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

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

Decision Criteria

The obvious criteria are turnaround time, cost, schedule, and reliability, along with the potential to raise the FMC rate. Other criteria may not be as straightforward. Any far-reaching solution will require a culture change for ZTM, DLA, and their suppliers and customers. So part of the decision criteria must be the ease of overcoming the resistance to change, which could affect the viability of the solution.

Proposed Solution

In the short term, increase on-hand inventory from existing certified sources while initiating and streamlining a qualification program for new companies with replacement parts. This should immediately reduce turn-around time, improve reliability, improve FMC, and lower the costs of parts to DoD through economic quantity pricing. It may increase DLA's inventory storage costs.

In the long term, develop and implement a Web-enabled ordering process to reduce cycle time, and adopt other lean manufacturing measures. Set contractor incentives (award fees) based on FMC rates. Encourage the establishment of smaller companies to administer this process so that ZTM can focus on production. Make ZTM fully responsible for supplying parts as part of a total system responsibility program.

Measures of Success

Although it is difficult to measure, the evolution of the culture will be a critical factor. In the short term, success can be accomplished without a culture change, but not in the long term. Warfighter satisfaction and the reduction in work-in-process inventory are excellent measures. Measuring the added value and a waste-free value stream of each organization in the process will institute a focus on continuous improvement. The more typical metrics used to rate the TMP are important as well. People and companies focus their attention and efforts where leadership focus their attention and dollars.

The Mustang Case as a Teaching Tool

I use the Mustang case in my DAU classroom to give potential PMs an opportunity to make significant, reality-based decisions in a safe environment. Secondary objectives are to focus the students' thoughts on the role that DLA plays in the weapons systems acquisition process, make them consider how the mission of the program management office is intertwined with the mission of DLA, and to provide them with a personal understanding of the difficulties encountered by a WSSM. As a tertiary objective, the case also provides an opportunity to discuss how PMs influence contractor motivations with incentives.

The proposed solutions from Roman, Possehl, and Carter are similar in some respects and different in others, highlighting one of the most powerful aspects of the case teaching method: reality demands integration. That integration leads each student to interpret the scenario from his or her functional perspective, each understanding a slightly different situation. Equally important are student belief systems, personality preferences, and experiences--in other words, individual perspective. It is the differences between these factors that bring about the essence of the case method: tension or disagreement.