Table of Contents
National Performance Review
Reinventing the Department of Defense
Defense Logistics Agency
- Business Unit Nominated for Award. The Defense Fuel Supply Center
has nominated the Alternative Fuels Commodity Business Unit (DFSC-A) for the 1996
Department of Defense Acquisition Reform Award. DFSC-A is making its business
processes more efficient and cost effective through the use of innovative
contracting methods to cut the red tape of Government contracting.
The procurement process has been simplified through the implementation and use of
a "commercial solicitation." The reduction in solicitation clauses from 192 to
76 has created a solicitation that is physically smaller and requires less time
to pull together. The revamped clauses, which now resemble those found in
industry, also reduce the chances of confusion on the part of the offerer.
Overall, reengineering the procurement process has moved DFSC-A to a more
efficient commercial solicitation with reduced lead time, negotiation time, and
administrative time. It has cut red tape for contractors and customers.
The use of electronic commerce is emphasized in day-to-day operations to provide
easy access for the business community with which DFSC-A works. Local utility
and interstate pipeline electronic bulletin boards (EBBs) are used to monitor
nominations, consumption, curtailments, and imbalanced trading. Doing business
in this manner reduces paperwork and provides up-to-the-minute information for
The Northwest Pipeline EBB is used to advertise and contract for released
pipeline capacity to cover transportation requirements for the Northwest Direct
Supply Natural Gas (DSNG) Defense Business Operations Fund (DBOF) Program
customers. The published tariff rate for interruptible transportation on
Northwest Pipeline is $.2826 per dekatherm, but DFSC-A has been able to purchase
this transportation for as low as $.03 a dekatherm. Use of this contracting
method has produced significant cost avoidance for DBOF DSNG customers in the
Northwest, i.e., $390,000 for the first quarter of FY 1996 alone. Electronic
Funds Transfer is used to pay for natural gas procured under DBOF funded
The Internet was used to negotiate terms and conditions for contracting action
for natural gas requirements in Alaska. Due to the time difference between
Alaska and Virginia, this method facilitated discussions and allowed for quick
response time between the parties.
- DLA Contingency Support Team. The Joint Logistics and Contingency
Operations Team has reinvented the process of providing support to the
warfighter/peacekeeper in a theater of operations. The DLA Contingency Support
Team (DCST) was developed to project DLA support forward into a theater of
operations. The DCST establishes in-theater assistance and provides essential
Agency support requested by the Commander in Chiefs (CINCs). For example, the
DCST will provide liaison officers to forward staffs, Contract Administration
Services, material management (including supply management of common commodities
such as subsistence), distribution operations, disposal, and fuels management.
This results in improved administration of LOGCAP contracts, improved
distribution capabilities for food, fuel and repair parts, and enhanced asset
visibility in the theater through the use of Automated Manifest System
technology. The DCST provides a flexible, tailored, modular, multi-function team
to support the CINCs in military operations and humanitarian efforts. Prior to
the development of the DCST, support was Continental United States based and not
as responsive to the requirements of the customer.
The DCST has been tested in CINC exercises such as ULCHI FOCUS LENS 95 and BRIGHT
STAR 95. DCST procedures have been refined, practiced and applied in real world
contingencies. The DCST Haiti deployed over 150 individuals to Haiti in support
of Operation UPHOLD DEMOCRACY. The DCST Bosnia has deployed over 100
individuals, to date, in response to Commander-in-Chief, Europe tasking for
Operation JOINT ENDEAVOR. The DCST has been approved by the CINCs, is working
well in contingencies, and has received very positive feedback from our
customers. The DCST provides accessibility of our experts to the customers and
enhances DLA support.
- DLA-American Federation of Government Employees (AFGE) Partnership
Council. Chartered in June 1994, the Partnership Council was the result of
the first labor-management partnership agreement under Executive Order 12871
(Labor-Management Partnership) signed at the Military Service or Component level
in the Department of Defense. There are 10 AFGE members and 10 representatives
of DLA management. Council meetings are held quarterly for three consecutive
The Council's mission is to function as a joint body to review policies and
initiatives which impact DLA's mission capability. The Council also serves to
provide advice and to recommend proposals and/or solutions to better DLA's goals
Council members are briefed on a wide variety of agency initiatives from every
business area. As an example, all DLA reinvention laboratories that have
DLA-wide implications or impact on personnel policies are forwarded to the
Partnership Council for review. With reinvention labs as well as other
initiatives, the group then recommends steps to be taken in order that the
interests of the DLA family are best served.
In addition to dealing with agency initiatives, the Partnership Council also is
committed to spreading partnership practices throughout the agency. As a result
of the Council’s efforts, DLA has nearly twice the percentage of employees
working in organizations with labor-management partnership agreements as do the
- 100% Closed Loop Wood/Fiberboard Recycling Wins White House Award.
Defense Distribution Depot Susquehanna Pennsylvania (DDSP) has closed the loop
for the massive wood and paper waste streams from its industrial operations.
DDSP is the Department of Defense’s largest distribution center and the
requirement for wood and paper (primarily boxes and packaging materials) is very
heavy. The depot faced a Department of Defense (DoD) pollution prevention
requirement to reduce land filled solid waste; and a Presidential Executive Order
calling for a 50% waste reduction. DDSP’s task of reducing such a large waste
stream was challenging.
DDSP established a team to reduce the amount of wood and cardboard waste. They
were to evaluate the process and make changes to meet the guidelines and
requirements set forth by DoD. Their recommendations led to the complete shut
down of two wood waste landfills (transfer stations) located on the installation.
All waste wood is examined for reuse within the depot. Reuse includes the
repair and remanufacturing of used pallets and wood cartons. Pallets that do not
meet specifications are sold through open markets to help fund the program, and
what little remains is processed through a local business where the wood is
mulched and sold back to DDSP at a reduced rate for use on the installation
In the fiberboard box area, DDSP has benchmarked with private industry and
initiated a closed loop system where scrap fiberboard generated from DDSP is
recycled and processed into a 100% recycled content fiberboard box for use in the
shipping operation. Both wood and fiberboard are being recycled in a true closed
DDSP's 100% Closed Loop Wood/Fiberboard Recycling Initiative has been chosen as a
winner of the White House Closing the Circle Award honoring their innovative
environmental closed loop program. The winners of this prestigious award
exemplify the best, most innovative programs implementing the objectives of
Executive Order 12873.
- Internal Process Standardization (DCMC DLA Directive 5000.4
Improvement). Creation of DLA Directive 5000.4 represents an historical
transformation within the Defense Contract Management Command (DCMC). Developed
as a single, cohesive integrated process oriented directive under DCMC's best
practices vision, DLAD 5000.4 promotes teamwork, efficiency and
cost-effectiveness in meeting customer requirements. This directive has, to
date, eliminated 25 manuals, handbooks, and other policy documents. Previously,
these regulatory documents bound DCMC personnel to specific step-by-step
instructions and procedures in performing contract management processes. DLAD
5000.4 covers all significant processes performed by DCMC; it includes the
contract administration services functions listed in the Federal Acquisition
Regulation and the Defense Federal Acquisition Regulation Supplement and those
functions performed as customer support to procuring contracting officers and
program managers. The spirit and intent of this directive recognize DCMC
personnel as valuable associates and shareholders with a vested interest in the
future of acquisition reform. It entrusts them with the flexibility and freedom
to perform tasks and improve management processes in order to best serve the
Significant progress towards meeting the challenge of standardizing DCMC's
processes by providing a solid, well-defined, and documented tool for
communicating operational policy to our field personnel was made when the DLAD
5000.4 was published in March 1995. However, due to changing customer
requirements, both internal and external, additional challenges associated with
the One Book Initiative have arisen. Acquisition reform and the appearance of
new and emerging technologies require that DCMC improve the methods by which they
develop and disseminate policy on processes, procedures, best practices and
lessons learned. These newly defined requirements have been rolled together and
identified as the Internal Process Standardization Challenge (DLAD 5000.4
- Prime Vendor Cuts Storage and Distribution Costs for Food. For decades,
the Defense Logistics Agency has relied primarily on its own depot distribution
system to store and distribute food to the armed forces. The Agency intends to
cut its costs further and improve service by reducing the need for storage of
The Agency's Defense Personnel Support Center recently developed an innovative
contracting program called Prime Vendor that uses private-sector distribution
capabilities. Under Prime Vendor, a contract is awarded to a supplier to ship
directly to military activities, on an as-needed and when-requested basis, within
a specific geographical area. This process reduces delivery leadtime to the
customer and, by utilizing the private sector's storage and distribution system,
reduces the Agency's associated warehousing and redistribution costs. It also
facilitates reductions in local inventories held by food preparation activities.
This, in turn, reduces the costs borne by the U.S. taxpayer. Due to the unique
requirements of Navy vessels, some food requirements may be more effectively met
through government-owned but contractor-operated warehouse facilities.
The Subsistence Prime Vendor Program was tested during FY 1995 in the
southeastern United States, and was determined to be a feasible and viable method
of providing high quality food for DoD stateside garrison feeding. With lessons
learned during the demonstration, the potential for optimizing the use of
commercial food systems will continue to be realized. While projected savings by
the Department are being calculated, DLA estimates a $20 million reduction in
wholesale inventory alone during FY 1996. In conjunction with the Services, DLA
is aggressively expanding the Subsistence Prime Vendor Program throughout the
continental United States, with a targeted completion date of March 1997.
- Customer Value Contracting (CVC) Lab. CVC provides customers with
freedom of choice, accommodates commercial practices, eliminates the need for
specifications for commercially available products, removes requirements for
burdensome quality inspections for commercial products, and captures state of the
art commercial technology, without forcing business to change their commercial
approaches. This approach has resulted in reduced inventory requirements,
reduced lead times with more responsive delivery items, and saved the taxpayers
money through contract prices based on quantity buys. The decision of which
commercial product best meets the needs of the user is made by the user - not
dictated by the procurement approach.
The "multi-fuel squad stove" procurement is an example of the application of CVC
resulting in better, faster, and cheaper support to the customer. Before Defense
Supply Center Richmond used CVC to acquire the multi-fuel squad stove, they had
tried to acquire this item using a military specification and set of drawings.
Customer demand was not being satisfied because the contractor had trouble
producing this $120 military specification stove with a delivery time of 300
days. Eventually the contract was terminated, and a serious problem developed,
with 78,000 units back ordered. To solve this problem, Richmond utilized the CVC
approach, focusing the acquisition strategy around the utilization of commercial
specifications as the means to describe the item. Richmond conducted customer
conferences that validated that the commercial description met the military
customer’s requirements. In August 1995, Richmond awarded three contracts
(Optimus, Interdyne for Coleman stoves and Interdyne for Franz Heinze stoves)
that provided the customers nine different National Stock Numbered stoves from
which they could select to meet their individual needs. The unit cost for a
stove was reduced to $50 and it can be delivered to customers within 30 days of
order. It is projected that over the life of this contract Richmond will save
the taxpayers $3 million. The field customer is very pleased with the results of
this approach and back orders have been reduced to 1,085 units.
- Specification Busting. Specification busting aims to eliminate
unnecessary requirements and only maintain military specifications that demand
military unique characteristics. Instead of specifying what features an item
should have, the program emphasizes how the item should perform. The goal is to
replace the specification with non-Governmental standards or commercial item
The Defense Personnel Support Center (DPSC)-Subsistence division created a
win-win situation when it commercialized item descriptions and item codes, and
streamlined the ordering process for fresh fruit and vegetables. No longer are
federal specifications or even commercial item descriptions used to purchase
these products...a fact which attracted new business for DPSC from the U.S.
Department of Agriculture’s National School Lunch Program. DPSC’s new marketing
approach incorporates simplified item descriptions and the U.S. Standards for
Grade markings. The overwhelming positive results of this "Spec Busting"
approach are reduced costs, greater product varieties, and more timely delivery.
Specification busting achieved $14 million in cost avoidances to customers for FY
1995 as a result of lower product prices. It is estimated that the program will
save customers an additional $70 million over the next five years.
Examples of price savings include development of a commercial item description
for canned ham, which saved nearly $400,000 for two fiscal quarters alone, and
changes in the requirements for Flameless Ration Heater (furnished as part of the
Meal Ready to Eat), pouched meals that troops eat while deployed. The revised
specification, allowing for commercial shipping containers, in lieu of government
requirements, saved over $216,000.
- Better Customer Support, Lower Inventory. Quick Response, along with
Electronic Data Interchange, allows the Defense Personnel Support Center (DPSC)
to support its customers better and reduces Department of Defense wholesale and
retail inventories. Under Quick Response, the point-of-sale information is
provided to the vendor via bar code scanning on a real-time basis so that
production planning reflects actual consumption, rather than what is forecast.
These data are then fed into flexible production lines and rapidly converted into
the product. The item is then shipped to the customer, inventoried by bar
coding, and readied instantly for customer sales. The old centralized warehouse
system took weeks or months to deliver a product to the customer. This system
features long-term, flexible contracts, direct vendor deliveries, and electronic
funds transfers. Delivery times are now measured in days as opposed to weeks.
Quick Response achieved $1.7 million in cost savings for FY 1995. The savings
are the result of lower distribution depot transactions costs (primarily handling
items out of the depot) experienced for Quick Response sales vice depot sales.
These savings are passed on to our customers as reduced surcharges (or the cost
required for the depot to fill a customer order). It is estimated that the
program will save customers an additional $79 million over the next five years.
Quick Response implementation began with "bag items." These items are the issued
uniforms required by recruits for basic training. The recruit centers are DPSC's
largest customers and therefore represent the greatest potential for system-wide
savings. Approximately 20% of the total dollars spent in FY 1996 on clothing and
equipment items will employ quick response. The goal of DPSC’s Directorate of
Clothing & Textiles is to incorporate Quick Response into contracts for all major
dress uniform items, footwear, gloves, and other non-bag items for rapid
- Response Time Dramatically Improved. The Medical Prime Vendor
Program provides that private firms will supply a wide range of pharmaceutical
and medical/surgical items directly to geographically clustered groups of
customers. Prime Vendors deliver 98% of their orders within 24 hours as opposed
to the 30 days it used to take from government stocks. The response time and
fill rate of this program enabled DLA and the military hospitals to drastically
reduce their inventories, resulting in significant savings in their cost of
operations, because they order only what they need. Prime Vendors invoice
electronically with summary billings that reduce the administrative cost of
handling a mass amount of paper invoices. Payment to the vendors is also made
electronically. Prime Vendor must satisfy customer orders by obtaining the
required items from manufacturers/dealers that have Distribution and Pricing
Agreements (DAPAs) that DPSC negotiated using DoD’s leveraged buying power.
Prime Vendor prices to customers must not exceed the DAPA price, plus the Prime
Vendor distribution fee and a DPSC surcharge. In general, those prices are 25%
to 35% less than customers used to pay for products.
Increased use of this program allowed customers to reduce their inventories by up
to 80% which saved considerable storage space and avoided additional construction
or modernization of warehouses. The program likewise reduced the need for
warehousing and transportation at DLA facilities. Additionally, the program
helped to eliminate supply backorders, stockpiles, depot disposal, and
miscellaneous handling charges. Initiatives under this program are estimated to
have allowed inventories to be reduced by over 29.1% ($l43.5 million) and to have
achieved $95.7 million in cost avoidance for FY 1995. It is estimated that the
program will permit further inventory reductions and will save customers an
additional $353 million over the next five years.
Walter Reed Medical Center reduced its Medical on-hand inventory by 83%, and
closed six warehouses in the process. They also reported over $7 million in
recurring annual savings by converting to Prime Vendor. DPSC so "delighted"
Walter Reed that they awarded DPSC the Commander's Award for Civilian Service.
Defense Personnel Support Center (DPSC) Wins Awards. DPSC in Philadelphia,
Pennsylvania has won the Innovations in American Government Award, sponsored by
the Ford Foundation and Harvard University, the Public Service Excellence Award,
and two Vice Presidential Hammer Awards, sponsored by the National Performance
Review for their Electronic Commerce/Electronic Data Interchange programs.
DPSC revolutionized how the military orders, distributes, and contracts for food,
medical, and clothing products. Contracting has moved from repetitive buying
according to detailed specifications to building business systems where the
customer purchases and receives commercial items directly from the vendor. DPSC
has adopted the best commercial practices and commercial systems to provide the
customer with the choice of commercial products, good prices, one-stop shopping,
and just-in-time delivery. It has changed its role from processing transactions
to brokering business information. It is using a buying and distribution system
that significantly reduces such traditional in-house functions as purchasing,
billing, inventory, and transportation. This system is built on electronic
commerce and electronic data interchange. The payoff is speed, choice, and
competitive cost to the customer.
Benefits include decreased delivery time, decreased inventories (both in the DLA
wholesale system and at the customers' sites), efficiencies gained through the
use of electronic ordering, invoicing and payment, decreased manpower levels, and
increased customer satisfaction.
- Innovative Contracting Methods Contribute to Customer Satisfaction.
The Defense Fuel Supply Center’s Alternative Fuels Commodity Business Unit
(DFSC-A) is utilizing innovative contracting methods that mirror industry to
serve their customers better. DFSC-A has been proactive in implementing new
business practices to meet the challenges of the rapidly evolving natural gas
industry and in taking full advantage of the opportunities offered by
deregulation. These changes have contributed to more reliable supply, reduced
administrative work, and increased cost avoidance for customers. The unit
improved upon or streamlined a number of fuel procurement practices which
contributed to more than $46.8 million in cost avoidance in FY 1995 for its
One of the inspired procurement practices was "bundling" together installations
on the same interstate pipeline for the purpose of solicitation, evaluation, and
award of contracts. The "bundling" approach is appealing to vendors because it
involves a larger quantity and increases the flexibility the offeror has in
making delivery to each installation. As a result of this corporate contracting
initiative, the number of offers from more reliable suppliers has increased and
prices are very competitive. This initiative also improves customer service
through increased contractor reliability, and reduces the administrative time and
costs associated with awarding numerous contracts.
A second change in procurement practices was to implement successfully the use of
source selection procedures for the evaluation of technical proposals and past
performance. This process allows DFSC-A to look at how the offeror intends to
meet the requirements of the contracts, while taking into consideration how the
offeror has met requirements on previous contracts. The technical and past
performance evaluations help DFSC ensure that natural gas customers are truly
receiving the best value. This initiative also increases the reliability of
contractors which, in turn, leads to decreased contract administration time for
both DFSC-A and its customers.
Similarly, unbundling of services by some local utility companies has enabled
DFSC to compete customers' gas requirements on a monthly basis, with the utility
competing as just another supplier. DFSC uses basic ordering agreements which
have terms and conditions prenegotiated with approximately 20 suppliers. On a
monthly basis, DFSC issues a one-page fax or wire solicitation to obtain
- Model Holds Great Promise for Predicting DLA Warfighting Support
Capability. The Defense Logistics Agency is a combat support agency
responsible for providing worldwide logistics support and services to the
Military Departments in times of both peace and war. Given the current world
situation, the Agency recognizes that it must have the capability to assess
quickly and accurately its military customers' distinct logistics requirements
under varying contingency "what if" operational scenarios. By obtaining this
more sophisticated capability, the Agency will be better able to support its
customers regardless of geographic wartime scenarios and to develop totally
defensible budget requirement estimates and validate shortfalls for future
The Agency has made a major breakthrough by having developed a model that will
assess its capability to support the warfighter forces with current assets. It
will also determine war reserve requirements for future force structures. The
model will assess Agency capability by weapon system, day-by-day, and based on
various operating scenarios.
The model is currently being tested against actual scenario type weapon system
data for all of the Military Services. Results appear to be very favorable. To
date, the model has concentrated on doing assessments against critical weapon
systems and associated critical components. The model will be part of an
Integrated Feasibility Demonstration to Service and Commanders-in-Chief of
Pacific and Central Commands. Based on a request from the Joint Staff, the model
will be used in the Global War Games. The model is currently being expanded to
include medical, bulk fuels, and repair parts. - Future efforts will address
other troop support items.
Expected benefits from this leading-edge effort are a reduction of risk to the
warfighter, improved visibility of war-plan support capability, and procurement
of requirements directly tied to war plans.
- Better Unit Cost Accuracy Improves Pricing Rates. Before 1992, the
Defense Logistics Agency (DLA) managed six wholesale distribution depots. The
Department of Defense decision to consolidate distribution transferred 24 Service
depots to DLA in March 1992. With the transfer came significant challenges,
e.g., merging widely diverse inventories; positioning materiel for optimum
efficiency and timeliness of shipment; and pricing accurately for diverse storage
and shipping functions. To make sound business decisions it was critical to have
accurate and uniform cost data to compare cost of operations from one depot to
another. With the declining Defense budget, it was equally important to price
our different services so that our military customers could choose the level of
support they required based upon their operational needs and their budgets.
Based on valid customer concerns, the DLA Depot Operations Team developed a
Discrete Pricing strategy. They established 10 processing rates and 30 storage
rates were developed based on materiel handling characteristics, storage
requirements (covered vs. open), and actual cost. Instead of a standard service
charge for every transaction as had previously been the pricing policy, the new
discrete pricing system charged more accurately for services performed and will
allow the customers to make intelligent tradeoff decisions.
Improved unit cost accuracy, as implemented under Discrete Pricing on October 1,
1996, will produce better and more consistent cost controls, more effective
decision making, and less fluctuation in the overall cost of the program. DLA
offers best value to its customer with a rate structure that charges the customer
for services rendered.
For their efforts, the DLA Depot Operation Team received the 1995 Distinguished
Team Award from the American Society of Military Comptrollers.
- Aircraft Acceptance Kaizen Improves Process, Reduces Cost. In the
spirit of reinvention, Defense Contract Management Command (DCMC) Sikorsky and
Sikorsky Aircraft united in order to perform a Kaizen, or continuous improvement,
investigation of the aircraft acceptance process at Sikorsky. The entire
process, including training and preparation, was completed in two months.
In 1995 DCMC test pilots and quality assurance personnel expressed concern that
aircraft production hangar operations had become overly cumbersome and in need of
improvement. They requested a review of the entire acceptance process, from the
time an aircraft enters the production hangar until it is delivered to our
Sikorsky Aircraft embraced the idea of a thorough and demanding review of the
acceptance process and joined with DCMC Sikorsky to effect the continuous
improvement, or Kaizen, investigation of the production hangar. The results were
dramatic. Reductions in acceptance test flights, a decrease in labor hours, and
a drop in the total number of days in the entire process were accomplished
without affecting the quality of the product. After a comprehensive evaluation
of the Kaizen results, DCMC Sikorsky and Sikorsky Aircraft incorporated the
changes into their operating procedures which guide the acceptance process.
Training was also provided to all employees in order to ensure a standard,
long-lasting impact on the acceptance process.
To date, the efforts of DCMC Sikorsky and Sikorsky Aircraft Acceptance Kaizen
have realized savings of over $2.5 million a year. Never satisfied, the
Acceptance Kaizen team continues to meet regularly to track and improve not only
the aircraft acceptance process, but other indirect processes at Sikorsky that
impact the quality and cost of our product.
- Catalog Wins White House Closing the Circle Award. The 1995 DLA
Environmental Products Catalog has won a White House Closing the Circle award to
be presented on Earth Day. The nominated employees worked together in 1994 to
design and publish an environmentally oriented products catalog for items managed
by Defense Supply Center Richmond (DSCR). The success of this catalog led to a
request by the Deputy Under Secretary of Defense for Environmental Security to
produce a similar publication including products for all of DLA's inventory
control points. The new 1995 DLA Environmental Products Catalog provides
customers with an efficient ordering and delivery system. Products are offered
at competitive prices; technical experts are available to answer customer
questions; and customers are assisted in meeting environmental procurement goals
Through the efforts of the DSCR Business Development Office, an Environmental
Products Catalog was produced in 1994 to offer customers alternatives to products
known to be detrimental to the environment. This publication included 300
national stock numbered items in ten categories.
The catalog includes all necessary data and points of contact and allows the
customer to research one publication instead of separate information sources.
Most items are delivered by the vendor, thereby reducing shelf-life problems and
liability from warehouse accidents. The catalog is distributed to DSCR's
military and federal civilian customers worldwide. Sales of
environmentally-oriented products almost doubled from $6.8 million in FY 1994 to
approximately $12 million by the end of FY 1995.
The expanded catalog, published in December 1995, includes 500 national stock
numbered items in 15 categories. The Environmental Products Catalog can be
electronically examined through the World Wide Web on the DSCR home page,
http://www.dscr.dla.mil. It can also be downloaded from the EPA Enviro$ense
electronic bulletin board system. This allows customers to electronically browse
the catalog and place requisitions on line.
- Streamlined Processes Improve Customer Support. The Produce Business
Unit, within the Defense Personnel Support Center, provides worldwide fresh
fruit and vegetable support and customer service to the Military Services,
Defense Commissary Agency, Military Exchanges, Civilian Agencies, as well as the
U.S. Department of Agriculture, including states and school districts in the
National School Lunch Program. This unit is responsible for advising all
continental Defense Subsistence Offices and produce field buying operations on
acquisition strategies, while also providing logistical planning support and
services to domestic and overseas installations for produce, refrigerated, and
frozen items. The unit also directs the acquisition and management of commercial
cold storage operations, and performs all other responsibilities related to the
integrated management of perishable subsistence.
Two of this unit’s most notable efforts were: using Electronic Data Interchange
to streamline the acquisition and payment processes for fresh fruits and
vegetables and, consequently, to eliminate manual processing of requisitions and
invoices; and joint development of the Controlled Atmosphere Reliable
Transportation System (CARTS).
The business newspaper of the Produce Industry, "The Packer," praised the
Department of Defense's use of CARTS in the transit process of fresh fruits and
vegetables. The joint effort of DLA and Trans Fresh, American President Lines,
and the University of California at Davis, has been recognized as reducing
transportation costs to military bases in the Far East by using ship
transportation instead of the old method of air freight. Experiments showed that
"hitchhiking" insects in fresh produce shipments could be destroyed by radically
reducing the oxygen in containers by using the controlled atmosphere technology.
In addition, with the impending international ban on ozone-depleting gases by the
year 2000, this new procedure provides a safe means of complying with insect
quarantine requirements demanded by many countries.
- Defense Reserve Once Again Hailed for its Management of Ozone-Depleting
Substances. The Defense Logistics Agency continues to support long-term
ozone depleting substances (ODS) requirements to DoD weapons systems through its
management of ODS Reserve. During 1995, DLA received approximately 2 million
pounds of material turned in from the Services. This is the largest quantity
received in the Reserve's three-year history and represents about 50% of the
total turn-ins. Also in 1995, DLA purchased approximately 3 million pounds of
ODS for the Reserve. Through a transfer agreement with the U.S. Customs Service,
the Reserve was able to offset the purchase of refrigerants that resulted in
savings of over $2 million. With these purchases and transfer, the Reserve
reached its planned level of purchases. The Reserve expects to obtain the
remaining requirements through donations and cooperative agreements with other
During 1995, Military Services added requirements for solvents to the Reserve.
DLA reacted quickly and was able to make purchases and began preparations for
required specialized storage.
The Environmental Protection Agency (EPA) endorsed DLA's proposal to provide
Reserve "type" support to other federal agencies. DLA worked with EPA to develop
and distribute a pamphlet that describes the Reserve and "banking" services
available. Two agencies, the United States Postal Service and the Central
Intelligence Agency have entered into agreements with DLA for banking support.
DLA is in discussions with several other agencies who have indicated interest in
this type support.
The success of the Reserve has been hailed not only by various government
agencies and the Services, but by industry as well. In fact, in recognition of
the establishment and management of the Reserve, Mr. Ron Sibley received the
Stratospheric Ozone Protection Award for exceptional contributions to global
environmental protection. This is truly a valuable active recycling program
which protects the environment, saves the government money, and promotes the
- Federal Contract Administration Services (FEDCAS). The FEDCAS
strategy is to give civilian agency customers an opportunity or the choice to use
DCMC contract administration services. A small DCMC team was devoted to active
marketing actions. Although difficult to quantify, a measure of the success is
the fact that the customers who chose to use DCMC were satisfied. The feedback
from FEDCAS customers has been overwhelmingly positive.
One success story is the Department of Justice Immigration and Naturalization
Service’s (INS) request for DCMC to close out 413 inactive contracts, as a
result of an Inspector General finding. In the three months allotted for this
effort, DCMC closed 400 of the contracts (97%), and recovered $20,000 dollars in
Another success story involved the Civilian Contract Management Office,
Washington, which was processing a Maritime Administration dispute involving a
wage determin-ation that had been pending for over three years. Experienced DCMC
personnel researched, and resolved the claim for the Maritime Administration,
resulting in a cost savings of $379,800. The contractor concurred and signed the
modification on January 31, 1996. This amount of savings had not been
anticipated by the Maritime Administration.
Although DCMC is closing its pilot test for marketing its contract administration
services and is preparing a final report for the Office of Federal Procurement
Policy, DCMC continues to offer services to non-DoD agencies on a reimbursable
basis. The current goal is to increase reimbursable work by $9.8 million between
fiscal years 1996 and 1997, which is a sizable increase from $3.4 million in
fiscal year 1993 and $5.3 million in fiscal year 1995.
- Facilitating Our Customer’s Ultimate Satisfaction (FOCUS). The FOCUS
initiative was created to institute a system within Defense Contract Management
Command (DCMC) that continuously evaluates customer feedback and satisfaction,
aligns the organization’s resources to satisfy customer needs, and provides
flexibility to adjust the organization’s priorities to meet changes in customer
requirements and the acquisition environment.
One of the major success stories for this reinvention laboratory is the
implementation of the DCMC Customer Liaison Program, which was established by
DCMC to provide on-site support to DCMC’s major customers, including the military
services, NASA, DLA inventory control points, and the DoD buying commands. The
liaisons have made significant contributions towards the improvement of
communications and support, have been proactive in resolving customer problems,
issues and concerns, and have been catalysts for change and conduits for the flow
of information. The program is an innovative approach for DCMC to reach out to
its customers, educate its customers, and offer an opportunity for the customers
and DCMC to communicate openly to ensure customer satisfaction. The liaisons
have an effective teaming arrangement and network that enable them to go full
circle in assuring customer satisfaction and preclude areas of weakness that
would otherwise go unnoticed.
FOCUS has institutionalized the Postcard Trailer Survey instrument. The Postcard
Trailers are product/service-based surveys that provide feedback from DCMC
customers on levels of satisfaction with DCMC’s Contract Administration Service
products and services. DCMC has developed a database that is used to collect,
analyze, and respond to specific customer concerns. The results of this feedback
are being used as a measure of customer satisfaction in the DLA Executive
Information System and, in turn, to change policy going into the current DCMC
One of the most important benefits from the DCMC Customer Liaison Program and
Postcard Trailers is that districts are now able to be responsive to immediate
- Electronic Catalog With On-Line Ordering Capabilities. The Defense
Personnel Support Center’s (DPSC) Clothing & Textiles Directorate accepted the
challenge of establishing the textile commodity on the "information super
highway." Using home grown talent and commercial off-the-shelf software DPSC
created a Home Page on the World Wide Web and developed what may be the most
sophisticated electronic catalog with on-line ordering capabilities in the
Department of Defense - ASCOT (Automated System for Cataloging & Ordering
ASCOT can be accessed through the Clothing & Textiles Home Page on the World Wide
Web using any industry-standard web browser that supports forms. Customers
without direct access to the Web will eventually be able to dial into the DPSC
Clothing & Textile commodity via modem and gain access through a dedicated
server. ASCOT allows customers to search DPSC’s complete catalog by various
methods, including key word descriptions (shirt, trousers, boots, etc.), national
stock number or specification. When a customer scans by description, a list of
all matching items is displayed. The catalog includes full screen digitized
photos for all items, various item-specific information (including price and
sizes), and a point of contact for any additional information or questions the
customer may have. Hypertext allows the customer to send E-mail to the point of
contact without exiting from the catalog. After identifying the item or items
desired, customers then have the option to place an order via the Internet by
filling in a few fields on a user-friendly screen. Although anyone can browse
the catalog, a security check restricts ordering to registered customers.
Requisitioning on-line through ASCOT saves customers from hours to days,
depending on the previous method utilized. The search capability greatly
facilitates the requisitioning process for our customers. The system allows the
user to get to the right item and provides all the information necessary to
submit an order. This eliminates manual research on the part of the users and
reduces the possibility of submitting a requisition for the wrong item. The
system also provides necessary controls by allowing requisitions only from
The system went "live" in December 1995 and has been well received by all who
have visited the Web site. A growing number of customers submit their clothing
and textiles orders by ASCOT.
- Faster, Cheaper, and Secure Movement of Classified Material. The
United States Air Force (USAF) and the Defense Logistics Agency (DLA) reinvented
the process of moving classified materiel (Secret and Confidential), weighing 150
pounds or less, within the continental United States. This initiative, known as
Mail-like Matter Movement (M3), was accomplished under the auspices of the
Express Delivery reinvention lab jointly sponsored by USAF and DLA.
M3 provides customers with cheaper service. For example, to ship a package
weighing 10 pounds from Defense Distribution Depot Warner Robins, Georgia, to a
customer at McClellan Air Force Base, California, would cost $27.60 using USPS
Express Mail, but would cost only $9.66 using Federal Express overnight delivery
service. This is a $17.94 savings/cost avoidance. During a six month test
period, M3 accumulated a savings/cost avoidance of approximately $129,000 with
the use of a GSA contract carrier (Federal Express).
M3 also provides customers with faster service. Use of commercial carriers
resulted in reliable delivery service compared to highly variable delivery times
associated with the old way of doing business. The typical transit time from
supplier to customer is one day. If shorter and more reliable delivery of
classified materiel allows the Military Services to reduce inventories, then the
savings/cost avoidance achieved through M3 will be even greater.
M3 provides customers with better service. Carriers' modern electronic tracking
and control systems provide intransit asset visibility and shipment control which
was previously unavailable. Burdensome red tape procedures created over many
years were eliminated. The new way of doing business avoids actions such as
obtaining clearance to ship, preparing a Government Bill of Lading, preparing a
Report of Shipment message, using dual vehicle drivers, having exclusive use of a
vehicle and performing constant surveillance.
As a result of M3's success, it was expanded to include unclassified and unkeyed
controlled cryptographic items and controlled substances. Work is in progress to
expand M3 to include other commodities such as small arms.
- 24 Hours from Order to Delivery. Premium Service is a Defense
Logistics Agency (DLA) program designed to reduce dramatically order and ship
time by emulating the best of commercial practices. It offers the Military
Services the ability to reduce retail and wholesale stocks in addition to
increasing unit readiness.
The objective is to provide expedited ordering and time-definite delivery service
for critical items that have an impact on customers’ missions. The primary focus
is on items weighing less than 150 pounds, but the facility can accommodate
shipments up to 750 pounds. Premium Service, operated by a contractor, Federal
Express (FEDEX), is located in a Government-owned facility at the Defense
Distribution Depot Memphis, Tennessee. As a result of the partnership with FEDEX
and the facility’s proximity to the FEDEX hub at Memphis International Airport,
requisitions can be received as late as midnight with customers receiving
delivery the next day. This additional eight hours gives the requisitioner a
significantly increased opportunity for next-day delivery, as over 50% if the
Premium Service requisitions are received in the evening hours.
Key elements include on-site inventory management, warehousing, streamlined entry
of customer orders, Military Standard Requisitioning and Issue Procedures
interface, and total in-transit asset visibility. Premium Service guarantees
direct delivery to continental United States customers within 24 hours after
receipt of the order, with delivery to all other customers within 48 hours after
receipt of the order. Customers receive orders within the continental United
States on an average of 21 hours from receipt of an order. International
shipments average 43 hours with same day or next-day customs clearance.
Premium Service is a relatively new program. All DLA Inventory Control Points
(ICPs), four Army ICPs, Marine Corps, and Coast Guard activities have items in
the facility. The Navy ICP and Navy Cruise Missile program will become customers
in April 1996. The items that are to be located in the facility have a potential
of generating in excess of 15,000 shipments per month.
Premium Service will satisfy customers’ needs to maintain a high degree of
flexible contingency response capability. It is anticipated that costs to
customers will be offset by reductions in the cost of maintaining retail and
wholesale inventories, and by improved workload scheduling arising from more
dependable delivery times and more responsive logistics support.
- Reengineering A Key Portion of the Distribution Process. The
employees at Defense Distribution Depot Columbus, Ohio (DDCO), took on the
challenge of reengineering its key business process of satisfying customer
orders. The team fundamentally rethought and radically redesigned the process to
achieve dramatic improvements in critical measures of performance--speed, cost
The depot ships items to federal agencies, schools and other non-military
customers, plus some foreign governments. DDCO ships and stores over 410,000
different items, valued at more than $500 million, and ships about 1,700,000
orders to customers each year. The depot reduced the average time to fill a
customer order from 11.8 days in November 1993, to 2.0 days in July 1994 --down
DDCO measured the time from receipt of order until delivery to the customer in
the U.S. or, for shipments to overseas customers, the time from receipt of order
until delivery to a cargo containerization point. The 83% improvement in
processing time was accomplished in the face of a 24% personnel cut and a 26%
budget cut, with a reduction of only 1% in customer orders from the previous
year. An analysis concluded that properly organizing the work processes would
allow every customer order received from Monday through Saturday to be packed and
shipped within 24 to 48 hours, despite the resource cuts. More specifically, all
small parcel orders could be shipped each day, while bulky freight items could be
shipped by the next day. In addition, all of the high priority customer orders
could also be completed on Sunday.
DDCO employees formed Quality Improvement Committees, Quality Improvement Teams,
and a Depot Steering Committee where they discuss the business processes at DDCO.
The processes are under continuous review through the use of statistical process
control techniques. New processes are developed through the "plan, do, check
and act" process. Teammates are encouraged to present their views on any
process, even if it is not within their primary work area, and they have
developed a philosophy to "not just meet a standard," but to "process today’s
customer orders today." The two unions representing DDCO employees were also a
part of the Team. By including the unions in every development within the
distribution depot, the DDCO Teammates have forged a relationship built upon
- Improving the Process, Serving the Customer. The International
Codification Division at Defense Logistics Services Center (DLSC) has reinvented
the way they process requests for National Stock Number (NSN) assignment (also
known by the transaction code as LSA) received from NATO and other foreign
governments. LSA transactions are cataloging services requests submitted by one
country to another country that result in either the assignment of a new NSN or
maintenance on an existing NSN. The NATO Direct Data Entry (DDE) system is an
automated cataloging system that was designed by a team of catalogers and
developed with the help of one DLSC programmer. It has replaced a slow, less
efficient and outmoded operation with this fully automated PC application that
delivers speed, accuracy, flexibility and dependability for several cataloging
processes. Since the implementation of the DDE system, the division has
increased productivity through faster LSA turnaround times to customers, paper
reduction, elimination of floppy disk handling, fewer keystrokes required for
transaction development, stringent transaction and file validations that result
in an increase in productivity and a reduction in errors, and a streamlined
workflow with tighter control and security.
A team of highly motivated cataloging technicians recognized the need for process
improvement and seized the opportunity to improve significantly the existing LSA
process by volunteering to design a new system. The DDE team was allowed a high
level of autonomy by management. They assumed responsibility for the design of
the DDE system and recognized their accountability for the end product being
Implementation of the DDE system resulted in a significant reduction in the
number of days required to process LSAs. The international goal for processing
LSA requests is 120 days. The percentage of LSAs processed within the 120 day
goal at DLSC has improved from an average of 70% in 1993 and 1994, to 98.9% in
1995. It now takes an average of only 37 days to process an LSA request using
the DDE system, a dramatic improvement in responsiveness. While continually
maintaining a high level of productivity (approximately 40,000 LSAs are processed
per year), the overall error rate has continued to decline since the
implementation of DDE, from 28% in 1994 to 10% in 1995.
- Lumber Test Methodology Designed to Save Time and Money for
Customers. For many years, the Defense Logistics Agency has lost lumber
sales because its military customers were dissatisfied with high costs and long
delivery times and were purchasing their wood products locally. The Defense
Logistics Agency believed that consolidating wood products orders within a
geographic region would result in greater buying power which in turn will
significantly lower the costs to the customer, while providing better service.
To retain current business and to regain lost lumber sales, the Defense Logistics
Agency tested its wood products initiative at two Marine Corps bases in the
southeastern United States. In the test the Agency compared local purchases at
Camp Lejeune, North Carolina, against use of a centrally negotiated long-term
contract at the Marine Corps Logistics Base at Albany, Georgia, to gauge which
method provides the better customer support. Customers using the DLA-centrally
negotiated long term contract placed their orders electronically and the wood
products were delivered in some cases by the next day. The test indicated that
the average prices customers paid under the centrally negotiated long-term
contract were almost 10% less than the local purchase prices, and that response
time was on average nine days better (a 33% improvement).
The Defense Logistics Agency believes that consolidating orders within a
geographic region will result in greater buying power which, in turn, will
significantly lower the costs to the customer while providing better service.
The projected estimated savings could exceed $1.4 million a year if customers
used the centrally negotiated long term contract instead of buying through local
Based on the successful outcome of the test, DLA has started to implement the new
procedure incrementally on a regional basis to its major customers. Long term
contracts have been negotiated to provide support to activities in Norfolk,
Virginia; North Carolina; Odgen, Utah; and Georgia.
- Credit Card Ordering Saves Time and Money. The Defense Logistics
Services Center (DLSC) has developed applications, subscriptions, publications,
and products which enhance customers’ day-to-day operations. By incorporating
technological advances in the finance system, steps previously required to obtain
products were eliminated. Prior to the change, DLSC’s internal customers were
required to call Customer Service or Freedom of Information personnel and obtain
a price quote, prepare necessary paperwork, or cut a check to procure the goods
and send it to DLSC for processing. Working with the Department of Treasury,
DLSC eliminated transaction and processing time by developing the capability to
accept credit card orders over the phone.
DLSC averages over 1,500 transactions a year, worth a net value of $95,000. By
incorporating the Plastic Credit Card Network, DLSC provides increased customer
satisfaction, convenience, and the ability to obtain new customers through direct
access pricing and processing.
DLSC averages 300-plus requisitions for goods and services monthly. Of these,
75% fall into the $2,500 or less category. Through training, research, and
advanced capability DLSC can now perform more efficiently while providing the
directorates fast and convenient service and product reliability. The retailer
is paid within 24 hours of the transaction, opening new doors and methods for us
to procure goods. Because of past experience with government payment procedures,
some retailers would not do business with the government agencies, but through
direct line payment, opportunities are available to enhance competitiveness, cost
comparison, and buying potential.
DLSC uses the credit card to support its internal customers, with attendant
reductions in cost and in time. Previously, when directorates wanted to procure
goods and services, they were required to fill out a form and process it through
the financial office, supply requisition office, procurement office, and
receiving dock. The average cost for processing each form was $422, and
processing time was at least 5-10 days. By using the credit card, DLSC was able
to cut the cost per transaction by $60 and processing time to an average of three
- Laser Card Reduces Processing Time and Labor Costs. Experience in
Operation Desert Shield/Storm presented a challenge to DLA--replace paper
shipping manifests and manually intensive labor processes associated with receipt
takeup. During the operation, thousands of vans and air pallets were rushed to
the Persian Gulf in a relatively short time, completely overwhelming receiving
capabilities. After arrival in country, supplies had to be identified,
processed, and sent to the ultimate destination quickly. The Automated Manifest
System (AMS) uses an optical memory card to give the troops instantaneous
visibility of supplies, ability to prioritize offloading, management information
reports, discrepancy reports, and expedited receipt processing.
This initiative brings together supply and transportation information from
various files in depot mainframe systems into a single data base in a personal
computer. With the aid of a laser card reader/writer, information is written
onto the card and accompanies the shipment to its destination. AMS is
operational at continental and other than continental U.S. sites and has also
been used successfully for contingency situations overseas in Somalia, Haiti,
Korea, Guantanamo Bay, and Bosnia-Herzegovina. Tangible benefits included a net
savings from reduction of receipt processing times amounting to $80,000 per year
per site implemented. For 600 sites planned for implementation, projected
benefits are $48 million per year. Distribution system-wide benefits reduce the
cost of shipping resulting from avoidance of excess supply requirements,
reduction of container detention fees and time spent in causative research, and
lateral distribution and container consolidation point operations.
The optical memory card has proven to be extremely resilient during the harshest
military environmental conditions, where it was subjected to heat, cold,
moisture, flexing, shock abrasion, dust, dirt, fingerprints, and magnetic
interference. AMS has been selected as the receipt system of choice because it
enhances intransit and total asset visibility.
- Logistics Response Time (LRT). DLA customers responded to a baseline
survey saying that they wanted their materiel faster. From the customer
perspective, DLA began to look at the actual customer wait time from the day of
order until the date the customer had his order in hand. Previously, DLA
measured its performance against the DoD time standard, which was based upon the
urgency of the order and was captured by customer order preparation time, center
processing time, depot processing time, and transportation time. Though all
elements of delivery time are not within DLA's control, the measurement led to
process reengineering that has not only reduced overall lead time, but resulted
in savings from reducing customer inventories and DLA inventories.
Since December 1994, overall Agency customer wait time has been reduced three
days. By first focusing on those portions of the delivery process controlled by
DLA, center processing time was further reduced by 33% from an average total of
six days to four days. Urgent requirements are averaging one day response. For
large categories of items such as food and medicine, DLA has brokered contracts
with major manufacturers and distributors to accept direct orders from military
customers with delivery directly to the users. The customer's wait time is
significantly reduced by avoiding interim storage in a DoD depot, and the
taxpayer saves money from reduced inventory holding and storage cost. Cost
avoidance for FY 1995 in medical alone are estimated to be $95.7 million, with
projection of an additional $353 million over the next five years.
In 1996 DLA will concentrate on another element of customer wait time that it can
influence. DLA will scrutinize customer backorders with a goal of reducing the
total number 10% and reducing aged backorders 25%. DLA expects to recognize and
implement other improvements that will materialize as yet another element of
product delivery is reengineered.
- Adoption of Commercial Contracting Techniques. For some time, DLA
has been effecting a conversion from buying items one at a time and bringing them
into depot stocks (an inefficient method of managing logistics) to longer-term
contractual arrangements characterized by economic order quantities and direct
deliveries to the customer. Business process reengineering enables us to
maximize industry support by employing the best commercial, non-DoD-unique
approaches, such as long term and corporate contracts. In this environment, DLA
is developing contracting instruments and making use of emerging technologies, so
that DLA and its customers can seamlessly interact with private-sector sources of
supply. Technology and the acquisition reform movement (including statutory
underpinnings) have facilitated our efforts.
DLA has put into place flexible ordering arrangements, including electronic
commercial catalogs and electronic bulletin boards, and is developing an
electronic commerce "mall" and Virtual Prime Vendor as additional flexible
techniques. These arrangements will provide customers a choice among a wide
range of items and sources for obtaining them, including contracts with prime
vendors, corporate contracts, contracts for on-demand manufacturing (quick
response), and other long-term schemes. The nature of the arrangements,
including the electronic link to our suppliers and customers, has reduced the
need for inventory, provided for shorter delivery timeframes, and resulted in
lower prices to DLA customers, while at the same time providing them with broader
choices. The conversion to commercial practices reflected in these various
approaches has brought about improvements in annual changes in material prices
(which were 88% below anticipated inflation in FY 1995), and a 33% improvement in
DLA’s logistics response time on issues, and inventory reductions totaling $1.6
billion to date. They are also bringing about a 45% reduction in overall DLA
staffing during the FY 1993-2003 timeframe (of which over half will be completed
by the end of this fiscal year), and the same percent reduction in distribution
storage capacity requirements by FY 2003, of which over half has already been
achieved. Examples of commodities in which commercial-type techniques have been
applied are the medical and surgical commodities; pharmaceuticals; subsistence;
clothing and textiles; bulk steel and non-ferrous metals; and vehicular
These techniques support the strategic objective of putting customers first and
the goals of "faster, cheaper, better" in that they enable those customers and
our logistics managers to conduct business in the electronic marketspace
environment, while simultaneously adding value in terms of lower prices, faster
response, and greater product choice.
- Commercial Items at Reduced Cost With Faster Delivery. The PartNet
search and ordering capability will provide a tool for the DLA customer to
identify, select and order commercial items at a reduced cost and a faster
delivery time. When commercial items are not available from DLA to satisfy the
customer's demand, the customer often resorts to local purchase means to obtain
the items. Local purchase actions are generally more expensive for the customer.
Under a logistics research and development partnership, the Defense Logistics
Agency, the University of Utah, Sacramento Air Logistics Center (SM-ALC), Newark
Electronics, and University of Southern California successfully tested and
implemented PartNet, a new Internet-based catalog of components that aims to
speed up and simplify the parts research and acquisition process. The system
will combine technical data with inventory and pricing information, allowing
customers to research, order and purchase parts from a central location via the
Internet, thus streamlining the parts research and acquisition process. The fact
that the items ordered from PartNet will be direct-vendor delivery will save the
depot storage cost associated with stocked items. During the test phase, PartNet
will be used to conduct parts research and buy the selected items using the
International Merchant Purchase Authorization Card (IMPAC) credit card.
Currently the system comprises a 125,000 item catalog from Newark Electronics.
Efforts are currently underway to add additional vendor catalogs. DLA expects
the parts availability to double or triple by the year’s end.
PartNet was recently tested at SM-ALC and item searches were accomplished via
electronic data interchange and other methods for several commodities. These
resulted in purchases that took 3-5 days vice 35-40 previously. Based on the
successful outcome of the test at SM-ALC, DLA has started to deploy PartNet at
other test sites. In March, PartNet was installed at the Air Force Logistics
Center Reengineering Lab. We will implement PartNet at Tobyhanna Army Depot in
April. Additional customer sites will be identified during the next three
The overall savings to the customer and DLA will be substantial. The Functional
Economic Analysis conducted by KPMG Peat Marwick indicated that total savings
eventually could exceed $500 million over ten years.
- Streamline, Improve and Redesign Civilian Personnel Processes. On
October 12, 1995, the Defense Distribution Region East, Office of Civilian
Personnel (OCP) received Vice President Gore’s National Performance Review Hammer
Award for an ongoing program to improve, streamline and redesign the civilian
personnel program. The focus was on simplified, cost-effective work processes,
employee ownership of programs, and methods to evaluate the effectiveness of OCP
programs in order to meet the key goal of putting their customers’ needs first.
Employees and supervisors participate in all stages of this process to simplify
and make work processes more cost effective by streamlining and improving work
flow, eliminating wasteful processes and increasing quality control. The OCP has
been restructured around its core processes to create work groups containing
customer service representatives dedicated to specific customers. Program
managers have been appointed for each core process/program. Almost all
supervisory positions have been eliminated; self-directed work groups have been
established that are empowered to work, following established operating
procedures, without direct day-to-day supervision. Results of customer surveys
are used to improve the level and quality of the service provided to their
customers. The service is customized to fit their needs.
This aggressive program of self-improvement has resulted in a supervisory ratio
of 1:24, compared to a ratio of 1:16 currently recommended by the National
Performance Review. The OCP also attained a personnel servicing ratio of 1
civilian personnel employee for each 125 employees serviced; they are on schedule
to achieve a personnel servicing ratio of 1:150 by the year 2001. A ratio of
1:150, when compared to the Department of Defense servicing ratio target for the
period from FY 1995 to FY 2001, will realize a savings of $8 million in salaries
- Reservists Add $58.8 Million in Value to Operations in 1995. Prior
to fiscal year 1993, military reservists assigned to the Defense Logistics Agency
were restricted to training in specific mobilization billets. Although most were
private-sector professionals--business executives, real-estate investors, and
corporate lawyers, for example--they were given limited assignments without
adequate regard to the optimal use of their talents and expertise.
Recognizing the potential to derive significant benefits from these highly
skilled professionals, the Agency reorganized the reservists into joint teams and
freed them to train by participating in front-line, high-return projects. Care
was taken to ensure that their training assignments were closely related to their
mobilization training requirements. A "reserve consulting service" was
established to match reservists’ skills to Agency requirements, giving career
managers greater access to the wealth of talent resident in the reserve program.
Recently, reservists have produced tangible benefits as expert consultants on a
number of projects like new processes for refrigerant reclamation ($15.4
million), price escalation indexing for fuel ($1.6 million), and inventory and
relocation of DLA material from depots facing closure ($1.0 million). Other
projects included design of data systems, an efficiency review of distribution
operations at Agency depots, reduction of contract closeouts, and contractor
Through these and other services, this cadre of reservists added $58.8 million in
value in 1995.
- Defense Logistics Agency Use of Public Manufacturing Sources Supports
Customers Faster. Faster response to Service requirements is one of the
major directives of DLA. We are not gaining in that area by using alternative
sources of manufactured parts more extensively. Buyers have continually
increased their reliance on organic "on demand" manufacturing from depots,
shipyards, air logistics centers, and naval aviation depots to support
requirements when the private sector cannot respond. The number of purchase
orders placed with public manufacturers has increased from 17 in FY 1992 to 394
in FY 1995. Dollar value has increased from $349,000 to over $13 million in that
same period. In many cases, the customer not only received parts sooner than
from the private sector but also at significant savings.
For example, Defense Supply Center Columbus calculated savings of $131,800 on a
metal tube assembly purchased for the Navy in December 1995. At Defense
Electronic Supply Center, they realized savings of $23,062 on circuit cards
bought for Tobyhanna Army Depot. Total calculated DLA savings for the first half
of FY 1996 are $593,825.
Buyers always consider the private sector first, but when there are no responsive
sources, the organic sources have been a significant help providing the
warfighter with a much needed safety net. In many cases there is no adequate
technical data package, or the original private sector manufacturer is no longer
in business, or does not want to produce the part, or cannot produce according to
the schedule of customer needs. In such cases, the buyers have no other option,
but to use public sector sources to meet customer readiness requirements.
As buyers work with the Services to fill requirements through manufacturing
sources, acquisition methods are being refined. More orders are being placed
electronically, against pre-arranged Blanket Purchase Order Agreements, and the
transfer of funds is becoming smoother. These trends must be continued and
expanded if DLA is to effectively use manufacturing sources when appropriate for
timely customer support.
- New Process Controls Will Enhance Depot Accountability. On a
corporate level, DLA’s customer is defined as the warfighter. However, for
purposes of achieving improvements in inventory accuracy, the "customer" is
defined as the DoD inventory owner - primarily the inventory control points of
the military services and DLA. DLA’s distribution depots are defined as the
"supplier" of accurate asset information. To institutionalize distribution depot
accountability for inventory accuracy, the Inventory Accuracy Team at DLA
Headquarters developed customer/supplier relationships between the DoD inventory
owners and DLA’s distribution depots.
An annual Inventory Accuracy Conference is convened to assess overall performance
and target areas for improvement. Follow-on workshops and continued analysis of
key indicators facilitate joint solutions to systemic problems.
Based on customer/supplier inputs, five performance improvement criteria
categories were developed. These provide the framework for integrating all
inventory accuracy related policies, processes, and system requirements. Program
assessments are made to evaluate operational performance against improvement
criteria. The DLA team then focuses on those areas most in need of attention.
To bring about continuous improvement over baseline performance, a Distribution
Process Management Program was established to place emphasis on maintaining
accurate information, document operational requirements, streamline material
flows, and to identify breakdowns in depot processes that impact inventory
Consistent with this reinvention initiative, DLA established performance goals
for inventory accuracy under the provisions of the Government Performance and
Results Act of 1993. The baseline performance for sample inventory accuracy was
83% in FY 1994. The DLA target is to improve to 90% by end of FY 1996. Based on
in-process actions to correct system deficiencies and aggressive depot cleanup
efforts, early indications are that the goal will be achieved.
Through this team's efforts, DLA has improved the accuracy of asset information
for DoD-owned material in the custody of DLA distribution depots.
- Reimbursements Improve Accountability, Shrink Overhead Costs by
Millions. Throughout Calendar Year 1995, the DLA Administrative Support
Center (DASC) has totally overhauled its business practices to become a model
provider of reimbursable administrative support and will soon operate without any
appropriated funding. DASC began planning several years ago for the reality that
its operating budget, like that of any private enterprise, would be subject to
DASC has conducted market surveys and cycle time reduction projects to enhance
its competitive position in the administrative support arena. As a result,
corporate overhead was reduced by 50% for the third consecutive year. The
achievements of this past calendar year have resulted in a price decrease for
nearly 85% of the 125 products and services DASC offers.
A comprehensive tracking and billing system was recently designed, developed, and
implemented throughout DASC. On a daily basis, staff members input actual
customer usage of DASC products and services into the system, which generates an
itemized billing report for each customer. Customers have hailed this
improvement as a genuine success in their drive to monitor support costs. One
customer was able to reduce its support costs by nearly $2 million, or 50%, with
the increased visibility offered by the billing reports. Users of the system are
also impressed with its capabilities and user-friendliness.
This past calendar year was a landmark year for DASC, which is now just a few
months away from becoming 100% reimbursable.
- Unified ADP System for Distribution Business Will Save $394.9
Million. The Department of Defense has in operation some duplicative
Automated Data Processing (ADP) systems for logistics management. The Defense
Logistics Agency, under which the Department’s distribution depots have been
consolidated, was challenged to select, develop, and implement a unified ADP
system covering its distribution business. Baseline development of the
Distribution Standard System (DSS) has been completed and the first phase of
implementation to seven depots, retiring one existing "legacy" automated
information system and three warehouse control systems, is complete. This has
resulted in an annual savings of $6.9 million per year.
Implementation of the DSS and retirement of related legacy systems continues.
At the same time, DSS supported improved Electronic Data Interchange, resulting
in improvements in the on-time payment of transportation costs. As a result,
related overhead costs will be reduced significantly. Central design and
interface demands will be eliminated. Systems maintenance, management
information, and associated training will all cost less as well.
The Agency projects an eventual saving of $255.3 million in automated data
processing savings and $139.6 million in savings as the result of improvements to
distribution operations. The benefit-to-investment cost ratio will be at least a
three-to-one pay back.
- Defense Reutilization and Marketing Service (DRMS) Reinvention and
Privatization. In July 1993, DLA nominated DRMS as a potential outsourcing
candidate under the aegis of the Defense Performance Review. Designated a
reinvention laboratory, DRMS pursued a policy of selective privatization while it
streamlined and reengineered many of its processes. Mr. David Osborne of the
Reinventing Government Network introduced DRMS to the concept of Enterprise
Management (EM). Using this framework, DRMS is restructuring into natural
business units and aligning along private industry lines.
The EM model is a public sector model for using funding and management approaches
that maximize accountability for government services. As applied to DRMS, it has
potential to provide better service at less cost to the warfighter, and to
increase substantially revenue from the sale of property. A new twist on
privatization, EM permits private sector firms to compete with government
activities for selected business. As a first step, DRMS functions have been
categorized as leadership services (inherently governmental), utility services
(natural monopolies) and/or marketplace services (robust commercial marketplace
Based on the EM model, DRMS is splitting into two separate business units. The
first, a Utility, will act as an information broker between turn-in activities
and organizations seeking to obtain property, to include reutilization, transfer
and donation customers as well as surplus buyers. This "Market Maker" function
will, for example, gather data regarding the quantity, type, condition and
location of the property from a turn-in activity. This information will then be
made available to interested parties via an electronic catalog. Even though DRMS
will operate this function as a utility, it is seeking private sector firms to
build the electronic catalog using their own capital. Their investment will be
recouped through the right to collect subscription fees and potential revenue
A second business unit, a Service Enterprise, will provide a full -range of
turn-in services, to include: demilitarization of surplus property; precious
metal recovery; and contract management for hazardous waste/materiel disposal.
The new aspect is that turn-in activities will now be allowed to choose either
DRMS or a private firm to handle the sale of surplus property based on their
individual performance in terms of cost-effectiveness and/or return on asset.
DLA will develop standards to evaluate DRMS and private firms' performance
against such requirements as full and open competition and receipt of fair market
value for property sold. The Military Services and DoD components will receive a
portion of the sales proceeds, thereby incentivizing more rational decisions
about the release and disposal of surplus property.
- Automated System Captures Costs of Doing Business. The Defense
Logistics Services Center’s (DLSC) Activity Based Costing (ABC) Team has
reinvented the process that DLSC uses to determine the costs of its products and
services. The ABC Team manually gathered information by interviewing employees
to obtain activity performance percentages and trace activities to the
appropriate products and services. The ABC Team developed and implemented an
automated ABC accounting system known as the Time and Attendance Productivity
System (TAPS). This system allows DLSC to track costs to all ABC processes and
activities, and to DLSC’s specific products and services. The system works in a
Windows environment and is linked to all 452 employees through a Local Area
Network. Prior to this system, employees manually recorded time and attendance
on a form. If the employees needed to record any exception reporting, they had
to conduct research using hardcopy listings. Implementing TAPS has eliminated
two extensive efforts: the manual effort of gathering activity data; and the
manual effort by employees of locating and reporting time and attendance data on
TAPS provides an automated method of collecting extensive information used in
tracking costs of DLSC's products and services. For ABC purposes, data must be
captured at the lower activity level. With the development and implementation of
TAPS, the labor and non-labor data is now automatically captured at the level
needed to determine the costs of DLSC’s activities. This assists the ABC Team in
determining the unit costs of DLSC’s products and services.
The ABC Team and the management of DLSC are utilizing TAPS data for many
purposes. Because TAPS allows DLSC to track costs to DLSC’s products and
services more accurately, it is a very valuable tool in the development of DLSC’s
product and service pricing strategies and cost recovery efforts. As DLSC enters
into a Fee-For-Service environment and budgets are reduced, the pricing of
products and services will be a key factor in determining whether DLSC will gain
or lose customers. TAPS has benefited both DLSC and its customers by providing a
more accurate accounting of DLSC’s products and services.
- Defense Reutilization and Marketing Service (DRMS) Achieves Great
Business Success. "Reutilization, transfers and donations (R/T/D), increase
by 3% to $3.5B despite a 15% reduction in surplus property turned in ($5B
acquisition value). Revenues up by 13% to $415M. Sales improve by 42% to $320M.
Corporation achieves profit of $26M after previously suffering annual losses
greater than $200 million."
Any corporation would tout these great improvements in their annual reports. In
fact, DRMS has made such superb gains for two years in a row. These dollars
saved and revenue generated have gone directly back to the Department of Defense
to fund additional needs.
This spectacular performance improvement is directly related to reinventing
business processes and adopting best business practices. The increase in sales
resulted from an improved rate of return on assets and property sold (up 52%
over FY 1994's rate), since the volume of business decreased by approximately
15%. Practices such as commodity--oriented sales and the use of the worldwide
web (with asset photographs) to advertise R/T/D and sales, reflect dramatic
changes in the way DRMS does business ... these changes emulate the best business
practices of successful private sector firms. Additionally, DRMS teamed with
private industry to accomplish sales by awarding contracts to auctioneering
firms, and by tapping into highly regarded firms with proven track records to use
their successful methods and business base to sell government property.
Innovations are still underway, including a very promising effort to negotiate a
joint venture arrangement for the sale of certain property.
DRMS reinvention successes saved the Department of Defense over $300M in FY 1994
and FY 1995. The additional revenue generated by DRMS permitted the Department
of Defense to reduce the prices charged for new materiel purchases.
- Electronic Files and Automated Process Controls Slash Cycle Time and
Costs. The Defense Logistics Agency makes extensive use of automation to
manage 3.8 million consumable spare parts with sales of over $11 billion a year.
The accomplishment of this mission requires extensive new automation at the
desktop as well as mid- and mainframe computing. Most orders are transmitted
electronically to vendors with on-line support for item managers and procurement
specialists. However, this support still includes millions of hard copy item and
contract folders. Contract, item and technical data, although electronically
stored, are often accessed through paper reports or time-consuming inquiries from
multiple systems and data bases. Desktop "off the shelf" products can be
integrated to improve productivity of workers dramatically in this transaction
The time and effort required to access the various information sources requires
up to 30% of item manager, procurement and technical specialists’ time. The DLA
electronic folder and workflow management initiative is targeted to reduce this
time to 5%. Savings of $1.1 billion are planned in the engineering support and
parts management areas over a 10 year period. Even greater savings are
anticipated for the contracting, item management and technical support areas.
What is planned is a client workstation at each work center that serves as a
gateway to all databases and digitized files required to do one's job from the
"electronic desktop." Besides significant productivity gains, these capabilities
will also include production workflow management, correspondence and suspense
management, job prioritization, suspense management, and tailored access to
logistics information. These capabilities will also reduce logistics response
time. For example, cycle time for engineering support from the Military Services
is expected to be reduced from 110 days to less than 30 days.
- System Provides Real-Time Performance Management Information. The
Performance Labor Account System (PLAS) was developed to deploy a Government
Performance and Results Act ready labor accounting system that measures the cost
of processes, outputs, customer support, and performance goal attainment on a
continuous basis. PLAS consolidates current time and attendance, and similar
reporting systems used within DLA, to provide user-friendly, real-time
performance management information.
Since the development of PLAS, several high level managers have had numerous
success stories involving PLAS. At DCMC Lockheed Martin - Sunnyvale, PLAS data
indicated that quality assurance personnel were spending a large amount of time
on administrative processes. By decentralizing indirect functions, quality
assurance "time on mission" was increased from less than 80% to more than 90% of
time available. As a result, these adjustments helped to save considerable
dollars for the Navy Trident Missile Program. The annual savings from the early
use of PLAS data exceeded $250,000. Furthermore, PLAS data has been used to
identify mature, low-risk processes in order to divert attention and resources to
new workload generated by the merger of Lockheed and the Martin Marietta
DCMC Wichita used PLAS data to reveal a high proportion of effort being expended
on nonmandatory product inspections. The data permitted management to refocus
effort on improving Process Oriented Contract Administration Services
surveillance and driving down the cost of inspections. The ability of DCMC
Wichita managers to see where resources were being applied at the process and
location level, contributed greatly to a Performance Plan goal that is specific,
actionable, and links performance in the field directly to established DCMC
For DCMC Hughes Los Angeles, PLAS has played a crucial role in helping to build
its budget. According to the director, the two or three minutes it takes to
enter information provides extraordinarily useful data. The data helps
management identify crucial processes and directly results in process
- Reducing Oversight Costs. The objective of this joint Defense
Contract Management Command (DCMC)/Defense Contract Audit Agency (DCAA)
initiative is to reduce both contractor and government oversight costs without
increasing cost, schedule or performance risks. Representatives from DCMC, DCAA,
Defense Logistics Agency’s buying activities, and selected defense contractors
have established teams at ten major defense contractor locations to identify
government oversight cost drivers and related cost premiums, assess if the degree
of government oversight is appropriate based on risk, and identify and implement
management and manufacturing process improvements to reduce oversight and related
The estimated targeted aggregate annual cost savings to date associated with
process improvements being studied or tested is $118.7 million, with the
potential for even greater savings. Examples of the process improvements being
studied or tested include the following:
- Replace multiple government quality assurance requirements with a single,
performance based quality assurance process.
- Use sampling techniques to perform soldering inspections, rather than 100
- For low risk suppliers, eliminate the mandatory and final inspections.
- Eliminate the plant clearance process for low-value or unserviceable
government property excess to contracts. Dispose of the property using the
company’s process, rather than the process described in the acquisition
- Increase the dollar threshold for government furnished property
- Streamline the cost/schedule control system by eliminating or consolidating
the reporting requirements which contain similar information, and focusing only
on significant areas.
- Endangered Blue Butterfly Sighted at Fuel Terminal. The Defense Fuel
Support Point (DFSP) San Pedro, California, has worked diligently to protect and
restore species of flora and fauna native to the Palos Verdes Peninsula. Most of
this effort has focused on the Palos Verdes blue butterfly, an endangered species
which was thought to be extinct prior to a March 1993, sighting on the DFSP. The
DFSP is the only place where the blue butterfly is known to exist. The DFSP is
also home for two threatened species (the California gnatcatcher and the
California coastal sage plant) and numerous other species, including over 150
plant species, 500 arthropod species, and 75 bird species.
Since the rediscovery of the blue butterfly, the DFSP has developed several
unique partnerships to promote species and habitat restoration. Partners include
the U.S. Navy, the U.S. Fish and Wildlife Service, and the University of
California. Three organizations (the Audubon Society, Rhapsody in Green, and Los
Angeles Clean and Green) provide volunteer workers. During 1995, 720 local
volunteers contributed 2,200 hours of work toward habitat improvement.
This work will provide critical information needed to prevent the extinction of
the Palos Verdes blue butterfly and it will enhance blue butterfly populations at
the DFSP without adversely affecting the DFSP mission. This project at DFSP San
Pedro could serve as a model for the reestablishment of the blue butterfly at
other sites on the Palos Verdes Peninsula.
The project has received very positive coverage from local and national news
media and receives strong support from the local community, the Department of
Interior, and the Department of Defense. In October 1995, The Honorable Bruce
Babbitt, Secretary of the Interior, presented letters of recognition and a
special award to DLA personnel. Secretary Babbitt noted in the letters, "I
believe that an agency can carry out its mission while at the same time
protecting endangered species."
- Use of Heat to Control Insect Pests. DLA has initiated and
successfully implemented the use of heat for killing powder-post termites in
crates and boxes. Typically, termites in wooden crates and containers are
controlled with fumigants, which in many cases are Class I ozone-depleting
chemicals. With heat treatment, infested wood is placed in a specially designed
chamber and heated until the insects are dead.
There is a growing public concern about the release of pesticides and toxic
chemicals in the environment. Food safety, occupational safety, and increase in
pest resistance to pesticides are also concerns. Heat control is an
environmentally and economically better alternative than the use of many chemical
fumigants. DLA is exploring ways to heat treat other infested products.
- Data Problem Solved with Commercial Products. Satisfying the
empowered employees' need for the right financial information at the right time
is a challenge. The Defense Logistics Agency had a repository of financial data
to be used by analysts and top managers. The data base was operating on an
obsolete minicomputer using software that was no longer supported by the
developer. Users of the system throughout the country were experiencing problems
getting needed information, the system was subject to frequent outages, and there
was insufficient storage space on the system to retain all needed information.
The Agency created a foundation for future growth and improvement by replacing
the minicomputer and software with new commercial off-the-shelf products. The
existing data base was converted in January 1994 and put into operation in March
1994. The new software is widely used in business and industry applications.
In October 1995, the Agency purchased a point-and-click data access tool to work
in conjunction with the new minicomputer and software. This tool will replace
the data query menu tool that was developed in-house. The analysts will enjoy
new capabilities, such as linking different types of information and generating
custom reports and charts, while at the same time improving the response time.
An initial training class will be provided to all analysts as an introduction to
This action encourages competition, reduces costs, and decentralizes the
financial data, thereby enhancing the manager's ability to improve customer
service. The improvements benefit both the financial information systems group
and all customers of the financial status information. The use of current
commercial products benefits the Government by reducing the time and effort to
maintain the system and by making new capabilities available without in-house
- Video Teleconferencing Initiative. The Video Teleconferencing (VTC)
capability was implemented at the Defense Logistics Agency (DLA) to reduce
government travel costs, provide better management of time, and allow more people
to participate in meetings, thereby improving communication and decision-making.
The Director has used this technology at DLA Headquarters to participate in Joint
Logistics Commanders meetings with his Military Service counterparts. The Joint
Logistics and Contingency Operations Group uses it to discuss readiness issues
with DLA Supply Centers. Examples of other types of meetings DLA has conducted
via this technology include In Process Reviews and Monthly Management Reviews.
Agency TDY (Temporary Duty) travel costs have dropped as a result of implementing
this new technology.
The planning and implementation of a VTC capability within DLA occurred over a
three-year period. The goal was to accomplish a reduction in TDY costs by
utilizing VTC, thereby improving communications internally and between DLA and
its major customers and suppliers. The planning team identified equipment
requirements and 10 site locations for the DLA Network and conducted the economic
analysis which identified expected savings of $1.9 million over a five-year
period from reductions in TDY. The team also requested and received funding,
allowing it to implement this new technology within DLA during 1994 and 1995.
Besides substantial financial benefits, implementation of the VTC capability
within DLA improves communication and decision-making, reduces overhead costs in
support of acquisition and logistics, improves customer service, improves weapon
support and readiness, and allows employees to participate in VTC meetings with
over 150 DoD organizations currently with VTC capability, plus major defense
contractors using the SPRINT Meeting Channel. This is especially useful in the
Defense Contract Management Command in communicating with a myriad of Defense
contractors in the management of major weapon systems contracts. The
availability of this technology during logistics readiness operations will
greatly facilitate DLA’s support to the warfighter.
Based on the results of actual cost avoidance of $1.838 million achieved from
October 1994 to March 1996, cost avoidance over the next five years is estimated
to be $7.412 million.