DEFENSE LOGISTICS AGENCY VADM Keith Lippert SC USN

DEFENSE LOGISTICS AGENCY VADM Keith Lippert, SC, USN Director, Defense Logistics Agency

Discussion Framework • • • DLA Top Five Priorities DLA Business What We Were What We Are Today What We Are Going To Be … – DLA Transformation • Summary 2

Top Five Priorities • Support to the Warfighter • Agency Transformation • Business Systems Modernization • Corporate Climate • “New Normal” • DPO Partnership 3

Discussion Framework • • • DLA Top Five Priorities DLA Business What We Were What We Are Today What We Are Going To Be … – DLA Transformation • Summary 4

The DLA Enterprise FY 02 Sales/Services: $21. 5 B FY 03 Sales/Services: $25 B FY 04 Projection: $28. 9 B • • • Land/Maritime/Missiles: $ 2. 7 B Aviation: $ 3. 3 B Troop Support: $10. 2 B Energy: $ 5. 2 B Distribution: $ 2. 2 B Other: $ 1. 4 B Foreign Military Sales Scope of Business • • • 45, 000 Requisitions/Day 8, 200 Contracts/Day #55 Fortune 500 – Above Northrop Grumman #2 in Top 50 Distribution Warehouses 23 Distribution Depots 4. 6 Million NSNs 24. 7 M Annual Receipts and Issues 1411 Weapon Systems Supported 147. 7 M Net Barrels Fuel Sold (FY 03) $12. 5 B Annual Reutilizations/Disposals • Sales: $719 M • Shipments: 580 K • Supporting 124 Nations People • • 21, 468 Civilians 525 Active Duty Military 636 Reserve Military Located in 48 States/28 Countries 5

Civilian & Military Personnel (# In Thousands) From ‘ 01 -’ 04, Sales and Services grew by 70%. . . Billions of Dollars Of Sales/Services DLA Transition… …Leaner…More Productive …while personnel levels fell to their lowest since 1963 … 12% below DPG 6

How We Did It • More stable financing (no hold tables) • Reduced volatility in workload • Better collaboration with customers and suppliers • Improved forecasting and delivery • More long-term contracts with suppliers • Increased reliance on more highly automated strategic distribution centers • Shorter administrative lead times through process improvements • Shifting from manual to automated buying procedures • A-76 process for non-inherently governmental positions 7

Supply Availability Hardware Items Navy SA of 90. 1% highest in over Net Demands (M) 20 years. Percent DLA Total DOD Supply Availability Goal: 85% Operation Iraqi Freedom DLA Navy 8

Backorders – Hardware Total Thousands Navy Backorders at record lows Operation Iraqi Freedom Lowest In DLA History 9

Backorders > 180 Days Hardware Thousands 10

Average Backorder Time (in Days) Improving Performance Backorder Delay Time Reductions 11

Linking DLA Backorders to Critical Parts Missing in Aircraft Data Source for Holes in Aircraft: Center for Naval Analysis (CNA) – POC Mr. Craig Goodwyn Total Navy Backorders for DLA Parts Mission Critical Parts Missing per Naval Aircraft Total DLA Navy Backorders Relationship to Critical Parts Missing in Naval Aircraft 12 * A critical part is defined as a part causing a NMC or PMC aircraft

Cost Recovery Rates Over Time Percent CRR % (Operating Costs as a Percentage of Total Sales) Lowest Cost Recovery Rate in DLA History Savings Returned to Warfighter 13

Returning Dollars To The Warfighters Returning Dollars to the Warfighters ($M) FY 04 -09 Net Savings $1. 8 B Competitive Sourcing Business Systems Modernization Customer Relationship Management Shift to Commercial Practices Near-Term Investment…Long-Term Savings 14

Discussion Framework • • • DLA Top Five Priorities DLA Business What We Were What We Are Today What We Are Going To Be … – DLA Transformation • Summary 15

DLA. . . What We Were • Large Wholesaler • Internally Focused Metrics • Little Customer Interface • Poor Reputation • Antiquated IT Systems and Business Processes • Slow, 1960’s vintage batch processing • Business practices dictated by systems • Large Inventories … "Just-In-Case" • Overlap with commercial sector • Food, Clothing and Medical Inventories • Too Costly 16

What We Were… Customer Assessment Summer 2001: 3 and 4 Star Flag Conference Customer Feedback: "DLA takes too long to provide material and DLA costs too much" What we did …. Improve supply availability … Reduce wait time … Drive down backorders - Improve Readiness Reduce costs - Contingency Support Strategic and Business Plan Developed Enterprise System Modernization - Changed Culture 17

Discussion Framework • DLA Top Five Priorities • DLA Business • What We Were • What We Are Today • What We Are Going To Be … – DLA Transformation • Summary 18

What We Are Today… Focused on Customer • Combatant Command Liaison Officers: • Inside Joint Staff J 4, EUCOM, PACOM, CENTCOM, TRANSCOM, SOUTHCOM/STRATCOM, JFCOM & NORTHCOM • Provide Planning, Contingency, and Single POC for DLA Logistics Support • DLA Contingency Support Teams • Deploy with Force as Requested by Combatant Commanders • Provides On Site DLA Logistics, Asset Visibility Support • Bosnia, Kosovo, Croatia, Kuwait, Iraq, and Uzbekistan Today • Customer Engagement Strategy • National Account/Customer Account Managers, Customer Service Reps (CSR) • CSR is single POC for DLA Logistics at 71 Major Service Locations Globally • Performance Based Agreements with Each of the Four Services 19

Focused on Customer: DLA Europe - Pacific • DLA Overseas Commands Supporting EUCOM and PACOM • Standing Up DLA Southwest Asia Next Year • Single Focal Point for all Combatant Commander's Support Issues • Customer Support and Lead Center Representation • Lead for Theater Contingency and Exercise Planning • Commands DLA Contingency Support Teams • Provides Director with a Single Touch Point for all DLA 20

What We Are Today… Moving Towards Transformation • Refined Goals and Metrics • Instituted Robust Performance Reviews • Focused on Backorder and Cost Reductions • Streamlined Procurement Processes • Fully supported by DOD leadership • Requirements Fully Funded • Deployment and Distribution 21

CENTCOM DDOC (CDDOC) • Collaboration • Customers and lift-providers share information and explore solutions to theater logistics problems • Visibility & Synchronization of Cargo and Passengers • Experimented with ITV/TAV to improve visibility • Forecasting • Enabling CFLCC and CJTF-7 to synchronize war-fighter support • Internet/Portal Technology • Central repository for theater distribution information • Process Improvements • Theater Retrograde, Task Force Express • Metrics to be refined • Process changes to be incorporated into Joint and Service Doctrine • DDOC being considered for support in other theaters 22

Discussion Framework • DLA Top Five Priorities • DLA Business • What We Were • What We Are Today • What We Are Going To Be … – DLA Transformation • Summary 23

DLA Tomorrow… Transformation Strategy • 10 Major Transformational Initiatives • $1 Billion+ Investment Committed • $1. 8 Billion Net Savings Committed for Return To the Services • Agency’s Core Business Model • Support to Services – driven by future requirements • Suppliers – manager and integrator • Supply Chains – effective, efficient and seamless Partner 24

The Transformation Roadmap Business Systems Modernization National Inventory Management Strategy Returning Plus Dynamic Materiel Positioning $1. 8 Billion to A-76 Forward Positioning the Services & Customer Relationship Mgmt BRAC 2005 Executive Agent: fuels-subsistence Supplier Relationship Mgmt Work Force Transformation Integrated Data Environment Fuels Automated System 1998 2009 12

BSM Schedule Sales $. 3 B to $3 B = Users and Materiel = System Functionality FY 2000 2 3 4 FY 2001 1 2 3 FY 2002 4 1 2 BPR Design, Build, Test 3 FY 2003 4 1 2 3 Users 390 to 1260 FY 2004 Line Items 4170 k 2 to 3250 k 1 1 4 Business Release 1. 2 Warehouse C&T, BW 1. 1 (Retire Legacy System) Legacy Procurement BDUs Solution (Retire PD 2) BW 1. 2 FY 2005 2 3 FY 2006 4 Release Two Release One Release 1. 1 Subsistence = Full Operating Capability Release 2. 0 Core Phased Roll-out Line Items & Personnel IOT&E 1 2 3 FOC Release 2. x Enhanced 26

Discussion Framework • • • DLA Top Five Priorities DLA Business What We Were What We Are Today What We Are Going To Be … – DLA Transformation • Summary 27

Summary • Critical Combat Enabler … Light and Agile • Focused on Improved warfighter support and reduced costs • 32. 8% reduction in backorders and improved readiness (since Oct 01) • 51% decrease in cost recovery rates • $1. 8 B back to services FY 04 -09 • Strong Support to OIF • CDDOC Improving Flow of Supplies and Personnel • Record Setting Support with Demand at Historic Highs Tomorrow’s vision … smaller, more efficient, leveraged with best business practices • DOD Leader In Enterprise System Transformation 28