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					Navy 2004 Logistics Conference
Logistics Transformation at DoD


               Mr. Brad Berkson
Acting Deputy Under Secretary of Defense (L&MR)
                 May 18, 2004
              DoD would be like Wal-Mart . . .

                    . . . if Wal-Mart's 3000+ stores moved
                                   . . . if a Wal-Mart stockout
                                           meant that everyone
                                          inside the store could
                                                             die.




        . associates had to random event kind 5 vest
. .... if if Christmas was awear a differentevery ofyears
8/11/2011 1:04 PM                                               2
                         2001 QDR Direction

            • Project and sustain the force with minimal
              footprint

            • Implement performance-based logistics to
              improve readiness for major weapon systems and
              availability of commodities

            • Reduce cycle times to industry standards



           8/11/2011 1:04 PM                                   3
04pm12-3
                    Opening Observations

• We have many supply chains to manage
     – Commercial Commodities (food, fuel, pharma, clothing)
     – Weapon Systems
     – Deployed Land Forces
• Each has different characteristics and requirements . . .
• Need to be tailored to optimize performance . . .
• Consist of multiple chains where the actual tailoring has
  to take place
• DoD’s scale, complexity, and coordination needed,
  provide challenges to fundamental improvements

8/11/2011 1:04 PM                                              4
              Joint Logistics Board Priorities
                                         •   Support current operations
Deployed Forces                          •   Ensure success of the DPO

                                         •   Streamline material flows
Commercial
                                         •   Explore and implement Customer Pay
commodity flows                              opportunities

                                         •   Accelerate Performance-Based
Weapons                                      Logistics (PBL)
Systems                                  •   Develop a way ahead for achieving
                                             maintenance excellence (e.g., Lean)

                                         •   Implement a balanced scorecard and
Infrastructure                               performance metrics
                                         •   Ensure Logistics Enterprise Integration
                                             efforts are coordinated and
                                             interoperable

               Memo to Acting Under Secretary of Defense (AT&L)
                              February 10, 2004
8/11/2011 1:04 PM                                                                  5
                       Comparison Matrix

                    Commercial
Chain               Equivalent          Inventory          Key Data          Flow
Commercial          • Sears             • $12 B            • Shelf demand    • High
commodities         • Wal-Mart          • Fast moving      • ITV             • Continuous
                    • True-Value        • Lower value                        • One way
Major System        • GE turbine         • $66 B           • Shelf demand    • Lower
• End items         • Caterpillar dealer • Slower moving   • ITV             • System
• Repairables       • IBM mainframe • Higher value         • UID               dependent
                                         • Readiness                         • Bi-directional
                                           critical
Deployed Forces     • NO direct         • $???             • Sequence        • Enormous
                    • Process           • DoD              • ITV             • Intermittent
                      industry                             • Real-time       • Multi-
                      indirectly                             system status     Directional




8/11/2011 1:04 PM                                                                               6
                     “Major Land Force Deployment”


                                                             Deployed
                                                            Ground Unit
                                                                          •   Use to close and sustain major
Service ICP                           AOR        AOR
                                                                              ground forces into AOR
                CONUS     Intercon
                                     Organic    Organic
                Organic   Organic
                 Port       Move
                                      Port       Move                     •   Metric: Time to close forces
 Garrison
                                                             Deployed
Ground Unit
                                                                          •   Transformation example: RFID
                                                                              ITV*
                                                            Ground Unit

    PMO
               CONUS      Intercon    AOR        AOR                      •   Leverage point: Improve trust in
              Commercial Commercial Commercial Commercial                     flow capability to allow smaller
                 Port       Move       Port      Move
                                                             Deployed
                                                                              footprint in theater
                                                            Ground Unit
   Vendor




       * RFID tags being seized and reprogrammed by in country forces – need more!

  8/11/2011 1:04 PM                                                                                            7
                      Deployment/Distribution Operations
                      Center-Forward (DDOC-FWD) Pilot
                                                                                         DDOC - FWD
  DPO National                                                                        TACON TO COCOM
    Partners                                                                        - Air         (CJ4)
                                                                                    - Land
                                                                                    - Sea
                                                                                    - Sustainment
       Service
        Reps


DDOC-FWD Mission Statement:
• executes CENTCOM deployment and distribution priorities
• validates/directs mode selection of intra-theater with CFLCC,
  CFACC & CFMCC
• adjudicates identified CENTCOM distribution and intra-theater
  shortfalls
• coordinates for additional USTRANSCOM support
• provides TAV and ITV for inter and intra-theater forces and materiel
• synchronizes effective theater retrograde

                                                                         The missing Theater link
                                                                              until now…
     8/11/2011 1:04 PM                                                                             8
               DDOC–FWD Pilot
               Immediate Impact – 1st Month
• Synchronized strategic air/sea & intra-theater lift: Increased throughput

• Improved readiness by diverting theater assets (track & DLRs)

• Improved customer confidence – collaborative theater environment

• Improved quality and availability of enterprise information

• Reduced operational costs with improved ITV & TAV (19 containers of track
  located & re-directed; over one hundred Class IX containers diverted)

• Accelerated 101st AA div redeployment by weeks

• Accelerated retrograde of DLRs by 900%

• Improved strategic delivery of critical materiel directly to forward units (pure
  pallets to forward warehouses)

 8/11/2011 1:04 PM                                                             9
               Why RFID now?

• Improve business processes
  now
• Drive the direction and cost of
  technology development
• Drive the standards to work
  for us
• Facilitate the implementation
  of Unique Identification
  (UID)

              Set the foundation for future supply chain
                       improvements…TODAY!
 8/11/2011 1:04 PM                                         10
               Passive RFID Requirements

  • Tagged cases and pallets shipped to DoD
    receiving points beginning Jan 2005
  • Tagged packaging for items that require a
    Unique Identification (UID) shipped to DoD
    receiving points beginning Jan 2005
  • Pilots will help determine pace of expansion
  • Tags will be EPC-compliant
          – Initial Implementations: currently available Class 0
            and Class 1, V1 EPC tags
          – When available: Class 1, Generation 2 EPC tags


8/11/2011 1:04 PM                                                  11
         “Commercial Commodity”
                             • Use to flow “consumer goods”
                               (e.g., food, fuel, clothing) to ground
            Army               forces in garrison, sea and air
                       Navy    forces, and depots
                             • Metrics: Availability, customer wait
                               time, inventory turns, log cost %
                               sales
                             • Transformation example: Prime
                   Air Force   Vendor contracts for fuel, pharma,
vendor
                               and bin stock at Depots
                             • Leverage point: Consolidate
                               inventory upstream, vendor direct
                   Marines     delivery of goods to shelf
               Current State: Background
• Thousands of DoD CONUS locations initiate freight movements
  using commercial freight carriers with thousands of destinations.
• Dozens of DoD receiving, storage, and shipment activities across
  the United States consume personnel, funding, inventory and
  time.
• Multiple systems are employed to execute and manage shipment
  activity and operations
      – there is no centralized planning or control
      – systems require stronger linkage and significant resources to operate
• Over the last fifteen years, organizations and processes have been
  aggregated and consolidated without the benefit of a holistic
  analysis which leverages today’s IT processes, commercial
  capabilities, and proven best practices.


8/11/2011 1:04 PM                                                               13
               Defense Transportation
               Coordination Initiative (DTCI)




                    Consolidation
                                                 Break Bulk
                       Points
                                                   Points

                        National coordinator manages DOD
                     transportation, including dedicated truck
Regional                service to leverage “best practices”     Regional
Shipping                                                         Receiving
 Cluster                                                          Cluster
8/11/2011 1:04 PM                                                      14
               Regional Inventory &
               Material Management Project

A pilot program designed to optimize        Pilot Location: San Diego
inventory, reduce material handling and     • Identify opportunities to
reduce customer wait time through             minimize touches
streamlining delivery of parts to end
users.                                      • Identify opportunities to
                                              streamline processes
The pilot will ultimately seek to deliver   • Optimize inventory by relying
the same or better mission capability at      on rapid wholesale response
lower cost.
                                              (vice multiple layers of
                                              inventory)
Improved repair cycle time on DLRs
can potentially reduce spare                • Identify alternative
requirements, resulting in inventory          organizational structures
optimization and cost savings.                (organic and/or contracted) to
                                              execute the streamlined process


8/11/2011 1:04 PM                                                          15
              “Weapons System Service Provider”
                                                    User




                                            •   Use to provide weapons systems availability
                           Local
                                            •   Metric: Mission capability, operating $/hour
                                            •   Transformation examples: Navy APU Cherry
                                                Point, JSTARs, C-17
                                            •   Leverage point: Have each PM design
                     ICP
                                                system’s supply chain to optimize its flow
                                                given the significant inherent variations (e.g.,
                                                submarine vs. radar)



                                   Vendor

Depot


 8/11/2011 1:04 PM                                                                        16
                                                    Weapon System Sustainment
                                                    Roadmap
                                                                                                                       Number of Partnerships
                                           PM accountable for life                                                       (1998 & 2002)
                                            cycle                                                         45

                                           JROC established
                                                                                                          40
                                                                                                          35
                                            sustainment requirements                                      30




                                                                                                 Number
                                           Enabling Depot                                                25
                                                                                                          20
                                            legislation                                                   15                                               • Joint Strike
                                           Revised Maintenance                                           10                                                 Fighter
                                                                                                          5
                                            Policy                                                        0                                                • Future Combat
                                                                                                               Army        Navy      Air Force   Marines
                                           Industry Supply Chains                                                                                           System
                                           Reengineered Training
                                                                                                                             1998   2002
                                                                                                                                                           • Advanced
                                                                                                                                                             Amphibious
          Historic                                                                                                                                           Assault Vehicle   • Warfighter-driven
•   Suppressed Readiness                                                                                                                                                         readiness
•   Marginal reliability                                                                                                                                                       • Ultra-reliability
•   Fractionated Accountability                                                                                                                                                • Clear PM
•   $67B/year                                                                                                                                                                    accountability
•   Huge footprint                                                                                                                                                             • Minimal
                                                     PBL Implementations                                                                                                         Footprint
                                           100
                                            90
                                                                                                                                    Financial Reform (PR05)
                 Cumulative PBL Programs




                                            80
                                                                                           85
                                                                                                                92                  Single-line Accounting
                                            70
                                            60                           71                                                         Life Cycle Cost
                                            50
                                                       57                                                                             Management
                                            40
                                            30                                                                                      • Operational requirements
                                            20                                                                                        synchronized with PBBS
                                            10
                                             0
                                                     2002              2003*             2004*                 2005*
2000                                         * Projected PBLs Based on Approved Service Plans                             2005                                                            2015
                                                                                                                                                                                          17
      8/11/2011 1:04 PM
              DoD Vision for Item Marking:
                          UID
To implement a policy establishing a strategic imperative
   for uniquely identifying tangible items relying to the
   maximum extent practical on international standards
   and commercial item markings and while not imposing
   unique government data requirements.

Uniquely identified (UID) tangible items will facilitate
  item tracking in DoD business systems and provide
  reliable and accurate data for management, financial,
  accountability and asset management purposes.

8/11/2011 1:04 PM                                          18
                   Performance-Based Logistics
                                                            Oversight via
                         Oversight via
                                                            DAB/DAES
                         R-TOC Forum



                                                             New program
                            30 Pilot                        implementation
                           Programs

                                                              Quadrennial
                                                             Defense Review
                                                            •   Performance-Based Logistics
  Reengineer                             Lessons            •   Legacy Systems
Product Support
                         Operational     Learned            •   FY03 DPG
                                                            •   Service Implementation Schedules
                        Demonstrations   Adjustments
                                                                    •   CY02/03 PEO/SYSCOM
                                                                    •   PM Roundtables
                          A joint, disciplined program to           •
                                                                    •
                                                                        AIA Product Support
                                                                        Industry/Government
                          successfully implement PBL!                   Tiger Team
                                                                                       19
    8/11/2011 1:04 PM
               PBL Programs & Partnerships
               in Support of GWOT
                                                                                         PBL Performance
 JSTARS      B-2                                                       100
                         F/A-18 E/F
                                                                         90




                                               Mission Capable Rates
                                                                         80
                C-17
  F-117                                                                  70
                                                                         60
                                                                         50
 AWACS                                                                   40
                       Common Ground Station                             30
                                                                         20
                                                                         10
                    Deliverin
                                                                           0
                        g                                                       F-117     FA-18E/F   AV-8B   F-14D    F-15C/E       F-16C

                    Capabilit                                                           PBL                   Traditional Support

                    y NOW!
                                                                               Figure 1 – PBL programs achieved readiness during OIF
8/11/2011 1:04 PM                                                                                                                    20
                    Why does the warfighter like
                    PBL programs?
 F/A-18 SMS - Availability Was 65% ... Now 98%
 Tires - Availability Was 81% ... Now 98%
 ARC-210 Radio - Availability Was 70% ... Now 85%
 APU - Availability Was 65% ... Now 90%
 F-14 LANTIRN - Availability Was 73% ... Now 90%
 H-60 Avionics - Availability Was 71% ... Now 85%
 F/A-18 C/D - 67% Availability ... F/A-18 E/F FIRST - 85%


                                              Improves Readiness
 PBL
                                               Lowers Total
WORKS!                                        Ownership Costs

8/11/2011 1:04 PM                                               21
                 PBL Vs. Organic Repair

PBL                           Organic Repair
 Parts Cost: $300,000         Used Parts: $120,000
 Labor & Admin Costs:         Labor & Admin Costs:
  $34,000                       $34,000
 Total Cost: $334,000         Total Cost: $154,000
 Average Life: 2,000 hours    Average Life: 375 hours
 Cost per hour: $167          Cost per hour: $411




 8/11/2011 1:04 PM                                        22
                  Future System Sustainment
                                        Real-Time System
                                          Status (CBM+)
  Industry/Government
                                         Performance-
                                        Based Logistics

                                        Weapon System
                                          Manager                      Force Provider
    Partnerships

    Ensure system is                                                      Provide continuous,
  sustained at optimum                                                    reliable, affordable
          level                                                                 support
Acquisition                                             Sustainment                   Disposal
                         Visibility into cost/risk decisions across life cycle

  8/11/2011 1:04 PM                                                                       23
                      Providing operational availability; not parts.
                       Enterprise Integration
                               Logistics Balanced Scorecard
                                Synchronized to DoD BSC
                                                                          Warfighting Perspective
                                                                        Warfighting Perspective
                                                                 Provide optimum responsive logistics
                                                                 support to the joint warfighter to ensure:

                                                                 • An immediately employable force option
                                                                 • A rapidly deployable capability
                                                                 • A sustainable total force



                              Innovation & Learning Perspective
                                  Innovation & Learning Perspective                                          Logistics Process Perspective
                                                                                                          Logistics Process Perspective
                              Ensure a capable workforce responsible                                   Provide effective logistics chain
                                for meeting the warfighter logistics              Vision
                                                                                                       performance and capacity while reducing
                                                                                   and
                                support requirements to include:                 Strategy
                                                                                                       the logistics footprint to include:
                              • Introduction of leading edge advanced
                                concepts                                                               • R&M, Leveraging Global Industry, IT
                              • Organization adaptability                                                Improvements, and Commercial
                              • Workforce shaping                                                        Advances


                                                                   Resource Planning Perspective
                                                               Ensure affordable logistics support through
                                                                 resources and choices that enable effective
                                                                 joint warfighter capability to include:
                                                               • Accurately forecast and identify logistics
                                                                 requirements
                                                               • Identify and understand the risks associated
                                                                 with logistics resource allocation

Enterprise Architecture                                                                                                                  Portfolio Management
                                                                                                              DUSD(L&MR)
                                                                                                                Memo                     DUSD (L&MR) Guidance & Oversight/Integration
                                                                                                          • Achieve FLE
                                                                                                          • Streamlined Systems
                                                                                                          • Efficient Systems
                                                                                                          • Integrated Knowledge
                                                                                                            Base          July 2002
                                                                                                                                                 Component
                                                                                                          • Interoperable
                                                                                                                           July 2002           Execution Plans                 Execution
                                                                                                            Systems
                                                                                                                                               • Milestones
                                                                                                                                                                                 And                  FLE
                                                                                                                                               • Schedules/Brown Out
                                                                                                                                                                              Modernization
                                                                                                                                               • Critical System/
                                                                                                                                                 Database Information
                                                                                                                Component                        (IT meta data)
                                                                                                                                                                                 • Evaluate Logistics AISs
                                                                                                                 Strategies                                                        and Databases
                                                                                                                                                               January 2003
                                                                                                                                                              January 2003
                                                                                                      •   Management Approach                                                    • Identify Systems to be:
                                                                                                      •   CIO Interface
                                                                                                      •   Evaluation Criteria                                                         Eliminated

                                                                                                      •   Process Methodology                                                         Sustained
                                                                                                      •   Metrics                                                                     Integrated
                                                                                                      •   POM Considerations

                                                                                                                        August 2002


 8/11/2011 DoD PM
   Leading 1:04 Enterprise Integration                                                                                                                                       24
                                                                                                                                                   Streamlined Portfolio Management
                   Enterprise Integrated Data
                   Environment (EIDE)

Provide an enhanced environment
that enables the DoD Logistics
Enterprise to execute practices,
processes, applications and
decision support tools to achieve
logistics interoperability and allow
for information exchange within and
between internal and external DoD
business partners.

   - Non-system dependent transactions
   - Consolidation and reuse of
Interfaces
   - Data integration/sharing
   - Leverage Modernization Efforts
   - Data Standards not Standard Data



    8/11/2011 1:04 PM                           25
                   DoD
                   Logistics Strategic Objectives
                                                   Warfighter Perspective*

                                            Provide optimum responsive logistics
                                            support to the joint warfighter to ensure:

                                            • Immediately employable force options
                                            • A rapidly deployable capability
                                            • A sustainable total force



                 Workforce                                                                      Logistics Process Perspective

 Ensure a skilled capable workforce                                                      Provide effective logistics chain
   responsible for meeting the warfighter                                                performance and capacity while reducing
                                                               Vision
   logistics support requirements to                            and
                                                                                         the logistics footprint to include:
   include:                                                   Strategy
 • Introduction of leading edge advanced                                                 • Reducing cycle time, improving
   concepts                                                                              effectiveness, improve product quality,
 • Organization adaptability                                                             leveraging IT improvements and
 • Workforce shaping                                                                     Commercial Advances


                                                     Resource Planning Perspective

                                            Ensure affordable logistics support through
                                              resources and choices that enable effective
                                              joint warfighter capability to include:
                                            • Accurately forecast and identify logistics
                                              requirements
                                            • Identify and understand the risks associated
                                              with logistics resource allocation
                                            • Improved cost predictability and constrained
                                                                                                          JLB Approved Aug 03
                                              cost growth.
8/11/2011 1:04 PM                                                                                                                  26
                        Logistics Transformation
         Mass-Based                     Just-in-Time               Sense and Respond




 More is better
                                  Precision is better
 Mountains of stuff measured                                     Agile is better
  in days of supply               Reduce Inventory to a
                                                                  Dynamically positioned
                                   minimum and keep moving
 Uses massive inventory to                                        Inventory throughout
  hedge against uncertainty in    Use precise demand
                                                                  Use transportation
  demand and supply                prediction and optimization
                                                                   flexibility and robust IT to
                                   to reduce uncertainty
 Mass begets mass and slows                                       handle uncertainty
  everything down                 Works great, except when it
                                                                  Supports adaptive
                                   doesn’t
                                                                   operations
  Prime Metric: Days of supply      Prime Metric: Flow Time           Prime Metric: Effects


              Migrating to the Force-centric Logistics Enterprise
    8/11/2011 1:04 PM                                                                   27
                              The End Game




                           Ubiquitous, cost-effective capability
            8/11/2011 1:04 PM
                              to project and sustain power.        28
04pm12-28
                    Backup/unused slides




8/11/2011 1:04 PM                          29
                    Single Point of Entry (SPOE)

   • A common way to exchange information with the
     Logistics Domain from modern weapons
     platforms and it’s suppliers via an Integrated Data
     Environment (IDE) at the process level not the
     system interface.
      ALIS - OEM




8/11/2011 1:04 PM                                          30
                                                                Where NAVICP Is Today
NAVAL SUPPLY SYSTEMS COMMAND                                                                                        42K Items,
                                                                                                                  12% of total obs
                                                                                                                     Covered
                                      $M         NAVICP PBL Obligations
                                      $700
                          200         $600                                               $578
                                                                                                          Awarded PBLs
                                                                             $486 $525
                          180         $500                                                                                  156
                          160
 # of Contracts Awarded




                                      $400                            $331                                            138
                          140         $300                     $245                                             120
                          120         $200                                                                104
                                                         $85
                          100         $100     $35
                                                                                                     72
                           80          $0
                                              FY98 FY99 FY00 FY01 FY02 FY03 FY04
                           60                                                est.               40
                           40
                                                                               7     17
                           20           1            1         2       3
                                  1
                            0
                                FY87 FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04
                                                                                             est.
                                A Reengineering Tool to Improve Readiness/Sustainment
                          8/11/2011 1:04 PM                                                                                    31    6
     F/A-18 E/F USN/Industry Partnership

          • Configuration                               • Material Management
                                • Program
            Control               Management               – E/F Unique Reparables
          • System Safety       • Systems                  – All E/F Consumables
          • Organizational and    Engineering              – Transportation
            Intermediate        • Information Systems      – Retail and NADEP Support
            Maintenance         • Fleet Support         • Reliability Improvement
            (Ashore/Afloat)                             • Configuration Management
                                • Life Cycle
                                  Management            • Component Repair
          • GFE and E/F, C/D
                                                        • Obsolescence Management
            Common Spares       • Support Planning
                                                        • Design Engineering
                                •
          • GFE Support Equipment Teaming               • Tech Data
          • Component Repair
                                                                   • Deployed 6 months early
                                                                     to meet OEF/OIF
• Industry/Gov’t                                                     requirements
  distribution                                                     • 99% Range and Depth of
• Seamless support                                                   Spares Deployed to OIF
  to warfighter                                                    • 70%-89% of demands met
• Web-based asset                                                    in 48 hours
  visibility                                                       • 97.1% successful launch
                       Leverage commercial and DoD                   rate
                              best practices                                        32
 8/11/2011 1:04 PM

				
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