Strategic Supply Chain Management - Supply Chain Online

U.S. DEPARTMENT OF DEFENSE PROFILE: Making the Tail Smaller and the Tooth Stronger 173
out the DoD—for the “components” (i.e., the Army, Navy, Air Force, and
Marines), as well as for the policy-making offices. As Morales describes it,
“We must build processes from the supplier base (both public and private)
through the distribution agents to enable rapid movement of materiel. We
must collaborate and build partnerships with industry to achieve this
responsive, end-to-end delivery capability. This involves real-time information
and tools such as radio frequency identification (RFID) tags to
track assets and more accountability and integration in the lifetime support
of weapons systems.”
Transformation at the DLA
Execution will not be for the faint of heart.
A case in point is the Defense Logistics
Agency (DLA). The DLA has served for
over four decades as the DoD’s “logistics
combat support agency.” With its nearly
$25 billion in sales and services for fiscal
year 2003, it would occupy the no. 65 spot
on the Fortune 500, just ahead of New York
Life. The agency operates in 48 states and
28 foreign countries and is staffed by
21,000 civilian and 500 military personnel.
“We run the world’s largest warehouse
With its nearly
$25 billion in sales
and services for
fiscal year 2003,
the DLA would
occupy spot no. 65
on the Fortune 500.
distribution system,” says Vice Admiral Keith W. Lippert, the DLA’s
director. “We also run a defense energy support center that supplies all the
fuel for the Department of Defense. We run a national defense stockpile
composed of strategic materials that we gradually sell into the market if
they’re not needed. The stockpile is big enough that we have to watch the
world markets, because we can end up affecting world prices through our
volume of sales.”
Admiral Lippert addresses the shift in thinking as it affects his
agency: “DLA was put together to manage consumable items that were
common to all the services. What DLA did—and this dates back to 1962—
was to buy material, put it in a warehouse, and then basically say to its customers,
‘OK, I bought it, so you had better come get it.’ The shift we’re
going through right now is toward understanding our customers’ requirements
and being responsive to them, even when there are problems in the
industrial base [that affect us].” In other words, the DoD is extending the supply
chain to include the customer’s customer and the supplier’s supplier.