Logistics Modernization in the Twenty-First Century Report - DTD Mar 09

According to the report’s executive summary, “the Department of Defense (DoD) is one of the largest and most complex organizations in the world. DoD’s budget dwarfs that of the world’s largest corporation and it employs millions of people that operate worldwide. More importantly, the DoD supply chain accounted for $162 billion in spending in Fiscal Year 2006, and managed a supply chain inventory of $85.6 billion (over 5 million different secondary items) (Bell 2007)—orders of a magnitude of more inventory items than the largest retail corporations (Government Accountability Office 2003). The current “system” is largely an ad-hoc mix of government and industry, with little cost visibility or performance accountability, and does not perform to world-class standards for responsiveness, reliability, costs, personnel and visibility (Bell 2007). An integrated (end-to-end) system within DoD—a critical component of “world class” commercial logistics systems—does not exist. This is due, in large part, to DoD’s traditional approach to logistics. This approach has proven to be highly inefficient, with segmented accountability and control by various stakeholders (Combatant Commands, Services, Depots, Defense Logistics Agency, Defense Contractors etc.), each with individual requirements, restrictions, and priorities. With most military disciplines there are few sound commercial models. However, with respect to logistics transformation, many of the necessary tools and concepts have already been well proven in the commercial sector.  Witnessing the capabilities of advanced state-of-the-art supply-chain implementation by commercial firms, coupled with the stresses of supporting two major conflicts, has crystallized the belief within the Department’s logistics’ community of the need for logistical transformation. The following planning documents demonstrate this recognition, and offer strategies to pursue it.  Quadrennial Defense Review, September 2001 Focused Logistics Joint Functional Concept, Dec. 2003 DoD Management Initiative Decision (MID) #917 October 2004 DoD Logistics Transformation Strategy, December 2004 DoD Directive Required Incorporation of RFID Throughout (beginning January 2005)  Despite these policy initiatives, logistics transformation within DoD to date has been fragmented, and unfortunately the results have been limited. As a result, we believe there is a clear requirement to move away from the traditional DoD models of support, and transform DoD’s logistics, fully leveraging the tools and capabilities used by “world class” logistics providers.” The report goes on to specifically include “Optimizing Use of Performance Based Logistics (PBL)” as one of those tools and capabilities, saying, “DoD must shift from purchasing parts to purchasing outcomes. DoD can achieve this end by optimizing use of PBL, which has the goals of attaining the highest levels of efficiency, effectiveness, accountability and reliability. PBL differs from more traditional support arrangements by (1) clearly delineating outcome driven performance goals; (2) ensuring responsibilities are assigned; (3) reducing cost of ownership; and (4) provides incentives for attaining performance goals. PBL is the standard for world-class commercial firms and has been successfully implemented in DoD projects, such as the F/A 18 Super Hornet.” This research was conducted by The University of Maryland Center for Public Policy and Private Enterprise, and was sponsored by the Lockheed-Martin Corporation. The University of Maryland Center for Public Policy and Private Enterprise “provides the strategic linkage between the public and private sector to develop and improve solutions to increasingly complex problems associated with the delivery of public services—a responsibility increasingly shared by both sectors. Operating at the nexus of public and private interests, the Center researches, develops, and promotes best practices;  develops policy recommendations; and strives to influence (through its research) senior decision-makers toward improved government and industry results.” This report is posted with permission of the report sponsor on this U.S. government website as a public service and does not constitute or imply endorsement of the report or its recommendations by the U.S. Government, the Department of Defense or the Defense Acquisition University.