Breakthrough innovation, courtesy of the military. Part 1: the roots of containerization and intermodal transportation.

When you think about innovative organizations, which one comes to mind?  Amazon?  Facebook?  Apple?

How about DoD?  The Department of Defense has been a relentless early adopter of new logistics technologies and strategies.  In the science and practice of logistics, the military – yes, the people who brought us the $435 claw hammer, the $640 toilet seat and $7,600 coffee makers – has throughout history often led the way in developing, nurturing, and implementing crucial tools and practices that have eventually proved crucial for the business world.

In logistics we make use of innovations, every day, brought to us by the defense establishment. Containerization and intermodal transportation are an obvious example.

Containerization and intermodal transportation are deeply imbedded in the way the world moves goods today. The commercial breakthrough for containers happened in the mid-50’s, brought about by visionary trucking executive Malcom McLean.   After building and selling a successful motor carrier operation, McLean Trucking, he purchased the steamship line U.S. Lines and led the way in developing the container ships shippers now take for granted.

McLean deserves enormous credit for that, but in fact, the initial development of containerized transportation came from the U.S. Army, driven by the exigencies of war.

In the latter part of World War II, the Army used something they called “transporters”-- standardized boxes that were really mini containers--to speed the loading and unloading of cargo ships going back and forth from Europe.  When the Korean conflict came along, the military started using the “transporters” for sensitive military equipment heading to the Pacific Rim.  In 1952 the Army began using the term CONEX, short for "container express," instead of “transporters.”  The first major shipment of CONEXes, containing engineering supplies and spare parts, moved by rail from the Columbus General Depot in Georgia to the Port of San Francisco, then by ship to Yokohama, Japan, and then to Korea, in late 1952.  

Innovations in military logistics will keep on coming, and commercial applications are sure to follow.  Delivery drones are already in use at the Marine Corps.  Driverless cargo trucks are being tested by the Army.  Field deployable 3D printing capabilities went forward in Afghanistan.

More ideas, still on the military drawing board, some in development, are certain to follow.  The Army is rolling out leading edge virtual reality combat simulators, to train people in battlefield conditions without an actual battlefield.  Perhaps we’ll train truck drivers the same way, taking a totally different approach.

What the military has learned over the years is that creativity by itself is insufficient, that better is sometimes not good enough.  The drive for different – innovating an entirely new approach – may be what is required to win the battle, or even the war. 

Earlier blog on military logistics innovation. 

No way to run a railroad. Or a passenger airline.

Earlier this month, on July 6, the Department of Defense Inspector General released a report on something called the Patriot Express.  The Patriot Express is a program of scheduled international passenger flights for military and government personnel – and their dependents – operated by DoD using chartered aircraft.  According to a brochure published by Air Mobility Command, who actually oversees the program, these flights “operate the same as scheduled commercial airlines.”

The Inspector General (IG) had a pretty simple finding.  “Although the Patriot Express flights were not always the most economical mode of transportation for DoD personnel traveling overseas, the program is an integral component to support DoD readiness and force protection.”

Let’s peel back the first half of that sentence.

“The Patriot Express flights were not always the most economical mode of transportation.”  The IG examined six routes, and found that on three of them the Patriot Express flights were cheaper, and on three of them the commercial routings were cheaper.  But what is truly damning is the size of the difference.  The average savings on Patriot Express routings when they were the most cost effective option were a little over $550, while the average savings on commercial routings when they were the most cost effective option were about $800.

And why is that?  In the report the IG published some statistics on load factors.  Across the routes they examined, on average 41% of the seats were occupied.  You got that?  Better than half the seats flew empty.  When was the last time you were on a commercial flight with more than half the seats empty?

AMC may think they operate the same as scheduled commercial airlines, but there is one big difference.  If a commercial airline operated with half their seats empty, it would go bankrupt, fast.  That sort of market discipline is lost on the federal government.

The IG waves its hands and tries to justify the value of the Patriot Express.  “According to DoD guidance, through the Patriot Express Program, DoD offers peacetime business to contract carriers that participate in the CRAF [Civilian Reserve Air Fleet] Program to secure additional aircraft resources in times of conflict when airlift needs exceed the capability of military aircraft.”  In other words, the Patriot Express is a subsidy for airlines who pony up aircraft during a national emergency.

I'm a patriot, and I'm all for answering the call during a national emergency, but the IG's hand waving doesn’t do it for me.  I’ve been to the dance with the IG, and with the GAO, and if I tried to wave the flag instead of running the numbers they’d light me up.  Crunch the data and make the case for the subsidy.  Do the Analysis of Alternatives.  Run the cost-benefit analysis.  Construct the Business Case Analysis.

What we have is a passenger airline operated by the Department of Defense, designed as a subsidy for aircraft operators who participate in CRAF, servicing destinations that can be reached by commercial routes, and is more expensive than the commercial alternatives.  And, by DoD’s own load factors, it’s obvious that the operational efficiency – the load factors – is horrible. 

The justification the IG offers is that we want to be nice to the CRAF operators.  This is no way to run a railroad, or a passenger airline.

Air Mobility Command is a sister command the Surface Deployment and Distribution Command (SDDC), the very same folks we blogged about last summer who couldn’t keep track of service members’ cars that were being shipped back home after overseas duty.  Click here to read, “We haven’t lost your car. We just don’t know where it is,” or here to read, “It's been awhile, but it's good to have you back, Dave. Now find the darn cars.”