Performance Based Logistics

During the last decade, analyses related to Performance Based Logistics (PBL), has become a major application area for Opus Suite. Not only because PBL has become an increasingly common support strategy for our customers, but also because it is an area where the kind of analytical decision support provided by Opus Suite can make tremendous impact. Ultimately, it can mean the difference between success and failure. PBL is also a complex field that may require advanced decision models and analyses that are different and more complicated, which has meant that Systecon is quite often engaged to assist with modelling and analysis, to provide for quality assurance or method development related to PBL.

PBL engagements are usually large undertakings that run for 5-20 years and hence significant commitments for both the end user of the technical systems and the supplier of the support services. First, it is important to establish a contract that provides appropriate framework and direction for collaboration during the whole period. Secondly, it is essential to be able to develop and optimize a cost effective support solution, and to continuously streamline and improve it’s ability to ensure that performance targets are met at an acceptable cost

During design and negotiation of the contracts, both sides need to analyse and understand all the central aspects of the arrangement, estimate costs and risks involved, and evaluate and predict consequences of different alternatives. Are the performance targets appropriate and will they ensure successful operation as planned? Are they realistic or unnecessarily low/high? What investments in equipment, personnel and spares is roughly needed to meet the targets? Is the incentive package relevant and fair, and does it provide proper direction and motivation?

Once the contract is in place, there is a long array of key decisions for the supplier to make regarding the solution and its implementation. What is the optimal support organization, what facilities, equipment, personnel, spares and other resources are needed? How does that match with current resources and their allocation?

All above are highly relevant questions where Opus Suite and Systecon provide answers. Further information on typical analysis areas follows below.

Opus Suite Application Areas

Opus Suite can be used during the design and negotiations of the PBL-contract to, for example:

  • Select/agree on the most suitable contractual metrics (measurement parameters) to ensure that
    • the PBL-contract give proper direction towards operational goals
    • selected metrics can be measured and verified in a unambiguous manner which gives a fair and appropriate assessment of supplier performance
    • selected metrics give enough control for the operator and at the same time enough degrees of freedom for the supplier to be cost effective
  • Negotiate the target levels for the selected metrics to ensure proper balance between the need to reach operational goals against the risk of unnecessarily driving up maintenance cost
  • Establish follow-up intervals and procedures so that the operator gets feedback and control and the supplier a relevant framework and impetus to monitor, manage, respond and improve as needed.
  • Define and evaluate/negotiate incentive models (rewards or penalties) that are well-defined, relevant and rational
  •  Estimating the cost of meeting certain performance targets by optimizing/estimating the facilities, equipment, personnel, spares and other resources needed.

Once the contract has been established, Opus Suite is an ideal tool for the supplier in the efforts to establish, maintain and trim the support organization so that target performance can be reached affordably. This can include:

  • Optimize the maintenance concept
  • Optimize the investment in facilities, equipment and other resources according to predicted maintenance volumes from scheduled and unscheduled maintenance
  • Optimize assortment and allocation of spare parts
  • Determine what personnel is needed where and when to ensure cost effective maintenance and support
  • Identify cost drivers, bottle necks and improvement areas to gradually improve financial margins as well as the ability to meet targets

While the parties in a PBL agreement may have partly different perspectives and objectives, openness and transparency regarding priorities, issues, cost driving factors, etc are often cited as contributing factors in successful PBL applications. In this context, Opus Suite is often used by both parties as a collaboration platform, providing a joint and neutral perspective on different alternatives and their pros and cons.

Through modelling, simulation, optimization and cost analysis, Opus Suite makes it possible to quickly analyse scenarios, evaluate alternatives and predict consequences on short and long term. For organizations with limited in-house know-how and experience of PBL or of how to apply Opus Suite in this area, Systecon has over 20 years of experience of working with performance based contracts of different types. We provide operators / end users as well as support service providers with decision support and method development for successful performance based product support.

PBL in Brief

Performance Based Logistics (PBL), also known as Contractor Logistics Support (CLS) or Performance Based Contracting (PBC), is a strategy for cost effective product support of advanced technical systems. The core of the PBL- concept is that the end user of the technical systems outsources their maintenance and support services to a supplier, who is measured and rewarded based on certain performance metrics.

There is substantial independent research showing that, applied correctly, PBL is likely to reduce cost and increase performance in comparison with traditional approaches like, for example, transaction based contracts. Other mentioned advantages with PBL are, better forecasting of costs, clearer accountability, and improved understanding of and focus on life cycle costs

Better PBL Decision Support through Simulation

Download Systecon’s technical paper on how simulation facilitates better PBL-agreements. The paper is published at the website of US Defence Acquisition University and different variants have been accepted and presented at several conferences including at NDIA Systems Engineering Conference in2011, Defence Logistics Conference and SOLE-conference in 2012, and NATO LCM-conference 2013.

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