dissertation proposal of strategic management tool...
TRANSCRIPT
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Master of Science in Asset Management Control
Valparaiso, November 30th, 2012
Dissertation
“A proposal of strategic management tool to control the in-service
support processes of second-hand capital assets of Navies”
Student: Rodrigo Vallejo C
Supervisor: Michel Kuijer, Msc.
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Outline
1. Problem definition
2. Literature review
3. The model
4. Validation
5. Conclusions / Recommendations
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1. Problem definition
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Life cycle of an asset according to Blanchard, 2004
1. Problem definition
All asset life cycle carried out in the same country
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Second-hand Capital Assets situation
1. Problem definition
1
Part of asset life cycle carried out in different countries
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Exporter Importer Asset Asset designation
Yea
r o
f
ord
er
N°
deli
ve
red
Ye
ars
of
deli
ve
rie
s
M U
S $
Comments
Belgium Bulgaria Frigate Type-Е71 «Wanderlaar» 2005 1 2005 30,6 Ex-armed forces; military assistance
Belgium Bulgaria Frigate Type-Е71 «Wanderlaar» 2008 1 2008 79 Ex-armed forces
Chile Ecuador Frigate Leander Class 2008 2 2008 20 Ex-armed forces
Denmark Estonia MCM ship Lindormen 2005 1 2006 Ex-armed forces
Germany United Arab
Emirates MCM ship Type-332 2006 2 2006 30 Ex-armed forces
Italy Peru Frigate Lupo-ITS 2004 2 2005 30 Ex-armed forces modernized before
delivery
Italy Peru Frigate Lupo-ITS 2005 2 2006 30 Ex-armed forces; modernized before
delivery
Italy Serbia Corvette Minerva 2007 2 2007 10 Ex-armed forces
Netherlands Greece Frigate Kortenaer 2002 1 2003 55 Ex-armed forces
Netherlands Greece Frigate Kortenaer 2003 1 2006 35 Ex-armed forces
Netherlands Latvia MCM ship Alkmaar 2005 2
3
2007
2008 71 Ex-armed forces
Netherlands Portugal Frigate M-Class 2006 1
1
2009
2010 306 Ex-armed forces
Netherlands Chile Frigate M-Class / L-Class 2004 2 + 2 2005 380 Ex-armed forces
Transfer of Second-Hand Major Surface Ships between 2003 and 2010
(Source: www.arms-tass.su/data/Files/File/144.pdf)
1. Problem definition
66 capital assets transferred in 8 years
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PFG BAQUEDANO
PFG ZENTENO
PFG LYNCH
PFG CONDELL
DLH BLANCO ENCALADA
DLH COCHRANE
DLG LATORRE
DLH PRAT
FF WILLIAMS
FF COCHRANE
FF CONDELL
FF LYNCH
FF BLANCO ENCALADA
FF RIVEROS
FFG LATORRE
FFG PRAT
“L”
“22”
“23”
“M”
2003 – 2007:
Replacement of the CN fleet in 5 years
1. Problem definition
2
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Chilean Navy situation: Second-hand frigate’s life cycle
Case study: M Class Frigate
1. Problem definition
Frigate Chilean Name Hand Over date Pennant
Number Ex- Dutch Name
M 1 FF 14 “Blanco” 16-Dec-2005 F 832 HNLMS “Abraham van der Hulst”
M 2 FF 15 “Riveros” 18-Apr-2007 F 830 HNLMS “Tjerk Hiddes”
Case study
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CN situation: Second-hand frigate’s life cycle (Source: AMC master course).
1. Problem definition
2008 - 2012
3
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Frigates were included
into normal rules and
logistic guidelines to
manage their logistic
support i.a.w. C.N. culture
and customs.
(ineffective) Managing
installations, not
assets
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1. Problem definition
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Current Situation:
The CN needs to capitalize the AMC body of knowledge towards the management
and control the in-service support processes of the M-Class Frigates.
1. Problem definition
5
????
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a) CN takes profit of AMC master course.
b) CN develops a scientific approach to manage the in-service support
processes → cost-effectiveness.
Why this study is relevant for the CN logistic organization?
1. Problem definition
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Main research question
¿“How to translate the strategy into concrete actions
to manage and control the in-service processes
of CN second-hand Capital Assets in a cost effective way?
1. Problem definition
CN organization?
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14 Current C.N. General Organization chart
¿How about CN (logistic) organization?
1. Problem definition
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Nº ORGANIZATION
NAME ACRONYM RESPONSIBILITY
FOCUS ON
ASSETS?
1 GENERAL LOGISTICS
DIRECTORATE DIRECSERV
General management of material and logistic
services.
Head of all other technical / logistical directorates.
No
2 ASMAR SHIPYARD ASMAR Repairs careening and construction of naval ships. No
3 NAVAL SYSTEMS ENG.
DIRECTORATE DIRISNAV
Design authority and logistics management of
weapons and platform Installations. Yes
4 TELECOMM. & IT
DIRECTORATE DIRECTELINF
Design authority and management of telecomm.
installations and information technology No
5 SUPPLY DIRECTORATE DIRECABAS Procurement and supply support activities. No
6 PROGRAMS, R & D
DIRECTORATE DIPRIDA Management of Projects, R & D. No
7 UNITS REFITTING
DIRECTORATE DRUARM
Preventive maintenance level 3. Repair and overhaul
process of Capital Assets in ASMAR shipyard. No
8 INFORMATION AND MAINT.
MNGMNT SERVICE SERVIMADA
Definition and control of preventive maintenance level
1 and 2. Delivery of logistics Information. No
9 NAVAL MISSIONS CHILIARCO
CHILONDON Procurement of spare parts in U.K. and U.S.A. No
10 REAL ESTATE SERVICE SERVICONS Design authority of civil infrastructure, management
of real estate of the CN. No
Details of responsibilities of current C.N. Logistic Organization
¿How about CN (logistic) organization?
1. Problem definition
- 0 -
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2. Literature review
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Towards the problem statement
1.- Findings from other Defense Organizations.
2.- Strategic Management Systems
3.- Strategy Maps (SM) / Balanced Scorecard (BSC).
4.- Planning & Control.
5.- Continuous improvement.
6.- Logistics Support Products
7.- Life Cycle Management (LCM) teams
Towards the hypothesis validation.
8.- Feasibility, Acceptability, Suitability (F.A.S.) analysis.
9.- Cost - benefit (C.B.) analysis.
2. Literature review
Focusing the literature review
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Country Organization Team name Reference
HOLLAND RNLN Life Cycle Management teams Stavenuiter, 2002
U.K. ROYAL NAVY Integrated Project Teams UK MoD , “Implementation of Int. Project Teams”, 2002.
U.S.A. US NAVY Team ships / NAVSEA 21 http://www.navsea.navy.mil/teamships/default.aspx
2. Literature review
2.1.- Findings from study of foreign defense organizations
Organization Reference
U.S. Marine Corps / Air Ground Combat Center USMC / Air Ground Combat Center, St. Plan 2007 – 2015.
U.S. Army Laura M. Downing and Lauren Keller Johnson.
U.S. Army Medical Command http://www.army.mil/media/56383/
U.S. Defense Medical Logistics. http://dml.fhpr.osd.mil/home.aspx
Canadian Department of National Defense Gillis, L.G.: 2004
U.K. Ministry of Defense. Kaplan, R.S. and Norton, D.P. “Strategy Maps”, 2004
U.K. Royal Navy: CNS (Chief of Naval Staff ), FOSF (Flag
Officer Surface Flotilla), 2SL (Second Sea Lord)
• CNS (Chief of Naval Support)
Woodley, 2006
• Chilean Navy Navy Staff Internal Regulation
* Regarding LCM Teams
* Regarding SM / BSC
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Method to improve the organization management in the long term through a tool
capable to have a “steering instrument”
helping managers to lead
• people
• process &
• technology
from the current situation → desired situation.
2.2.- (Strategic) Management System
2. Literature review
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20 Strategy Map of Canadian Department of National Defense. (Source: Gillis, 2004)
2. Literature review
2.3.- Strategy Map / B.S.C. (1)
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Mission before objectives, objectives before measures
2. Literature review
BSC has 4 perspectives which have to be “balanced”
2.3.- Strategy Map / B.S.C. (2)
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2.4.- Planning & Control
2. Literature review
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2.5.- (Planning & Control) + PDCA
2. Literature review
The Deming Cycle (continuous improvement) is also known as PDCA Cycle.
P
D
C
A
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The LSA products (Source: AMC course, Module 8: Logistic Support Analysis modified by
the author)
2. Literature review
2.6.- Logistic Support Products
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LCM Team representatives (RNLN), Source: Stavenuiter, 2002
2.7.- Life Cycle Management Team
2. Literature review
validation
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Evaluation of the hypothesis (Source: Leonhard, 1993)
2. Literature review
2.8.- Hypothesis evaluation 1: F.A.S. Analysis
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4.- Validation
2.8.- Hypothesis evaluation 1: F.A.S. Analysis
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2. Literature review
2.8.- Hypothesis evaluation 2: cost – benefit analysis
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3.- The model
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3.- The model
How the proposed model was performed
3.1.- Proposed organizational changes
3.2.- S.M. / B.S.C. + P.D.C.A.
3.3.- (S.M. / B.S.C. + P.D.C.A.) LCM team
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Nº ORGANIZATION
NAME ACRONYM RESPONSIBILITY
FOCUS
ON
ASSETS
?
1 GENERAL LOGISTICS
DIRECTORATE DIRECSERV
General management of material and logistic services.
Head of all other technical / logistical directorates. Yes
2 ASMAR SHIPYARD ASMAR Repairs careening and construction of naval ships. Yes
3
NAVAL SYSTEMS ENG.
DIRECTORATE +
TELECOMM. & IT
DIRECTORATE
DIRISNAV –
DIRECTELINF
Design authority and logistics management of all
weapons and platform Installations including IT’s. Yes
4 SUPPLY DIRECTORATE
+ NAVAL MISSIONS
DIRECABAS -
CHILIARCO
CHILONDON
Procurement and supply support activities.
Buying of spare parts in U.K. and U.S.A.
Yes
5 PROGRAMS, R & D
DIRECTORATE DIPRIDA Management of Projects, R & D. Yes
6
UNITS REFITTING
DIRECTORATE + INFORMATION AND
MAINT. MNGMNT
SERVICE
DRUARM -
ERVIMADA
Preventive maintenance level 3. Repair and overhaul
process of Capital Assets in ASMAR shipyard.
Definition and control of preventive maintenance level 1
and 2. Delivery of logistics Information.
Yes
7 REAL ESTATE SERVICE SERVICONS Design authority of civil infrastructure, management of
real estate of the CN. Yes
Details of responsibilities of proposed C.N. Logistic Organization
3.- The model
3.1. – CN proposed organizational change. CN Logistic Organization.
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Proposed Organization of the CN Logistics Organization
3.- The model
3.1. – Proposed organizational change: CN logistic organization
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3.1. - Organizational change: no changes on DIRISNAV organization.
an asset-oriented organization
3.- The model
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3.- The model
3.1. – Proposed organizational change. Asset-oriented CN logistic organization
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3.- The model
DIRISNAV + DIRECTELINF
The only one Directorate responsible of 100
% of installations on board).
Organized in a matrix way.
Its mission: Design Authority of Platform and
Combat Systems Installations + communic..
ASMAR
Shipyard in charge of Depot level
Maintenance.
Main Contractor for level 3
maintenance tasks.
COMOPER
Direct military command of the Frigates.
3.1. - Organizational change. M-Frigate LCM Team proposal
S.M.
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PERSPECTIVESTRATEGIC
OBJECTIVES
MEASURES
(Progress towards the objectives)TARGETS INITIATIVES
Institutional
(Customers)
(ENDS)
Improve M-Class
Frigates effectiveness
Current availability, reliability and
capability indicators compared with
expected.
Target Date: Before Dec 2016.
Select the AMC methodology
(AMICO tool) to calculate A, R & C,
of M frigates during a year basis.
Target Date: Before Dec 2016.
Organize a set of progress meetings to
assure the fulfillment of the methodology to
calculate system effectiveness.
Reduce M-Class
Frigates overall costs
Current operation and support cost of
the frigates compared with expected.
Target Date: Before Dec 2016.
Define a methodology to allocate
and calculate operation and support
costs of the M-Class frigates.
Target Date: Before end of 2016.
Organize a set of progress meetings to
verify the fulfillment of the methodology to
calculate life cycle costs.
Application based on SALINO data.
Internal
(WAYS)
Improve SALINO data
quality
Audits: amount of errors discovered
versus total amount of registers.
Error: Difference compared with
standard
Decrease data errors in 5% yearly
and communicate the results on the
web portal.
To perform audits of data quality according
to ISO 8000 standard, 2009.
Improve of LSA
products in quantity
and quality
Degree of completion of the LSA
products comparing with the baseline
(purchased LSA products in Holland
along with the frigates)
10% of improvements of LSA
products every year up to reach the
baseline
Show results on asset web portal, ir order
for all stakeholders having the same
information.
Improve pending
facilities in ASMAR
Amount of facilities implemented versus
planned
All facilities implemented before end
of 2016Show results on asset web portal
Finance and
efficiency
(MEANS)
Reduce Operations
costs of M-Class
frigates.
To establish a set of measurements to
know the actual operations cost.
On 01 Dec 2013, the accounting
method has to be agreed upon.
Formulate an exploitation plan to know and
agree the “degree of activity” (realistic
objective) of the M-Class Frigate.
Reduce Maintenance
costs of M-Class
Frigates
To set a set of measurements to know
the actual maintenance (corrective +
preventive) cost.
On 01 Dec 2013, the accounting
method has to be agreed upon.
Formulate a maintenance operations
strategy (in-house capability, outsourcing,
condition based monitoring, RCM, etc).
Innovation,
learning &
growth
(MEANS)
Improve M-Class
Frigates web portal
training
Number of qualified LCM people on web
portals regarding the total amount of
people of LCM team.
All LCM members trained and
skilled before the end of 2014.
Define a “SALINO Training Plan” dedicated
to reach the specified target.
Improve knowledge of
AMC approach
Number of qualified LCM team people
regarding the total amount of people of
LCM team.
All LCM members trained and
skilled before the end of 2014.
To implement the Action Plan :“Asset
Management Control Initiative for the C.N.”
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3.- The model
3.2.- Strategy Map (Cause-and- effect relationship)
BSC
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PERSPECTIVE (STRATEGIC)
OBJECTIVES
MEASURES
(Progress towards the objectives) TARGETS INITIATIVES
Institutional
(Customers)
(ENDS)
Improve M-Class
Frigates effectiveness
Current availability, reliability and
capability indicators compared with
expected.
Target Date: Before Dec 2016.
Select the AMC methodology
(AMICO tool) to calculate A, R & C,
of M frigates during a year basis.
Target Date: Before Dec 2016.
Organize a set of progress meetings to
assure the fulfillment of the methodology to
calculate system effectiveness.
Reduce M-Class
Frigates overall costs
Current operation and support cost of
the frigates compared with expected.
Target Date: Before Dec 2016.
Define a methodology to allocate
and calculate operation and support
costs of the M-Class frigates.
Target Date: Before end of 2016.
Organize a set of progress meetings to
verify the fulfillment of the methodology to
calculate life cycle costs.
Application based on SALINO data.
Internal
(WAYS)
Improve SALINO data
quality
Audits: amount of errors discovered
versus total amount of registers.
Error: Difference compared with
standards
Decrease data errors in 5% yearly
and communicate the results on the
web portal.
To perform audits of data quality according
to ISO 8000 standard, 2009.
Improve of LSA
products in quantity
and quality
Degree of completion of the LSA
products comparing with the baseline
(purchased LSA products in Holland
along with the frigates)
10% of improvements of LSA
products every year up to reach the
baseline
Show results on asset web portal, ir order
for all stakeholders having the same
information.
Improve pending
facilities in ASMAR
Amount of facilities implemented versus
planned
All facilities implemented before end
of 2016 Show results on asset web portal
Finance and
efficiency
(MEANS)
Reduce Operations
costs of M-Class
frigates.
To establish a set of measurements to
know the actual operations cost.
On 01 Dec 2013, the accounting
method has to be agreed upon.
Formulate an exploitation plan to know and
agree the “degree of activity” (realistic
objective) of the M-Class Frigate.
Reduce Maintenance
costs of M-Class
Frigates
To set a set of measurements to know
the actual maintenance (corrective +
preventive) cost.
On 01 Dec 2013, the accounting
method has to be agreed upon.
Formulate a maintenance operations
strategy (in-house capability, outsourcing,
condition based monitoring, RCM, etc).
Innovation,
learning &
growth
(MEANS)
Improve M-Class
Frigates web portal
training
Number of qualified LCM people on web
portals regarding the total amount of
people of LCM team.
All LCM members trained and
skilled before the end of 2014.
Define a “SALINO Training Plan” dedicated
to reach the specified target.
Improve knowledge of
AMC approach
Number of qualified LCM team people
regarding the total amount of people of
LCM team.
All LCM members trained and
skilled before the end of 2014.
To implement the Action Plan :“Asset
Management Control Initiative for the C.N.”
3.- The model
3.2.- M-Frigates LCM Team Balanced Scorecard
BSC for the CN’s M-Class Frigates LCM Team
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BSC and PDCA for continuous improvement (Krivokapic, 2007).
3.- The model
3.3.- S.M. / B.S.C. + P.D.C.A.
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BSC and PDCA for continuous improvement (Krivokapic, 2007).
3.- The model
Continuous
improvement!!
3.3.- S.M. / B.S.C. + P.D.C.A.
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3.- The model
3.3. – LCM Team aspects
Continuous
improvement
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3.- The model
3.3. – LCM Team aspects
Continuous improvement
Continuous
improvement
Continuous improvement
Continuous improvement
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3.- The model
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4.- Validation
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4.- Validation
Strategy is at risk when “means”, “ends”, and / or “ways” are not in balance!!
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An. Compare To Description Result
Fea
sib
ilit
y
Means
(Resources,
people).
Ways
(Planning
guidance).
Resources involved in the hypothesis seems insufficient
to support the planned ways.
The main part of resources is already invested, because
the AMC course is already paid.
The CN LCM team implementation needs 20 technicians
(part time) to be set in place.
Hypothesis is feasible
depending on the
contribution of 20 AMC
officers and technicians
(part time) to set in place the
CN LCM team.
Ac
ce
pta
bilit
y
Ends
(Objectives)
Means
(Resources,
people).
The “end” or “objective” is improving the cost –
effectiveness of the M-Frigates, reducing the overall
costs. Another “end” is reducing the costs of spare parts.
Means (people) are not sufficient because officers MSc in
AMC should be used as a basis for change. (DGSA
Regulation “Modernization of CN Logistics”.
20 technicians to perform the LCM Team should be
assured.
Hypothesis is Acceptable
depending on the
contribution of 20 AMC
officers and technicians
(part time) to set in place the
CN LCM team.
Su
ita
bil
ity
Ways
(Planning
guidance).
Ends
(Objectives)
The objective involve all the CN organization.
What is missing is a holistic planning guidance for that.
So far, the hypothesis is
unsuitable because today
the planning guidance does
not exist, so are not
sufficient to produce the
desired ends.
4.- Validation – FAS analysis
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4.1. – BENEFITS of (SM / BSC + PDCA)LCM team
1 Capitalization of AMC approach in an objective and
measurable project.
2 Having a tool of comparison of effectiveness v/s costs of
Capital Assets.
3 Having a tool to communicate the strategy (BSC)
4 Having a tool to compare effectiveness among two or more
assets.
5 Having a rationale tool to apply a continuous improvement
methodology
6 Having a tool for continuous improvement development.
7 Saving of 20% of costs in spare parts are attainable
[Stavenuiter. 2008]
4.2. – COSTS (SM / BSC + PDCA)LCM team
1 Implement LCM Team inside the organization
2 To develop a web Asset portal to communicate
results.
3 To allocate people in a LCM Team (part time)
to perform a CN M-Class Frigates LCM Team
4.- Validation – Cost / Benefit Analysis
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4.1. - Benefits
Benefits Nº 1 to 6: not measurable in pecuniary terms.
Benefit Nº 7: Saving of 20% of costs in spare parts. 20 % x 4 M€ is 800.000 € / year.
4.2.- Costs
Costs Nº 1 and 2 are not measurable in pecuniary terms.
Cost Nº 3: Salary of each technician (average) plus other enterprise costs = € 1.800 / month.
assumed 50 % partially dedicated to AMC LCM team = € 900 / month = € 10.800 / year.
For 20 technicians: € 10.800 x 20 = € 216.000 / year.
4.3. - Conclusion: Benefits > Costs in about 584.000 € / year
4.- Validation – Cost / Benefit Analysis
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4.1. - Benefits
Benefits Nº 1 to 6: not measurable in pecuniary terms.
Benefit Nº 7: Saving of 20% of costs in spare parts. 20 % x 4 M€ is 800.000 € / year.
4.2.- Costs
Costs Nº 1 and 2 are not measurable in pecuniary terms.
Cost Nº 3: Salary of each person (average) plus other enterprise costs = € 1.800 / month.
assumed 50 % partially dedicated to AMC LCM team = € 900 / month = € 10.800 / year.
For 20 persons: € 10.800 x 20 = € 216.000 / year.
4.3. - Conclusion: Benefits > Costs in about 584.000 € / year
4.- Validation – Cost / Benefit Analysis
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4.1. - Benefits
Benefits Nº 1 to 6: not measurable in pecuniary terms.
Benefit Nº 7: Saving of 20% of costs in spare parts. 20 % x 4 M€ is 800.000 € / year.
4.2.- Costs
Costs Nº 1 and 2 are not measurable in pecuniary terms.
Cost Nº 3: Salary of each technician (average) plus other enterprise costs = € 1.800 / month.
assumed 50 % partially dedicated to AMC LCM team = € 900 / month = € 10.800 / year.
For 20 technicians: € 10.800 x 20 = € 216.000 / year.
4.3. - Conclusion: Benefits > Costs in about 584.000 € / year
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4.- Validation – Cost / Benefit Analysis
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5.- Conclusions / Recommendations
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The BSC complemented with PDCA methodology is a suitable model to be in
control of in-service support of second-hand capital assets depending on
planning. Acceptable and feasible depending on people.
B.S.C. / PDCA for M-class frigate LCM team are not a panacea, but it gives the
CN the proper direction to conduct the in-service support management of the
frigates.
The SM / BSC proposed by this study have been done in order to be applied by
some small part of the CN Logistic Organization: the LCM team. Nevertheless,
more realistic will be focusing on the entire organization.
5.1. - Main Conclusions
5.- Conclusions / Recommendations
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5.2. - General recommendations
The C.N. logistic organizations seems quite complex, even for the daily life. It is
advisable to have a look on it trying to concentrate functions and responsibilities
for having a simpler and lighter organization.
A more asset-oriented organization will create possibilities to be more cost
effective (i.e. more performance with less costs).
5.- Conclusions / Recommendations
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5.3. - Recommendations for future research
Implementing a M-Frigate LCM team is related with “people”, “process”, and
“technology”. In this research more or less “process” aspects is covered.
Nevertheless, deeper analysis should be done on “people” and “technology”.
Without good data quality any S.M.S. could be effective. Some improvements
could be done on this subject, along with Web Portals, as a complement of the
communication of the strategy to manage capital assets.
A field survey performed inside the CN organization could be done to do the
research more solid with that feed back. Two ways are visualized. To interview
only “logistic experts” on the top, or many technicians on the bottom.
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5.- Conclusions / Recommendations
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Thanks for your attention!!
AKNOWLEDGEMENTS
AND
QUESTIONS