Chapter 15
LOGISTICS
MEETING THE LOGISTICS MANAGEMENT CHALLENGE
In this continuing era of downsizing, privatizing, and restructuring, the Department's aggressive initiatives to reduce infrastructure costs while optimizing logistics support are beginning to bear fruit. The 1996 version of the Defense Logistics Strategic Plan outlines the goals and objectives that the Department is pursuing to meet this challenge.
REDUCING LIFE-CYCLE COSTS OF WEAPON SYSTEMS
The Department's challenge of not just maintaining, but improving levels
of support required by U.S. combat units, is intensified by the critical
need to generate the funds necessary to accomplish much needed modernization.
Consequently, the Department is pursuing a wide variety of initiatives to
reduce weapons systems life-cycle cost. One of those is a new program being
established to use technology to reduce the cost of ownership for in-service
weapon systems and equipment. The Office of the Deputy Under Secretary of
Defense for Logistics is currently developing an implementation plan for
that program. Other initiatives include:
DoD has supported acquisition reform through both the rewrite of the DoD 5000 series acquisition regulations and the Defense Standardization Improvement Council's action to eliminate or reduce government dependency on the use of military specifications and military standards. DoD logisticians have been especially involved in rewriting relevant military standards in the packaging policy area to clearly indicate the preference for commercial type packaging for many items DoD purchases. The new packaging policy standard practice will require military level packaging only for items in extreme cases, such as long-term storage or unprotected outdoor environments. The new marking standard practice will focus only on what information DoD needs to clearly identify distribution of materiel during operations, and not on details of how to provide the marking and labeling. Gone are the specific requirements for unique marking for subsistence, ammunition, and medical materiel. Both documents were briefed to the Defense Standardization Offices in December 1996. They will undergo final government and industry coordination and will be published by April 1997.
STREAMLINING LOGISTICS INFRASTRUCTURE
Reducing the cost and size of the logistics organizations is a major strategic goal of the Department. With the reduction in force structure and peacetime logistics workload, the Department has implemented policies, procedures, and methods which minimize the structural overhead of logistics.
Secondary items of inventory and the space required to store them are major elements in the logistics structure. The Department has exceeded its reduction goals in these areas. From FY 1989 to FY 1995, the last year for which data is presently available, the Department reduced its secondary inventory 35 percent, from $107 billion to $69.6 billion in constant 1995 dollars. Further reductions will leave an inventory of approximately $55 billion by 2001 in constant 1995 dollars. Disposal actions, handled by the Defense Reutilization and Marketing Service (DRMS), increased from $8.4 billion in FY 1989 to $26.4 billion in FY 1995. DRMS managed this workload increase while reducing processing sites by 9 percent and limiting workforce growth to 4 percent.
From September 1992 to September 1996, the Department reduced occupied storage space 44 percent, from 631 to 353 million cubic feet. Storage capacity declined 32 percent, from 788 to 532 million cubic feet, and storage locations decreased from 57 to 34 during the same period. The Base Realignment and Closure Report 95 will further decrease the total number of storage sites to 19 by the end of FY 2001.
The Department continues to implement successful business practices from industry and expand best processes from within DoD. To obtain the substantial reductions in administrative costs and response times available through the government-wide purchase card, nonessential technical screening requirements were removed for purchase card buys up to $2,500. The Defense Logistics Agency (DLA) expanded its commercial distribution programs for medical and subsistence items and initiated a program to obtain quantity discounts for purchases of vehicle parts made using the government-wide purchase card.
REDUCING LOGISTICS RESPONSE TIMES
To achieve the quality support needed to support smaller, more agile forces with less infrastructure, the Department is continuing an initiative to reduce logistics response times. Logistics response time measurement is a customer-oriented technique used to document actual delivery times to military customers for materiel requisitioned through the DoD logistics systems. By reducing response times, the Department aims to maintain the current high readiness rates for less cost, increase customer confidence in the DoD logistics systems, and reduce the need to carry inventory, particularly at the customer level.
Because it is difficult to manage what is not measured, an important part of the initiative is directed towards increasing the accuracy and timeliness of response time measurements and reports. Significant progress has been made in identifying data collection and reporting weaknesses, and corrective actions are in process. New standard response time measurement segments have been defined, and system changes are underway to expand data collection. Outdated reports were earmarked for elimination and more useful ones are being developed with a goal of increasing data integrity. The Services submitted retail stock fill data that was utilized to make a preliminary assessment of the impact of the requisitions that are satisfied from local stocks on overall response times. DLA expanded the Logistics Information Processing System capabilities of the Defense Automated Addressing System Center to report on the performance of all segments of the logistics pipeline for items managed/requisitioned by all DoD components.
Each of the Services and DLA have established individual programs and organizations to accelerate response times within their control. A DoD-wide Logistics Response Time Executive Level Steering Group and Process Action Team are coordinating efforts and addressing systemic issues. An evaluation of the Department's uniform materiel movement and issue priority system led to an initiative to rectify inequities in the assignment of materiel distribution priorities among the components. A draft revision to this system has been developed and is being coordinated among DoD components. This change will establish and implement faster distribution time standards to provide better service to military customers, similar to private sector companies.
Studies to improve both intermediate and depot repair cycles have led to new initiatives to reduce repair cycle times and costs by revising repair cycle metrics, improving repair cycle performance measurements, and increasing the responsiveness of repair actions to customer requirements. A simulation model was developed to provide a management tool for making better decisions on when it makes economic sense to spend more to accelerate distribution times in order to reduce inventory investment costs. Response time goals have been updated to reflect expectations for further improvement.
TOTAL ASSET VISIBILITY
Total Asset Visibility (TAV) is the ability to gather information from DoD systems on the identification, quantity, condition, location, movement, and status of materiel, units, personnel, equipment, and supplies anywhere in the logistics system at any time, and to apply that information to improve logistics processes. DoD has expanded TAV to include all classes of supply, units, personnel, and medical patients. TAV provides an essential management tool to customers, item managers, weapon system managers, and commanders in chief (CINCs) to move and redirect materiel, to redistribute items, to view forces flowing into theaters, and to optimize overseas stock positioning.
Further, TAV is a key ingredient of the Chairman of the Joint Chiefs of Staff focused logistics concept for the future. Developing a capability to provide the CINC/Joint Task Force (JTF) commander visibility over incoming, in place, and outgoing materiel, supplies, and personnel is critical to the United States' ability to fight and win. The Joint TAV Implementation Plan provides the broad architecture for this capability. The benefits for U.S. warfighters are clear and include common in-transit visibility technology, one complete picture of the provider-to-user pipeline, lower in-theater inventories of spares, smaller logistics footprint, and equal or better mission capable rates. The United States is committed to both battlefield distribution as the foundation for providing effective support to the warfighting CINCs with TAV as an enabling technology.
A Joint Total Asset Visibility (JTAV) charter assigned specific responsibilities for implementing JTAV to the Army as DoD's executive agent. A JTAV Implementation Plan defines the actions and milestones to achieve the desired capabilities.
DoD has long recognized that wholesale visibility and redistribution of retail assets has a force multiplier effect in the defense supply system. When the wholesale inventory control point (ICP) has visibility of retail assets, excesses in one Service are immediately visible and can be purchased back for reuse. Additionally, when wholesale assets are in short supply, the wholesaler can buy back retail assets across Services to fill high priority requirements that otherwise would have been backordered. This improves readiness with no additional cost by reducing logistics response time for high priority requisitions. Critical to this process is an interservice agreement to release retail assets for other Service high priority requirements. Intercomponent business rules have been established, and the Department is reaping the benefits of DLA's visibility and redistribution of Service-owned retail consumable assets. This year the Department will expand this visibility and redistribution capability to repairable assets.
Service ICPs will have visibility of other service retail assets, and business rules are already in place for releasing retail assets for other Service high priority requirements. The rate limiting step will be the release of software systems to comply with TAV requirements and business rules. The plan is to have all Services operational by July 1997. The Advanced Traceability and Control (ATAC and ATAC PLUS) systems are being utilized to track reparables from the point of breakdown until delivery to the depot. Commercial Asset Visibility (CAV) was named as the migration system for controlling assets in repair for commercially repaired depot level reparables. CAV II has been implemented at 185 Navy contractor sites and nine Army contractor sites. The JTF Logistics Management Information System was successfully demonstrated during the Operation Joint Warrior Interoperability Demonstration 95.
Intransit Visibility (ITV) is a critical piece in the JTAV challenge. Efforts to attain ITV are proceeding on schedule, with the Defense Intransit Visibility Integration Plan already developed and approved. The United States Transportation Command (USTRANSCOM)-developed Global Transportation Network (GTN) is the centerpiece of DoD's ITV efforts. The GTN development contract has been awarded, and the initial design and joint program reviews have been conducted. GTN Initial Operational Capability (IOC) is scheduled for early 1997; however, a portion of this capability is being fielded early to support Operation Joint Endeavor redeployment.
The Army is DoD's Executive Agent for Automatic Identification Technology (AIT). A dual standard was established for two-dimensional bar codes for logistics labeling and electronic commerce application. As a preliminary step to establishing the DoD radio frequency (RF) standard, a draft request for proposal was sent to vendors to initiate an RF device procurement. In cooperation with the American National Standards Institute (ANSI), the JTAV Office is also developing a standard for RF tags and readers. They have developed an interim JTAV RF tag format, and USTRANSCOM has agreed to use ANSI RF interrogators at selected sites. Additionally, RF technology is being employed for shipments to Bosnia. DLA has incorporated the Automated Manifest System laser optical card functionality into the distribution standard system to enhance ITV and has begun field implementation at several sites.
Joint Personnel Asset Visibility (JPAV), the personnel module of JTAV, is being operationally tested in Europe in support of Operation Joint Endeavor. This system provides the JTF commander and the CINC with visibility of all personnel assigned to a particular contingency. This provides the commander with not only the numbers of forces deployed, but the specific attributes associated with the force, for example, language skills, occupational skills, and such. Concurrently, a noncombatant evacuation (NEO) tracking systems, a subset of JPAV, is being demonstrated in Korea as a proof of concept prototype. This system provides the JTF commander with a means to account for and track noncombatants throughout the duration of a NEO operation. The JPAV medical initiative for patient tracking is prototyping an interface with the USTRANSCOM Regulating and Command and Control Evacuation System (TRAC2ES). These three systems provide visibility over where U.S. forces and other individuals are located.
PRIVATIZATION AND OUTSOURCING
Last year, the Department launched efforts to identify opportunities for improving support processes and reducing the logistics infrastructure by outsourcing and privatizing selected logistics functions. This effort is part of a comprehensive logistics reengineering effort intended to meld the best capabilities of DoD and industry into an efficient and responsive support structure with the flexibility to meet worldwide logistics requirements well into the 21st century. Outsourcing and privatization are not being pursued as special initiatives, but as integral elements of a comprehensive strategy to introduce greater competition into logistics business areas to eliminate inefficient duplications between DoD and industry, create unrivaled support structures, and generate savings for the Services to fund modernization and other priorities.
During FY 1996, the Services and DLA examined materiel management outsourcing opportunities in detail. Outside consultants performed comprehensive business case analyses to evaluate opportunities for improving processes and reducing costs of operations through outsourcing and reengineering strategies. DLA has started implementing the recommendations of these studies in the areas of the DRMS, distribution depots, and cataloging and will continue to expand its successful private sector-based practices of direct vendor delivery, prime vendor, and other commercial practices. DLA awarded a Virtual Prime Vendor (VPV) contract in October 1996 to provide all parts and logistics support to selected depot maintenance lines. Under VPV, the contractor is responsible for total logistics support to the selected facility to include wholesale item management, forecasting, and direct delivery of materiel to the customer when and where needed. The Services have completed materiel management outsourcing analyses and are in the process of evaluating candidate proposals to ensure they are economically and operationally sound before beginning implementation.
The Assistant Deputy Under Secretary of Defense (Transportation Policy) and USTRANSCOM established a comprehensive action plan to reengineer the Department's transportation processes. They established and published a portion of this greater effort, a transportation acquisition policy, to streamline and achieve consistency, efficiency, and flexibility in transportation contracting processes. Further, two pilot programs have been initiated to test new procurement and operational concepts to reengineer and outsource the DoD personal property shipment and storage program. In both cases, DoD will rely heavily on commercial practices and capabilities to accomplish critical transportation missions.
Although use of contractor support for depot maintenance activities will be strongly pursued to the extent allowed by law, the integrity of the DoD depot maintenance core capability will be maintained to meet essential wartime surge demands, promote competition, and sustain institutional expertise.
DOD DEPOT MAINTENANCE CORE POLICY
Depot maintenance core is the capability maintained within organic defense depots to meet readiness and sustainability requirements. Core capability exists to minimize operational risks and to guarantee required readiness. Core depot maintenance capabilities will comprise a ready and controlled source of required technical competence. Depot maintenance for the designated weapons systems will be the primary workloads assigned to DoD depots to support core depot maintenance capabilities.
Once minimum depot maintenance core capability is established, remaining workloads will be accomplished so that DoD obtains best value. This necessarily involves consideration of not only commercial sources of repair but also economic use of organic capacity (for example, efficient peacetime use of those capabilities established to support core capability requirements). It may also involve having organic depots compete with private sector firms. In addition to considering cost, achieving best value requires the Department to take into account factors such as past performance, reduced cycle times, reduced pipeline costs, alternative replacement of parts, and other practices focused on providing a more effective end result.
DoD is promoting the reengineering of business practices in conjunction with
future consolidations, transfers, and competitions of depot maintenance
workloads.
LOGISTICS BUSINESS SYSTEMS
Current DoD strategic planning places emphasis on rapidly deployable, tailored joint forces. New logistics business processes require cross-functional information sharing. Much of the needed information is not shared between government and industry information systems. The logistics community and the warfighters must be linked to share needs, requirements, and capabilities.
This Seamless Logistics System is a group of systems composed of mission and support applications, supported by shared data and electronic commerce standards, and linked by the National Information Infrastructure and the Defense Information Infrastructure. The defining characteristic of this new logistics system is the transition from delivery of logistics support through massive, rigid support structures to delivering logistics support through lean inventories and agile infrastructure. Rather than relying on the staging of massive amounts of materiel at fixed echelons of support, this new system relies on agility and knowledge to acquire and move materiel to the end user within a user-specified or accepted period of time.
The Seamless Logistics System will reach back from the battlefield to not only DoD facilities, but also to the private sector as well. As new weapon systems are delivered, their data will be delivered in place by Contractor Integrated Technical Information Systems and made available to the operating and logistics forces through the National Information Infrastructure. Other initiatives such as DLA's Direct Vendor Delivery program will move responsibility for a significant portion of materiel management support back to the private sector. The success of these programs, designed to interweave the private sector into the overarching logistics infrastructure, is highly dependent on a robust integration with private sector processes and systems. By sharing data across the public and private sectors, supply chain management can be used to drive down cost, improve quality, and increase performance.
The primary mechanism to enable the new logistics information sharing environment is the concept of a common/standard operating environment (COE/SOE) that provides a reusable set of common software services via standard Application Program Interfaces (APIs). By building modular applications that use a common software infrastructure accessed through a stable set of APIs, as well as a standard integration approach, developers should be able to plug and play their applications into a centrally maintained infrastructure. The use of the standard APIs allows mission applications to be quickly integrated and updated relatively independent of each other. The concept allows developers to concentrate their efforts on building mission area applications rather than building duplicative system service infrastructure software.
The initial construction of the COE is being accomplished with the deployment of both hardware elements and basic standard operating and other support software. Initial application software components of the COE are those elements of the materiel management, depot maintenance, Joint Computer Aided Acquisition and Logistics Support (JCALS), Joint Engineering Document Management Information and Control System (JEDMICS), and other development processes identified by the Services and DLA as being necessary to the new business orientation of the logistics support process. For example, 23 transportation systems have been approved for consolidation and integration. The funding which would have sustained the older, less capable systems is now being used to develop the systems required to accomplish strategic force projection. One of the most critical transportation systems is the Transportation Coordinator Automated Information for Movements System II (TC AIMS II), a joint Service system under development by the designated lead agent, the Army. TC AIMS II will provide critical transportation deployment and redeployment data for planning and execution purposes, feed ITV visibility data, and integrate unit and base level transportation processes. The current Service and agency legacy processes, which are still needed, are being made compatible for operation within the COE in conjunction with these new application processes.
CONTINUOUS ACQUISITION AND LIFE-CYCLE SUPPORT
Continuous Acquisition and Life-Cycle Support (CALS) is a core strategy to share integrated digital product data through a set of standards to achieve efficiencies in business and operational areas. Implementation of the core strategy will enable the realization of integrated enterprises and virtual enterprises between DoD and industry. The CALS strategy is being implemented throughout DoD and industry, as well as being embraced internationally in Europe and the Pacific Rim countries. Many diverse organizations are using the CALS strategy and related technologies to improve business performance. These range from governmental organizations to large defense contractors to numerous small and medium-sized enterprises. Building on the successful implementation of the CALS strategy in the Army's Combat Mobility System, other weapon system programs like the C-130 and the F-15 are under near-term consideration for CALS implementation. The DoD CALS-sponsored Integrated Data Environment (IDE) Benefit Assessment Tool is nearing completion and will allow the measurement of actual costs and benefits of IDE implementations.
The CALS Thrust Team effort has focused on exploiting improved business processes that take advantage of the efficiencies to be gained through the use of digital data. Multiservice functional products such as the Interactive Electronic Technical Manuals for truck vehicles used by the Army and Marine Corps are one example. There are also DoD/industry demonstrations of reengineered processes such as the joint Contractor Integrated Technical Information Systems project between McDonnell Douglas Aerospace and the Navy/Air Force. This project provides reengineering to the business processes for locating/modifying contractor-held technical data, interfacing government and contractor systems, and reviewing and approving data products/deliverables.
CALS International Activities
The trilateral forum, led by the Under Secretary of Defense (Acquisition and Technology), identified and initiated a program for electronic classroom development and sharing for the LM-2500 engine, used in the Aegis cruiser and other ships by Canada, the United States, and Australia. There is also a shared development project for C-130J drawings between Canada and the United States. The United States has digitized some C-130J drawings, and Canada has developed a digital index for those drawings. The project incorporates the best of what both countries have already invested in to avoid duplication of work.
The CALS office is demonstrating the use of the United Nations' Rules for Electronic Data Interchange for Administration, Commerce, and Trade (UN/EDIFACT) in support of Electronic Data Interchange (EDI), an internationally accepted standards set in the areas of transportation, procurement, and fuels management. Each activity which promotes the implementation and acceptance of the CALS strategy in the international arena helps to achieve international standardization digital profiles worldwide.
CALS Process Change/Acquisition Reform Initiatives
In addition to promoting and facilitating the use of digital technologies in DoD's business processes, the DoD CALS office has aggressively pursued process change initiatives in the Configuration Management (CM), Technical Data Management, and the Engineering Drawing and Technical Data Package programs. Significant advances have been made in adopting performance requirements and commercial processes in these areas.
A joint industry/government effort completed development of an interim commercial standard for CM, ultimately issued in August 1995. Work is continuing with industry to transition this standard into an ANSI standard. In addition, the CALS office has been leading a multiyear effort with industry and the Services to generate an interface standard that will allow industry to use any data base tool to maintain its CM information and still be able to provide the needed information to populate DoD CM databases. DoD is preparing a handbook that emphasizes process assessment, rather than product inspection, and integrated product development, in keeping with the acquisition reform/performance-based environment. DoD mandatory requirements for specification content have been converted to guidelines for specification content, which allow industry to use its own compatible specification preparation practices.
The Department is in the process of overhauling its technical data acquisition procedures and guidance to more fully implement acquisition reform and support the application of digital data technologies to all related DoD business processes. Between 1995 and 1996, the Department reduced the paperwork burden placed on defense contractors for deliverable data products by 39 percent, from 127 million to 77 million burden hours. The Department anticipates further reductions in 1997 through additional requirements consolidation, application of electronic technologies, and business process reform.
A multiyear effort to promote the development of industry standards on engineering drawing practices is nearing completion. These industry standards allow DoD to identify and document those drawing practices that are unique and necessary to DoD business functions and processes. This allows DoD to concentrate on reducing the number of these processes even further. DoD has issued new policies to promote and expedite the acquisition and use of digital data through electronic delivery and on-line access.
Virtual Enterprise
As a result of major changes taking place in industry, the Department has embarked on a research effort that will focus on the virtual enterprise as it applies to depot maintenance operations and management. Primary examples of change are a marked increase in outsourcing, reduction in the number of suppliers, increased reliance on noncontractual coordinating mechanisms such as bilateral access to proprietary data, managers working full-time in another firm's plant, and long-term exchange of guest engineers. These and similar trends describe the commercial virtual enterprise. It is not at all clear, however, how far the commercial virtual enterprise examples can be extended to depot maintenance or other related functions. There is high interest in virtual management approaches for joint DoD operations, especially for functions like single or integrated managers for depot maintenance. What is needed is a pragmatic, operational characterization that can guide both the long-term vision and an informed implementation policy. The research effort will determine an appropriate role for virtual enterprise management approaches in depot maintenance and could lead to a future demonstration.
REENGINEERING TRANSPORTATION
In May 1995, the Deputy Secretary of Defense approved the establishment of a task force to reengineer the Department's transportation process. A critical first step was the approval of the following Transportation Vision for the 21st century: a world-class, globally capable, intermodal transportation system that is responsive, efficient, fully integrated, and in partnership with industry -- ensuring readiness, sustainability, and quality of life.
The task force approved three major transportation processes to be reengineered: transportation acquisition, transportation financial process, and transportation infrastructure. They established integrated product process teams (IPPTs) to address major initiatives within each process. The IPPTs used two guiding principles of the transportation reengineering initiatives: warfighting effectiveness is paramount, and defense transportation should operate the same during peace and war. Major functional initiatives within these processes are establishment of the Joint Traffic Management Office, development of the first transportation acquisition policy, reduction of manpower authorizations (where practical), reduction of Defense Transportation System overhead costs, reengineering of DoD's personal property shipment and storage program, initiatives in developing technology to streamline billing and payment functions with the intent to pay transportation bills quickly and correctly, renewed partnership with industry for passenger travel and small package express delivery, and development of a comprehensive plan for EDI implementation.
In addition to these successes within the scope of transportation process
reengineering, there have been several practical, functional improvements.
They are:
The following objectives support these guiding principles:
Defense transportation, in partnership with the commercial transportation industry, will strive to continually improve its capability to support U.S. peacetime and wartime transportation requirements. The primary focus will be on CONUS-based military forces rapidly responding to a spectrum of activities ranging from major regional conflicts to operations other than war. Throughout the 20th century, in peace and war, the DoD/industry partnership has demonstrated its capability and flexibility in meeting DoD's transportation requirements.
As it enters the 21st century, defense transportation must expect and plan for even greater change. Technological progress, the information revolution, environmental concerns, global mergers and consolidations, diversification, international competition, evolving multinational transportation, and full-service logistics enterprises will challenge the U.S. transportation industry to achieve success in the international marketplace. DoD must preserve and expand the commitments contractually established with commercial partners to ensure the availability and commitment of transportation assets are critical to maintaining defense transportation's future capability.
CONCLUSION
The Department fully realizes that every logistics dollar expended on outdated systems, inefficient organic capability, and excess inventory is a dollar not available to build, modernize, or maintain warfighting capability. During 1996, DoD made great strides in implementing the road map that the Department of Defense Logistics Strategic Plan provides for achieving the improvements necessary to continue a high level of support to U.S. forces into the next century.
