Defense logistics agency issue - KMI Media Group

Q: Buying—what will that mean for staffing at DLA?
A: It will probably mean an increase in our contracting corps. As
we work hard to get the demand signals right, which is one of our
biggest challenges, our acquisition professionals are focused on
procuring those demands.
Since we use the working capital fund, we don’t work with a table
of organization equipment or a table of distribution and allowances
like our military service partners. Instead, we work on a need basis
and manage our workforce to the requirement. If we need more
acquisition folks because of the rigor that goes into planning and
purchasing, we may have to increase that workforce.
On the other side of the coin, the distribution and storage
requirement will probably decrease. If so, our manning and support
to those kinds of functions will shrink. Overall, I would say the
budget impact on the structure and the face of DLA from an organizational
point of view probably won’t make us change very much.
We won’t face significant personnel cuts like the military services
are facing. Instead, we face a challenge to ensure we have the right
skill set appropriate to meet the largest challenges. This gives us
huge opportunities for efficiencies. It’s much like the private sector—the
better you can provide the material to your customer, the
more likely they are to buy. The more accurate you are in meeting
their demand, the more likely they are to have what they need
when they need it. It’s about hitting the sweet spot between focusing
on the supplier side or the distribution side … about focusing
on the acquisition side or the supply and storage side. Those are the
metrics we look at when we right size and right-skill our workforce.
Fortunately, DLA has more than 50 years of experience to draw
upon. We consider past practices and past challenges and come
up with some pretty accurate staffing models that give us what
we need to come real close to what right looks like to support the
services effectively and efficiently.
Q: Are there any initiatives that highlight what DLA is doing to
shoulder their share of the burden of generating efficiencies and
meeting goals?
A: That’s the perfect question.
It may sound like it’s just business as usual for DLA … that
we simply shift resources around but nothing else would change.
Nothing could be further from the truth.
Our director has challenged us to be effective and efficient—
we’ve coined it the 10 in 5 plan, $10 billion in five years. He’s challenged
us to take $10 billion out of DLA over the next five years.
Last year, DLA was about a $46 billion enterprise. About $4.5
billion goes to running the business at DLA; the other $40 billion
is tied to sales. Given those two numbers—$40 billion and $4.5
billion—which number should we focus on? Our director’s challenge
is to go after the big number—to take $10 billion out of
sales, while dramatically improving performance. In no way does
this mean we’re going to change readiness rates and not provide
sustainment. The biggest single initiative is looking at ways we can
be more effective over the next five years to achieve that $10 billion
dollar reduction.
So how do we actually make it happen?
There are several programs that are going to help.
Strategic network optimization [SNO] is the first. It’s an effort
to get our distribution arcs—how we deliver the supplies to our
20 | MLF 6.5
supported units, how we provide material to our customer and how
we position that material around the world—as efficient as they can
be. As background, we have 10 years of experience from two wars in
two theaters, while supporting the continental U.S. and the other
geographic COCOMS. The demand patterns that we’ve used over
the last 10 years give us some dramatic demand history for looking
forward—who needed what when, what issue priority it was
supplied against, and how many pounds or items went to these
different locations.
Using some modeling processes, we looked at where the material
flowed from, which distribution depot to which customer,
etc. We’ve asked that model be optimized based on cost, time and
weight. Using those models, we look at where the efficiencies lie.
Was this cost driven? Supply driven? Could we have purchased it
instead of moved it? Or was it cheaper to have moved it instead of
purchasing it? Taking that information, we then apply the operational
impact on these models.
In the initial phase, when we optimized only the process, we
came up with a little over $700 million of savings just by a distribution
optimization. In phase two, we’ll look at how to optimize
inventory by looking at what we buy, when we buy and where it’s
positioned.
So if it’s something that’s going to be delivered to the central
U.S.—Fort Hood, Texas, for example—we’ll position that material
at a distribution site that’s as close to Fort Hood as possible and
then buy the supplies that Fort Hood needs and store them close
by. We may have material now in our pipeline or in our warehouses
at another location, and it may be cheaper to ship that
material from that known location today to that distant location
where that customer is, but it would be bought back to the closer
location. Doing it this way means we don’t waste material and
we don’t mistakenly position material. It’s all about making our
process more effective.
We borrowed Willie Sutton’s idea of following the money, so we
focus on where the money is. Now that we have the distribution
process optimized, we position the material in those optimized
locations to get a double payback for our investment. We get not
only the distribution dividend, but the inventory dividend as well.
Finally, the third leg of the SNO stool is the infrastructure.
As we better position material, certainly there’s going to be warehousing
space that will be freed up. Not all at one time, as it’s a
slow process, but over the next five years as those facilities are
freed up, we’ll be able to take those locations out of the inventory
or pass them back to the services. We’re also working with another
department and the Secretary of Defense to see if we can get demolition
money to assist the services in demolishing excess locations.
We could avoid a double touch for that excess warehouse by centralizing
the demilitarization and demolition if that was what the
service was planning on doing anyway. Unused facilities tend to fill
up because there’s always a natural tendency to store things. SNO
will discourage bad behavior and reduce unnecessary costs.
Q: You mentioned not only having the supplies but getting them
into the distribution channels—the PAKGLOC for example. You
all don’t handle or transport materials yourselves. How do you
adjust for circumstances that will impact the delivery of supplies?
A: On November 26, 2010, the PAKGLOC closed. We’d been dependent
on it for almost 10 years, moving material with our partners
www.MLF-kmi.com