Service part innovation transforms UK defence programmes
OEM grows revenue by £190 million and cuts service support costs by 33% in ground-breaking programme
Following the Government’s Strategic Defence Review in 1997, the UK Ministry of Defence (MOD) needed to reduce costs and improve in-service support of its battle-winning equipment platforms. The MOD approached the manufacturer (OEM) of its Main Battle Tank, Challenger 2, to introduce an innovative in-service support regime and avoid the high inventories and poor parts availability of 72% that had plagued the previous Challenger tank programme.
With no previous experience of providing a parts availability solution, the OEM needed to either develop capabilities in-house quickly or find a specialist partner. The OEM decided to initiate a competition to select its preferred partner for Challenger 2, imposing tough targets to cut costs by 33% and help the MOD achieve parts availability of 90%+.
Service part consultants deliver big win for service provider
At this time, our lead consultant was working for a service provider looking to bid for the OEM partner contract. Work included managing the winning bid, managing all client communications, designing, developing and managing the implementation of the service solution for Challenger 2, pricing the offer, preparing the bid response, delivering the bid presentation and negotiating/preparing the resultant commercial contract.
The result was a £70 million contract win for the service provider and provision of a platform that enabled the OEM of Challenger 2 to secure £120 million of extra revenue in 2 years.
Knowledge delivers legacy impact
Specialist knowledge of the MOD supply chain and parts availability contracting was leveraged to develop an innovative Contractor Logistics Support (CLS) model for Challenger 2, prompting the creation of JSP 886 – the MOD’s Defence logistics support chain manual.
This radical and innovative solution replaced the MOD’s base ordnance inventory with Challenger 2 parts inventory managed by the service provider. Similarly, the MOD’s demand planning, fulfilment systems and logistics activities were replaced, enabling direct deliveries to Army units.
OEM strengthens from servitisation capability
By accessing a brand new range of equipment support capabilities, the OEM went on to win additional service contracts for Challenger 2 derivatives (driver training vehicles, recovery vehicles, etc.) with the Ministry of Defence and also overseas export customers, expanding its business revenues by an additional £120 million+.
Dramatic operational benefits for Challenger 2 impress MOD
In operational terms, the new programme was to have real impact with the following improvements noted: