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DEFENSE LOGISTICS AGENCY

VADM Keith Lippert, SC, USNDirector, Defense Logistics Agency

DEFENSE LOGISTICS AGENCY

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DLA Business Overview• Performance Focus

• Supply Availability

• Backorders

• Cost Recovery Rates

• Business Systems Modernization

• OIF Support

• DoD Supply Chain And Contractor Logistics Support

• DLA Initiatives

• Summary

Agenda

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Scope of Business

●#65 Fortune 500 - Above New York Life●#2 in Top 50 Distribution Warehouses● 4.6 Million NSNs ●1312 Weapon Systems Supported●147.7M Net Barrels Fuel Sold (FY03)●$12.5B Annual Reutilizations/Disposals●24.7M Annual Receipts & Issues●22 Distribution Depots●8,200 Contracts/Day●45,000 Requisitions/Day

People

●21,000 Civilians●488 Active Duty Military●618 Reserve Military●Located in 48 States/28 Countries

Foreign Military Sales

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

FY02 Sales/Services: $21.5B FY03 Sales/Services: $25B

●Land/Maritime/Missiles: $2.7B●Aviation: $3.3B●Troop Support: $10.2B●Energy: $5.2B●Distribution: $2.2B ●Other: $1.4B

The DLA Enterprise

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80

82

84

86

88

90

92

Oct-0

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Oct-0

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0.5

1.0

1.5

2.0

2.5

3.0

Supply AvailabilityHardware Total

PercentPercent Net Demands (M)Net Demands (M)Highest Aviation Supply

Availability Ever

DOD Supply Availability Goal: 85%

Operation Iraqi Freedom

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250

350

450

Oct-0

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Jun

Jul

Au

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Oct-0

3N

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Backorders – HardwareTotal

ThousandsThousands

Lowest In DLA

History

Operation Iraqi Freedom

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40

50

60

70

80

90

100

110

Oct-0

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Oct-0

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Backorders > 180 Days Hardware

ThousandsThousands

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12.0

15.0

18.0

21.0

24.0

27.0

30.0

33.0

36.0

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

Per

cen

t

Savings Returned to Warfighter

Lowest Cost Recovery Rate in DLA History

(Operating Costs as a Percentage of Total Sales)

CRR %

Cost Recovery Rates Over Time

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Business Systems Modernization

• Incorporating Commercial and Best Practices Via Commercial off-the-Shelf (COTS) Based Tools

• Replacing 30-year old Legacy Information System with State of the Art Technologies

• Teamed with Accenture … Within Budget • Release 1 Deployed In Jul 02

• Major Reengineering Effort … From Functionally Stove-Piped Segments to Cross-Cutting Enterprise-Wide Processes

Projected FY 04-09 Savings = $360.6M

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• Release 1 “WENT LIVE” 31 Jul 2002

• End-To-End Material Management, Financials and Procurement

• Hardware, Medical, Subsistence, Construction

• Commercial Software-Best Practices

• Successfully Processing Materiel Requests• Release 1.1:

• BDUs, Subsistence (35K Line Items, $2.2B Value) • "Live" November 30, 2003

• Release 1.2:• Tents, Accessories, Flags (6K Line Items, $283M Value)• Go Live is Planned for March 04

• All Materiel in ERP - Jan 2006

Business Systems Modernization

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DLA executed Logistics Operations early because OSD supported extra OA• $924M Lean Forward Investment• Initially, $18M material forward positioned

Operation IRAQI FREEDOM … Preparatory Actions

Biggest Lessons Learned

OEF triggered surge, readied wholesale systemDLA involved early in wartime planning process by

initiating logistics outreach; paid big dividends in early sustainment

Planned requirements did not match actuals

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Operation IRAQI FREEDOM DLA Support Plan

Sustaining 4 Operations Concurrently NOBLE EAGLE (Home Land Defense), OEF (Afghanistan),

Horn of Africa (CJTF), Bosnia-Kosovo … Including Disaster Relief

• Embedded with War-Fighter - Kuwait, Bahrain, Qatar, Jordan, Afghanistan, Iraq, Turkey & Israel

• COCOMs: JCS, CENTCOM,TRANSCOM, NORTHCOM, JFCOM & EUCOM

• Forward Positioned Construction items in Bahrain; optimized Surface Lift/avoided 1,000 C-17 sorties

• Visited Key Customers CONUS, OCONUS• Actively engaged - VTCs, conferences

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DLA Logistics Operations in OIF:

• Issued 15M gals of Fuel daily – Florida’s use in a day

• Deployed: over 220 Personnel

• Sold $424.4M of MREs…shipped 5.1M boxes …never ran out

• Planned Thanksgiving & Christmas meals …$5.6M; positioned Religious Meals, Koshers/Halals …$2.5M

• Food for 35 Dining Facilities: $800K/day …in Feb 04: $2M/day

Supporting the Global War on Terrorism

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• Issued Land, Sea, & Aviation spare parts … totaling $221.4M

• RFID tags written...grew from 500 to over 5000 per/month

• Stocked over 3000 containers of Construction Material forward in Bahrain – valued at $30M

• Depot Ops … building 4500 463L pallets, packing 500 containers per month

• Surged JSLIST, desert uniforms, and SAPI production …contract values over $1.3B and climbing… sales to date $756M

Supporting the Global War on Terrorism

Demand spiked…50-400% for Clothing, Vehicle Parts, Food, Lumber, JSLIST, Medical ; OIF Sustainment and Reset Investment …$4.8B To Date

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Lessons Learned

1. OEF operations in Afghanistan…shaped OIF

– Readied Forces…Enabled Early Sustainment Flow

2. More Collaboration & Definition of Requirements

3. Adaptability…Fog & Friction w/o TPFD (Time-Phased Force

Deployment), but, RFF (Request for Forces) process…allowed for a

rolling start

4. Joint Theater Logistics Process “Evolving”

– Needs standardization, integration across Services

– Need close loop feedback system that provides visibility,

consumption data, and requirements…to solve last tactical mile

5. Investments in Positioned/Forward Stocking …priceless

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More Organic More Commercial

Traditional Organic Support Environment

ContractorResponsibleFor Majorityof Support

Examples:

• Total System Support Responsibility (TSSR)• Industry Partnering• Service Level Agreements• Performance-based Agile Logistics Support (PALS)

One Size Does Not Fit All

DoD Supply Chain & Contract Logistics Support

CONTRACTORORGANIC MIXOrganic Support

Contractor Support

Public/PrivatePartnering

Opportunities

•Prime Vendor Support (PVS)•Contractor Delivery System (CDS)•Performance Plans•MOU with Warfighter

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DLA Initiatives

• Performance Based Agreements• Vendor Initiated Parts Replenishment

• Wal-Mart/DLA Pilot• Forward Stocking• Defense Energy Support Center – Fuel To Iraqi Population• Working The Last Tactical Mile

• Distribution Process Owner Partnership• Deployment/Distribution Operations Center Partnership

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Summary

• DLA Focused on the Warfighter • Critical Combat Enabler … Light and Agile• Improved warfighter support and reduced costs

• 31.5% reduction in backorders and improved readiness (since Oct 01)

• 51% decrease in cost recovery rates• $1.8B back to services FY 04-09

• Strong Support To OIF• Early And Well Planned Forecasting Requirements

Means Better Warfighter Support• Superb Support At Low Cost Is The Key To Future

Success

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Back-up Slides

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Fiscal Year 02 - $500M:• Clothing/Textiles ($150M)

- JSLIST ($164M)

• Subsistence ($73M)• Aviation ($36M)• Land and Sea ($29M)• Medical ($30M) • Construction ($18M)

Fiscal Year 03 - $424M:• Medical Items ($21.4M)• Tents ($21.4M)• Construction ($31.5M)• Cots ($4M)• JSLIST ($77M)• MREs ($250M)• Distribution ($18.7M)

Operation IRAQI FREEDOM … How We Did It

Early & Close Collaboration with OSD and CENTCOM …Early & Close Collaboration with OSD and CENTCOM …

Early Planning + Financial Strategy = Sustainment Success

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Forward Stocking

•Forward Stocking Tenets:• Reduce Strain on Strategic Air Transportation Assets

• Bulk Items and Fast Movers• Reduce Transportation Costs

• Reduce Logistics Response Time

• Reduce Retail Inventories

•Forward Stocking Locations: CURRENT: Germersheim, GEYokosuka, JAPearl Harbor, HISigonella, Sicily

PROPOSED:GuamKoreaSWA

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Distribution Process Owner

• TRANSCOM Designated Distribution Process Owner By SECDEF Summer '03

• Charter In-Progress, Close To Completion• TRANSCOM To "Supervise Execution Of The

Strategic Distribution System" On Behalf Of The SECDEF

• “Coordinate With Military Services, Combatant Commands, Joint Chiefs Of Staff, Joint Staff, SECDEF, Defense Agencies, And DoD Field Activities To Carry DPO Responsibilities.”

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Distribution Process Owner Cont.

• DPO Shall “Make Recommendations To The Defense Logistics Executive (USD AT&L) For Service-Related Equipment, Systems, Processes, And Resources That The DPO Does Not Otherwise Control.”

• DLA Inputs To Charter Via USD AT&L• DLA Membership On DPO Working Groups

Mandated In Draft Directive