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