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Defence Supply Chain Modernisation

The Ministry of Defence has been reviewing how best to organise elements of our supply chain in order to provide the armed forces with the necessary logistic support in a modern environment. I am today able to announce the outcome of a number of studies into logistic support arrangements. The Future Defence Supply Chain initiative aims to deliver a modern and effective Defence Supply Chain focused on meeting the demands of today's armed forces both in peace-time and in support of operations. MOD has been evaluating four alternatives and has selected an in-House option worked-up in close consultation with the trades unions to provide the best possible combination of effectiveness and cost. By updating processes, improving training for staff, rationalising the distribution network and the closure of the storage depots at Stafford by the end of 2007, Llangennech by mid-2008, and Longtown by mid-2009 we expect to make savings of over £50 million per year by 2010 and over £400 million over the next 10 years. The new organisation will require around 2,000 fewer civilian posts and around 50 fewer armed forces personnel. These reductions will contribute to the wider MOD manpower reductions announced in the 2004 White Paper. A study into the future role of the Defence Munitions Centre at Crombie in Dumferline West is now complete and I have decided, subject to consultation with the national trades unions, to implement the recommendations. The study determined that the explosives storage capacity available at DMC Crombie is not required to meet the known and projected storage liability of its customers. Crombie will, in future, concentrate on providing a loading/off-loading function to HM Ships and Royal Fleet Auxiliaries, together with berthing and other jetty operations. DMC Crombie currently employs 168 staff. If the recommendations of the Study are implemented, there would be a reduction of 142 posts at the site. It is anticipated that 67 posts would go in the first year, with the balance of 75 posts being phased over years 2006–07 to 2009–10. Implementation of the study recommendations has the potential to deliver savings in the order of £18.1 million over a 10 year period. I have also today approved, subject to conclusion of trade union consultation, ABRO's proposal, to begin phase one of a two part rationalisation programme. Phase one addresses the immediate impact of the downturn in ABRO's Defence revenue projections, but will not diminish the range of capabilities ABRO is currently able to deliver to the front line. As a result, ABRO will reduce its headcount to approximately 2,150 posts by 31 March 2006, which includes the potential for up to 246 redundancies. The changes will realise annual manpower cost savings in the region of £2.1 million in 2005–06, and £8.3 million per year thereafter. ABRO are still developing phase two of the programme but the aim is to address the process efficiencies, site re-structuring, and other change initiatives required to ensure ABRO has a sustainable competitive position from which it can grow in the medium term. Finally, as a direct consequence of an announcement made today by Rolls-Royce Defence Aerospace on the outcome of an open competition for future overhaul and component repair on RB199 engine modules, up to 50 jobs will be lost at the Defence Aviation Repair Agency's (DARA) Engines Business Unit at Fleetlands in Gosport, Hampshire. I have agreed that DARA can now begin the formal 30-day consultation process with the trades unions. We are doing everything possible to mitigate the impact on the people affected by these announcements. Our current plans envisage that the majority of civilian reductions will be achieved through a combination of natural wastage and voluntary early release but some compulsory redundancies may prove necessary. There will be no redundancies from the armed forces. Staff and the trade unions are being kept fully informed of developments through meetings, briefings and formal consultation.