wait time.In 82% of all referrals, the referral process saved

2-3 days in wait time per item.The SSA in Taji reduced Wait Time from 28 days

(Jan ’08) to 9 days (May ’08).In 10 months, referred 32 million pounds of

parts. Cost avoidance to not transport into theater: Over $65 million.

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316th ESC - Conclusion

Leadership driven management used by the 316th ESC saved lives, saved time, and saved money.

The lessons of the 316th ESC’s operations in Iraq are applicable to both ongoing and future operations.

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