Headquarters U S Air Force Integrity Service Excellence

Headquarters U. S. Air Force Integrity - Service - Excellence Life Cycle Logistics Perspective KC-46 Product Support Frank Washburn 11 April 2018 1

BLUF Purpose Provide the ICEAA Workshop with insight into how projected O&S cost influenced KC-46 product support decisions, specifically the supply chain strategy. Context • The KC-46 program is approaching the seventh year on contract and the AF has remained firm with no requirements changes • O&S was considered early in the acquisition strategy • Led to decisions to leverage a commercial derivative aircraft and maintain FAA certification to gain access to commercial spare parts and reduce sustaining engineering cost • A significant effort within the USAF to “think differently” regarding the KC-46 supply chain strategy in order to maintain a FAA certified aircraft and reduce life cycle O&S Integrity - Service - Excellence 2

Air Force Organic Supply Chain Business Analysis ■ Consolidated Sustainment Activity Group – Supply Division ■ Activity group within the AF Working Capital Fund ■ CSAG-S $’s used to procure, repair, and stock AF managed depot-level reparable and consumable items ■ CSAG-S is big business, but it’s also old business ■ $5. 8 B in “revenue” for FY 17– #450 in Fortune 500 ■ ~90% of the spend in CSAG-S are for items related to weapon systems fielded prior to 1980 2000 s 1990 s 1980 s 1970 s 1960 s 1950 s FY 17 CSAG-S Spend by Weapon System's Decade of Introduction 3% 8% 53% 1% 36% 0% 10% 20% 30% 40% 50% 60% % of Total Buy & Repair Integrity - Service - Excellence 3

USAF Supply Support Evolution Reasons why the AF organic supply chain is in the legacy parts business ■ Post Cold War modernization delays ■ Average fleet age is 28 years ■ Trends in acquisition culture ■ Prior to 1990, organic support was the default choice for SCM ■ Exceptions: small fleets, classified programs, and comm derivatives ■ After 1990, a number of factors challenged the status quo ■ Political pressure to push more work to the private sector ■ Acquisition reform that encouraged CLS and PBL strategies ■ The belief that private industry was more cost-effective Integrity - Service - Excellence 4

KC-46 Supply Chain • Traditional organic supply chain approach – Transactional – Commodity centric – “Hundreds” of commodity-based repair/buy contracts • KC-46 supply chain “game changers” – ~85% of KC-46 DLRs are commercial common – Compliance with FAA certification • Drive “new” approach to cost-effective KC-46 organic supply chain management Integrity - Service - Excellence 5

Post-ICS KC-46 Supply Chain Strategy Commercial Common KC-46 Military Unique Common to Other W/S • Joint AF/DLA Competitive “Tip to Tail” PBL • Leverage existing DLA Boeing “Captains of Industry” contract • Leverage existing organic supply chain capabilities • Outcome based • Asset Availability • Order Response • • • FAA mandate Evaluating outcome based vs. transactional approach • Demand maturity • Technical maturity “Add” KC-46 requirements to existing organic repair and new support strategies • Off-ramps for organic DLR repair transition • • • FAA certification may drive assignment of unique NSNs Blend of organic and industry supply chain strengths/capabilities Allow buffer for depot activation planning and off-ramps for organic repair I n t Integrated e g r i t y - S e AF/DLA r v i c e - EApproach xcellence 6

KC-46 Leveraging Commercial Aviation Industry for KC-46 Common Parts Boeing 767 -2 C Derivative 5% Military Unique 95% Commercial Capitalizing on existing industry capabilities ■ Open parts pool philosophy ■ Minimize investment in excess stock ■ Integrity - Service - Excellence 17

Desired Outcomes • Reduce O&S cost through “thin layer” of inventory investment versus traditional large inventories held at wholesale level and at every operating location • Execute a working capital funded “tip to tail” PBL to achieve warfighter outcomes versus managing “thousands” of individual transactional contracts • Reduce life cycle sustaining engineering cost by leveraging commercial capabilities • Leverage partnership with DLA to achieve mutual outcomes---versus operating in agency silos Integrity - Service - Excellence 8

QUESTIONS? Integrity - Service - Excellence 9