National Audit Office Gives the MoD yet Another Kicking (Logistics)


This is an update of an earlier post on logistics software, bought right up to date by yet another report from the National Audit Office that kicks the MoD in the love spuds. It is on a subject that does not quite have the allure of Typhoons but is just, if not, more important. We all right to froth about major equipment projects but it is in these kinds of ‘back office’ issues that true efficiency and military effect are derived from.

So what did the NAO say?

The chain by which military operations, such as those in Afghanistan, are supplied with essential equipment and supplies would be much more efficient if directed by a modern information system supported by appropriate skills and procedures.

The National Audit Office has reported today that the Department faces considerable challenges ensuring front line personnel get the ‘materiel’ they need. Despite these challenges, the Department made 130,300 deliveries to Afghanistan in 2010. Indeed, the amount of time troops wait for supplies has declined since the spending watchdog’s 2009 report on support to high intensity operations. However, the Ministry of Defence is still not meeting its own performance targets. Highest priority items sent by air should arrive in theatre within five days. However, in 2010, this was achieved in only around a third of cases.

Failure to deliver the right item on time is primarily due to items being unavailable for transport. This means that either the Department is not accurately forecasting usage and repair rates to ensure the right amount of stocks are held; or suppliers are unable to respond to demand.

Good business intelligence is crucial if the Department is to succeed in running an effective and efficient supply chain. While the Department collects much of the information required, gaps remain.
Moreover, the Department is unable to reconcile coherently the information it does possess on the location of its assets and its inventory and supply chain costs. The Department’s use of information to manage its supply chain falls short of general logistics industry best practice.

One consequence of this lack of information is, to ensure that personnel have the items they need, more material than necessary is being sent by air, including many items which have predictable demand. While surface routes are not suitable for all types of equipment and can carry greater security risks, at least 90 per cent of the Department’s total transport costs to Afghanistan comes from air deliveries – transferring just 10 per cent of items sent by air to Afghanistan to surface delivery routes would save an estimated £15 million per year.

£15m, is that it?

Of course, that’s only one small aspect of potential savings and we might reflect on the fact that RFA Largs Bay has been flogged to the Australians at a knockdown price in order to save £10m a year, which kind of puts £15m into context doesn’t it.

One of the key findings was about the visibility of assets, as all Hitch Hiker’s Guide to the Galaxy fans knows, you should always know where your towel is!

If you have poor visibility of the location of items in storage or transit there is a degree of uncertainty and this uncertainty translates into real impacts on the ground. Logistics professionals will compensate for system shortcomings any way they can, over-ordering, hoarding and circumnavigating accepted processes. These workarounds will help but in many cases will make the global picture much worse.

Read the full NAO report here, in its unvarnished glory.

The report noted improvements and the MoD responded by saying ‘look how much we are spending as usual, confusing the amount it is spending with the actual results it gets.

The £800m the MoD responded to the bad press about is for the Future Logistics Information Services (FLIS) project.

Announcing the contract award to Boeing, Peter Luff MP stated;

The new arrangement will ensure the long-term delivery of operationally essential logistics information to both the MoD and industry, and the significant financial efficiencies will contribute to the government’s strategic deficit reduction programme, without reducing operational capability

FLIS will replace the poorly made jigsaw, with seven pieces missing, that represents the current logistics system.

The current system has over 100 contracts with 50 or so companies and nearly 300 applications. Boeing is acting as a lead systems integrator and will subcontract many of the existing prime contractors back into the MoD.

We all know the Government does not have a great record on transformational IT projects with a long and distinguished history of pissing billions of pounds up the wall on ill-conceived IT projects that invariably fail to deliver on the contractors promises.

To look at the background to this issue we need to go back a few years.

In 1991 UK forces took part in the liberation of Kuwait, Operation Granby.

In 1991, the armed forces truly were in Cold War mode so the achievement of mounting an out of area operation of this size should not be underestimated and comparable to the herculean logistics effort for the Falklands.

However, significant shortfalls were exposed, especially in logistics support.

One of the numerous issues identified was the rate of consumable use for the Nerve Agent Immobilised enzyme Alarm and Detector (NAIAD) in high temperatures which led to shortages. [if you want to see what a NAIAD looks like click here

To quote the MoD

There were also problems caused by poor stock-keeping: many of the chemical reagents and enzyme pads that were provided were out of date. The fact that the enzyme pads needed to be replaced more often than normal, and that the high temperatures of the Gulf region were thought to reduce the lifetime of these pads, meant that this shortage of NAIAD consumables became a real problem. As a result, 1 (UK) Armd Div ordered that Army units were not to activate NAIAD below the Threat State NBC MEDIUM

In 1994 we had Front Line First that sought to reduce the cost of defence, cuts that is.

In 1998 the Strategic Defence Review stated

If we ask our forces to fight, we must be sure they will win. That means we must correct the deep-seated problems we inherited from the previous government, most obviously in the medical and logistics areas, to ensure that our forces are properly supported. Past cuts in support have been presented as “trimming the tail without blunting the teeth”. The reality is that logistic support is the life-blood of the forces, and we must ensure that our forces get the back up they need


We will also radically reorganise our procurement and logistics organisations to spur efficiency and drive through best business practice


To assist the process we will establish a tri-Service Chief of Defence Logistics, who will be responsible for delivering best business practice throughout our support services. This is another huge change for the Ministry, which will allow us to coordinate and standardise our support services properly for the first time.

The 1998 SDR put the armed forces on an expeditionary footing and created the Joint Rapid Reaction Force (JRRF) and with a swish of the pen, solved the problems of logistics.

The newly formed Defence Logistics Organisation had a key objective of reducing the cost of its outputs by 20% over its first five years. As part of this fresh thinking, a whole raft of initiatives was put forward and of course, those management consultants have a field day.

Projects included a single system to replace the existing Royal Navy, Royal Air Force and Army supply systems, the Defence Stores Management Solution (DSMS), consignment tracking In-Transit Visibility (ITV) and an asset and configuration management tool called Project DRUMM . DSMS was designed around a commercial off-the-shelf solution that would provide an optimised suite of IT packages with a simple interchange of data between the separate specialised elements.

After the usual short term budget problems, resultant descoping and extensions to the project lifecycle, it was dumped in 2002.

How much, a snip at a £118.3 million write off. (remind yourself of how many years of RFA Largs Bay that could cover)

It was a depressingly familiar tale of over-ambition backed up with cold feet when the real issues are revealed.

The Ministry of Defence (MoD) then procured two tracking systems – Visibility in Transit Asset Logging (VITAL) for the Army and Air Force, and the Royal Navy Invoicing and Delivery System (RIDELS).

Both were MoD-developed systems tailored for each Service.

After a McKinsey study in 2002, a revised DLO Change Programme with a “de-scoped” asset tracking requirement was recommended.  Given the suspension of DSMS, a new project, now known as Management of Materiel in Transit (MMiT) was initiated, specifically to build upon the then-current tracking systems. Full replacement of existing systems was considered but, on grounds of affordability and the DLO’s experience with DSMS, this was rejected as being unrealistic.

Also in 2002 the Defence Logistics Organisation (DLO) initiated the Future Defence Supply Chain initiative (FDSCi)

The initiative was set up to deliver a private sector outsourced solution but after intense pressure from the trade unions, two in-house teams were allowed to bid against the two private sector consortia. Defence Supply Chain Solutions comprised Exel and Devonport Management and Defence Logistic Solutions, consisting of TNT Logistics, BAE and Westland Helicopters.

In 2003 UK forces are again in the Middle East, on Operation Telic. The NBC threat was even higher but we had been practising expeditionary warfare for several years and had also recently conducted a series of exercises in the area (Saif Sarea) to prove and improve.

Interestingly, NAIAD is still in service and a pretty vital piece of equipment given the whole reason we went to war was that one Saddam Hussein Esquire had an NBC arsenal and wasn’t afraid to use it.

After operations had concluded the Parliamentary Defence Select Committee and National Audit Office both conducted investigations. The NAO report was particularly scathing and had this to say about NAIAD;

vital cassettes for the NAIAD detectors were unavailable

So, in 1991 in Iraq we had a problem with the availability of NAIAD consumables and exactly the same problem, in exactly the same place, in 2003, 12 years later.

This was just one example of logistics failures including a complete lack of NBC filters for armoured vehicles, not a shortage, a complete lack of them. Others included a shortage of desert combats and boots, NBC suits, morphine, small arms ammunition and body armour. Body armour was particularly contentious given its implications in the first UK casualty of the campaign. Geoff Hoon rightly copped for a lot of the blame for this but much of it must also be shouldered by the MoD, uniformed and civilian, if various lessons about logistics were heeded and incompetence in programme execution was not in evidence then perhaps the outcome might have been different.

The NAO reported also stated;

  • The means of tracking supplies in-theatre was largely ineffective, manpower-intensive and swamped by the sheer volume of supplies. The whereabouts of some key equipment and supplies were unknown and therefore arrangements could not be made to get it to the people who needed it. This led to shortages, loss of confidence in the supply chain and inefficiency as personnel searched for items they had ordered or ordered duplicates urgently
  • Lack of consignment tracking led to inefficiencies. For example…the absence of an accurate consignment tracking system meant that commanders could not verify precisely where the equipment was…a duplicate consignment was therefore cannibalised from equipment in Germany and the United Kingdom (in addition to equipment cannibalised earlier) and flown out to theatre as a contingency measure
  • The lack of confidence in the ability of the logistics system to meet units’ needs in-theatre led to a considerable degree of misappropriation of equipment and stores moving through the supply chain…the unauthorised removal of items as they moved through the chain towards the front line served to further complicate the logistics process.

This is sterile and measured wording but translate that to the environment it is talking about and it is clear that yet again, we had to rely on individuals, military and civilian, to make up for a woeful system, lacking in almost every respect.

In 2004 the Defence Logistics Transformation Programme (DLTP) was launched with the aim (yet again) of increasing efficiency and responsiveness of the logistics organisation.

In 2005 the MoD announced that an in-house option for the Future Defence Supply Chain initiative (FDSCi) had won, promising cutting edge technology like roller cages and live shelving!

In 2006 another programme is launched, the Defence Logistics Programme is built around a number of themes; Comprehensive Capability Planning, Flexible Command and Control (C2), Minimised Demand on Logistics, Optimised Support Network and Unifying Logistics Ethos. Here is an update

In 2007 in a written statement to the House of Parliament, Lord Drayson stated

Significant improvements have been made since 2003 to the joint supply chain. The core tracking system, VITAL (visibility in transit asset logging), has been integrated with deployed inventory systems, and VITAL terminals have been located alongside the unit quartermasters in both Iraq and Afghanistan. Improvements to training, policy and process have made it easier for troops to operate the system. Further improvements to VITAL are planned to enable a simpler, more streamlined method of tracking consignments. These changes will also improve the quality and coverage of the data held by VITAL.

At this point, it is worth noting the nickname US forces give to UK forces

The Borrowers

It is also worth noting that after every major operation there will always be write-offs of equipment, military operations are complex and sometimes understandably chaotic affairs, whilst the individual may be asked to sign and indicate LAST ITEM on his 1157 or 1033, accountability higher up the chain has often eluded the MoD. There is a tale that when the items that were claimed as being lost on the Atlantic Conveyor in 1982 were added up, they would have filled the ship many many times over!

The same with the ‘Great Fire of Donnington’

There is also the tendency of soldiers, airmen and sailors to hoard equipment against some future contingency that never seems to arrive and to coin a well-worn phrase, if the equipment were meant to be given out it would not be held in stores, the clue is in the name.

It is vitally important, therefore, to know where your stuff is.

But, the diversity of requirements is mind-boggling, a Challenger 2 tank to an indicator bulb, some items perishable, some not, sometimes critical, some not and perhaps in what is a unique challenge, a changing delivery address, akin to threading a needle whilst riding a horse.

And this is just for the forward delivery, logistics is of course much much more than that.

As we move ever closer to full-scale jointery and centrally managed logistics we must also ensure that the different approaches of the services to logistics are maintained because supplying a ship with fuel or a Tornado with Paveway IV’s is very different to supplying a forward-deployed infantry battalion. The QM’s in Army units are usually LE officers with a wealth of operationally useful knowledge that cannot be replaced with a web-based application.

Stung by bad press, critical reports from the NAO and Defence Select Committee and genuine recognition of the need for improvement (remember, service personnel will be all too aware of the implications) there has been a concerted effort to improve matters with a number of projects including;

  • Future Logistics Information System Delivery Project (FLIS DP)
  • JAMES 2 – Joint Asset Management Engineering Solutions
  • JAMES(LAND) – Joint Asset Management Engineering Solutions for complex equipment
  • Consignment Visibility (CONVIS)
  • Management of the Joint Deployed Inventory (MJDI)
  • Total Asset Visibility (TAV)
  • Management of Materiel in Transit (MMiT)

In 2002, the MMiT programme was initiated, in 2008 the contract was awarded to EDS (of JPA infamy), came into service in 2009 and is now reportedly delivering real benefit.

Perhaps there is light at the end of the tunnel after several hundreds of millions have been wasted.

All these programmes are part of the wider Log NEC capability area.

FLIS is defined as;

Over the life of the FLIS contract the challenges and focus of the DP will change to meet requirements. Initially the DP will focus on:

  • Absorption of, and transition from, current support arrangements whilst maintaining and optimising Log IS in support of logistics transformation.
  • Integration of ongoing development work in progress at contract award (such as JAMES and MJDI).
  • Reducing the Whole Life Cost of Logistic Information Systems
  • Assisting the JSC in the maintenance and future development of the Joint Logistic NEC Enterprise Architecture.

Over time the focus of the DP is expected to:

  • Migrate from the maintenance of current systems towards the delivery of optimised logistics business information solutions across the support chain.
  • Achieve this transformation by delivering an integrated approach to the provision of, and support to, all capabilities across the IS life cycle. This will cover concept to termination
  • Provide a coherent process for the delivery of the whole Log IS portfolio. All providers supplying underlying logistics applications will be incorporated into this process.
  • Provide greater overall Value for Money (VfM) solutions for the MoD.

The expected benefits of FLIS will be both financial and non financial.

Non-Financial Benefits include:

  • Reduced lead times for new applications and adaptive change
  • Reduced capability gap
  • Transfer of risk
  • Improvements to service delivery to customers

Financial Benefits include:

  • Service rationalisation
  • Reduction in cost of providing end to end logistic information

Current logistic information systems support arrangements involve over 50 contractors, an in-house service provider and 120 different contracts. They are complex, resource intensive to manage and do not facilitate the delivery of agile, responsive information in support of logistic transformation.

FLIS will resolve these issues by providing a framework for logistic information services, programmes and applications that facilitates greater coherence and communication between the MoD and its providers, ensuring commonality and interoperability between separate Logistic Information Systems (Log IS).

The result will be:

A service managed and owned by DE&S on behalf of Defence, to sustain, develop and integrate logistic information in order to support transformation and execution of defence logistic processes”

FLIS was established in 2007 and 3 years later, the contract was awarded to Boeing Defence UK (BDUK)

The unsuccessful bidders were a Fujitsu Defence and National Security Services-led consortium known as E-fect with Lockheed Martin as the other main partner; LogOS, a consortium with information technology service provider Steria as the prime and EADS Defence & Security as the core partner; and a fourth team comprising IBM and EDS.

Boeing would not be your first company that springs to mind when buying a logistics capability but why not, they won the bid process.

The contract will incorporate a nine-month phase-in period followed by 10 years of in-service support.

As FLIS transfers some aspects of work that is carried out by MoD employees there have been inevitable problems.

The FLIS contract value is £803 million and 11 years long with an in-service objective of 2012.

In what is becoming a depressingly familiar story, starving projects of funds has real consequences and after spending huge sums of monies, for a small amount more the whole ship as it were, were lost.

On FLIS, the latest NAO Report has this to say

the Future Logistics Information Services proposal included the option of upgrading the base inventory managementsystems for an additional £70 million; the Department has identified weaknesses in these systems as a critical risk, however, funding has not yet been made available. Likewise,funding for the project to automate the production of management reports has yet tobe approved. We also observed that compromises have been made between costand functionality: some projects that have been funded have only been approved aftercosts were reduced, usually through stripping down their capability

So after several years, hundreds of millions and a projected lifetime cost of nearly a billion pounds, FLIS, unless we spend more

will not negate the risk of failure across all base inventory warehousing systems, nor will it resolve the supply chain information capability shortfall

On JAMES it mentions this morsel

The Joint AssetManagement and Engineering Solutions system (JAMES) for example, can only transfer data between systems using a memory stick, which introduces a significant risk of data lossand error, because funding for more advanced functionality was not approved.

USB memory sticks, seriously, just as we are implementing JAMES(LAND) and in a post-Wikileaks era, USB sticks have become the devil incarnate.


The NAO makes the following recommendations;

  • There is limited focus on the efficiency of the supply chain. The Department must collect better information on the costs of the supply chain and use this data to control costs and increase efficiency. There is fragmentation in the operational management of the end-to-end supply chain due to the number of agencies involved. During the course of its organisational review, the Department should assess the costs and benefits of bringing the supply chain process agencies, their respective performance management teams, and a supply chain finance function, under one roof.
  • There is no clear business intelligence strategy that outlines what data is needed to operate the supply chain. The Department has begun to develop its approach, through documents like the Interim Defence Logistics Information Strategy, and it should build on this work to develop a comprehensive information strategy for its supply chain, and the Chief Information Officer should champion the importance of good supply chain information.
  • Legacy systems, especially those for base inventory and warehousing systems, represent a critical risk to the Department’s ability to supply its personnel. The Department should improve and upgrade all facets of its supply chain information data systems, especially considering the significant operational risks of continuing to use decades-old IT systems.
  • The Department should make more use of the Supply Chain Operating Reference benchmark. The Department should identify opportunities to learn from others, and benchmark performance and processes where possible. It should do this with immediate effect.
  • Many roles in the performance management cells in the supply chain are filled by non-specialists who often lack the requisite skills, furthermore, skills developed in-role are often lost as staff usually stay in the post for two years or less. This is inefficient and risks value for money. The Department should ensure it has specialists in the post, by creating a specialist career path for logisticians to allow retention and reward of key skills and implementing documented handover processes and mentoring of new staff.
  • The Department has not clearly identified which arrangements are best suited for increasing the awareness of its staff of the need for good data, or for improving skills to produce data. The Department should develop its federated model for producing good data on its business

Again, depressingly familiar to anyone with even a passing interest in this subject.

I know this is a bit of a dry subject but readers should have a read of the NAO report.

Military logistics is uniquely difficult and comparisons with Tesco or DHL are patently unfair.

To give credit where it is due, the MoD has made great strides but we have had agile supply chains, supply chain integration, joint supply chain, converged logistics, end to end logistics, contractor logistics support, just in time logistics, mergers of different logistics organisations, outsourcing, contracts awarded, a whole alphabet of initiatives, consultants paid, bonuses all-round, KPI’s fulfilled and boxes well and truly ticked yet here we are in 2011 and forward units still have to manually unload and break down pallets of stores, aircraft and vehicles going unserviceable for lack of spare parts and yet again the MoD’s accounts are qualified by the NAO because of issues around tracking of assets, particularly BOWMAN.

We must not in any way underestimate the huge and diverse challenges and it is true credit to those involved that the joint supply functions as well as it does.

More is needed though.

FLIS is a large programme with many challenges, if the latest NAO report is anything to go by, there is a steep hill to climb. There have been many systems and programmes that have gone before yet have used remarkably similar language in their objectives. There is a difference between saying and doing so let’s hope FLIS can achieve its objectives.

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