Transforming Logistics

1. Transforming Logistics An AT&L Perspective 3 March 2004

2. “Amateurs talk about strategy; Professionals talk about logistics.” former General R.H. Barrows Commandant, USMC

3. Our History • Unparalleled industrial capabilities • Highly trained and motivated workforce • First fully automated logistics system • Envied by our allies; Feared by our adversaries World class in mass logistics.

4. $109B in inventory (1989) 60-day response time 42 Maintenance Depots 788M cubic feet of storage space Post Cold War • $67B in inventory • 32-day response time • 20 Maintenance Depots • 323M cubic feet of storage space Ready to Project and Sustain a Smaller “Cold War”

5. The Changing Game • Immediately Employable Force Option • Preemptive Capability • Net-Centric Warfare • Focused Joint Logistics

6. The Logistics Challenge “On my signal …unleash hell….” Ubiquitous, cost-effective capability to project and sustain power.

7. Words of Wisdom “The dogmas of the quiet past are inadequate to the stormy present. . . As our case is new, so we must think anew, and act anew. We must disenthrall ourselves, and then we shall save our country.”

8. Our Complex Web Combatant Commanders • Integrated Priority List • Joint Lessons Learned • Ongoing Operations Quadrennial Defense Review • Project and sustain the force with minimal footprint • Implement performance-based logistics • Achieve industry performance standards External Influences • Congressional Oversight • GAO • Inspector General DoD Logistics • $90B+/year • Over 1 million people • 16-day customer wait time • Over 600 disparate systems Related DoD Initiatives Public Perceptions End Game • Financial Reform • Business Improvement Council • Defense Business Board • Freedom is Free • Conflict is quick • Government should be accountable Service Initiatives (over 500) • Product support • Footprint reduction • Customer wait time

9. Lt. Gen. Chesty Puller

10. 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 04pm12-10

11. Logistics Transformation Immediate: Near-Term: Long Term: Meet Immediate Readiness Requirements • Increase spare parts availability • Accelerate reduction in ownership costs • Focus on LD/HD assets Reengineer to World-Class Standards • Achieve end-to-end global distribution • Implement commercial business solutions • Implement integrated supply chains for weapon systems • Infuse accountability and performance measurement Accelerate Modernization of Highly Reliable Systems • Reduce footprint as a military requirement • Streamline acquisition process • Achieve Focused Logistics • Achieve net-centric operations

12. Cost of AgingFlying Hour Program Costs Actuals Projections Problem: We are eating our young!

13. Aircraft Procurement Commitment We must break this trend! Source: Joint Council on Aging Aircraft

14. Reduction in Total Ownership Costs Pilot Programs LCC % Savings Reported FY05 & Life Cycle Savings/Benefits FY05 % Savings FY05 Goal 60.0% 50.0% 40.0% Reported Savings/Avoidances 30.0% 20.0% 10.0% No Report 0.0% • 46% of the eligible 26 Pilot Programs project FY05 cost reductions of 18% or greater. • Projected FY05 cost reduction (26 Pilot Programs) exceeds $1.5B, $75B over the LC of all 29 Pilot Programs Reducing Costs Through Improved Reliability and Readiness

15. Expanding Reduction in Total Ownership Costs • Low Density/High Demand • Mature Programs • DAES Reporting • Special Interest MaturePrograms ServiceNominations • AT&L Selection • Defense Systems • ARA • DUSD(L&MR) PotentialCandidatePrograms • Promising Programs • Prioritized Investment • Projected Economic Benefits • Validated Investment Model (Standard for future BCAs) Leverage Point Model (supply chain model) • F-16 • F-18 • M-1A1 Program Assessment Using Leverage Point Model Value Engineering Potential

16. Focus on LD/HD Assets: B-2 Recent Results Exceeding ACC availability 50% reduction in MMH/FH (projected) Exceeded OIF forward operating base requirements Eliminated all LO backlogs Accelerated tactical radio secure SATCOM capability Achieved 72% MC rate (historical high) Program Management Fielded System Maintenance Officer as PM Managed to ACC performance expectations 7-year management goals; 10-year roadmap Synchronized modernization, R-TOC, and PDM Aggressively managed DMS program Government/Industry Partnership Northrop-Grumman PBL awarded in FY03 Organic maintenance and supply support (DLA) SPD provides program management, configuration control, sustaining engineering

17. Near-Term:Reengineer to World-Class Standards • Achieve end-to-end global distribution • Implement commercial business solutions • Implement integrated supply chains for weapon systems • Infuse accountability and performance measurements

18. “An Epic Logistics Mess”* Never Again! * The Plain Dealer, 02/08/04, Cleveland Ohio

19. Commercial Business Solutions: Distribution USTRANSCOM Designated Distribution Process Owner Demand Planning Supply Planning Rules and Tools guide Customer-Supplier relationship Sources of Supply Direct Source Collaboration Customer Places Orders Next Day (seconds/minutes) Order confirmation number (Order Status by Exception) Supply Center (source, pick, configure, pack, label) Order Processing System Fulfillment Agents Performance: Hours/Days Shipment arrives (Time definite delivery) Next Day Carrier (AMC, UPS, FedEx, APL etc.) Collaboration Simple, Responsive, Reliable, Visible

20. Enterprise Integration Logistics Balanced ScorecardSynchronized to DoD BSC Warfighting Perspective Warfighting Perspective Warfighting Perspective Provide optimum responsive logistics Provide optimum responsive logistics Provide optimum responsive logistics support to the joint warfighter to ensure: support to the joint warfighter to ensure: support to the joint warfighter to ensure: An immediately employable force option An immediately employable force option An immediately employable force option • • • A rapidly deployable capability A rapidly deployable capability A rapidly deployable capability • • • A sustainable total force A sustainable total force A sustainable total force • • • Innovation & Learning Perspective Innovation & Learning Perspective Innovation & Learning Perspective Logistics Process Perspective Logistics Process Perspective Logistics Process Perspective Ensure a capable workforce responsible Ensure a capable workforce responsible Ensure a capable workforce responsible Provide effective logistics chain Provide effective logistics chain Provide effective logistics chain Vision Vision for meeting the warfighter logistics for meeting the warfighter logistics for meeting the warfighter logistics performance and capacity while reducing performance and capacity while reducing performance and capacity while reducing and and support requirements to include: support requirements to include: support requirements to include: the logistics footprint to include: the logistics footprint to include: the logistics footprint to include: Strategy Strategy Introduction of leading edge advanced Introduction of leading edge advanced Introduction of leading edge advanced • • • concepts concepts concepts R&M, Leveraging Global Industry, IT R&M, Leveraging Global Industry, IT R&M, Leveraging Global Industry, IT • • • Organization adaptability Organization adaptability Organization adaptability • • • Improvements, and Commercial Improvements, and Commercial Improvements, and Commercial Workforce shaping Workforce shaping Workforce shaping • • • Advances Advances 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 • Enterprise Architecture Portfolio Management with logistics resource allocation DUSD(L&MR) DUSD(L&MR) DUSD(L&MR) DUSD (L&MR) Guidance & Oversight/Integration DUSD (L&MR) Guidance & Oversight/Integration Memo Memo Memo Achieve FLE Achieve FLE Achieve FLE • • • Streamlined Systems Streamlined Systems Streamlined Systems • • • Efficient Systems Efficient Systems Efficient Systems • • • Integrated Knowledge Integrated Knowledge Integrated Knowledge • • • Component Component Component Base Base Base July 2002 Execution Plans Execution Plans Execution Plans July 2002 Execution Execution Execution Interoperable Interoperable Interoperable • • • Systems Systems Systems FLE FLE And And And Milestones Milestones Milestones • • • Modernization Modernization Modernization Schedules/Brown Out Schedules/Brown Out Schedules/Brown Out • • • Critical System/ Critical System/ Critical System/ • • • Database Information Database Information Database Information Component Component (IT meta data) (IT meta data) (IT meta data) Evaluate Logistics AISs Evaluate Logistics AISs Evaluate Logistics AISs • • • Strategies Strategies and Databases and Databases and Databases January 2003 January 2003 January 2003 Management Approach Management Approach • • Identify Systems to be: Identify Systems to be: Identify Systems to be: • • • CIO Interface CIO Interface • • Eliminated Eliminated Eliminated Ø Ø Ø Evaluation Criteria Evaluation Criteria • • Sustained Sustained Sustained Process Methodology Process Methodology • • Ø Ø Ø Metrics Metrics • • Integrated Integrated Integrated Ø Ø Ø POM Considerations POM Considerations • • August 2002 August 2002 Leading DoD Enterprise Integration Streamlined Portfolio Management

21. Enterprise Integration TODAY! • Unique Identifiers • Radio Frequency Identification • Regional Material Handling • Technical Manuals Leading logistics transformation through international standards.

22. Infusing Accountability Warfighter Perspective Level 1: Force Closure Level 2: % Transportation Closure by ULN Level 2. % Closed by RDD Level 1: Force Readiness Level 2: Oper. Availability for Critical Systems Level 2. % of Critical Systems Equip. on hand Innovation and Learning Perspective Logistics Process Perspective Level 1: Force Sustainment Level 1: Logistics Chain Reliability Level 1: Logistics Chain Effectiveness Level 2: Perfect Order Fulfillment (On time Delivery) Level 2: Order Fulfillment /Total Pipeline Time Resource Planning Perspective Level 1: Logistics Chain Predictability Level 2: Production/Delivery Flexibility Level 2: Planning & Re-planning Cycle Time Level 1: Logistics Chain Affordability Level 2: Logistics Chain Expense Detailed Process Metrics Under Development

23. Long-Term:Accelerate Modernization • Reduce footprint as a military requirement • Streamline the acquisition process • Achieve net-centric operations • Achieve Focused Logistics

24. JROC: Focusing on Capability • Capability based • Net-centric driven • Mobility/footprint are military capabilities • Reliability/maintainability are military performance parameters

25. The “Future” is being determined NOW! JSF FCS DDX Designing OUT Logistics

26. Focused Logistics End-to-end communications Total asset visibility Information fusion Logistics decision superiority Rapid delivery of mission-ready forces Reduced inventory, smaller footprint, faster response Rapid distribution of tailored support packages Bottomline: Forces in theater — whether forward-stationed or deployed — deliver more capability, require less support

27. Logistics Transformation Mass-Based Just-in-Time Sense and Respond FSB • More is better • Mountains of stuff measured in days of supply • Uses massive inventory to hedge against uncertainty in demand and supply • Mass begets mass and slows everything down • Precision is better • Reduce Inventory to a minimum and keep moving • Use precise demand prediction and optimization to reduce uncertainty • Works great, except when it doesn’t • Agile is better • Dynamically positioned Inventory throughout • Use transportation flexibility and robust IT to handle uncertainty • Supports adaptive operations Prime Metric: Days of supply Prime Metric: Flow Time Prime Metric: Effects Migrating to the Force-centric Logistics Enterprise

28. Sense and Respond Logistics Concept • Supply network is dynamic • Supply doctrine anticipates reconfigurable supply nets • Emphasizes transportation flexibility over large inventories • Negotiation-basedrelationships • All entities use commander’s intent and detailed situation awareness to negotiate and synchronize • Roles and commitments of entities are dynamically defined within a specific context • All entities are described in terms of current capabilities, not as static forces • Networks are difficult to analyze and attack • More robust to node failure • Adapts to real-time demand driven by unit signals • Supports a more logistically agile force • Network adaptivity allows logistics decisions to be made later • Emphasis on information and transportation allows a greater degree of operational flexibility

29. Near-Term Priorities • Support Current Operations • Distribution Process Owner • Performance Metrics and Balanced Scorecard • Enterprise Integration • Performance-Based Logistics • Maintenance Excellence • Streamline Material Flows • Logistics Transformation Roadmap

30. We Need Your Help • Appropriate risk/reward sharing on PBL programs • Control and visibility of industrial supply chains • Critical safety items • Rapid adoption of industry and international standards

31. The End Game Ubiquitous, cost-effective capability to project and sustain power. 04pm12-31