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Maritime Logistics Community News : Summer 2010
19 NAVY SUPPLY NEWSLETTER SUMMER 2010 Supply Chain Challenges Defence is well supported by a number of key suppliers with whom we have standing offers in place for the supply of fuels and lubricants the ADO. These agreements are mainly for supply within Australia and its territories -- from remote mainland sites, to off-shore centres including RAAF Butterworth, Christmas or Cocos Island, and back to major Air Force and Navy Installations in Capital Cities of Australia. Our must significant supply chain challenges are as follows: • Supply Chain Complexity. There is a range of disparate participants in the fuels supply chain including suppliers, DMO, DSG and service elements. The roles include a mix or procurement action, facilities management and distribution modes. Coordinating the availability and service provision is key to ensuring the supply chain operates effectively. • Requirements Determination (RD). Accurate RD and forecasting is essential if we are to get what we want when we want it and at a good price. The consequence of poor forecasting is that supply chains become stressed or inefficient due to unscheduled high or low demand. The more remote the site, the more the stress is felt by Industry. Industry like stability and the cost of accommodating a lack of predictability will be factored into contracts directly by higher pricing or as penalties. • Stockholding Policy. All together the ADF holds around 120 million litres of fuel at any one time, the bulk of which is F76. Although NHQ is working on a detailed Navy wide stock holding policy that accounts for operational, surge and strategic stock holding, we are not there yet. The absence of a detailed and Defence wide, stock holding policy makes it difficult to both manage the stock and achieve procurement efficiencies. Future Challenges JFLA is also looking to mitigate future total supply chain risks. A small sample of the most significant issues under consideration are as follows: • Australian Domestic Refining Capacity. It is possible that local refineries will become increasing uncompetitive over the next 30 years. This would result in an reliance on offshore refineries to sustain our Defence Force. The ADF will need to consider the strategic and operational impact and develop sourcing and storage strategies to contend with this eventuality. • Peal Oil. Sooner or later the stocks of crude necessary to support the world economy will peak, plateau and decline. As we approach this point, the ADF will need to consider its response carefully. This may include a range of measures including demand reduction, an increase in the use of alternative technologies such as bio-fuels, or the development of alternate propulsion technologies. Many of the strategies associated with contending with peak oil are under consideration or development by a wide range of agencies including, DMO, the Services and DSTO. The ADO is also engaging actively with foreign governments and Defence forces. • Defence Budgetary Constraints. The fuels budget for Defence has committed to deliver $375m in SRP savings over the DMFP. The majority of these saving will be generated by Services initiative to reduce consumption. Examples of this include reduce operating tempo, cleaner hulls and propellers for ships. We need to be aware that fuel is not a free good and that is significantly exposed to wild fluctuation in world commodity and foreign exchange variations. Summary Modern military forces are highly dependent upon fuel and its availability is a mission essential element of any operations planning activity. There are number of agencies across industry and the ADO that support the provision of fuel and there are a number of not insignificant challenges involved in getting it to the point of operation. End users need to be mindful of these supply chain complexities. In most cases engaging JFLA and Port Services Manager early in the planning / requirements process will ensure that the products are available on the wharf (anywhere in the world) when required. As always communicate early and often.