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Maritime Logistics Community News : Autumn 2010
44 NAVY SUPPLY NEWSLETTER AUTUMN 2010 DGMarSpt has provided Sponsorship and funding to the Maritime Platforms Division (MPD) of DSTO to develop a suite of tools designed to reduce LCOO in the Australian naval domain. One such tool is the Mean Variance Tool.(MVT). The MVT is based on Markowitz mean-variance optimisation which is commonly used in the financial investment industry to select portfolios of investment options that provide minimum risk at given levels of return. This technique has been adapted to select minimal risk work packages for naval platforms. (MVT) is nearing maturity and will be trialled with AASSPO and DMARSS staff shortly. A simple to use prototype software package has been developed, using standard mean-variance concepts, for the optimal selection of naval platform maintenance and update/upgrade work packages. Operating the software requires only modest data entry and involves filling out three tables, one listing each "Work Package" and its associated upper and lower costs, the second listing the "Mission Types" relevant to the platform and ranking the overall importance of each, and the third ranking the increase in capability associated with each individual "Work Package" against all relevant "Mission Types". Hence, a knowledgeable individual would be expected to be able enter the data, from either personnel knowledge or available hard data in less than a couple of hours. A number of reports are available from the software including a graphical representation of the mean-variance efficient frontier based on the simulation of a large number of random portfolios of work package combinations. Selection of a set of work packages that lie on the efficient frontier ensures the best possible increase in capability given an overall uncertainty level in costs. Advantages of the mean-variance approach as an aid to maintenance and configuration management decision making include; • Modest data entry • Selection of work package options from the efficient frontier lowers the risk in funding a set of sub-optimal work package options • Ability to maximize overall platform capability for a given level of funds • Ability to minimize costs for a given level of overall platform capability • The software can be run by an individual in isolation (permitting potentially unpalatable options to be explored in private) • The software and data entered can be shared, hence making the underlying assumptions visible to a group leading to group agreement/ consensus on ranking and cost variability data. • The software provides a robust, repeatable and auditable process for work package prioritisation Furthermore the mean-variance approach has the potential to be extended to other Sustainment decision making areas (i.e. selecting the optimal mix of services to support DMO Products, selecting the optimal mix of funds allocation within and between DMO Products, etc...). For further information on the tool and its release contact Halina Scott on 02 9393 3703 or by email email@example.com Applying Mean-Variance Optimisation to Naval Maintenance and Configuration Management Director General Maritime Support (DGMarSpt) Branch has carriage of the Logistic Cost Of Ownership (LCOO) initiative within the Maritime Systems Division (MSD) of DMO. MS HALINA SCOTT Nu-Kleen Maintenance Services Pty. Ltd. Fully recommended for Naval Support Internal cleaning of all supply, exhaust and recirculating ventilation systems including fans and associated equipment Yalgar Business Park 11/10 Yalgar Road, Kirrawee 2232 PO BOX 394, GYMEA NSW 2227 Ph: (02) 9521 8986 Fax: (02) 9545 1871 Email: firstname.lastname@example.org Website: www.nukleen.com.au