1. Diminishing Manufacturing Sources and Material Shortages (DMSMS) Fundamentals Executive Summary An Executive Overview of SD-22: A Guidebook of Best Practices for Implementing a Robust DMSMS Management Program

2. Diminishing Manufacturing Sources and Material Shortages (DMSMS) Fundamentals Executive Summary DISTRIBUTION STATEMENT A: Approved for public release by DOPSR on M/D/YYYY; SR Case # 16-S-#### applies. Distribution is unlimited. (PENDING)

3. 3 Course Agenda and What to Expect This course consists of a single lesson that should take approximately 1 hour Upon completion of this course, one will be able to explain the elements and steps of the DMSMS management process and why it is important, based on the following: –Recognize the elements of DMSMS management and its importance –Identify the characteristics of the prepare and identify steps of DMSMS management –Identify the characteristics of the assess, analyze, and implement steps of DMSMS management

4. 4 What is DMSMS? Diminishing Manufacturing Sources (DMS) deals primarily with obsolescence issues: A part is no longer being manufactured Material Shortages (MS) deals with the availability of materials like steel, refrigerants, lubricants, and minerals needed for manufacturing ‘”DMS” is more prevalent than “MS”

5. 5 Why is DMSMS Management Important? What is DMSMS management? –Identifying DMSMS and obsolescence issues –Assessing potential negative impacts –Analyzing mitigation strategies –Implementing cost-effective ways to mitigate negative outcomes Objectives of DMSMS management: –Eliminate production or maintenance schedule delays –Minimize the need for out-of-cycle redesigns –Prevent degradations to mission performance, safety, or readiness Who is responsible? You…if you have any responsibility for or oversight over the management of defense programs or systems DMSMS management mitigates risks posed by the obsolescence of system components Objective: Minimize risks from DMSMS issues

6. 6 Bottom Line Up Front Make DMSMS management a high priority and ensure the right people are involved Fully fund DMSMS management activities and issue resolutions Strive to mitigate DMSMS issues before they have negative impacts –Review designs to avoid obsolete items and reduce the risk of near-term obsolescence –Use open-systems architectures for easier replacements –Starting early in design, proactively monitor critical, vulnerable items and software to identify potential problems Where applicable, include DMSMS language in contracts “Better Buying Power” means controlling future costs to achieve affordable systems. Robust, risk-based DMSMS management seeks to do just that. Acquisition and systems managers should promote robust, effective DMSMS management High payoff from robust DMSMS management

7. 7 DMSMS is Inevitable DOD systems can require a decade or more to develop and have a life that spans decades Yet, the life cycles of many items that comprise a system are brief by comparison –As low as 18 months for Commercial Off-the-Shelf (COTS) electronics –Approximately 5 years for COTS software –Environmental or regulatory restrictions can impact materials availability at any time Robust management is necessary

8. 8 What Does DMSMS Management Encompass? Identify the items of the system (assemblies, sub-assemblies, parts, software, etc.) Decide which of those items are essential for –Production –Sustainment (mission-critical, safety-related, scheduled maintenance) Determine which essential items are subject to obsolescence concerns Monitor essential items subject to obsolescence for current or future obsolescence issues When an obsolescence issue is revealed, assess the impact and determine the best mitigating resolution Implement the resolution when needed DMSMS management is a complex process

9. 9 Two Approaches to DMSMS Management Reactive –Little attempt to identify obsolescence issues in advance –Obsolescence usually identified by a failed attempt to purchase Proactive –Institute a monitoring program to identify obsolete or nearly obsolete items along with suppliers at risk, prior to a failed attempt to purchase –Extends the time “window of opportunity” available to deal with an issue, facilitating better resolution options –Initiate mitigation to minimize impacts on the program There are significant advantages for being proactive; however… being proactive requires significant resources and thus is not appropriate for all items

10. 10 Basic Forms for DMSMS Management Program Office lead –Primes and subcontracted original equipment manufacturers (OEMs) provide required data to perform DMSMS management Primary management responsibility delegated to prime contractor with program office oversight –Prime manages the level and type of sub-contractor DMSMS involvement –Resolutions can be funded by either contractor or by the program office Third-party organizations and DMSMS subject matter experts (SMEs) can also provide valuable assistance to program offices in DMSMS management and oversight DMSMS management can take a variety of forms

11. 11 SD-22’s Five Steps of Robust DMSMS Management Prepare: Establish a DMSMS management program infrastructure Identify: Monitor for DMSMS problems Assess: Determine DMSMS problem impacts Analyze: Find the best resolution Implement: Implement the resolution Robust DMSMS management is a dynamic process -- It never ends. The rest of the briefing will discuss each step in turn

12. 12 SD-22 provides all elements that should be covered in a plan Preparing for Effective DMSMS Management Program management buy-in is essential Establish the strategic underpinnings and set priorities –Specific overarching objectives –Establish risk-based operating guidelines –Define program management role Develop a DMSMS Management Plan (DMP) Form a multidisciplinary DMSMS Management Team (DMT) Establish DMSMS operational processes

13. 13 Adopt a Risk-Based Approach Proactive DMSMS management for all items is not cost-effective Which subsystems and which items should have priority for monitoring? –For production, most, if not all, items should be monitored—best done by prime and OEMs –For sustainment, prioritization should be based on such considerations as mission criticality, safety, or known problem areas At one end of the spectrum, everything could be proactively monitored. At the other end, the impact of obsolescence may be small if alternatives are readily available or demand is very low How important is DMSMS management for software? –For systems heavily dependent on COTS software, monitoring software obsolescence should be a high priority Strike a balance between high-risk items that should be proactively monitored and lower risk items

14. 14 Estimating Funding for DMSMS Management and Operations Program offices must provide operations funds to support DMSMS management—via contracting or in-house resources. Functions include: –Planning and management –Data management, research, and forecasting –Data analysis and reporting Drivers of operations funding –Whether DMSMS program is established (steady state) or new (startup) –Scope of monitoring Data forming the basis for estimating operations funding –Number of items in the system and number subject to monitoring –Cost of tools or contractual arrangements in monitoring for obsolescence risks –Funding for team activities--meetings, travel, admin. support, etc. Ensure there is not a mismatch between the plan and the funds available to execute it

15. 15 DMSMS Monitoring and Surveillance One-time processes –Prioritize systems based on risk –Select and acquire monitoring tools (“Predictive tools”) –Collect and prepare data for items monitored Recurring processes –Analyze item availability –Collect and update demand data –Develop products of monitoring and surveillance “Identify” consists of one-time processes and recurring processes pertaining to the monitoring and surveillance of DMSMS issues

16. 16 One-Time Processes System prioritization criteria include: –Safety-related –Mission criticality –High replacement costs –History of obsolescence issues Select and acquire monitoring tools that include the ability to: –Contain a large number of the system’s key items –Provide accurate data—real-time assessments of item availability –Low cost Collect and prepare item data based on: –Obtaining BOMs and parts lists as early as possible –Taking a risk based approach to prioritizing items to be monitored –Life-cycle phase –Sustainment strategy –Availability of technical data

17. 17 Recurring Processes Analyze Item Availability Analyzing item availability may be accomplished by— –Using a predictive tool –Manual monitoring through vendor surveys –Receipt of product discontinuation notices The recurring processes are the bread and butter of DMSMS management

18. 18 Recurring Processes Collect and Update Programmatic and Logistics Data Programmatic data (applies to hardware and software) includes: –Acquisition phase –Planned number of units –Unit modernization plans –Technology refresh or insertion plans Logistics data (applies to hardware) could include: –Average demand –Operating tempo –On hand –Due in/ due out –Procurement lead time The recurring processes are the bread and butter of DMSMS management –Repair philosophy –Cost –Backorders –Unserviceable –Measure of reliability

19. 19 Recurring Processes Develop Products of Monitoring Types of monitoring products –A “quick look” health assessment Provides a high-level snapshot of obsolescence health Used particularly in early phases of the life cycle –Detailed health assessment (also referred to as Tombstone charts) Provides a more detailed snapshot of obsolescence health Used particularly once the system design is mature Conducted whenever new parts lists are received and in support of major technical design review or design change Documents the timing of obsolescence issues and their impact Enables identifying the ideal timing to address a set of DMSMS issues The recurring processes are the bread and butter of DMSMS management

20. 20 DMSMS Impact Assessment Data needs –Programmatic –Availability –Criticality –Logistics Assess impact of DMSMS issues –Detailed Health assessments provide key information to assess the impact of identified DMSMS issues “Assess” examines the potential effects of a DMSMS issue, at any level of a system, on cost, schedule, readiness, and availability

21. 21 Data Needs Programmatic data, e.g., — –Planned average operating hours per system Availability data –Differentiated between currently unavailable and forecasted to be so in the near-term Criticality data, e.g., — –Item, assembly or unit functions and cost Logistics data, e.g., — –Demand history and reliability

22. 22 Assess Impact An impact assessment is triggered by a change –Change in the predictive tool/vendor survey status of an item –Receipt of a product discontinuation notice –Failed attempt to procure an item Impact assessments must answer three questions –Should a resolution to the problem be pursued? –Which problem should be addressed first? –At what level should a resolution be applied? Proactive DMSMS management provides more time for evaluation of impacts

23. 23 DMSMS Resolution Determination Options for resolution of DMSMS issues Resolution cost elements Determine best DMSMS resolution “Analyze” means finding the best resolution option

24. 24 DMSMS Resolutions Overview SD-22 identifies ten basic resolution types for DMSMS issues, falling into three broad categories: –Existing Material (logistics)—Entails securing availability of existing supplies –Substitutes (engineering)—Entails engineering analysis to identify, qualify and implement a replacement item –Redesign (engineering)—Entails broader-scoped engineering analysis considering all aspects and implications of the issue from a system perspective, resulting in the design of new or highly modified equipment Resolutions vary from very simple (and cheap) to very complicated (and costly)

25. 25 DMSMS Resolution Types Resolution TypeBrief Description 1No Solution RequiredLow demand item; on-hand assets sufficient to end of life 2Approved ItemAlternative item approved on the drawing and still available 3Life of Need BuyCan buy enough of existing item to last to end of life 4Repair, Refurbish, ReclaimFrom existing inventory 5Extend Production or SupportArrange for existing supplier to extend production 6Simple SubstituteExisting item is available that meets all requirements without modification and requires only minimal qualification 7Complex SubstituteAvailable item has different specifications, but requires no modification and is researched and validated 8Develop a New Item or Source Develop replacement product that meets requirements of the original product without affecting the Next Higher Assembly (NHA). Nonrecurring engineering, testing, etc. will be required 9Redesign –NHAThe item’s NHA must be modified but the new design will not affect anything at a higher level in the system 10Redesign – Complex/ System Replacement Major redesign affects assemblies beyond the NHA, may require changes to higher-level assemblies, software, and interfaces

26. 26 Estimates of Average Costs of DMSMS Resolutions by Type Based on a 2014 Department of Commerce Survey Data indicate that redesigns dominate total DMSMS resolution costs Category Average Cost No solution requiredNA Approved part$1,047 Life-of-need buy$5,328 Simple substitute$12,805 Complex substitute$25,867 Extension of production or support$25,930 Repair, refurbishment, or reclamation$66,185 Development of a new item or source$667,209 Redesign–NHA$1,112,528 Redesign–complex/system replacement$10,473,148

27. 27 Resolution Cost Elements Costs to find and qualify a resolution –Engineering and engineering data revision; Purchase engineering, design, or technical data; Qualification of new items; Revision of test procedures; Software changes; Start-up costs; Testing; Tooling, equipment, test equipment, software Costs to implement –Computer programs and documentation, interim support, item cost, manpower, spares, provisioning data, test equipment, technical manuals, training, other Additional Cost Element Considerations –Counterfeit Items--Testing costs must be included –Lead Free-Electronics--Additional costs may be incurred to detect and mitigate To evaluate potential resolutions, the total implementation cost for each resolution must be understood

28. 28 DMSMS Resolution Determination Process Determine if the issue will be resolved by an external organization Determine most viable resolutions –Factors to consider include: Near-term and life-cycle costs, planned technology refreshes, results of impact assessments, terms and conditions of contract Conduct an Analysis of Alternatives or Business Case Analysis –Identify the implementation cost for the viable resolutions –Calculate the return on investment (ROI) –Apply risk factors: Technical, supply chain, financial, schedule Some solutions might entail multiple resolutions over time –For example, an interim buy of a quantity to last until the next planned tech refresh The best resolution is determined by a number of factors

29. 29 Implementing DMSMS Resolutions Securing DMSMS resolution funding Ensuring implementation of DMSMS resolutions “Implement” entails securing resolution funding and ensuring the implementation of the chosen DMSMS resolution

30. 30 Roles and Responsibilities for Implementation The program office DMSMS lead should be involved in two final processes: Finding funds for the implementation of the preferred resolution –Some contracts require the contractor to fund DMSMS resolutions; this can be reflected in two different ways— The contract requires the contractor to buy additional items to resolve a DMSMS issue The contract requires the contractor to resolve, and possibly fund, DMSMS case resolutions Overseeing implementation of the preferred resolution A program office DMSMS lead ’s responsibilities do not end with a decision to pursue a resolution option

31. 31 Budgeting for DMSMS Resolution Funding Program Offices should include funds for DMSMS resolutions in their near-term budget and longer-term programmatic requests Estimating the program and budget funding necessary to support DMSMS resolutions is not an easy problem For well-established DMSMS management in mature programs, there will be a history of past DMSMS resolution funding Less mature programs are more problematic. Several approaches for estimating resolution funding are outlined in the SD-22 If a program has not reserved sufficient funds for DMSMS resolutions, all is not lost; there are other resources available within and external to a program (e.g., Working Capital Funds, ManTech, Title III, etc.) Funding for DMSMS resolutions must be budgeted in advance

32. 32 Other Implementation-Related Issues The program office’s DMSMS should: –Ensure that all stakeholders understand their roles and responsibilities –Ensure that the implementation steps are defined –Verify that appropriate technical actions were successfully carried out –Monitor the process –Obtain feedback on the project status –Update BOMs being monitored This job is not complete for a program until a resolution is fully implemented!

33. 33 Other DMSMS Courses A rich selection of training related to DMSMS is available at Defense Acquisition University (DAU) for program managers and staff DAU Courses include –CLL 200, DMSMS: What Program Management Needs to Do and Why (forthcoming) –CLL 201, DMSMS Fundamentals –CLL 202, DMSMS Fundamentals Executive Summary –CLL 203, DLA DMSMS Essentials –CLL 204, DMSMS Case Studies –CLL 205, DMSMS for the Technical Professional

34. 34 For More Information https://acc.dau.mil/dmsms-guidebook DMSMS Knowledge Sharing Portal https://acc.dau.mil/dmsms