Supply chain lessons from the military: what air freight could learn from the $2 trillion defence sector

Supply chain lessons from the military: what air freight could learn from the $2 trillion defence sector

Nicole Verkindt, founder of OMX and “dragon” on Canada’s Dragon’s Den, is taking part in a panel exploring digital transformation in the supply chain at TIACA’s 2018 Air Cargo Forum in Toronto, Canada, which takes from 16-18 October. Speaking exclusively with TIACA, Nicole shares her views on what lessons airfreight can learn from the military.

Global military spending is at its highest since the end of the Cold War. At over USD$1.7 trillion, the defence sector accounts for 2.2% of global GDP.

I founded OMX seven years ago as a procurement network and supply chain platform to connect buyers and sellers to centralize the bidding, building, and reporting processes. What started in the defence sector has expanded to include energy, infrastructure and – you guessed it – aerospace and air freight.

The defence and air freight sectors have a lot in common. Both have huge supply chains that span the globe. Both contain an increasing number of moving parts, tiers, and suppliers. And both are established industries that are still in the process of transitioning to digital solutions.

Today, the world’s largest defence contractors and aerospace companies like Boeing, Lockheed Martin, and Raytheon all use OMX for their procurement needs and to build billion dollar supply chains. Along the way, I’ve learned some important lessons from military and defence supply chains that are just as applicable to air freight:

Collaborate with your supply chain

It can be difficult to align an organization, let alone an entire supply chain.

But it’s not impossible and the benefits are overwhelming. During the Gulf War in 1990, U.S. forces operated as separate divisions on different tracks and contractors were paid on a per-repair basis, which meant a lot of  time and resources were spent on reconciliation.

By the Iraq War in 2003, all ground forces (including coalition partners and private contractors) were on a single, integrated network and contractors were now paid based on overall system availability –  increasing operational availability from 80% to 92%.

Visibility is everything

Unlike other commercial supply chains that may only require a forward pipeline, defence and air freight supply chains often require reverse and lateral ones too. Military equipment has to be serviced and when it becomes obsolete, disposed of. Air freight also has to deal with maintenance and returns.

As supply chains become increasingly globalized and fragmented, there are more moving parts which means more chance for error. The problem now is not necessarily in tracking all the supply chain parts, but knowing which of those millions of data points are relevant and how to translate that into actionable insight. Which brings me to the last lesson…

Digital is a game changer

Of course, more collaboration, visibility, and insights on an integrated platform is always going to be desirable. But getting there is another matter entirely.

That’s why digital is such a game changer. Lots of technologies start with the military and make their way down to civilian applications: from computers, to the Internet, to RFID tracking technology. And the next big technologies are all very exciting: cloud and blockchain technologies ensure networks are always online and available. Automation and machine learning mean tedious and repetitive tasks can be done much quicker and with less errors. Technological modelling allows users to plan the most efficient models. And big data analytics is offering insights that nobody would otherwise see.

And in today’s world of integrations, all of this can be done from a single platform or network of platforms across your entire supply chain.

This is what I set out to build when I started OMX: a wholly-integrated platform for procurement and supply chains that spans the bidding, building, logistics, and analytics stages. Seven years, 160,000 companies, and billions of dollars in supply chain deals later, I think I’ve succeeded.

Are you interested in new business and procurement opportunities in the air freight and cargo industry?

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