Transformation and the future at DLA.

The Defense Logistics Agency, headquartered at Fort Belvoir, Va., is DoD's largest combat support agency, providing worldwide logistics support in both peace and wartime to the military services as well as several federal agencies and foreign countries as authorized. "Support" includes everything from millions of MREs [meals-ready-to-eat] to repair parts, jet fuel, uniforms, medical supplies, and more. As the DLA saying goes: "If America's forces eat it, wear it, maintain equipment with it, or burn it as fuel ... DLA probably provides it." This worldwide mission is performed by approximately 22,000 civilian and military personnel.

DLA doesn't limit activity to the military sphere: The agency recently proved critical in providing supplies to areas suffering in the aftermath of hurricanes Katrina and Rita, and the earthquake in Pakistan.

Navy Vice Adm. Keith W. Lippert has served as director of DLA for over four years, steering the organization through transformation and incorporating significant changes to the way business is done. In early October 2005, he took time out to speak with Randy Fowler, director for the Center for Logistics and Sustainment at the Defense Acquisition University, about how DLA is responding to ever-escalating requests, and what is ahead for the organization.

Q

Even as a career-long logistician. I continue to be amazed at all the things DLA gets into. DLA must respond to unpredictable domestic events as well as support forces abroad. My first question is a two-part one: How was DLA able to support the disaster relief effort after Hurricane Katrina; and how can you do that while still meeting all the operational military missions, such as ongoing support for operations Iraqi Freedom and Enduring Freedom?

A

Let me put that question into the context of the overall mission. In the last four-plus years, from 2001 to this past fiscal year [2005], our sales have almost doubled. In 2001 specifically, we did $17 billion in sales; our projection for '06 is over $34 billion. We just finished '05 with $31.8 billion. Four years ago, DLA was getting about 30,000 requisitions a day; we're now getting 54,000 requisitions a day. To keep up with that volume of business, we are completing 8,200 contracting actions a day.

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No matter how you look at it, business has increased dramatically--and for several reasons. One reason, obviously, is OEF, OIF, [Operation Enduring Freedon, Operation Iraqi Freedom] and the war on terrorism. But another big piece of it is that more and more, the customer is coming to DLA. When you put those factors together, you see sales going up at the rate they are.

So when Katrina came, and there was so much need all at once, we at DLA were thrust into it. We began preparations even before the storm approached land. The storm hit early in the week, and by mid-week, we were told that FEMA [the Federal Emergency Management Association] was asking for our help. The request was consistent with what DLA has always been able to do, since we are manned, organized, and fully capable of responding to surges for the military, and our activities go on 24/7. We resource headquarters here with what we call the DLA Logistics Operations Center. We're there to receive the requirements, figure out how we can best meet them, and then worry about distribution.

We deployed about 19 people to work positions in support of Katrina and Rita relief efforts. We had people in NORTHCOM [U.S. Northern Command], people down in Louisiana and Texas, and we deployed with the 82nd Airborne--all that was part of the whole relief effort. In many ways it was similar to what we would do in a war zone scenario.

The immediate problem centered around getting food to the people. We ended up providing 24.4 million MREs from stocks from all over the continental United States. We can provide support through 26 distribution networks worldwide: 19 here in the continental United States and seven overseas. All but one of them provided support to victims of hurricanes Katrina and Rita. As I sat there and watched things on television, I didn't feel good at all at what was happening until I saw the first convoy with MREs rolling in. On CNN, I watched Secretary Rumsfeld describe how to eat an MRE, and the next day on TV, I saw an 80-year-old man who was saying he was just fine because he had food and talking about the MREs. So it was very reassuring.

We issued the MREs from our stocks, which took us to a lower level of inventory than we would like. We took some risks, but we talked to the Services and worked with them. We put our three MRE producers on a 24/7 production basis; they are on that schedule right now [early October] and surging. Responding to Katrina didn't require a new contract. We simply exercised options in an existing contract to ramp the production up so that we could refill our supplies.

MREs are just one example of what we provided. We also provided ice, bottled water, generators, trucks, medical supplies, fuel for our people (Defense Energy played a big role in this), right on down the line of the type of commodities and requirements that were given to us. Right across the board, I just couldn't be more pleased to see the reactions of DLA to these crises and what we were able to do.

We will go over our lessons learned this month, and one of those lessons is that MREs were never designed for humanitarian relief; they were designed for use by warfighters. They have high calorie, high energy content, and certainly were never designed for an 80-year old man or a 5-year old child. So--assuming we're going to be involved in this sort of thing again--we're going to have to work with industry to design meals that are more appropriate for disaster relief in the United States. Those efforts have already begun. In fact, we provided almost 17 million commercial ready-to-eat meals for the hurricane victims, which were more appropriate for their nutritional needs than the MREs.

Q

A follow-on question: Are you still there, and at what level of support?

A

We have obviously downsized. We still have a couple of people working with FEMA and in the NORTHCOM area, but most of our people have returned from deployment. [All had returned by early November, after providing similar support for Hurricane Wilma.] We have disengaged substantially. However, we are still getting requests for materiel. FEMA has requested 3 million more MREs, not only for current Katrina and Rita support, but also to stock up for the next crisis, whatever it is. That request is competing with all our other requirements worldwide, so the MREs won't be issued immediately, but they will be issued in a timely manner as the production continues to increase.

Q

Let's talk about one of your favorite topics: transformation. I recall that about the time you came aboard, DLA was a command that faced quite a bit of customer dissatisfaction, declining sales and market position, lots of stovepiping within the organization. You seem to have turned that around, and from what I've read, a big part of the reason is the enterprise approach that you've taken. Would you explain how you've moved toward this enterprise approach.

A

I had an advantage coming in. I had been in DLA in the early 1990s, and throughout the '90s I was a customer, so I came in knowing both the capabilities and some of the weaknesses of the organization. One of the main criticisms was that it was taking too long for materiel to get to the customer.

The former chief of Naval Operations, Vern Clark, used to hold three- and four-star officer off-sites. Early on--maybe my second month here--I went to one. Clark was looking for ways to save money for the Navy as they were trying to recapitalize, and everybody was asked to write down the top ways Navy could save money. Number three on the list was to do away with DLA. Obviously, that got my attention!

One of the things I wanted to focus on was to reduce our costs and have materiel available much more quickly than we had in the past. And through a team effort, we have been able to reduce costs. Many things contributed. From an overseeing comptroller perspective, we had excellent front-end support. We set up metrics and goals, and we held people accountable. When 9/11 occurred, industry really responded to the challenge. I got phone calls from CEOs of companies, asking what they could do. Since we put all that together, back orders have hit the lowest levels in DLA's history. Our cost recovery rate, which is an indication of our costs, is at the lowest level it has ever been; we have fewer people at DLA now than we have ever had--yet sales have doubled. All of this has really improved the support for the warfighter. We can show statistically that as our back orders go down, full mission capability rates in the Air Force and Navy have improved. It has a direct impact.

Another effort we focused on was creating a strategic plan that meant something to this organization--meaning it was developed by the leaders of people in the organization, not just the director dictating what it was going to be. Part of that whole thing was to worry about transformation, and we now have 13 initiatives as part of this whole effort. One of the decisions was that instead of acting like little fiefdoms all over the world, we were going to act like one organization. It's very easy to say that, but very difficult to do it. You get into the human capital side of the scene. We hired an executive coach to help us work as one team. The strategic planning is the framework. We update it; we get all the input from people; and it has made a big difference in getting us to act as a corporation.

The biggest transformation is BSM--Business Systems Modernization. Our legacy system was designed in the 1960s and implemented in the 1970s. It should have been replaced maybe in the late 1980s. The system is written in Cobol and it's a batch type of system. When you compare that with world-class logistics or even any kind of company in the private sector, it was a dinosaur.

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The agency, to its credit, started looking at this in 1999. We went into a concept demo in the year 2002, and it took much longer than we were anticipating. January 2005, we started rolling out 200,000 items a month, and we will continue at about that pace through full implementation.

There are all kinds of benefits. It pays itself by 2009. We will pass a financial audit for it for the first time in our history. The customer wait time goes down dramatically because it's a real-time as opposed to a batch-mode system. It forces you to have data integrity. It uses a construct that's form-based to meet the Department of Defense's main areas, so you have fewer people operating the system. Two years ago, if you and I had been sitting here talking, I couldn't have looked you in the eye and said, "This thing is going to work." But it is going to work. It's required cultural change, it's required reorganization of inventory control points, and it's required a lot of change in management training, so it's been a huge effort. It's a big step forward.

Q

You talked about how BSM is integral to DLA transformation. What spin-offs might it have to a more widespread DoD transformation? Have the other components learned from watching you with BSM implementation?

A

We have worked with all the Services and shared lessons learned with them because we are farther along than they are, maybe because we started this whole transformation process earlier. Everything that we've done has shown us where the challenges are. We have funded interfaces to work with these new systems. There is much, much more to do. DLA can't wait for another Service that may have just started this process so that we all march together at the same pace; the decision I've made--and OSD has concurred--is to get this thing fully up and operating, and then we will go back and worry about the interfaces and make sure that everything works appropriately. As we go along, there will be more discussions on the right configuration and the optimum way to be doing all this stuff, but we have worked very hard with all the other Services to share lessons learned as we go.

A good example is that as part of our concept demo, we went to a commercial off-the-shelf procurement system. However, it didn't have the functionality we needed to award 8,200 contracts a day, so either we stayed with the legacy system we had, or we looked at new COTS systems. We expect to receive a solution from SAP [a vendor of enterprise software solutions] this month, and all our preliminary work with them has indicated that it's a very good, robust program. We are working with the Services, and if we are happy with the solution, the intent is to have it as part of a DoD-wide procurement system--at least at the wholesale level.

Q

DLA has worked as hard as any logistics organization with which I'm familiar to build a customer-centric culture, and this is consistent with the principles of supply chain management, particularly the component regarding customer relationship management. DLA seems to have really emphasized customer relationship management.

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A

We're in the process of an interesting evolution. DLA was formed back in the 1960s as strictly a wholesale organization, meaning it bought common materials to put in warehouses and issued them to customers, and other than that there was very little interface. But even back in the late '60s and early '70s, we had people dealing with and working with customers. In the 1990s, a decision was made in this organization to be much more proactive with the customer. I think the Defense Management Review Decision [DMRD 902] that the Office of the Secretary of Defense put out [in 1989] forced the issue because a lot of the buffer inventories of the era went away. DLA was given more responsibility, and if DLA was to be successful in this environment, a hands-off approach just wasn't going to work.

My predecessors set up DLA employees as liaison officers with all our combatant commanders and joint staff. As we speak, we have 102 customer support representatives with our major customers throughout the world. We have DLA Europe and DLA Pacific, and we recently stood up a DLA CENTCOM [U.S. Central Command]. About a year-and-a-half ago, we stood up a J4 [Joint Staff, Logistics] organization in DLA, which is our customer outreach. We have all these people I just mentioned--liaison officers, customer support reps, DLA Europe, CENTCOM, and Pacific--pulling together to make it work. Their purpose is to be with the customer, to be with the warfighter. They know what the customer requirements and thought processes are, and they report back to us so we can respond accordingly. I think this has also contributed quite a bit to the rate at which our sales are going up.

The second piece is that we have worked on a customer relations management. There's a whole science in the private sector that concerns itself with segmentation markets and producing unique solutions for customers. We are interested in that right now, and we're applying the lessons learned to our customers. As an example, we have already talked with the Army in the theater of southwest Asia, where there is the potential for DLA to be a one-stop shop for subsistence. Instead of just providing the food, DLA could also do the contracting for the preparation and service.

Q

To continue the customer track, DoD's logistics customers really care about a few things: the ability of the system, the transparency of the system, and--maybe foremost--accountability for the delivery of that capability to the system. What you have done at DLA, "one-call resolution." is to make it easier for the customer to touch one point, one contact, and yet touch all the elements of DLA.

A

It started off as a customer call center, and the original idea was to have people up 24/7 to answer high-priority questions from a worldwide perspective. That turned out to be such a success that it has now expanded into a contact center. A phone isn't the only way you can get in; e-mails are another good way of doing it.

We have a whole series of metrics to measure how quickly we're able to respond to a telephone call: what's the queue time; what's the customer satisfaction rating--and by the way, it is 95 percent. Calls are referred to people who are subject matter experts in different areas.

And there are other things we're working on. Certainly the asset visibility is worth mentioning. The first issue is to make sure that we have the materiel, then that we can see where it is all located. I think we are on track on that one. We have used active radio frequency identification tags for some years. Now everything of a certain size that leaves DLA's distribution centers for Operation Iraqi Freedom has RFID tags. The problem was that when containers got over there, some people knew how to read the RFID tags but other people didn't; and if they didn't know how to read them, we'd wasted our time putting them on. That led to the distribution process partnership with U.S. Transportation Command, which has helped with this asset visibility. As materials leave the continental United States, we have a big initiative to use passive RFID for everything being shipped to the theater. Soon our centers are going to have that capability. We are working with the customers right now to make sure we are all in sync on how this is going to be working in the future.

I should also mention the Integrated Data Environment or IDE, the idea being a browser that can go through the various databases in DLA and pull out the required information so we can get it to the customer. The main thrust of that is to go through an enterprise-integrated data environment so that we can interface with the other Services' databases also.

Q

Can you expand on how your efforts on IDE are going to have a synergistic impact across all the Services, to include acquisition and engineering organizations?

A

We hope to have the first phase of the integrated data environment up this fall [2005] for our customers here at DLA to access the customer databases. Again, it's a browser that enables you to go into our data information, which is really centered on the asset visibility while in transit, and that's a great step forward.

The problem still is that I still see people in the DLA CENT-COM joint service deployment distribution operations centers tracking the material and having to go from one computer to another to get from the supply center to transportation. It's crazy! The idea is to create an enterprise-integrated data environment where you can sit at one computer and access all the databases you need. We are working the process with U.S. Transportation Command right now. We're reviewing their effort--primarily their transportation mode versus our asset visibility--and joining them together. The joint logistics board is looking at that as a business case and trying to expand it to the rest of the databases. It will be a huge step forward. The technology and the capability are there; we don't have to create this huge data warehouse that we used to worry about--you can look at the spare databases and just go get the information. The discussions are going on. I'm cautiously optimistic that we will get there.

Q

We've lived for almost a decade with the mantra that we need to manage suppliers, not supplies. I know that's been a principle at DLA. Can you comment on what this vision means for DLA and your customers?

A

Let me begin with efforts that started in the early 1990s with direct vendor deliveries of certain commodities, primarily subsistence items and pharmaceutical and medical items. Instead of following the traditional pattern--awarding the contract, getting the materiel, putting it in the warehouse, and issuing it to the customer--we awarded contracts to contractors and didn't involve the warehouse at all. Contractors were responsible for providing the type of materiel we wanted in a timely manner and performing from a surge perspective when necessary.

That program, which started off relatively small, has expanded dramatically. In fact in the subsister ce area, with the exception of MREs, we have hardly any food in our warehouses at all. So by executing these types of contracts, our warehouse requirements have dropped dramatically. It's interesting from a food perspective. I have a personal view on that. I've been on several ships in my career, and the food was always supplied from warehouses. We'd be eating brands I'd never heard of in my life, and you always wondered what the devil you were eating, because it was certainly from the cheapest provider! Under the new method, in addition to getting the materiel in a timely manner, you can order the brands you want, and customer acceptance is much higher.

Another good example of this kind of contract is how we loaded out the USS Comfort [a Naval hospital ship] to the Gulf to support Katrina victims. We don't have medical and pharmaceutical materials in the warehouse; private companies have the contracts. They loaded up the Comfort, and she left quickly. We got some supplies to her, and we hit her again in Jacksonville and Pensacola, Fla. That materiel was there from the industries. It's industry's problem to deal with the shelf-life issues, so you get a great response from the warehouses and contractors. This is a good example of the management of a supplier. You award a contract that has performance requirements in it, including surge and emergency situations.

We have taken these types of contracts now and expanded them to many other types of commodities and classes of materials where it makes good business sense to do so. You start seeing things like performance-based logistics contracts that are coming out of DLA. We have what we call strategic supplier alliances. That means contracts that are basically sole-sourced. The companies know we are going to go to them anyway. We award long-term contracts, and we throw in many performance requirements. We rate them in terms of cost reduction, production lead time, quality, on-time delivery; and they get a "report card" with a rating. It's beneficial all around: the companies get a long-term contract with minimal quantities, and we get a much better performance. So it becomes a win-win situation. We continue to try to expand these type of arrangements.

Q

DLA is a wonderful integrator in terms of medical supplies, food, water, those types of commodities, but when you look into the weapon systems area, logistics becomes more complex and challenging. I know that Maj. Gen. Daniel G. Mongeon, DLA's recently retired director of logistics operations, was seeking an increased role for DLA as a performance-based logistics product support integrator for these types of models. How do you see that potentially coming together?

A

We have already awarded a whole series of these types of contracts after doing a business case to convince ourselves that this is actually the right thing to do. Either we do it by ourselves or we partner with a Service, and we've had excellent results. We may have an associated response-time requirement, and we've seen significant results and improvements--to such a degree that when we got into the joint cross-Service group for supplying storage to Base Realignment and Closure efforts, one of the BRAC recommendations is that DLA is designated to award contracts for depot-level repairables. The idea is that you take the consumables and the depot-level repairables, and you can total the requirements with a certain company and go with one DoD contract. We're now challenged to perform in the same way for repairables as we do for consumables.

Q

You guys really are the combat support agency. That has been your mission statement before and for some time, but it is still so impressive how operationally driven you are. I didn't know this, but you are even providing a role when it comes to redeployments. Can you talk more about that?

A

The redeployments have been an interesting evolution. They are centered around our people in DLA Europe, DLA Pacific, and DLA CENTCOM, which is where our focus is right now: providing expertise along with the DLA contingency support teams that are in theater about what we should be doing with the materiel that is over there. Should it be sent back to the continental United States?

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Should it stay there? If it's going to stay, we have set up defense reutilization marketing offices over there. We have one in Iraq, we have one in Kuwait, and we're working on setting up one in Afghanistan. We've already redistributed a lot of the materiel that is over there to incoming troops or other troops that are remaining there so we get the best bang for the buck.

We are also demilitarizing some of the materiel there and selling it to the private sector. There are all kinds of issues, of course, because you are in another country. There are rules and regulations about transporting hazardous materials and selling materiel on the open market, so it may take time to get the right to do that, but all that effort is ongoing right now and it has been a huge success. You can imagine the amount of materiel over in Iraq and the effort that's being made to best utilize it.

Q

I want to ask now about people transformation, an important component of your transformation. What role does workforce development play in the overall DLA's transformation process?

A

It's a very interesting effort. The people who have worked on business systems modernization recognized very early on that the average age of a DLA employee is 40 years old. Those people have used the legacy system their entire professional life with DLA, and we are in the process of yanking it from them and saying, "Okay, here's a brand new way of doing things. Now get on with it." Well, their first reaction is an institutional resistance to change. We went through a lot of change management training. There's a very robust effort to incorporate change, and of course the training itself is highly conducive to the system. We've had some success with that.

I think the most difficult thing is dealing effectively with certain feedback. We have done corporate climate surveys here at DLA for years, and the surveys were telling us that we weren't communicating well with the workforce. There was a lack of trust in the leadership and management of the organization. We did another test, a survey called the Denison Model. The Denison Model takes a look at 1,000 companies in the private sector, gives them 60 questions that deal with internal and external focuses of the company--strategic planning, things like that--and then creates a database of the companies' responses. Your organization goes in and answers the same questions, and they tell you where you rate among everyone else. It's a percentile rate. When we did this at DLA, we were at the 98th percentile for GS-15 and above, but for GS-14 and below, we were at the 20th and 15th percentile. They were falling off the page.

What we learned is that we promote our civilians based on technical expertise, and we don't spend any time on how you manage, how you lead. What they end up doing is modeling themselves after people who have gone before them, who may or may not have been a success. What we had to do was start at the very top of the environment. We did 360-degree evaluations. Everyone took it--I've gone through it twice. We're now giving our management team leadership and management training. We have just started this whole process and I expect to see significant benefits.

Q

My last question is a personal interest one: How long have you been director of DLA? Is yours a record tenure for a director?

A

It's funny that you ask that because I am in my fifth year here, and my staff are telling me that this month I become the longest-serving director in DLA's history.

Q

So it is a record! Admiral, it has been a pleasure talking with you.

Vice Adm. Keith W. Lippert, USN, Director, Defense Logistics Agency

RELATED ARTICLE: Vice Adm. Keith W. Lippert, USN

Director, Defense Logistics Agency

Vice Adm. Keith W. Lippert became the 14th director of the Defense Logistics Agency on July 20, 2001.

Before coming to DLA, Lippert was the commander, Naval Supply Systems Command and 41 st Chief of Supply Corps since August 1999. From 1997 to 1999, he served as vice commander, Naval Supply Systems Command.

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Lippert's sea duty tours include supply officer, USS Queenfish (SSN 651); assistant supply officer, USS Simon Lake (AS 33); and supply officer, USS Canopus (AS 34). Shore duty tours include assignments as assistant comptroller, commander Submarine Force, U.S. Pacific Fleet; operations research officer at the Navy Ships Parts Control Center, Mechanicsburg, Pa.; inventory analysis staff, Naval Supply Systems Command, Washingtor, D.C.; executive officer, Naval Supply Center, Jacksonville, Fla.; and director, Spares Programs and Policy Branch in the Office of the Deputy Chief of Naval Operations for Logistics. In 1990, Lippert rejoined the Naval Supply Systems Command as the deputy commander for financial management/comptroller, with budget responsibility for a worldwide multibillion-dollar supply system. While serving as comptroller he was also responsible for the Navy's successful inventory reduction program.

From July 1993 to July 1995, Lippert served as the commander, Defense General Supply Center, Richmond, Va. In August 1995, he became the first commander, Naval Inventory Control Point, with offices in Philadelphia and Mechanicsburg, Pa.

Lippert earned his commission through the regular Navy ROTC Program, graduating in 1968 from Miami University, Oxford, Ohio, with a bachelor of arts degree in mathematics. He also holds master's degrees in management and operations research (with distinction) from the Naval Postgraduate School. In 1994, Lippert attended the Senior Executive Program in National and International Security at the John F. Kennedy School of Government, Harvard University.

Lippert's personal awards include the Defense Superior Service Medal, three Legion of Merits, four Meritorious Service Medals, two Navy Commendation Medals, Navy Achievement Medal, and Submarine Supply Dolphins. He is the recipient of the Society of Logistics Engineers 1992 International Award for outstanding performance in financial management/inventory control.