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Land Supply Chain Strategic Material Sourcing Capability Summit November 14, 2007

Land Supply Chain Strategic Material Sourcing Capability Summit November 14, 2007. Land Supply Chain SMS Capability Summit. Performance. Transformation. Culture. Introduction: Chief, Tailored Support Team Topics Covered Business Overview KID campaign recap

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Land Supply Chain Strategic Material Sourcing Capability Summit November 14, 2007

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  1. Land Supply Chain Strategic Material Sourcing Capability Summit November 14, 2007

  2. Land Supply Chain SMS Capability Summit Performance Transformation Culture Introduction: Chief, Tailored Support Team Topics Covered • Business Overview • KID campaign recap • Long Term Contracts and Warfighter Support • SMS Programs • Small Business Impact/Issues • TINA Implications for Industry • Value Engineering/Testing • SMS Web Site Demo Break-Out Sessions Capability Assessment

  3. Performance Business Overview Transformation Culture Director, Land Supplier Operations

  4. Performance Transformation Culture Land Supply Chain • Wheeled Vehicles • Tracked Vehicles • Batteries • Nuts & Washers • Converters • Tires • Small Arms • Non-NSN • 385K NSNs, 3 sites, $1.6B in sales • Army/Marines …85% of demand • 4,100 + suppliers • 320K contract actions • 24 integrated supplier teams

  5. Performance Transformation Culture Land Supply Chain FSCs (Preponderance of FSCs assigned to Land SC)

  6. The Nine Indicators Impacting Your Business Performance Transformation Culture • Order Fulfillment (Delivery) • Stock availability • Order quantity fill rate • Logistic response time • Time definite delivery • Planning • Attainment to plan • Financial • Aged accounts payable • Tech Quality (PQDRs) • Order quality • Procurement • Administrative lead time • Production lead time • Key Item Drivers (KID) • BO Reduction • Contract Delinquencies These KPIs measure how we do business with you

  7. Performance Transformation Culture Focus on KID 1-4 FY08 SMSG Strategy • Objective: • Key business drivers on long-term contract • Prioritized approach to project selection • Target population: • FSC 5340 – hardware • FSC 1005 – small arms • FSC 3030 - belts • Weapon systems • Tires (ancillary support) Building strategies that are directly linked to customer requirements

  8. M2 .50 cal Machine Gun Sourcing NSN’s Performance Transformation Culture 5930-00-614-7461 SWITCH,EXTRACTOR 5310-00-501-3623 NUT,PLAIN,HEXAGON 5315-00-501-3524 PIN,SHOULDER,HEADLE 5315-00-600-8919 PIN,ECCENTRIC 1005-00-625-7592 BAR, TRIGGER 1005-00-600-8934 SIGHT, FRONT 5365-00-600-8920 BUSHING,MACHINE THR 1005-00-657-3953 SLIDE ASSY, RETR 5360-00-726-6134 SPRING,FLAT 5315-00-600-8784 PIN,SPRING 1005-00-550-4082 EXTENSION ASSEMBLY, 1005-00-716-1302 LOCK,BREECH,MACHINE

  9. Performance Transformation Culture Business Drivers on LTC LTC Obligations for 1st Quarter FY08: $104,482,859.58 GOAL FOR FY08- 1,549 90% OF FY08 FOCUS WILL BE ON KID 1-4 NSNs 10% OF FY08 FOCUS WILL BE ON LOW DENSITY SYSTEMS

  10. KID Campaign Recap Performance Transformation Culture Focusing efforts on small group of Key Item Drivers (KID) Small population of items have a large impact on our business Broadcast fax sent out to industry in September Campaign Goals: • PR Production (Manual Awards): 4,000 / Mo • 20% Reduction in KID 1-4 Open PRs • PRs > ALT • Open PR Workload • Awarded ALT

  11. KID Matrix Performance Transformation Culture

  12. Performance KID Statistics Transformation Culture All NSNs Total PRs on Hand KID 1-4 = 5% (17,000) KID 1-4 = 21% All Others = 95% (358,000) All Others = 79% 4th Quarter FY07 Obligations for KID 1-4 NSNs: $265,719,805 Total Backorders Total Requisitions All Others = 25% All Others = 20% KID 1-4 = 75% KID 1-4 = 80%

  13. Performance KID and SMS Transformation Culture SMS targeting KID 1-4 items for FY08 projects Ensures support for multiple years Streamline ordering process Reduce manual PRs on-hand

  14. Performance War Fighter Support Transformation Culture • Customer Operations Mission • DLA Support to the Warfighter • Benefits of LTC's • Vendor Support to the Warfighter

  15. Strategic Material Sourcing (SMS) Presented by Director, Procurement Process Support Directorate Program Overview 14 November 2007

  16. Focus of the SMS Program DLA directed by OSD to develop Enterprise strategy to reduce inventory by $340 M by end of FY 2011 The Strategic Material Sourcing (SMS) program is DLA’s umbrella initiative designed to facilitate the Agency’s efforts to meet this directive by: Placing items of strategic importance on Long Term Contracts (LTCs) Developing initiatives to reduce depot inventory levels Reducing Administrative and Production Lead Times on these items Adopting best commercial practices wherever possible to Include developing strategic Alliances with Key Suppliers, such as, Strategic Supplier Alliances with our Sole Source Suppliers

  17. Goal of SMS • Increase Number of NSNs covered by Long Term Contracts • Increase Percent of Long Term Contract Obligations • Lower Inventory Levels/Cost • Lower Administrative and Production Lead Times .

  18. How Are SMS NSNs Determined? Total DLA Hardware NSN Population: 3.9 million • Sales Drivers – Pareto (80/20 percent rule) based on last 2 years of sales data • Demand Drivers - Pareto (80/20 percent rule) based on last 2 years of demand data • NMCS – NSNs which have historically impacted readiness • Warstoppers – Needed by the Services in case of wars or other contingencies • Readiness Items– EC 1 WSIC items with PLT>179 and at least 1 Back Order in past 3 years • Critical Items - Critical item code ‘Y’ with PLT>179 and at least 1 Back Order Demand in past 3 years • High Frequency Items - 100 or more annual requisitions in the past 12 months • Supply Chain Focus Items- Items important to initiatives and directives the Supply Chains are responsible for managing. Focus on SMS: 335,715

  19. FY08 SMS Population

  20. Strategic Materiel SourcingExecution Plan 131,444

  21. SMS Annual Demand Value (ADV) & SMS Annual Demand Frequency (ADF) ADV/ADF illustrates that the most strategic items are being placed on LTC

  22. Total Long Term Contract Obligation Rate Placing items on LTC leads to improved support to the Warfighter … at lower administrative cost

  23. SMS Gross Inventory SavingsQ3 Revised Numbers* Total Program Savings As Of June 2007 = $219 Mil

  24. SMS DLA Average Administrative Lead Time (ALT) FY07

  25. SMS DLA Average Production Lead Time (PLT) FY07

  26. The Road Ahead

  27. Performance Small Business Perspective Transformation Culture Director, Office of Small Business Programs (800) 262-3272

  28. Performance Transformation Culture Office of Small Business Programs • Our Function: • Represent the interests of the small business • community as new initiatives are developed • Look for opportunities for small business, • HUBZone, 8(a) and Service Disabled set-asides • If the role of Prime Contractor is not indicated, • support and develop contractual language to assure • best possible representation as subcontractors • Do all of this while remembering that Customer • Support is paramount

  29. The Role of Long Term Contracts (LTCs) Performance Transformation Culture • Long term contracts provide many DSCC benefits: • Significantly reduces administrative lead times • Reduces manpower requirements • Offers stronger relationships between the • contractor and DSCC • Frequently provides enhanced customer support • LTCs can be more risky for the contractor: • Escalating material or other costs may not be • adequately covered in the out years • LTCs can reduce the number of competitors over • time

  30. How Set-aside Determinations are Made Performance Transformation Culture • Historical experience – how many small businesses • are able to provide the parts and related services • (Rule of Two) • Methods of determining interest/capability • Industry Day • Market Survey – Very Important!!!! • Direct feedback to: • Contracting Officer • Office of Small Business Programs • Possible visits to potential contractors

  31. Performance Transformation Culture How to Compete? • Small Businesses interested in acting as Prime • Contractors on larger initiatives should: • Gain a full understanding of the requirement • Assure they have the “right stuff” • Impeccable past performance • Adequate financing • Strong support staff including Customer Service • Comparable experience – even if on a smaller scale • Robust IT infrastructure for parts acquisition, • forecasting, item management, etc • Realistic pricing • Warehousing and distribution capabilities • Partners, if needed

  32. Performance Transformation Culture Things to Consider • Mentor – Protégé Programs • Both the DoD or DLA Programs offer many benefits for • the mentor and the protégé • Start out on smaller initiatives and developing a • track record of exceptional performance and • customer support • Developing strong, positive relationships with key • contracting personnel • Become the “go to guy” when support is critically • needed

  33. Little Things are Important Performance Transformation Culture • When submitting a proposal be sure to: • Read and understand the requirements • Adequately address each part of the solicitation • Remember neatness and accuracy count – this is your • chance to show the evaluation team that your are fully • capable • Be timely • Read and re-read your proposal – make sure that what • you say in one part is not contradicted in another

  34. Performance Transformation Culture Final Thoughts • Ask for clarification if you are not sure • Make good use of the time with the contracting team: • Have a strong “pitch” • Emphasize what you can do for the Customer • Offer to host a site visit • Be a problem solver • Never underestimate the importance of a strong • Market Research response! • Utilize the Office of Small Business Programs • The better we understand what you can do, the more • likely we can successfully set-aside future acquisitions

  35. DSCC SMALL BUSINESS TEAM 1-800-262-3272 OR COMMERCIAL 614-692-3541 Performance Transformation Culture

  36. TINA Requirements Under the Truth in Negotiations Act (TINA) in DoD Presented by Director, Procurement Process Support Directorate November 14, 2007

  37. Agenda TINA Background TINA Requirements for DoD DLA Policy Changes

  38. Truth in Negotiation Act (TINA) Background Truth in Negotiations Act (TINA) Passed in 1962 Requires cost or pricing data for use in negotiating contracts and modifications. Certify in writing that, the cost or pricing data submitted are accurate, complete, and current.

  39. What has Occurred? 2001, Contracting Officer Determinations of Price Reasonableness When Cost or Pricing Data Were Not Obtained (DOD-IG Report): CO’s lacked valid exceptions and failed to require data in 32% of contracting actions reviewed. Inadequate documentation to support price reasonableness in 86% of actions reviewed. CO’s did not challenge items categorized as commercial and accepted catalog prices/price lists without analysis. 2002, DOD Needs Better Guidance on Granting Waivers for Certified Cost or Pricing Data (GAO Report): Regarding type of data and analyses and outside assistance. Whether waivers should be granted in first place.

  40. Recent TINA Changes for DoD Section 817 of Public Law 107-314 (FY 2003 NDAA) established stricter TINA requirements for DoD--- Waivers now limited to the most exceptional cases: DoD can no longer waive the requirement for cost or pricing data solely because the price can be determined fair and reasonable without the data (therefore FAR 15.403-1(c)(4) does not apply to DoD). CO’s must request the cost data and the Certificate of Certified Cost and Pricing Data. If the company cannot comply, a Waiver may be granted but all of following must be met: 1. Property or service cannot reasonably be obtained without granting the waiver; 2. Price(s) can be determined fair and reasonable without the submission of cost or pricing data; and 3. There are demonstrated benefits to granting the waiver. Required Congressional reporting requirements for actions over $15 million.

  41. 2007 Actions Affecting DLA February 20, 2007 – Senate Armed Services Committee letter to the USD(AT&L reiterating the statutory requirements from the FY 2003 NDAA). March 23, 2007 – Director, Defense Procurement and Acquisition Policy (DPAP), memorandum to Departmental Deputy Assistant Secretaries and the Directors of Defense Agencies emphasizing that the standard to be met for granting a TINA waiver is extremely high .July 19, 2007 – DLA’s PROCLTR 07-10 specified actions to be taken when an offeror or contractor refuses to provide cost or pricing data. Implemented IAW DFARS PGI 215.403-1(c)(4)(A)(1). October 2007 - DLA’s new PROCLTR provided detailed guidance to incorporate PROCLTR 07-10 and other TINA-related procedures into DLAD.

  42. What PROCLTR 07-10 Covered Implemented DFARS guidance for FY 03 NDAA: The three findings required for an HCA to grant an exceptional circumstances exception (waiver), DPAP guidance that a waiver should no longer be granted to a contractor business segment that normally performs Government contracts subject to, and in compliance with, TINA, and That pending and actual waivers granted should be reported to our DLA J-73 focal point at the earliest possible date, to enable timely reporting of these waivers to OSD immediately following the end of each fiscal quarterly period.

  43. Summary • DLA must comply with statutory and policy guidance • Fair and Reasonable Pricing is a critical component for success • High Visibility item for Congress and OSD • We need your cooperation!

  44. Performance Value Engineering Transformation Culture Value Engineering/Source Development http://www.dscc.dla.mil/programs/sdi/

  45. Performance Transformation Culture Small Arms Challenges • Diminishing manufacturing base • Develop priority list for sourcing efforts • First article and production lot failures • Increased use of pre-award surveys • Qualified source list • Increased surveillance visits by DCMA

  46. Performance Transformation Culture M2 .50 cal Machine GunSource Development NSNs 1005-00-918-2618 KNOB 1005-00-927-7273 SPRING,HELICAL,COMP 5310-00-501-3623 SPRING,FLAT 5315-00-501-3524 BUSHING,MACHINE THR 5315-00-600-8784 SWITCH,EXTRACTOR 5315-00-600-8919 SIGHT, FRONT 5355-00-550-4062 FRAME HANDLE, LOWER 5360-00-200-5800 CAM, BREECHLOCK, MACH 5360-00-726-6134 BAR, TRIGGER 5365-00-515-2834 SLIDE ASSY, BELT 5365-00-600-8920 SLIDE ASSY, RETR 5930-00-614-7461 PLUG, MACHINE THREAD 1005-00-550-4060 LATCH,BOLT 1005-00-550-4081 COVER,SUB ASSEMBLY 1005-00-550-4082 EXTENSION ASSEMBLY, 1005-00-550-4094 SLEEVE,BUFFER TUBE 1005-00-600-8782 GUIDE,BUFFER SPRING 1005-00-600-8934 LOCK,BREECH,MACHINE 1005-00-600-8936 TUBE,HANDLE GRIP 1005-00-614-7583 PLATE,BACK 1005-00-625-7592 LOCK,BACK PLATE LAT 1005-00-626-1110 NUT,PLAIN,HEXAGON 1005-00-657-3953 PIN,SHOULDER,HEADLE 1005-00-716-1302 PIN,SPRING 1005-00-918-2617 PIN,ECCENTRIC Solution: Established website that provides a list of NSNs where DSCC would like to develop additional sources.

  47. Performance SMS Web Site Demo Transformation Culture http://www.dscc.dla.mil/programs/sccs/index.html

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