Optimizing the supply process at the Defense Logistics Agency: a case study

Defense AT&L, Nov-Dec, 2004 by John F. Horn

Longer term, a modern system for placing orders electronically with the original manufacturers must be implemented at DLA. For this, McMahon needs to work within the overarching DLA21 initiative, which will involve implementing DLA-wide supply chain management systems.

Measures of Success

It's tempting to say that meeting readiness level is the measure of success, but McMahon has limited control of the readiness metric. The CWT for consumables is believed to be a factor in fleet readiness, and while it is one of many factors, it's the only one McMahon can control. So success should be measured by reduction in CWT. It is important to set a "stretch goal." Reducing the CWT from 320 days to 120 days is an improvement, but it is much too modest. The CWT goal should be based on benchmarks from industry where supplies are delivered in hours or a few days. The fact that ZTSC is delivering reparable parts in six hours suggests that the same can be accomplished for consumables.

Stephanie Possehl

There are no easy answers for McMahon. He's faced with poor operational readiness levels for the Mustang, a less than stellar relationship with the sole source prime contractor, and organizational changes within DLA. Additionally, shrinking defense budgets and acquisition reform initiatives are spurring him to make the supply support process significantly more efficient. There are many approaches to choose from, among them developing a partnership such as TMP, increasing DLA's inventory levels, working with the contractor to improve the existing process, choosing a different contract type, and so on. McMahon's previous approaches have failed, so he's going to have to take drastic steps.

Issues

The 88 percent fully mission-capable operational readiness level is McMahon's most immediate issue. The 320-day average turnaround time for purchase requests must be resolved. Underlying issues include the low priority given to spares support by ZTM and the fact that subcontractors and vendors have been going out of business with little advance warning. Field units' use of credit cards to purchase unqualified parts to keep their readiness levels up has led to both configuration and reliability problems that, in turn, contribute to the low readiness levels. McMahon must break the Catch-22 cycle. The question is, how?

Decision Criteria

Overall process improvements are necessary to bring about the following: significantly improved turnaround time; only qualified parts in the field; the ability to meet S & S requirements; and an improved government/contractor relationship. The proposed solution is a long-term fix and will not realize immediate improvements in readiness levels. Some up-front investment is required to develop the predictive parts model, the obsolescence database, and the Web-based ordering system; however, lower unit costs can be anticipated.

Proposed Solution

McMahon must meet with his ZTM counterpart to improve their relationship. He must assure ZTM that a reasonable profit is available and make spare parts production easy and non-obtrusive (to the Mustang production line). As the sole-source prime contractor, ZTM is a good candidate for a long-term contractual relationship with DLA. Together they can determine the contract structure and establish incentives.