Transformation for a worthy customer

That’s the philosophy of the Defense Logistics Agency (DLA), which is responsible for providing the U.S. Army, Navy, Air Force and Marines and other federal agencies with a variety of logistics acquisition and technical services in times of peace and war. The agency, which employs more than 21,000 civilian and military personnel worldwide, offers 5.2 million national-stock-numbered items to its customers. For fiscal-year 2008, the DLA projects that those customers will spend approximately $33.5 billion on DLA products and services.

How vital is the DLA to our national security? The agency, on its Web site, explains it this way: “If America’s forces eat it, wear it, maintain equipment with it or burn it as fuel, DLA probably provides it.”

According to the DLA’s fiscal-year 2006 “Transformation Roadmap” report, the agency over the past few years has been undergoing some major changes to its “core business model, supporting processes and systems architecture.” The initiatives launched by the DLA have been designed to save taxpayer dollars, keep the agency efficient and effective and provide a dramatically improved level of support, at a reduced cost, to the agency’s ultimate customers—our troops.

“We’re not happy with just maintaining the status quo,” Claudia Knott, director of acquisition management for the DLA, explains. “We recognize that the importance of our mission demands that we’re continuously improving.”

In an interview with Government Procurement, Knott detailed some of the initiatives and strategies that the DLA is implementing to improve the way that the agency links supply with demand to support the “war fighter.” According to Knott, bolstering that all-important link has been a “hallmark” of DLA Director Lt. Gen. Robert Dail’s philosophy. Dail became the 15th director of the DLA on Aug. 23, 2006.

Nowhere is Dail’s philosophy more evident than in the creation of the DLA’s Directorate of Acquisition Management. Dail, recognizing early in his tenure that the DLA did not have a primary staff office for acquisition management, established the directorate at the DLA’s Fort Belvoir, Va., headquarters and named Knott—a distinguished acquisition executive who has been with the agency since 1981—its director.

“He recognized that within the DLA, we have two primary core competencies: One is supply chain management; the other is acquisitions,” Knott explains. “In order to supply and deliver 5.2 million items, we need a major connection with the industrial base to acquire those in a timely fashion. Gen. Dail decided to make it obvious to the work force and to the industrial base we do business with that acquisition is a significant part of our mission.”

With the establishment of the directorate, acquisition now has its own staff code and a seat at the board of directors’ table “with the other operational elements of DLA.”

“That was a huge move forward for acquisitions within DLA,” Knott says.

According to Knott, the focus on acquisition management already has paid dividends. For example, when the military needed to refurbish a number of Humvees that had been used in war efforts, the acquisition executive and acquisition management team were invited to the planning table. (As a result of the 2005 Base Realignment and Closure [BRAC] initiative, the DLA now is responsible for managing the procurement of “depot-level” repair parts for all military services). The acquisition management team suggested establishing an integrated logistics partnership with the Red River and Letterkenny Army depots—where the maintenance was to be performed—“to guarantee 100 percent availability for all repair parts that would be necessary when the Humvees were moved through the refit line.”

“As a further process improvement for the Army Depots, we said we would even be willing, along with partner AM General, to only invoice when repair parts were actually consumed in the refit process and the vehicle rolled off the refit assembly line,” Knott explains.

The contract included a clause that there would be no work stoppages during the Humvee refurbishment process. For South Bend, Ind.-based AM General LLC—the developer of the Humvee—that was not a problem. According to Knott, the AM General project manager talks to each person on the assembly line “to get a really good demand forecast” for the repair parts that are needed.

The bottom line: Nine months without a work stoppage, and millions of dollars in spare-parts inventory saved.

“That’s an example of where having a really good understanding of your customers’ needs and linking that with the capability that is in the industrial base via acquisition strategy and contract allows for a much improved economic solution as well as performance,” Knott asserts.

Among the other DLA initiatives that demonstrate the agency’s commitment to making acquisition a fundamental component of its operations:

• At two of DLA’s critical supply centers—the Defense Supply Center Philadelphia and the Defense Supply Center Richmond (Va.)—the agency has appointed a senior acquisition executive “whose sole responsibility is acquisition.” Acquisition at the Defense Supply Center Philadelphia, which manages four out of the DLA’s eight supply chains and $13 billion worth of business, previously was overseen by a Navy captain and a civilian deputy, Knott points out. “By assigning a senior executive in the field where all of our business is executed, [Dail] was able to make that linkage, if you will, with the corporate board of that organization,” Knott explains. “I think it’s been very beneficial to us.”
• As part of a strategic materials sourcing initiative, the DLA conducted a spend analysis to determine where it spends its dollars and to streamline the acquisition process for the bulk of its purchases. The agency is targeting approximately 500,000 items for purchase on long-term contracts, which reduces acquisition and delivery times and, consequently, reduces the amount of inventory it needs to carry. Knott estimates that the DLA has saved $160 million through such strategic sourcing efforts.
• As the DLA shifts “from what has traditionally been a transactional type of contracting to a larger, strategic type of contracting,” Knott says, the agency has been developing the skills of its current acquisition and contracting work force through a competency assessment program and other training initiatives. “We spend a lot of time developing those advanced skills, in addition to the rudimentary skills that everyone needs to know about contracting, so they can become business managers and not just contracting professionals.” The agency also has an eye on the future, as it grooms the next generation of contracting officers through “an aggressive corporate intern plan.”

According to Knott, the establishment of the Acquisition Management Directorate and acquisition executive positions in the field “bring a focus to acquisition integrity and a commitment to effective policy, oversight and compliance, acquisition personnel growth and continuous improvement.”

Of course, all of those goals serve a higher purpose: providing top-notch support to the brave men and women in our armed forces.

“You can’t just sit on your laurels when you see the contributions of our war fighters,” Knott concludes.