Major General James Wright fellows at the College of William and Mary's Mason School of Business undertook a capstone project for determining the validity of the Army's operational readiness float (ORF) program as a readiness enabler. The team used tools and concepts developed through Lean Six Sigma (LSS) training and through their 14-month MBA program.
Under the overarching LSS construct of define, measure, analyze, improve, and control, the team incorporated diverse methods of study and gathered multiple sources of quantitative and qualitative data to shape their assessment and findings. The project team devised courses of action (COAs) ranging from maintaining the status quo to eliminating ORFs altogether.
ORF BACKGROUND
ORF assets serve to maintain unit readiness. But in the wake of downsizing and budgetary shortfalls, should the Army continue to maintain ORFs? The ORF program has endured from its inception more than four decades ago. The program ensures that a unit's equipment readiness does not fall below acceptable levels, which are often benchmarked by the 90-percent threshold outlined in Army Regulation (AR) 220-1, Army Unit Status Reporting and Force Registration-Consolidated Policies.
Float equipment is a form of safety stock that provides a fully mission capable piece of equipment in exchange for a not mission capable piece of equipment. The primary regulations governing the ORF program are AR 750-1, Army Materiel Maintenance Policy and AR 710-2, Supply Below the National Level.
The program's existence stems from a time of limited asset visibility, less efficient lines of communication, and lengthy supply chains. However, changes in the Army's force structure and doctrine from 14 years of continuous conflict indicate that the ORF program may no longer be relevant.
The ORF program experienced computation issues early in its existence. After a period of intense study and assessment in the 1970s and early 1980s, the program exhibited a period of relative stability and effectiveness until the post-9/11 era. A series of structural changes occurred in response to the fast-paced evolution of the Army during Operations Enduring Freedom and Iraqi Freedom. The ORF program is now undergoing another assessment.
As the military focused its efforts on operations in Afghanistan and Iraq, the Army's operating tempo, combined with Army Force Generation, created a reliance on theater-provided equipment. Many units were no longer deploying with organic assets.
In the meantime, units preparing to deploy could use left-behind equipment, often in a temporary loan capacity, to fill training equipment needs. This wartime equipping strategy led to a decreased emphasis on peacetime readiness and a decreased need for ORF equipment.
ORF institutional knowledge and best practices eroded. Standard Army management information systems did not sufficiently capture the limited number of transactions taking place. Documentation was not thorough, and there was widespread miscoding of assets. The lack of historical ORF demand data has made it difficult for leaders to implement data-driven decision-making because analysis is only as good as the data available.
NECESSARY ACTIONS
Based on the information gathered in the define, measure, and analyze phases of the research project, the team developed four COAs. If the ORF program persists in any form (as it would in all but one COA), certain steps are necessary for improvement. These actions would be required in COAs 1, 3, and 4:
• Use Global Combat Support System-Army (GCSS-Army) to standardize reporting and data collection.
• Update the Department of the Army critical items list for authorized ORF.
• Assess other float pools and consider consolidation or elimination.
• Enforce existing policy.
COA 1: MAINTAIN
The first COA is to maintain the ORF program in its current state so that units will continue to have ORF equipment. This will result in no change to current budgeting for ORF, nor will it change the mission set. The primary advantage of COA 1 is retaining flexibility for commanders to authorize and make ORF exchange decisions locally. The main disadvantage is the current $1.05 billion cost of maintaining the ORF program.
Maintaining the status quo will support the Army during a period of operational and fiscal transition. During the change from the Army Force Generation model to the Sustainable Readiness Model, having forces trained and ready will rely more on unit formations for sustainment versus contracted support.
Taking into consideration anticipated maintenance and supply discipline challenges, ORF will provide flexibility and mitigate readiness shortfalls as the Army goes back to basics. This shift should revive institutional knowledge and restore the program back to functionality.
The problem with COA 1 is its failure to address the ORF program's key shortfalls and issues identified in the study's failure modes and effects analysis (FMEA), including a lack of visibility, overlapping equipment pools, and poor management. (See figure 1.)
COA 2: DISCONTINUE
The second COA discontinues the ORF program and reallocates current on-hand ORF assets to fill critical operational shortages in units across the Army. The estimate includes planned procurement as well as current and future carrying costs to maintain the equipment. (Carrying costs are those incurred by maintaining, storing and warehousing, or otherwise keeping a piece of equipment.)
Discontinuing the ORF program would allow approximately $832 million to be used for other programs or higher priority requirements, particularly to fill unit shortages. It also would require divesting current on-hand ORF assets.
Even though COA 2 addresses failure modes identified in the FMEA, it discards a program with past performance and future potential. Removing a degree of flexibility from commanders could adversely affect training. Simply ending the program resolves many current failure modes, but the future operational landscape may present unforeseen challenges that the ORF program could help meet.
COA 3: SCALE DOWN
The third COA significantly pares down the current amount of ORF equipment in the Army and looks for further opportunities to shrink the program's footprint. The main effort in this COA is enforcing current guidance and aggressively eliminating unauthorized equipment.
The team chose to start with cutting equipment that was not authorized as ORF. The maintenance master data file (MMDF) currently lists 448 ORF-approved items. Of this number, 244 are removable because they are obsolete or explicitly eliminated.
This study's June 2015 data pull of entries with property book identification code F (PBIC F), which is the specific code designated for ORF equipment, yielded 325 items, but only 6 percent of them matched MMDF ORF authorizations. The remaining 94 percent of the items on the list were improperly coded as ORF equipment.
The data pull of all PBIC F-coded items in the Army totals over $198 million. Factoring in that the 18 percent carrying cost brings the total to nearly $234 million, the reconciliation of PBIC F and MMDF yields a reduction of approximately $189 million. This includes both unit price and carrying cost for all items that should not be classified as ORF.
Enforcing existing policy reduces the ORF program to $32.9 million (and carrying costs that amount to $5.9 million). The grand total of all reductions equals a cost savings or asset redistribution value of nearly $195 million.
A second important aspect of COA 3 is examining units eligible for ORF. Geographic location or mission set should be the driving justifications for ORF equipment. The need to maintain high states of readiness for missile and radar systems in field artillery and air defense artillery units provides ample reason in U.S. Army Pacific and U.S. Army Europe. Units in the continental United States should be considered with scrutiny, especially if little demand data accumulates.
Equipment density can serve as another criterion. Low-density, mission-essential items are a logical choice for float qualification. This COA does not differentiate high-density versus low-density equipment but offers the idea as a means to further slim down the program.
COA 3 nests with the 2015 Army Posture Statement by forcing self-examination and cutting back on resource commitments. It strikes a balance between maintaining readiness in the face of a complex threat spectrum while enforcing resource discipline.
This COA adequately addresses the failure modes outlined in FMEA if implemented with the aforementioned four required actions. COA 3 also requires a reasonable amount of effort that will produce meaningful results.
COA 4: REORGANIZE
The last COA entails a significant restructuring of the ORF program through reassignment to the Army Materiel Command (AMC). Units would no longer maintain possession or perform maintenance on ORF equipment. AMC owns logistics readiness centers (LRCs), formerly known as directorates of logistics, which report to the Army field support brigades (AFSBs). There are 73 LRCs worldwide that support virtually every installation.
The LRC will maintain property accountability in place of the supply support activity. The fact that the LRC falls under the installation property book office would ensure that the ORF could reside on installation property books that are managed by an accountable officer. The LRCs would also perform maintenance to ensure equipment is fully mission capable.
The capabilities of LRCs are robust and configurable to support requirements beyond the ability of resident units. The drawdown of predeployment training equipment will leave the LRCs with a potential mission gap. The migration of LRCs from the Standard Army Maintenance System-Enhanced to GCSS-Army will be complete by August 2017, enabling these units to send Army Materiel Status System reports. The consolidation of accountability and maintenance functions resolves this dysfunctional aspect of the current ORF program.
LRCs work closely with the installation senior commander. Many organizations currently use a senior logistician such as the deputy commanding general for support as the ORF authority to execute transactions. Decision authority to conduct an ORF transaction would reside with the installation senior commander, who could delegate responsibility to the ranking sustainment authority. This relationship would consolidate mission responsibility under more natural roles and further enhance the direct support relationship between AMC and tactical units.
One of the biggest benefits of this construct is having an "honest broker." Tactical units are prone to making internal decisions to misuse float equipment, such as not completing lateral transfers, engaging in controlled substitution and cannibalization, or using ORFs as training equipment. Having an impartial organization assessing the eligibility for float transactions mitigates this misuse.
This COA recognizes that LRCs range in scale and capability. There are some intricacies that may or may not affect putting this COA in place. Span of control could be an issue. For example, the 406th AFSB has many smaller LRCs when compared to the large-scale LRCs belonging to the 407th AFSB. For these LRCs, the AFSBs could nest their obligation to support ORF equipment under larger LRCs.
Cost is a significant concern for COA 4. Contractors are expensive and are reducing in number. Work done by AMC usually costs a premium because of the quality and expertise its force has to offer; this means that carrying costs will increase significantly in the continental United States. But COA 4 is logical when one considers the limited volume of equipment managed.
As mentioned in COAs 1 and 3, the number of incorrectly coded ORF items must be reduced. Only the most critical equipment for special missions should qualify. COA 4 uses the equipment value of $32.9 million identified in COA 3. Applying a significantly higher carrying cost for AMC amounts to an additional yearly cost of $19.8 million, which is still an improvement over COA 1. Even if COA 4 leads to an overall lower program cost, the higher individual sustainment costs will not be popular.
Because of unforeseeable issues of the Army's transition from counterinsurgency to forcible-entry operations, the lack of hard demand data, and the potential for a reduced level of ORF, the team recommends COA 3; the program should be reduced.
It is premature to end the Army's ORF program. There is strong evidence that ORF is not a readiness enabler, making it an appealing target during budget reductions. The program undeniably is in a state of mismanagement. However, to completely eliminate it as the Army transitions would be irresponsible and shortsighted. Given the anticipated struggles with the Army's future budget, the ORF program warrants greater scrutiny, active oversight, and selective retention of mission-essential equipment for key units.
The ORF program requires certain measures to introduce standardization and reliable reporting. The Army should create a function in GCSS-Army that truly tracks demand data. It needs to include frequency, duration, remarks for justification, and an indication if ORF positively affects readiness.
Determining the demand for ORF is essential to determining what the appropriate level of safety stock should be. Statistical analysis deduced from historical data is the most appropriate way to identify true needs. This level of analysis must precede any decision for wholesale program elimination. In the meantime, efforts should concentrate on seeking efficiencies and purposeful applications that preserve the ability for fluctuation in the face of future challenges.
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Capt. Andrew Horsfall is currently undergoing Russian language training at the Defense Language Institute Foreign Language Center. He has a bachelor's degree from the United States Military Academy in human and regional geography and an MBA from the College of William and Mary through the Major General James Wright (MGJW) Fellowship.
Capt. Kimberly Osorio-Torres is a capability developer at the Combined Arms Support Command. She has a bachelor's degree in criminal justice with a specialization in forensic psychology from Seattle University and an MBA from the College of William and Mary through the MGJW Fellowship.
Capt. Jon Watson is a force developer at the Combined Arms Support Command. He has a bachelor's degree from the University of Nebraska-Lincoln and an MBA from the College of William and Mary through the MGJW Fellowship.
Capt. David Wyche is a Captains Career Training Department instructor at the Army Logistics University. He holds a bachelor's degree in computer science from National Louis University and an MBA from the College of William and Mary through the MGJW Fellowship.
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This article was published in the May-June 2016 issue of Army Sustainment magazine.
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