Working Group Leader: Manasakis Constantine, Phd

WORKING GROUP: Financing of crisis management operations - Logistics role to the success of multinational crisis management

Working Group Leader: Manasakis Constantine, PhD http://www.soc.uoc.gr/benetec/manasakis/biografy.html

The aims of this document are the following:

1. To introduce the participants of this Working Group, in the relevant field.

2. To motivate the discussion and exchange of views and experiences, within a well defined context.

3. To summarize the conclusions reached through the two meetings of the working group during the conference days. Logistics and Finance in Crisis Management A strategic roadmap for the management of (multinational) crises includes the following milestones: . Identification and prioritization potential crises and their sources. . Preparation of a systematic program for crisis avoidance. . Preparation of a systematic Crisis Management Plan (CMP), for the cases where a crisis is not avoided. . Identification of the cases when the CMP will be implemented. . Implementation of the CMP when needed.

Within a Crisis Management Plan (CMP), a core issue is to ensure that Logistics Capabilities are available to materialize the CMP itself.

Logistics capabilities imply that sufficient funding and equipment must be available when needed, for the implementation of a CMP.

Funding and equipment can both be treated as recourses within an Integrated Logistics Support System (ILSS).

An Integrated Logistics Support System is a standardized and integrated approach for the identification and development of logistics support and system requirements for military systems, with the goal of creating systems that last longer and require less support, thereby reducing costs and increasing return on investments.

A systemic point of view: . ILSS – Vision & Mission: to support the implementation of the CMP . ILSS - Goals: well defined and quantified objectives . Setting the System’s requirements and organizational structure . Defining the operational, efficiency and effectiveness criteria to evaluate the system’s effectiveness and efficiency.

From a managerial point of view, an ILSS should be grounded on the following pillars: Just-in-Time: is a Logistics Management practice where the objective is to reduce inventory and associated costs. Lean Manufacturing: is a Production Management practice where the expenditure of resources for any goal other than the creation of value for the end customer is wasteful and should be eliminated. Value is defined as any action or process that a customer would be willing to pay for.

A best practice on the development and implementation of an ILSS: The NATO Maintenance and Supply Agency (NAMSA)

The NAMSA was established by the North Atlantic Council (NAC) in 1958 and is NATO's principal logistics support management agency.

The Logistics aspects The NAMSA's mission is to ensure that its customers (the NATO nations and other NATO bodies) receive the very best logistics support available to guarantee the operational readiness of their various weapon and equipment systems.

The above mission is executed under a grid of services and principles.

The NAMSA offers the following services to its customers: . Supply . Maintenance . Procurement . Contract Management . Engineering and Technical Support

The NAMSA offers these services in the context of three basic principles: consolidation, centralization and competition. Consolidation: NAMSA consolidates identical or similar logistics requirements expressed by two or more of its customers. The consolidation of requirements means larger quantities can be ordered, resulting in lower prices. Centralization: By placing their requirements with NAMSA, customers have the added advantage of addressing a single entity rather than having to deal with a multitude of suppliers. Competition: NAMSA's international competitive bidding allows a widest market to be scoured to obtain the best quality at the lowest prices. The NAMSA is the executive agent of NAMSO. The NAMSO's mission is to maximize, in peacetime and in wartime, the effectiveness of logistics support to the Armed Forces of NATO states, both individually and collectively, and to minimize costs.

The Finance aspects

1. NAMSA's core finance principle is that costs incurred in the support of a weapon system are passed only to the customers using that system. To achieve this, NAMSA's finances are organized in terms of specific projects or programmes. 2. NAMSA works with two types of budget: one type for operational activities and another for administrative activities. Operational budgets normally contain credits for the creation, increase, modification and repair of stocks and equipment, for the purchase of supplies, for indirect services and to cover corresponding transportation costs. Administrative budgets normally contain credits for expenditure resulting from the internal functioning of NAMSA, such as salaries, recurring expenditure for utilities, building maintenance and other operating costs, and capital expenditure for IT equipment. Each country participating in a Programme contributes to the administrative costs according to an approved administrative cost-sharing formula agreed by the participants. 3. NAMSA is in the process of implementing the International Public Sector Accounting Standards. 4. NAMSA's financial accounts and practices are subject to regular review by internal auditors and the International Board of Auditors for NATO. WORKING GROUP MEETINGS The working group had two meetings during the ATHENA 11 conference: Wednesday, June 1st 2011 (16:00-18:00) and Thursday, June 2nd 2011 (16:00-17:30).

The starting points of the group’s discussions were the following: . In times of tight budgets, efficiency of public procurement has become an even more important priority. . In addition, the policy is steering towards an increased use of established Logistics Management and Finance tools, as active drivers for sustainable growth.

The presentation of the framework of the previous pages motivated an interesting discussion between the leader and the members of the working group. This discussion incorporated the views and opinions of the working group members that had participated in multinational crises management operations.

The discussion was about some properties of an Integrated Logistics Support System (ILSS) as part of a Crisis Management Plan (CMP). These properties can guarantee the relative effectiveness and efficiency of the ILSS and the CMP, and are the following: I. Inter-compatibility and inter-operability of the equipments used across the different participants in the crisis management operation. These properties reveal the crucial role of: (i) The standardization of (a) items and (b) processes, as a cooperative process across participants. (ii) The incorporations of the end users’ opinions during this standardization process.

II. Given the standarization of processes across inter-compatible equipments, the next step is to standardize the process of consolidating demand across the different participants in the crisis management operation. These properties reveal the crucial role of the standardization of items and processes, as a cooperative process across participants in multinational crises management operations.

III. From an economics and resource allocation point of view, the working group further argued for the need to use auction mechanisms and competitive binding between rival procurement agents. The consistent use of “markets” can become an interface for the alignment of supply to demand and increase the effectiveness and efficiency of the ILSS and the CMP, in cases of multinational crises management operations.

IV. Another conclusion of the working group was the need to develop Geographical Information Systems (GIS) visualizing real-time data for warehousing. This would allow for: (iii) On-time identification of demands. (iv) Real time decision making before a crisis and during a crises, i.e., during the execution of a multinational crisis management operation.

The above views (I - IV) can be summarized in the term “Integrated Joint Logistics Support System” that the working group introduced and which is grounded on the assumptions and the properties of Lean Systems.

Last but not least, another common conclusion of the working group was that Management Science, Logistics Management Methodologies and Finance Tools offer the appropriate grid of techniques for the success (from a Finance and Logistics point of view) of multinational crisis management operations.

Yet, it is a matter of political commitment to establish the interfaces needed for the meeting and cooperation between military agents, civil agents and technical experts in order to develop pioneering Logistics and Finance tools and procurement guides for the execution of national and multinational Crisis Management Plans.