1. Transforming Logistics
Good afternoon. I want to thank Gen. Skibbie and Gen. Landis for the opportunity to chat with you about our ongoing efforts to transform logistics.
An AT&L Perspective
3 March 2004

2. “Amateurs talk about strategy; Professionals talk about logistics.”
former General R.H. Barrows
Commandant, USMC

3. Our History Unparalleled industrial capabilities
Highly trained and motivated workforce
First fully automated logistics system
Envied by our allies; Feared by our adversaries
World class in mass logistics.

4. Post Cold War Ready to Project and Sustain a Smaller “Cold War”
$109B in inventory (1989)
60-day response time
42 Maintenance Depots
788M cubic feet of storage space
$67B in inventory
32-day response time
20 Maintenance Depots
323M cubic feet of storage space
Ready to Project and Sustain a Smaller “Cold War”

5. The Changing Game Immediately Employable Force Option
Preemptive Capability
Net-Centric Warfare
Focused Joint Logistics

6. The Logistics Challenge
“On my signal … unleash hell….”
Ubiquitous, cost-effective capability to project and sustain power.

7. Words of Wisdom
“The dogmas of the quiet past are inadequate to the stormy present As our case is new, so we must think anew, and act anew. We must disenthrall ourselves, and then we shall save our country.”
At this juncture, I think it is imperative that we remember our country has faced similar, devastating challenges in the past. Our rich, national history is replete with examples of leadership, courage, and appropriate change and adaptation to overcome threats. My sense is Mr. Lincoln’s words ring as true today as they were during the Civil War.

8. Our Complex Web End Game Combatant Commanders Quadrennial Defense
Integrated Priority List
Joint Lessons Learned
Ongoing Operations
Quadrennial Defense
Review
Project and sustain the force with minimal footprint
Implement performance-based logistics
Achieve industry performance standards
External Influences
Congressional Oversight
GAO
Inspector General
DoD Logistics
$90B+/year
Over 1 million people
16-day customer wait time
Over 600 disparate systems
Related DoD Initiatives
Public Perceptions
We initiated the FLE to focus energy and resources on our most pressing logistics needs. Recent operations emphasize the need for rapid power projection and for appropriate tools to manage the flow of forces and sustainment. The Quadrennial Defense Review documents our national need to:
Projected power rapidly with minimal footprint
Improve readiness through performance-based logistics
Achieve industry standards for customer responsiveness.
Simultaneously, the Department launched several initiatives, such as the Financial Management Enterprise Architecture, to improve business operation with direct implications on logistics operations. Finally, the Services were pursuing several logistics improvement efforts. All these efforts are directed at improving our $88B+ per year logistics business, but the net impact wasn’t clear. The FLE is our program to harness the innovation within the Department to transform logistics in the near future. Our immediate focus is on:
Transforming weapon system support
Implementing end-to-end warfighter support processes
Integrating our diverse logistics enterprise to provide the warfighters with the support they need and deserve.
In Air Force language, the FLE will enable:
More Bombs on target
Via more rapid power projection
At significantly less cost, in terms of dollars and human recourses!
As you all know first hand, we need this capability NOW – not 20 years from NOW – because the threat is NOW, the forces are deployed NOW, and our pilots and airmen are counting on us NOW!
End Game
Financial Reform
Business Improvement Council
Defense Business Board
Freedom is Free
Conflict is quick
Government should be accountable
Service Initiatives
(over 500)
Product support
Footprint reduction
Customer wait time

9. Lt. Gen. Chesty Puller

10. QDR Direction Project and sustain the force with minimal footprint
Implement performance-based logistics to improve readiness for major weapon systems and availability of commodities
Reduce cycle times to industry standards
04pm12-10

11. Logistics Transformation
Immediate:
Near-Term:
Long Term:
Meet Immediate Readiness Requirements
Increase spare parts availability
Accelerate reduction in ownership costs
Focus on LD/HD assets
Reengineer to World-Class Standards
Achieve end-to-end global distribution
Implement commercial business solutions
Implement integrated supply chains for weapon systems
Infuse accountability and performance measurement
Accelerate Modernization of Highly Reliable Systems
Reduce footprint as a military requirement
Streamline acquisition process
Achieve Focused Logistics
Achieve net-centric operations

12. Cost of Aging Flying Hour Program Costs
Actuals
Projections
This chart shows the cost per hour historical trend along with the current projections being considered by NAVCOMPT
This chart, prepared and shown by N43 at last Thurs mtg, reflects NAVCOMPTs current position on the outyear budget projections for forces (# of operating aircraft budgeted), flight hours, and cost per hour.
It should be noted that these forecasted hours (>1M hours per year) are significantly higher than those that were in the TPOM baseline that was submitted to NAVCOMPT.
Outyear budget controls in the TPOM resulted in flight hour levels in FY2006 and out closer to 800,000 per year
Although NAVCOMPT believes that this is currently the most likely projection of the program baseline, I believe that N8 is still very concerned about the affordability of these projections given that offsets may have to be found to buy back these outyear flight hours not programmed in the Presidents Budget and POM/TPOM.
Outyear inflation guidance of less than 2% per year issued by NAVCOMPT and used in budget projections constrains the cost per hour growth budgeted. Actual annual price change factors for AVDLR have varied dramatically over time but average out to about 7%.
Problem: We are eating our young!

13. Aircraft Procurement Commitment
FY02
FY03
FY04
FY05
FY06
FY07
FY08
PB00
163
183
187
201
PB01
130
173
177
PB02 88 92
115
119
143
155
PB03 90 85
105
147
193
BES04
100
110
144
199
254
We must break this trend!
Source: Joint Council on Aging Aircraft

14. Reduction in Total Ownership Costs
Pilot Programs
Reported FY05 & Life Cycle Savings/Benefits
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
Reported Savings/Avoidances
LCC % Savings
FY05 % Savings
FY05 Goal
No Report
46% of the eligible 26 Pilot Programs project FY05 cost reductions of 18% or greater.
Projected FY05 cost reduction (26 Pilot Programs) exceeds $1.5B, $75B over the LC of all 29 Pilot Programs
The Life Cycle savings for all 29 of the Pilot programs far exceeds the FY05 forecasted savings number of $1.5B and is currently predicted to be $75B.
Reducing Costs Through Improved Reliability and Readiness

15. Expanding Reduction in Total Ownership Costs
Low Density/High Demand
Mature Programs
DAES Reporting
Special Interest
Mature Programs
Service Nominations
AT&L Selection
Defense Systems
ARA
DUSD(L&MR)
Potential Candidate Programs
Promising Programs
Prioritized Investment
Projected Economic Benefits
Validated Investment Model (Standard for future BCAs)
Leverage Point Model
(supply chain model)
F-16
F-18
M-1A1
Program Assessment Using Leverage Point Model
Value Engineering Potential

16. Focus on LD/HD Assets: B-2
Program Management
Fielded System
Maintenance Officer as PM
Managed to ACC performance expectations
7-year management goals; 10-year roadmap
Synchronized modernization, R-TOC, and PDM
Aggressively managed DMS program
Government/Industry Partnership
Northrop-Grumman PBL awarded in FY03
Organic maintenance and supply support (DLA)
SPD provides program management, configuration control, sustaining engineering
Recent Results
Exceeding ACC availability
50% reduction in MMH/FH (projected)
Exceeded OIF forward operating base requirements
Eliminated all LO backlogs
Accelerated tactical radio secure SATCOM capability
Achieved 72% MC rate (historical high)

17. Near-Term: Reengineer to World-Class Standards
Achieve end-to-end global distribution
Implement commercial business solutions
Implement integrated supply chains for weapon systems
Infuse accountability and performance measurements

18. “An Epic Logistics Mess”*
Never Again!
* The Plain Dealer, 02/08/04, Cleveland Ohio

19. Commercial Business Solutions: Distribution
USTRANSCOM Designated Distribution Process Owner
Demand Planning
Supply Planning
Rules and Tools guide Customer-Supplier relationship
Sources of Supply
Collaboration
Direct Source
Customer Places Orders
(seconds/minutes)
Next Day
Order confirmation number
(Order Status by Exception)
Supply Center
(source, pick, configure, pack, label)
Order Processing System
Fulfillment Agents
Performance:
Hours/Days
Shipment arrives
(Time definite delivery)
Next Day
Carrier (AMC, UPS, FedEx, APL etc.)
Collaboration
Simple, Responsive, Reliable, Visible

20. Enterprise Integration
Logistics Balanced Scorecard Synchronized to DoD BSC
Warfighting Perspective
Warfighting Perspective
Warfighting Perspective
Provide optimum responsive logistics
Provide optimum responsive logistics
Provide optimum responsive logistics
support to the joint warfighter to ensure:
support to the joint warfighter to ensure:
support to the joint warfighter to ensure: • • •
An immediately employable force option
An immediately employable force option
An immediately employable force option • • •
A rapidly deployable capability
A rapidly deployable capability
A rapidly deployable capability • • •
A sustainable total force
A sustainable total force
A sustainable total force
Innovation & Learning Perspective
Innovation & Learning Perspective
Innovation & Learning Perspective
Logistics Process Perspective
Logistics Process Perspective
Logistics Process Perspective
Ensure a capable workforce responsible
Ensure a capable workforce responsible
Ensure a capable workforce responsible
Vision
Vision
Provide effective logistics chain
Provide effective logistics chain
Provide effective logistics chain
for meeting the warfighter logistics
for meeting the warfighter logistics
for meeting the warfighter logistics
support requirements to include:
support requirements to include:
support requirements to include:
and
and
performance and capacity while reducing
performance and capacity while reducing
performance and capacity while reducing
the logistics footprint to include:
the logistics footprint to include:
the logistics footprint to include: • • •
Introduction of leading edge advanced
Introduction of leading edge advanced
Introduction of leading edge advanced
Strategy
Strategy
concepts
concepts
concepts • • •
R&M, Leveraging Global Industry, IT
R&M, Leveraging Global Industry, IT
R&M, Leveraging Global Industry, IT • • •
Organization adaptability
Organization adaptability
Organization adaptability
Improvements, and Commercial
Improvements, and Commercial
Improvements, and Commercial • • •
Workforce shaping
Workforce shaping
Workforce shaping
Advances
Advances
Advances
Resource Planning Perspective
Ensure affordable logistics support through
resources and choices that enable effective
joint warfighter capability to include: •
Accurately forecast and identify logistics
requirements
Enterprise Architecture •
Identify and understand the risks associated
with logistics resource allocation
Portfolio Management
DUSD(L&MR)
DUSD(L&MR)
DUSD(L&MR)
Memo
Memo
Memo
DUSD (L&MR) Guidance & Oversight/Integration
DUSD (L&MR) Guidance & Oversight/Integration • • •
Achieve FLE
Achieve FLE
Achieve FLE • • •
Streamlined Systems
Streamlined Systems
Streamlined Systems • • •
Efficient Systems
Efficient Systems
Efficient Systems • • •
Integrated Knowledge
Integrated Knowledge
Integrated Knowledge
Base
Base
Base
Component
Component
Component
July 2002 • • •
Interoperable
Interoperable
Interoperable
July 2002
Execution Plans
Execution Plans
Execution Plans
Execution
Execution
Execution
Systems
Systems
Systems
And
And
And
FLE
FLE • • •
Milestones
Milestones
Milestones
Modernization
Modernization
Modernization • • •
Schedules/Brown Out
Schedules/Brown Out
Schedules/Brown Out • • •
Critical System/
Critical System/
Critical System/
Database Information
Database Information
Database Information
Component
Component
(IT meta data)
(IT meta data)
(IT meta data) • • •
Evaluate Logistics AISs
Evaluate Logistics AISs
Evaluate Logistics AISs
Strategies
Strategies
and Databases
and Databases
and Databases • •
Management Approach
Management Approach
January 2003
January 2003
January 2003 • • •
Identify Systems to be:
Identify Systems to be:
Identify Systems to be: • •
CIO Interface
CIO Interface • •
Evaluation Criteria
Evaluation Criteria Ø Ø Ø
Eliminated
Eliminated
Eliminated • •
Process Methodology
Process Methodology Ø Ø Ø
Sustained
Sustained
Sustained • •
Metrics
Metrics Ø Ø Ø
Integrated
Integrated
Integrated • •
POM Considerations
POM Considerations
Leading DoD Enterprise Integration
August 2002
August 2002
Streamlined Portfolio Management

21. Enterprise Integration TODAY!
Unique Identifiers
Radio Frequency Identification
Regional Material Handling
Technical Manuals
Leading logistics transformation through international standards.

22. Infusing Accountability Detailed Process Metrics Under Development
Warfighter Perspective
Level 1: Force Closure
Level 2: % Transportation Closure by ULN
Level 2. % Closed by RDD
Level 1: Force Readiness
Level 2: Oper. Availability for Critical Systems
Level 2. % of Critical Systems Equip. on hand
Innovation and Learning Perspective
Logistics Process Perspective
Level 1: Force Sustainment
Level 1: Logistics Chain Reliability
Level 1: Logistics Chain Effectiveness
Level 2: Perfect Order Fulfillment (On time Delivery)
Level 2: Order Fulfillment /Total Pipeline Time
Resource Planning Perspective
Level 1: Logistics Chain Predictability
Level 2: Production/Delivery Flexibility
Level 2: Planning & Re-planning Cycle Time
Level 1: Logistics Chain Affordability
Level 2: Logistics Chain Expense
Detailed Process Metrics Under Development

23. Long-Term: Accelerate Modernization
Reduce footprint as a military requirement
Streamline the acquisition process
Achieve net-centric operations
Achieve Focused Logistics

24. JROC: Focusing on Capability
Capability based
Net-centric driven
Mobility/footprint are military capabilities
Reliability/maintainability are military performance parameters

25. The “Future” is being determined NOW!
JSF
FCS
DDX
Designing OUT Logistics

26. Focused Logistics Rapid distribution of tailored support packages
Rapid delivery of mission-ready forces
Information fusion
Total asset visibility
Reduced inventory, smaller footprint, faster response
Bottom line:
Forces in theater — whether forward-stationed or deployed — deliver more capability, require less support
End-to-end communications
Logistics decision superiority

27. Logistics Transformation
Mass-Based
Just-in-Time
Sense and Respond
FSB
More is better
Mountains of stuff measured in days of supply
Uses massive inventory to hedge against uncertainty in demand and supply
Mass begets mass and slows everything down
Precision is better
Reduce Inventory to a minimum and keep moving
Use precise demand prediction and optimization to reduce uncertainty
Works great, except when it doesn’t
Agile is better
Dynamically positioned Inventory throughout
Use transportation flexibility and robust IT to handle uncertainty
Supports adaptive operations
Prime Metric: Days of supply
Prime Metric: Flow Time
Prime Metric: Effects
Migrating to the Force-centric Logistics Enterprise

28. Sense and Respond Logistics Concept
Supply network is dynamic
Supply doctrine anticipates reconfigurable supply nets
Emphasizes transportation flexibility over large inventories
Negotiation-based relationships
All entities use commander’s intent and detailed situation awareness to negotiate and synchronize
Roles and commitments of entities are dynamically defined within a specific context
All entities are described in terms of current capabilities, not as static forces
Networks are difficult to analyze and attack
More robust to node failure
Adapts to real-time demand driven by unit signals
Supports a more logistically agile force
Network adaptivity allows logistics decisions to be made later
Emphasis on information and transportation allows a greater degree of operational flexibility

29. Near-Term Priorities Support Current Operations
Distribution Process Owner
Performance Metrics and Balanced Scorecard
Enterprise Integration
Performance-Based Logistics
Maintenance Excellence
Streamline Material Flows
Logistics Transformation Roadmap

30. We Need Your Help Appropriate risk/reward sharing on PBL programs
Control and visibility of industrial supply chains
Critical safety items
Rapid adoption of industry and international standards
I am impressed and thrilled with the progress the Military Departments have made in implementing FLE, especially the Air Force. But – we still have a long way to go – and we need your help! First, demand the same level of service from your logistics providers that you demand in your private life. If you don’t settle for 16-day delivery time and 85% fill rates from LL Bean – don’t settle for it from AFMC. Leading Air Force programs are demonstrating world-class support at reduced cost. Demand more – –you’re worth it!
Second, when you return to your operational units – question the conventional wisdom of “operational flexibility”. Demand direct, collaborative planning with your support providers, advocate commercial distribution practices, and break the cycle of unanticipated demands, cannibalization, and obfuscation!
Finally, help us accelerate the integration of operations and logistics. Pull your support providers into operational planning, demand top-line support for training and exercises, and capitalize on our strong comparative advantage in logistics to put “bombs on target” as the ultimate demonstration of our national will.

31. Ubiquitous, cost-effective capability to project and sustain power.
The End Game
Ubiquitous, cost-effective capability to project and sustain power.
04pm12-31