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  annual report and accounts 2002-03

Logistic support

Objective:

To provide more responsive, integrated and efficient logistic support.

Performance Measures:
  1. Proportion of logistic support outputs delivered by the Defence Logistics Organisation.
     
  2. 80 Field Hospital beds at increased readiness.
Performance Assessment:
  1. The Defence Logistics Organisation delivered 97.4% of the logistic support outputs identified in its Customer Supplier Agreements, narrowly missing the 98% target. It continued to address remaining areas of weakness.
     
  2. Operation TELIC saw the deployment of 700 hospital beds.

On-going PSA targets are in italics. See Annex B for a complete table.

Summary

133.  The Defence Logistics Organisation (DLO) met all of its customers' operational demands in what was a demanding year. It provided the support required to maintain operations in Iraq and elsewhere, and successfully demonstrated the new Joint Force Logistic Component arrangements. Work continued towards meeting targets for provision of field hospital beds. Progress also continued on reducing DLO stockholdings, and making the required efficiency improvements to ensure that we get the best value for our logistic investment.

Defence Logistics Organisation - Performance and Developments

134.  The DLO maintained its operational focus throughout the year and met all of its customers' operational demands. During Operation TELIC there was much media reporting that there were shortages of equipment. While the Department accepts that not all units had their kit and supplies when they first arrived in theatre, all key operational supplies were in place by the start of hostilities. Indeed, the first indications from Operation TELIC are that the overall logistics support went well, and that the DLO should be congratulated on the speed of deployment and overall performance in a very challenging and hostile environment. Progress on the DLO's Business Change Programme to achieve required output efficiencies is set out in paragraphs 146-147 below.

Customer Supplier Agreements (CSAs)

135.  CSAs are contracts between the Chief of Defence Logistics and each of the other ten MOD Top Level Budget Holders. They provide a clear specification of required DLO outputs and their resource costs, which informs Defence-wide decisions on provision of logistic support underpinning the delivery of military capability. In 2002/03, the DLO delivered 97.4% of the logistic support outputs identified in its CSAs. This only narrowly missed its target of 98%, and was an improvement from 96% in 2001/02.

Specific Operational Achievements

136.  The DLO Logistic Operations Centre (DLOC) was formed in February 2003 at Andover, to provide more effective co-ordination of strategic movement and the delivery of logistics from the home base to the operational theatres. It proved very successful. The DLO also successfully bought significant amounts of equipment directly from industry specifically for use in Operation TELIC that, given the speed of deployment, had to be delivered directly to units in theatre.

Joint Force Logistic Component

137.  The Joint Force Logistic Component is a new, task organised, joint, logistic Headquarters. Its role is to deliver coherent and co-ordinated theatre-level support to a deployed joint force. Its exact composition is determined by the Permanent Joint Headquarters to meet the needs of a specific Operation. It achieved considerable success in support of operations in Iraq, but these and other recent deployments have highlighted areas where improvements and investment are required to develop its full capability.

Medical Support

138.  Progress has been made towards the Comprehensive Spending Review 1998 PSA target of 800 Field Hospital beds at increased readiness. Operation TELIC saw the deployment of 700 beds (600 Land and 100 Maritime). The requirement, however, is now being reviewed in the Deployable Medical Capability Study against the types of Operations envisaged in 'A New Chapter to the Strategic Defence Review' (see paragraphs 62-64). Further information on Service personnel health issues is set out in paragraphs 100-103 above.

Reduction in Stockholdings

139.  The DLO's stock and Capital Spares holdings reduced by £483M in 2002/03. Acceleration of existing review programmes (including Lean Support) and application of a range of other improvements, many of which were identified in the report on Defence Logistics produced by the consultants McKinsey's, will enable further asset rationalisation opportunities to be taken.

End-to-End (E2E) Logistics Review

140.  The E2E Review, whose findings were reported to Parliament on 10 September 2003, considered the effectiveness and efficiency of logistic support to Air and Land forces, including Naval Air and the Royal Marines. It looked at the logistic support provided across organisational boundaries, from industry to the front line, both in peace and war, deployed and non-deployed, and proposed a future support strategy. This strategy recognises that small and medium scale operations outside Europe are now the norm and such operations require logistic support that is Joint, flexible, rapidly deployable and robust. The implications that the changes proposed in the Review will have for Service and civilian personnel will be addressed in detail during the next phase of work.

Customer Supplier Agreements

What are Customer Supplier Agreements?

A Customer Supplier Agreement (CSA) is an agreement defining the output required from a supplier organisation to enable its customer organisation to meet its Defence outputs. It sets out the working relationship between the organisations, the resources involved, and the performance targets against which delivery will be judged.

Why do we have them?

CSAs have been introduced to support the principle of management by output. They are a key element of the Department's financial planning and management processes, as they are the mechanism by which the demands placed on a supplier by a customer, to satisfy an intermediate output, are specified. They should make costs visible and facilitate the continuing drive for greater efficiency. They provide a framework for agreeing, and a process for formalising relationships, between a customer and a supplier. In the longer term we also expect them to help establish better organisational structures and boundaries.

How do we use them?

A CSA is a management tool, which enables both parties to consider carefully what services or activities they require (in the case of customers) or can provide (in the case of the supplier). They form an integral part of the Department's financial planning process. A CSA defines, in terms of quantity, quality, timeliness and cost, the output required from a supplier in order to enable the customer to meet its Defence outputs. Resources are allocated to budget holders in accordance with the outputs those budget holders have undertaken to deliver; and budget holders' in-year objectives (and hence the performance reporting system) are primarily framed with reference to the outputs they have been resourced to deliver. In principle, all Departmental activity should be explicitly tasked either through CSAs or directly in management plans. If a Customer does not require an output, the Supplier will need to provide some other justification for incurring the related expenditure.

CSAs are not there for a Customer to manage a Supplier's business. Rather, a CSA is used to manage the relationship between the Customer and Supplier and stipulate what output is required. The level of output agreed in the CSA then becomes the 'Target' against which the Supplier's performance is aimed and subsequently measured. The Customer proposes appropriate performance indicators, which are then used to monitor and report upon the Supplier's performance in delivering the agreed outputs.


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Last Updated: 3 Dec 03