© Copyright 2013 Alvarez & Marsal Holdings, LLC. All rights reserved. ALVAREZ & MARSAL®, ® and A&M® are trademarks of Alvarez & Marsal Holdings, LLC.

LOGISTICS & SUPPLY CHAIN MANAGEMENT IN THE MILITARY AND BEYOND –

THE BIG PICTURE Mark F HeinrichRear Admiral, Supply Corps, US Navy (Retired)Managing DirectorAlvarez and Marsal holdings, LLC

February 13th, 2014

© Copyright 2013 Alvarez & Marsal Holdings, LLC. All rights reserved. ALVAREZ & MARSAL®, ® and A&M® are trademarks of Alvarez & Marsal Holdings, LLC.

WE ARE A GLOBAL FORCE… Who is Mark Heinrich

The Navy Today

The Naval Supply Systems Command The Navy Supply Corps

Logistics Challenges

Talent Requirements

Questions for Consideration

Discussion

WHO IS MARK HEINRICH?

3A career that highlights the [continued] importance of San Diego3

46th Chief of Supply Corps &[former] Commander of Naval Supply Systems Command

La Jolla High School – 1975

United States Naval Academy (BS) – 1979

University of Kansas (MS, MBA) – 1989

SIX tours of duty in San Diego

Three ships (USS KINKAID, USS GRIDLEY, & USS CONSTELLATION)

Three staffs (AIRFOR, SURFOR, & NAVSUP Global Logistics Support)

Eight years as a Flag Officer

Retired on 30 November, Joined Alvarez and Marsal Holdings, LLC on December 1st.

• A Lifelong Swimmer

• Who Believes in

• Leadership

• Education

• Communications

• The power of Alignment

• With 20 moves in my 34.5 year Navy career

THE NAVY TODAY

Active Duty:   323,051  Officers:   53,529  Enlisted:   265,075  Midshipmen:   4,447

Ready Reserve:   109,099 [As of Dec 2013 ]  Selected Reserves: 61,432  Individual Ready Reserve: 47,667

Reserves currently mobilized:   3,917 [As of 24 Jan 2014]Navy Department Civilian Employees:   201,000

Ships and Submarines

Deployable Battle Force Ships: 283  Ships Deployed: 85 (30%)  Ships Underway for Local Ops / Training

(USFF / 3rd Fleet): 44 (15%)Ships Underway

  Aircraft Carriers:              USS Carl Vinson (CVN 70) - Pacific              USS Harry S. Truman (CVN 75) - 5th Fleet

  Amphibious Assault Ships:

              USS Boxer (LHD 4) - 5th Fleet              USS Makin Island (LHD 8) - Pacific

Aircraft (operational): 3700+ 

4

NAVSUP…Optimizes the Naval Support Network to meet the Operational Readiness and Quality-of-Life Requirements of our Maritime Forces

5

NAVSUP’S ORGANIZATIONAL FIT IN THE NAVY

NAVSUP Weapon Systems

Support

NAVSUP Global Logistics

Support

NAVSUP Business Systems

Center

Navy Exchange Service Command

Naval Supply Systems Command

(NAVSUP)

NAVSUP Fleet Logistics

Centers

NAVSUP Logistics Operation

Centers

5

NAVSUP is a Lean, Fleet-Focused Organization with Global Reach

NAVSUP WEAPON SYSTEMS SUPPORT (NAVSUP WSS)

6Drives Industry’s Best for the Fleet’s Benefit6

NAVSUP’s Supply Chain Experts

Manages Surface, Submarine, Aviation, Nuclear Platforms Repair Parts, Components and Assemblies

Determines Inventory Investment and Stock Positioning Decisions

Provides Life Cycle Logistics Support for DON and Allied Nations through Foreign Military Sales

Manages Total Ownership Cost Portfolio Reduction Solutions

Creates, Executes Performance Based Logistics (PBL) Contracts

NAVSUP’s Face to the Fleet Products & Services Ammunition Supply Chain Management Contracting Fuel Services Global Logistics Support Global Logistics Planning and

Coordination Hazardous Material Management Household Goods Integrated Logistics Support Material Management Postal Transportation and Distribution Warehousing

7The Tip of the Logistics Spear7

Provides Global Direct Support to Afloat, Expeditionary and Ashore Units

NAVSUP GLOBAL LOGISTICS SUPPORT (NAVSUP GLS)

NAVSUP BUSINESS SYSTEMS CENTER (NAVSUP BSC)

NAVSUP BSC IT Personnel

8Navy’s Premier Information Technology Provider8

Develops, Maintains, Rationalizes, Optimizes and Integrates Business Systems

Sustains Navy ERP

Provides Data Management, Business Intelligence, Enterprise Architecture and Information Assurance Solutions

NAVSUP’s Finance & Logistics Systems Integrator

NAVY EXCHANGE SERVICE COMMAND (NEXCOM)

$67M Revenue40 Lodges$35M Savings

(DOD & Sailors)

$72M Sales$10M to MWR158 Navy Ships

$2.7B Sales93 Store Complexes11 Countries24 States

Navy Exchange Ships Store Navy Lodge

Personal Telecom Uniforms NCTRF

Internet, Cellular Phone Cards

Afloat Phones: 178 Ships

$147M Sales24/7 Call

CenterWeb Store

Uniform R&D Facility

Uniform Testing & Certification

NEXCOM’s 14,000 People Run a $3 Billion Global Retail, Services and Lodging Business

9Delivers Quality-of-Life to Our Sailors & Families 9

THE NAVY EXCHANGE (NEX)

10

THE NAVY SUPPLY CORPS

Connected, global, highly educated, diverse officers aboard:

Every Operational Platform

Every SYSCOM and DLA

Every COCOM

Logistics Professionals leading:

ContractingSupply Chain MgmtFinancial MgmtLOG PlanningFuel & EnergyLOG IT

10

Fe-male; 13%

White, M; 64%

Non-White, M; 23%

War Fighting First – Operate Forward – Be Ready

Surface – Aviation – Sub – EXPED – SPECWAR – GSA

NAVSEA – NAVAIR – NAVSUP – SPAWAR – SSP – DLA

NORTHCOM – SOUTHCOM – EUCOM – AFRICOM – PACOM – CENTCOM – SOCOM – TRANSCOM – STRATCOM – CYBERCOM

11

THE SUPPLY CORPS IS OPERATIONAL

All OPA JO OPAURL - 11XX & 13XX 23,327 42% 47%SC - 3100 2,201 31% 47%ADO/AEDO/AMDO - 15XX 738 26% 47%IDC - 18XX 3,486 23% 29%CEC - 5100 1,269 19% 25%

Operational (%)Community OPA

Supply Corps is the second

most operational community

47% of SC JO billets operational …equivalent to URL

1 of every 3 billets are operational

Every ENS 36 month operational assignment

Warfighters First: SC on 239 ships and in every Expeditionary/Naval Special Warfare Unit

LT Britta Christianson, gold crew supply officer for the guided-missile submarine USS Ohio (SSGN 726), is first female to receive her “dolphins.”

First Female Submarine Officers (Including 7 SC LTs)

12

WE RECEIVE “ON-THE-JOB TRAINING” IN LEADERSHIP

13

THE SUPPLY CORPS’ AND NAVSUP’S CULTURE ARE ALIGNED

13

Using Continuous Process Improvement

Leveraging ERP as the Strategic Platform to Support All Weapon Systems

Maximizing Taxpayers’ Dollars & Creating Value

Exploiting the Power of Actionable Data

Capitalizing on Educated, Experienced Workforce; Backed by Engaged Leadership

Delivering Auditability & Financial Transparency

Fostering Inclusiveness & Stewardship

In Step with SECNAV & CNO Strategic Guidance

Warfighting First, Operate Forward, Be Ready

NAVSUP’S CULTURE – WORLD CLASS ORGANIZATIONS CAN PASS AUDITS

15

EDUCATION REMAINS CRITICAL FOR THE CORPS

15

Karlie Blake – Olmsted Scholar

Heightened criterion for CIVINS Selection (Top 30 MBA and KU)

Training With Industry (TWI) SC most selective board

Shift NR selection to post Op tour with intern board

LOG IT internships

Contract intern payback tours

LDO on-ramp PG opportunity

Executive Training Program

Nearly 100 Percent Supply Corps CAPT and CDR have a Masters or Higher

READY FOR SEA

We are Aligned with the CNO’s Sailing Directions & Tenets:Warfighting First, Operate Forward, and Be Ready!

Focus on Cost-Wise Readiness in Harsh Budget Environment

Value as Navy’s Business Managers

16Ready Where It Matters, When It Matters.16

THE SUPPLY CORPS – TAKE AWAYS

17

CAN YOU SEE THE LOGISTICAL CHALLENGE?

The Kabul Bird Market

18

CHALLENGE: RETROGRADING THE FORCE FROM AFGHANISTAN

 - over 70 bases closed

- 12,000 pieces of Rolling Stock redeployed or retrograded

- 100,000 Twenty Foot Equivalents Units (TEUs) of materiel redeployed or retrograded 

 - 40,000 containers removed from theater

- $260M materiel transferred

- 23,000 contractors reduced (~$3B) / 2,000 pieces of contractor Rolling Stock / 10,000 contractor TEUs of materiel descoped

19

FLY… TRUCK… OR SCRAP?

NAVAL ERP RELEASE 1.1 BUSINESS PROCESSES

20

Five Main Elements of Supply Chain Integrated in Release 1.1

What Made Us Successful

21

Demonstrating Senior Level Commitment

Establishing Well-defined Transition Plans

Assigning Local Ownership of Training

Establishing Centralized War Rooms

Conducting Training Close to ‘Go Live’

Understanding and Preparing Data

WHAT MADE OUR ERP SYSTEM SUCCESSFUL

22

SUPPLY CORPS TALENT REQUIREMENTS

Must be U.S. citizen

Open to men and women

Minimum of Bachelor of Science/Arts degree

with 2.5 GPA

Degrees in business or Science, Technology,

Engineering and Mathematics (STEM)

concentrations are preferred, but not required

Minimum Officer Aptitude Rating of 35

Must be commissioned by age 29 but can be

waived up to age 31 for those who possess

particularly exceptional qualificationsContracting officers need math, technical & analytical skills

© Copyright 2013 Alvarez & Marsal Holdings, LLC. All rights reserved. ALVAREZ & MARSAL®, ® and A&M® are trademarks of Alvarez & Marsal Holdings, LLC.

QUESTIONS FOR CONSIDERATION

We’re not auditors, but we need to understand Audit procedures

Everyone isn’t an ‘IT’ expert, but everyone needs to embrace and master our SAP ERP system… and also the concept of SaaS

How important is Lean Six Sigma to improving BOTH our processes and our culture?

DISCUSSION

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Discussion