dla logistics transformation

Senior Executive Partnership Round Table Senior Executive Partnership Round Table

November 10, 2004 November 10, 2004

Right Item, Right Time, Right Place, Right Price, Every Time...Best Value Solutions For America's Warfighter

2

AgendaAgenda

• DoD Transformation • DLA

–The Enterprise Today– Transformation

• Supply Chain Integration• What This Means to Suppliers • Summary

3

Defense Transformational Goals: • Protect the US Homeland and Critical Bases of Operation• Deny Enemies Sanctuary• Protect and Sustain Power in Access-denied Areas• Leverage Information technology to connect troops and their operations• Improve and protect informationnetworks from attack•Enhance space operations

DoD TransformationDoD Transformation

4

What is DOD Transformation?What is DOD Transformation?

• Transforming how we fight

• Transforming how we do business

• Transforming how we work with others


5

Joint Logistics PrioritiesJoint Logistics Priorities

• DoD Logistics Balanced Scorecard• Enterprise Integration• Performance Based Logistics• Logistics Transformation Roadmap• Maintenance Excellence• Streamline Material Flows• Distribution Process Owner (DPO)

Logistics TransformationLogistics TransformationDoD TransformationDoD Transformation

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• Raise the Bar on Performance

• Make DLA a World Class Organization

• Execute Transformation

• Supply Chain Integration/Business Development

• Raise the Bar on Performance

• Make DLA a World Class Organization

• Execute Transformation

• Supply Chain Integration/Business Development

DLA’s FY05 Goals: DLA’s FY05 Goals: Focus The VisionFocus The Vision

Logistics TransformationLogistics Transformation


DLA TransformationDLA Transformation

7

Why Transformation?Why Transformation?

For DLA to remain valuable to the warfighters, it must better organize its workforce, develop and implement new business strategies and relationships that deliver end-to-end supply chain solution sets to the COCOMs and Military Services…otherwise, we become irrelevant.

8

AgendaAgenda




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Scope of Business

• 45,000 Requisitions/Day• 8,200 Contracts/Day• #56 Fortune 500 - Above Prudential Financial• #2 in Top 50 Distribution Warehouses• 25 Distribution Depots• 5.2 Million Items • 24.7M Annual Receipts & Issues • 1411 Weapon Systems Supported• 144M Net Barrels Fuel Sold (FY04)• $14.6B Annual Reutilizations/Disposals

People

• 21,490 Civilians• 524 Active Duty Military• 637 Reserve Military• Located in 48 States/28 Countries

Foreign Military Sales

• Sales: $719M • Shipments: 580K• Supporting: 124 Nations

FY 02 Sales/Services: $21.5B FY 03 Sales/Services: $25B FY 04 Projection: $28.0B

• Land/Maritime/Missiles: $2.8B• Aviation: $3.1B• Troop Support: $12.4B• Energy: $5.9B• Distribution: $2.5B • Other: $1.3B

The DLA Enterprise…TodayThe DLA Enterprise…Today

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1721.5 25

28.9

0

10

20

30

FY01 FY02 FY03 FY04

Sales and Services in $Billions

Civ

ilian

& M

ilita

ry P

erso

nnel

(# In

Tho

usan

ds)

1633

5065.5

52

33

24.5

12.75

21.7

0

20

40

60

80

FY 1962 FY 63-65 FY 66-68 FY 89-92 FY 93-96 FY 97-01 FY 02-09

DLA DFAS DISA DCMA

Bill

ions

of D

olla

rsO

f Sal

es/S

ervi

ces

…while personnel levels fell to their lowest since 1963 …12% below DPG

From ‘01-’04, Sales and Services grew by 70%...

DLA Transition… DLA Transition… …Leaner…More Productive…Leaner…More Productive

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12.0

15.0

18.0

21.0

24.0

27.0

30.0

33.0

36.0

PB/POM 06 CRR 29.0 34.4 25.9 26.4 28.4 28.7 25.6 24.4 19.8 22.1 24.7 21.5 20.7 15.5 15.0 14.5 13.6 13.1 13.0 12.9 12.7

FY 91

FY 92

FY 93

FY 94

FY 95

FY 96

FY97

FY98

FY99

FY00

FY01

FY02

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

Per

cen

t

Savings Returned to Warfighter(FY 06-11 based on PBR 2006 Proposal)

FY 05 … 15%Lowest Cost Recovery

Rate in DLA History

(Operating Costs as a Percentage of Total Sales)CRR %

Cost Recovery Rates Cost Recovery Rates Over TimeOver Time

DoD Policy Decisions

12

Backorders Backorders HardwareHardware

250

275

300

325

350

375

400

425

450

Oct-0

1N

ov

De

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nF

eb

Ma

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pr

Ma

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ug

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ct-02

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ec

Jan

Fe

bM

ar

Ap

rM

ay

Jun

Jul

Au

gS

ep

Oct-0

3N

ov

De

cJa

nF

eb

M

ar

Ap

rM

ay

Jun

Jul

Au

gS

ep

Thousands

Lowest In DLA

History

Operation Iraqi Freedom

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PercentPercent Net Demands (M)Net Demands (M)

DOD Supply Availability Goal: 85%

Supply AvailabilitySupply AvailabilityHardware TotalHardware Total

80

82

84

86

88

90

92

Oct-0

1N

ov

De

cJa

nF

eb

Ma

rA

pr

Ma

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p-

Oct-0

2N

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ug

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ct-03

No

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ec

Jan

Fe

bM

ar

Ap

rM

ay

Jun

Jul

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Operation Iraqi Freedom

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WSDC Level A Weapon System SA BO Readiness WSSM

Weapon System 1 G G R YWeapon System 2 G G G GWeapon System 3 G G R YWeapon System 4 G G R YWeapon System 5 G G R GWeapon System 6 G R G GWeapon System 7 G R NA YWeapon System 8 G G R YWeapon System 9 G R G YWeapon System 10 G G NA GWeapon System 11 G G R GWeapon System 12 G G G G

A Military Service’s Level A SystemsTobyhanna PA

60%

65%

70%

75%

80%

85%

90%

95%

100%

Ju

n-0

3

Ju

l-03

Au

g-0

3

Sep

-03

Oct-0

3

No

v-0

3

Dec-0

3

Jan

-04

Feb

-04

Mar-0

4

Ap

r-04

May-0

4

Ju

n-0

4

Ju

l-04

Au

g-0

4

Sep

-04

0

1000

2000

3000

4000

5000

6000

7000

DLA Demands B/O Goal 19% Reduction (Feb04)Total Backorders DLA Supply AvailabilitySupply Availability Goal

Readiness Review Sample ChartsReadiness Review Sample Charts

Airframe System

SA BO Readiness WSSM Assessment

WS 1 G G G G

WS 2 G G R G

WS 3 G G R G

WS 4 G R R G

Aviation Weapon System Performance MetricsDLA Performance

50%

55%

60%

65%

70%

75%

80%

85%

90%

95%

100%

JUN

JUL

AU

G

SE

P

OC

T

NO

V

DE

C

JAN

FEB

MA

R

AP

R

MA

Y

JUN

JUL

AU

G

SE

P

0

5,000

10,000

15,000

20,000

DMD LINES DLA SA OPL READINESS GOALSA GOAL OPL READINESS TOTAL BACKORDERSB/O REDUCTION GOAL

DLA Performance in Support of a WS

DLA Support to a Maintenance DepotDLA Support to a Maintenance Depot

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AgendaAgenda




Strategic Materiel Sourcing

Strategic Supplier Alliances

Supply Chain Integration

Supplier Relationship

Managem

entSupplier R

elationship M

anagement

Systems Architecture (SAP/Manugistics)Systems Architecture (SAP/Manugistics)

Cus

tom

er R

elat

ions

hip

Man

agem

ent

Cus

tom

er R

elat

ions

hip

Man

agem

ent

Customer Insight

Customer Service

Emergent Problem Resolution

Returns Management

Order Fulfillment

Planning Financial

Management Procurement Tech & Quality

Business Systems Modernization

Distribution Planning Management System Load Planning

Network Warehouse Management IT Systems Integrated w/Partners

Manage Vendor & Carrier Performance

INDUSTRY

SERVICES

Data Architecture (Integrated Data Environment))Data Architecture (Integrated Data Environment))

Technical Architecture (Common Protocols and Standards)Technical Architecture (Common Protocols and Standards)

Technical Infrastructure (Enterprise Telecommunications and Network Data Center)Technical Infrastructure (Enterprise Telecommunications and Network Data Center)

How DLA Pursues Transformation

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17

BSM Business VolumeBSM Business Volume

Users

500

1500

2500

3500

4500

5500

6500

BDUsConcept

DemoSubsistence

Release 2

FOC

FY02 FY03 FY04 FY05 FY06

Items

0

1000

2000

3000

4000

5000

Thou

sand

s

ConceptDemo BDUs

SubsistenceRelease 2

FOC


Revenue

0

3000

6000

9000

12000

15000

18000

$ M

illio

ns

Concept Demo BDUs

SubsistenceRelease 2

FOC


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Jan05 Feb05 Mar05 Apr05 May05 Jun05 Jul05 Aug05 Sep05 Oct05 Nov05 Dec05

DSCP

DSCR

MaritimeNon Pow ValvesNSN-75K$79M

MaritimeDetachmtNSN-171K$129M

MaritimeDetachmtNSN-190K$46M

AviationComm/NSN-228K$145M

InactiveAviationNSN-157K

Land DetachmtNSN-164K$78M

Airframes& EnginesNSN-140K$417M

R 2.1.1 R 2.1.2 R 2.1.3

MaritimeNSN-191K$172M

Aviation/SSA ISTsNSN-236K$239M

LandNSN-141K$152M

C&TFlag/InsigNSN 3K$20M

BSM Rollout Through Dec 05BSM Rollout Through Dec 05

C&T AccssrsNSN 2K$156M

C&TTentsNSN-1K$110M

AviationDetachmtNSN-189K$124K

DSCC

Maritime(Elctrncs)NSN-281K$99M

C&TChem StsNSN-1K$ 240M

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DSCC

DSCP

DSCR Aviation OEMNSN-142K$788M

C&ENSN-93K $228M

Release 2.2

STA

BIL

IZA

TIO

N

C&TDrs ClothNSN-6 K$225M

Subs PV FSENSN-19K$56M

Def WSDetachmtNSN-68K$200M

Maritme(Elctrncs)NSN-204K$79M

DeferredNSN163K $1,092M

Maritime(Elctrncs)NSN-306K$174M

DeferredDetachmtNSN-81K$446M

Med 2Trad/AsblNSN-67K$815M

Medical 3PharmItms -29K $2,000M

Medical 4Med/SurgItms-235K$150M

Medical 1ECATItms 1.8M $70M

DSCP Operational Acctg HQ – Operational Acctg.DSCR Operational AcctgDSCC Operational Acctg – Pilot & Rollout

C&TFootwearNSN-5.6K$260M

C&TOCIENSN- 6K$775

C&E NSN133K$221M

C&E NSN-77K $250M

C&E NSN-67K $170M

AviationDeferred NSN-55K$671M

BSM Rollout From Jan 06 – Sep 06BSM Rollout From Jan 06 – Sep 06

Jan06 Feb06 Mar06 Apr06 May06 Jun06 Jul06 Aug06 Sep06 Oct06

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AgendaAgenda




21

More Organic More Commercial

Traditional Organic Support Environment

ContractorResponsibleFor Majorityof Support

CONTRACTORORGANIC MIX

Organic Support

Contractor Support

Public/PrivatePartnering

Opportunities

DoD Supply Chain & Contract Logistics DoD Supply Chain & Contract Logistics SupportSupport

One Size Does Not Fit All One Size Does Not Fit All

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Case for ChangeCase for ChangeCurrent EnvironmentCurrent Environment

• Comprehensive logistics solutions being demanded– Performance Based Logistics– Contractor Logistics Support/3PLs– Joint Logistic Solutions– Executive Agent– End-to-End Initiatives

• OIF/OEF places increased pressure on agile logistics to support operations - Joint solutions preferred

• Today’s technologies facilitate horizontal integration across traditional vertical “ownership”

Defense Transportation Defense Transportation Coordination Initiative (DTCI)Coordination Initiative (DTCI)

Repairable Repairable Partnering with Partnering with

TACOMTACOM

DLA must evolve its logistics solutions to meet changing DLA must evolve its logistics solutions to meet changing demands being placed on its supply chainsdemands being placed on its supply chains

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DLA’s Business StrategyDLA’s Business StrategyWithin Supply ChainsWithin Supply Chains

End to End Supply Chain IntegrationEnd to End Supply Chain Integration

Moving From Physical Site to Supply Chain ManagementMoving From Physical Site to Supply Chain Management

PlanningDLADLADisposal/

ReutilizationDistributionOrder

FulfillmentProcurement

DSCRAviation

DSCCLand

DSCCMaritime

DSCPConstruction

DSCPC&T

DSCPMedical

DSCPSubsistence

DESCEnergy

Tech/QAFinance

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Managing Across the Supply ChainManaging Across the Supply Chain

Customer Operations

Supplier Operations

CRM Cells/Support

Teams

Item Planning Teams

Integrated Supply Teams

StrategicMaterial

SourcingGroup

Customer Support

Supplier Support

Item Planning Teams

Integrated Supply Teams

In most cases, single face to the customer (OF, customer DP) regardless of what the customer is buying

Item-level planning for the items managed by the Supply Chain

Shared services (e.g., Finance) for Customer Operations units

Supply planning, procurement, and tech/quality for items managed by the Supply Chain

Strategic sourcing for items managed by the Supply Chain

Shared services (e.g., Finance, T/Q for Supplier Operations units

Direction of IPTs planning this Supply Chain’s items at other locations

Direction of ISTs managing this Supply Chain’s items at other locations

Detachments

Keep focus on accountability for obtaining

customers’ requirem

ents

Kee

p fo

cus

on a

ccou

ntab

ility

for p

lann

ing

cust

omer

s’ re

quire

men

ts

““Supply Chain” = Customer Operations + Supplier OperationsSupply Chain” = Customer Operations + Supplier Operations with Distribution functions across the chainwith Distribution functions across the chain

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Supplier Relationship ManagementSupplier Relationship Management

Director of Supplier Operations

Strategic Materiel Sourcing Group


ManagerKey Suppliers

Supply Planners

Product Specialist

Acquisition Specialist

Sourcing Strategy

Specialist

Director of Supplier Operations

Strategic Materiel Sourcing Group


ManagerKey Suppliers

Supply Planners

Product Specialist

Acquisition Specialist

Sourcing Strategy

Specialist

26

AgendaAgenda




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• SRM is a strategy to build and optimize relationships with selected suppliers while:

– Evaluating and capitalizing on supplier capability– Monitoring supplier performance– Jointly solving problems– Teaming to provide best value and end to end Logistics

Solutions in Performance Based Logistics arrangements– Supplier Relationship Manager acts as DLA’s primary

POC to the supplier

SRM is one of DLA’s eleven transformational initiativesSRM is one of DLA’s eleven transformational initiatives

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• Goals– Build partnerships with industry and suppliers

• Streamline business processes for DLA and supplier• Improve supply visibility• Form solid basis for PBL support

– Improve supply chain performance– Delivering results to end users– Manage inventories, resources and assets more effectively by

leveraging joint capabilities– Create competitive advantage by bringing new, better and more

customer centric solutions to market

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SRM provides for DLA:

•Strengthened customer confidence that mission requirements will be met

•Improved management of relationships with key suppliers

•Partnering opportunities with counterparts in supplier organizations for issue resolution

•Integration of suppliers into business processes for improved execution

SRM provides for Suppliers:•Reduction in costs

•Better communication leading to better supply management and fewer out of stock and overstocked items

•Relationship driven, qualitative and quantitative feedback on actual performance

•Improved operational execution through increased communication between DLA’s left and right sides via the Supplier Relationship Manager

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Strategic Materiel SourcingStrategic Materiel Sourcing

Reliance On IndustryReliance On Industry

Outcome OrientedOutcome Oriented

Managing Supplier RelationshipsManaging Supplier Relationships

Long-Term ArrangementsLong-Term Arrangements

Integrating Supply ChainsIntegrating Supply Chains

Reliance On IndustryReliance On Industry

Outcome OrientedOutcome Oriented

Managing Supplier RelationshipsManaging Supplier Relationships

Long-Term ArrangementsLong-Term Arrangements

Integrating Supply ChainsIntegrating Supply Chains

From To

Reliance on Inventories

Transaction Based

Managing Supplies

Instant Buys

Managing Separate Processes

A Value Added Supply Chain Integrator

SMS targeting430K items of

3.6M hardwaretotal

31

BSM Release 2.1.2 Supplier CollaborationBSM Release 2.1.2 Supplier Collaboration

• DLA has developed a new method for suppliers to manually review and comment on DLA supply plans.

• The new Collaborate process will be managed through the use of Manugistics Networks Collaborate v7.1 Web-based tool.

• The system will be tested with a small number of launch vendors (6-12) beginning in Feb 2005.– Vendors had to be sole source suppliers or have current long-term

contracts for a substantial number of items already in BSM.• Beyond the launch vendors ≈480 additional Sole-Source &

Long-term Contract vendors will be given view-only access to the collaboration tool

32

Supplier AwarenessSupplier AwarenessBenefits of CollaborationBenefits of Collaboration

• More accurate forecasting• Better, timelier customer support• Reduce safety stock levels and warehousing costs• Reduce administrative churn

Supplier Perspective:

DLA’s Perspective:

• Improve production planning within and across the supply chain• Reduce Raw Materials and inventory• Better visibility of DLA requirements• Enhance supply chain end-to-end performance

33

How It WorksHow It WorksRelease 2.1.2 SupplierRelease 2.1.2 Supplier

Collaboration Step-By-Step Collaboration Step-By-Step• Total requirements at the item level sent to collaboration tool in

monthly buckets (TPIP).– Supply Plan for 24 months will be shown– Vendor will see only the items on his/her contract

• Initial process only applicable to forecastable sole-source and long-term contracts for items managed by BSM.

• Vendor updates will be compared to DLA’s supply plan and exceptions will be highlighted for supply planners. Collaboration only permitted for requirements not yet committed to a contract.

• Suppliers & DLA POCs will collaborate on exceptions and develop final supply plan.

We Need Your Feedback and We Need Your Feedback and Active ParticipationActive Participation

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SummarySummary

DLA’s Transformation is underway –• streamlining supply chains

• driving down costs

• becoming more efficient

We want you to be part of the team……

collaborating together to provide Best Value

Logistics Support in traditional and non

traditional (PBL) arrangements

dla logistics transformation

Documents

agenda dod transformation

g g g g ws

maritime nsn

g r g g ws

powvalves nsn

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landdetachmt nsn

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