Armor & Mobility

MAR/APR 2017

Military magazines in the United States and Canada, covering Armor and Mobility, focuses on tactical vehicles, C4ISR, Special Operations Forces, latest soldier equipment, shelters, and key DoD programs

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DRIVING PERPETUAL PROCESS IMPROVEMENT DLA's supply chain managers have traditionally concentrated on metrics for things such as materiel availability, backorders, and the speed to award contracts. "Today, the agency is also looking for opportunities to measure—and improve—other areas," said Michael Scott, DLA's Deputy Director for Logistics Operations. "The agency is examining everything from demand planning, to delivery options such as shipping materiel directly from a supplier to a customer, and the length of time it takes products to get to a customer," he explained. Inventory management is another priority area and DLA is focusing on innovative ways to determine how to minimize stocked inventory. "Reducing our inventory has been a goal for several years, and we're seeking smarter ways to still provide what we do, but with less stock on hand," he said. One way DLA is looking to reduce its inventory needs is by moving toward a "consumption-pull system" based on long-term supplier arrangements. A pilot program is currently underway with almost two dozen companies who hold contracts for supply items the agency currently stores in its warehouses. Instead of using the traditional demand forecast in addition to safety stocks the agency keeps on hand as a baseline, DLA is seeking to reduce safety stocks by counting on suppliers to perform at a top level in turning inventory more quickly based on actual consumption. "When we give the order, we can depend on what that delivery lead time will be so that when we hit that date, we'll have the material," he explained. "When suppliers perform at a high level in terms of responsiveness, DLA can reduce its inventory, thereby creating big savings." Improving delivery times is the foundation of the consumption-pull initiative and is a big push at DLA, Scott said. Another initiative underway is to establish DLA as a Performance-Based Logistics, or PBL, Center of Excellence. DLA is expanding its business model from a parts provider to a provider of performance outcomes. Unlike contracts that are based on purchasing consumables, PBL contracts focus on a service provider's level of performance or outcomes that are measured using performance metrics. PBL arrangements are typically long term with objectives of decreasing costs while incentivizing improved performance outcomes. "We stipulate what we want and how much we'll pay—and it's up to the contractor to use their best practices to achieve it," Scott said. With so many different methods and tactics available to meet contract requirements, it provides industry a lot of flexibility. "The contractor figures out how to get there," Scott said, "and does it at a savings to the government." However, PBLs can be challenging in many ways because they are a much more complex type of acquisition. To address this, DLA is building up its expertise. "We're bringing in, for a limited time, commercial experts to work with our supply chains and train our folks about the art of these types of contracts," Scott said. "This will provide our people that critical capability to help us become a PBL center of excellence." DLA is growing its acquisition knowledge in this area so that the military services and other customers can look to DLA for this kind of support, he explained. "Providing PBL contracts will be yet another capability we can offer our customers." Michael Scott Deputy Director for Logistics Operations Employees at DLA Distribution, Susquehanna, Pa., pick parts in preparation for shipment. (DLA Distribution) While the Defense Logistics Agency (DLA) is proud of its success in ensuring that warfighters and its other customers have what they need, when they need it, the agency is not resting on its laurels. Continuous process improvement is a critical tenet of DLA's culture, driving the agency to evaluate and validate its business practices. This includes, of course, DLA's supply chain management, which includes an expansive array of nine supply chains with more than 5 million items. By DLA Public Affairs SUPPLY CHAIN LEADERSHIP 10 | Armor & Mobility | March/April 2017

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