DFAS. . . Road to Transformation

1. DFAS. . . Road to Transformation Tom Bloom Director Defense Finance and Accounting Service September 2003

2. The DFAS Mission and Vision Mission: Provide responsive, professional finance and accounting services for the people who defend America. Vision: Best value to our customers • World-class provider of finance and accounting services • Trusted, innovative financial partner • One organization, one identity • Employer of choice, providing a progressive and professional work environment Your Financial Partner @ Work

3. DFAS Magnitude of Operations • 5.7M military, civilians, retirees, annuitants paid • 7.3M travel payments • 11.2M invoices paid • $346.6B in disbursements • 124M accounting transactions • $1.45T total liabilities • $12.5B in foreign military sales • $176B Retirement Trust Fund manager • 267 active DoD appropriations World’s Largest Finance and Accounting Operation Your Financial Partner @ Work

4. DFAS at a Glance Total Workforce OAS Overall Ratings -- 2000-2003 Results Your Financial Partner @ Work

5. Total Work Force 24% Decline in Total Workforce since July 1999 Your Financial Partner @ Work

6. Customer Service Matrix Corporate Overview Your Financial Partner @ Work

7. Why Transformation? • In today’s arena, continual adaptation to changing customer requirements, market influences, and technology improvements is a matter of survival • External Drivers • President’s Management Agenda • Quadrennial Defense Review (QDR) • Defense Planning Guidance (DPG) • 2005 Base Realignment and Closure (BRAC) • Internal Influences • Achieve tenets of DFAS-vision to increase mission effectiveness • Strive for operational excellence Your Financial Partner @ Work

8. What is Transformation? • Transformation is the Roadmap to move DFAS forward • Transformation is Integration of all DFAS initiatives to accomplish our mission and achieve our strategy • Transformation is Action to implement the best course of change to improve our operations Transformation is a Journey... Your Financial Partner @ Work

9. Transformation Objective • Transformation supports the DFAS Vision to be the Best-Value for our customers and a World-Class organization • Best-Value • Competitive in the marketplace • World-Class • “Brand name” is accepted as industry leader • Organization becomes a benchmark for others • DFAS success stories: • DFAS Garnishments - best-value due to cost, efficiency, timeliness, and systematic approach • DFAS Civilian Pay - 1 of 4 to provide pay services for entire civilian government workforce Your Financial Partner @ Work

10. 2002 2000 2003 1995 2001 1991 DFAS Transformation from the Beginning Site Consolidation Competitive Sourcing (A-76) DFAS Implementation DFAS Business Evolution Balanced Scorecard Transformation Integration Your Financial Partner @ Work

11. Vision • World-class provider of finance and accounting services • Trusted, innovative financial partner • One organization, One identity • Employer of choice, providing a progressive & professional work environment From: Regional Focus To: BL & PL Focus From: Budget-Driven Organization To: Leadership-Directed Strategy From:Processors To: Value Creators Future State Define Enable • Customer Focused • Value Driven • Efficient Strategy Transact Analyze Process Advise BSC Current State $ • Build & Operate System • Process Transactions • Respond to Customers Build Own Budget Customer Focused Strategy Based Metrics Driven DFAS Strategic Direction DBE Strategy & BSC Transformation Your Financial Partner @ Work

12. Competition Generates Value Competition Customer Choice Customer Perceived Value Generate Value DFAS has chosen to TRANSFORM the Agency in order to increase value to the customer Your Financial Partner @ Work

13. Transformation Process • Transformation process begins with analysis of a function and leads to implementation of the best improvement • Must fully understand the business function before determining best course of action to effect improvement • Functional analysis tool is the Business Case Analysis (BCA) • Analysis by Business/Product Lines (Segment Approach) • BCA presents alternatives and supporting information to DFAS leadership for a decision • BCA presents a recommended course of action from available Transformation Strategy options Your Financial Partner @ Work

14. Conduct BCA Six Step BCA Process 1. Identify Team 2. Define Scope 3. Define Current Organization 4. Conduct Market Research 5. Analyze Options 6. Provide Recommendation Government Private BCA Process Identify Function for Transformation Transformation Option Decision Transformation Actions High Performing Organization (HPO) Competitive Sourcing (A-76/FAR Part 15) Your Financial Partner @ Work

15. DFAS Transformation Schedule • 21 BCAs from FY2003-2008 • 9 BCAs scheduled for completion to support DFAS BRAC planning • FY2003 BCA Schedule: • Marine Corps Accounting (Completed) • Vendor Pay (Completed) • Technical Services Organization (TSO) (Completed) • Acquisition Services Division (Completed) • Disbursing (In Progress) Your Financial Partner @ Work

16. Business Case Analysis - FY 2004 Schedule Your Financial Partner @ Work

17. Transforming DFAS through Lean Thinking • Lean Thinking -- tool for stopping waste and creating value • 5 principles of Lean Thinking • Customers determine value • Identify the value stream • Make the process flow • Let customer demand pull the process along • Drive for perfection • Progress comes in bursts (kaikaku) and incremental improvement (kaizen) Your Financial Partner @ Work

18. Lessons Learned • Detailed functional flowcharts of “As-Is” processes are mandatory for complete understanding of current processes & functions • A clear, well-defined scope statement of the function is critical to the successful completion of the BCA and a recommendation that is achievable • Transformation actions must be integrated and reviewed continuously by the leadership to ensure the agency is moving forward together • LEAN THINKING must be a foundation of any transformation option Your Financial Partner @ Work

19. Transformation Integration • Leadership Council determines the best course of action to achieve: • Greater effectiveness • Increased efficiency • Continued productivity gains • Transformation consolidates all internal DFAS improvement efforts utilizing: • Corporate restructuring • Workload consolidation • Business process improvement • Transformation integrates external impacts to include: • Competitive Sourcing • Base Realignment and Closure (BRAC) • Business Management Modernization Project (BMMP) Your Financial Partner @ Work

20. Success Stories We have already reaped benefits from BCAs Identified duplicative processes – Marine Corps Accounting • Multiple entry of the same data in the Journal Voucher process Identified non-standard processes – Vendor Pay & TSO • Different practices for paying invoices & processing payments even within the same network • Non-standardized practice & delivery of voice communications function results in increased cost for DFAS Identified antiquated processes – Acquisition Services • 5 copies made, stapled, and sent • 4 copies thrown away, 1 used Your Financial Partner @ Work

21. What Does It All Mean? • Transformation involves “Moving Forward Together” • Transformation will allow us to become more competitive and provide the best value to our customers • Active participation enables best ideas to emerge • Customer and employee involvement is critical to define changes necessary to support transformation actions • Communication - Communication - Communication • “Straight Talk” video presentations by Director, DFAS • “By All Accounts” newsletter articles • Employee and customer presentations • ePortal postings • Feedback via hq-transformation-team@dfas.mil Your Financial Partner @ Work

22. Conclusion • Bottom Line - Transformation is a Journey • Long-term path to continually evaluate and improve functions • Integration roadmap for past, current and future change efforts Your Financial Partner @ Work

23. DFAS Your Financial Partner@Work