A Cost Model for Integrated Logistic Support Activities

An Integrated Logistic Support (ILS) service has the objective of improving a system’s efficiency and availability for the life cycle. The system constructor offers the service to the customer, and she becomes the Contractor Logistic Support (CLS). The aim of this paper is to propose an approach to support the CLS in the budget formulation. Specific goals of the model are the provision of the annual cost of ILS activities through a specific cost model and a comprehensive examination of expected benefits, costs and savings under alternative ILS strategies. A simple example derived from an industrial application is also provided to illustrate the idea. Scientific literature is lacking in the topic and documents from the military are just dealing with the issue of performance measurement. Moreover, they are obviously focused on the customer’s perspective. Other scientific papers are general and focused only on maintenance or life cycle management. The model developed in this paper approaches the problem from the perspective of the CLS, and it is specifically tailored on the main issues of an ILS service. 1. Introduction A specific type of after-sale contract is expanding beyond the boundaries of military, where it was initially introduced. It offers the customer an Integrated Logistic Support (ILS) service [1], to improve system’s efficiency and availability for the life cycle. The Contractor Logistic Support (CLS) core business is the design, construction, and installation of complex hi-tech systems, which are produced in a limited number and usually require a long time to market. Basically, a customer enters into partnership with the CLS because its specific and sometimes exclusive skills for the system’s life cycle management. The CLS commits itself for a very protracted period, frequently for the entire system’s life cycle, to guarantee the performance at the service level. It requires the elaboration of a management framework in order to optimize costs and achieve the CLS’s business objectives. In this context, the aim of this paper is to provide an approach to support the CLS management in the budget phase for ILS activities. The approach should be used to run a comprehensive examination of expected benefits, costs, and savings under alternative ILS strategies. The main feature of the proposed model is to explore the problem of the life cycle management for the CLS. The paper begins with a short literature review in order to point out as in the ILS context only the development of specific cost figures that has been addressed up to now. Moreover,