[Senate Hearing 110-391]
[From the U.S. Government Publishing Office]
S. Hrg. 110-391
FROM WAREHOUSE TO WARFIGHTER: AN UPDATE
ON SUPPLY CHAIN MANAGEMENT AT DOD
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HEARING
before the
OVERSIGHT OF GOVERNMENT MANAGEMENT,
THE FEDERAL WORKFORCE, AND THE
DISTRICT OF COLUMBIA SUBCOMMITTEE
of the
COMMITTEE ON
HOMELAND SECURITY AND
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
__________
JULY 10, 2007
__________
Available via http://www.access.gpo.gov/congress/senate
Printed for the use of the Committee on Homeland Security
and Governmental Affairs
----------
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Washington, DC 20402-0001
COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan SUSAN M. COLLINS, Maine
DANIEL K. AKAKA, Hawaii TED STEVENS, Alaska
THOMAS R. CARPER, Delaware GEORGE V. VOINOVICH, Ohio
MARK L. PRYOR, Arkansas NORM COLEMAN, Minnesota
MARY L. LANDRIEU, Louisiana TOM COBURN, Oklahoma
BARACK OBAMA, Illinois PETE V. DOMENICI, New Mexico
CLAIRE McCASKILL, Missouri JOHN WARNER, Virginia
JON TESTER, Montana JOHN E. SUNUNU, New Hampshire
Michael L. Alexander, Staff Director
Brandon L. Milhorn, Minority Staff Director and Chief Counsel
Trina Driessnack Tyrer, Chief Clerk
OVERSIGHT OF GOVERNMENT MANAGEMENT, THE FEDERAL WORKFORCE, AND THE
DISTRICT OF COLUMBIA SUBCOMMITTEE
DANIEL K. AKAKA, Hawaii, Chairman
CARL LEVIN, Michigan GEORGE V. VOINOVICH, Ohio
THOMAS R. CARPER, Delaware TED STEVENS, Alaska
MARK L. PRYOR, Arkansas TOM COBURN, Oklahoma
MARY L. LANDRIEU, Louisiana JOHN WARNER, Virginia
Richard J. Kessler, Staff Director
Evan Cash, Professional Staff Member
Jennifer A. Hemingway, Minority Staff Director
David Cole, Minority Professional Staff Member
Emily Marthaler, Chief Clerk
C O N T E N T S
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Opening statements:
Page
Senator Akaka................................................ 1
Senator Voinovich............................................ 3
WITNESSES
Tuesday, July 10, 2007
Hon. Jackson P. Bell, Deputy Under Secretary of Defense,
Logistics and Material Readiness, U.S Department of Defense.... 5
General Norton A. Schwartz, Commander, U.S. Transportation
Command........................................................ 7
Lieutenant General Robert T. Dail, Director, Defense Logistics
Agency......................................................... 9
William M. Solis, Director, Defense Capabilities Management, U.S.
Government Accountability Office............................... 11
Alphabetical List of Witnesses
Bell, Hon. Jackson P.:
Testimony.................................................... 5
Joint prepared statement with Lieutenant General Dail and
General Schwartz........................................... 27
Dail, Lieutenant General Robert T.:
Testimony.................................................... 9
Joint prepared statement with Mr. Bell and General Schwartz.. 27
Schwartz, General Norton A:
Testimony.................................................... 7
Joint prepared statement with Mr. Bell and Lieutenant General
Dail....................................................... 27
Solis, William M.:
Testimony.................................................... 11
Prepared statement........................................... 49
APPENDIX
Background....................................................... 77
GAO Report entitled ``DOD's High-Risk Areas, Progress Made
Implementing Supply Chain Management Recommendations, but Full
Extent of Improvement Unknown,'' January 2007, GAO-07-234...... 83
GAO Report entitled ``Defense Logistics, Efforts to Improve
Distribution and Supply Support for Joint Military Operations
Could Benefit from a Coordinated Management Aopproach,'' June
2007, GAO-07-807............................................... 245
Copy of the ``Business Case Analysis for Radio Department of
Defense Passive Radio Frequency Identification,'' submitted by
General Schwartz............................................... 307
FROM WAREHOUSE TO WARFIGHTER:
AN UPDATE ON SUPPLY CHAIN
MANAGEMENT AT DOD
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TUESDAY, JULY 10, 2007
U.S. Senate,
Subcommittee on Oversight of Government
Management, the Federal Workforce,
and the District of Columbia,
of the Committee on Homeland Security
and Governmental Affairs,
Washington, DC.
The Subcommittee met, pursuant to notice, at 2:36 p.m., in
Room SD-342, Dirksen Senate Office Building, Hon. Daniel K.
Akaka, Chairman of the Subcommittee, presiding.
Present: Senators Akaka and Voinovich.
OPENING STATEMENT OF SENATOR AKAKA
Senator Akaka. Good to see all of you here. Good afternoon.
This hearing of the Oversight of Government Management
Subcommittee is called to order. I would like to welcome all of
our witnesses. Today's hearing will look at progress made--and
after reading some of the history, I must say that is true that
progress has been made--in implementing the Department of
Defense's 2005 plan for improving supply chain management.
Supply chain management has been on the Government
Accountability Office's High-Risk List since 1990, and that is
far too long. My good friend Senator Voinovich and I are
dedicated to seeing this issue removed from the list.
Since 2005, he and I have chaired several hearings on
supply chain management.
After our last hearing in July 2006, Senator Voinovich and
I asked GAO for an analysis of DOD's Joint Theater Logistics
Initiative, which is one aspect of the plan for improvement.
GAO has completed their analysis, and their report is being
made public today at this hearing. Mr. Solis, I look forward to
hearing more about your team's findings today.
Supply chain management is critical to our security. It
affects the safety of men and women in uniform who are
currently engaged in two simultaneous conflicts in Iraq and
Afghanistan. Even after these conflicts end, effective supply
chain management will remain vital. We need to look to the
future when we must stock and store supplies for the next
contingency, be it missions abroad or assisting others right
here at home.
To begin, let me congratulate the Defense Department for
what it has done well in supply chain management. I am very
impressed by the progress made by the Defense Logistics Agency
in implementing the Joint Regional Inventory Materiel
Management initiative (JRIMM), which has now been operational
in my home State of Hawaii on Oahu, and it has been operating
since August of last year. I hope that we will continue to see
the benefits of jointly managing supplies regionally as JRIMM
is expanded in the Pacific Command and into other regions.
I also want to recognize the progress made by the
Transportation Command in implementing several forward-looking
initiatives as it grows into its role as the ``distribution
process owner.''
However, having said all of this, there are several areas
we are especially concerned about.
First, poor container management continues to be a serious
problem. At this moment, DOD cannot account for more than
50,000 containers in the Central Command theater. They are
lost. They have disappeared. Many of these containers do not
even belong to the military. DOD also has thousands of
containers that it has simply failed to return to their
commercial owners who, in turn, charge the government late fees
for not getting them back. This has forced the Defense
Department to buy them out. It has spent $203 million to buy
out over 25,000 containers. Now it has thousands of containers
that are its responsibility--if it can ever find them. This is
exactly the kind of waste that helped put this issue on the
High-Risk List.
Asset visibility cannot be fully achieved without adequate
technology applied to the supply chain. Radio Frequency
Identification Initiative (RFID), in theory will track every
pallet and every container from the warehouse to the
warfighter. This capability has been in use in the private
sector for years now and has greatly improved inventory levels
and visibility. While implementation of RFID continues to move
forward at DOD, there is still a long way to go.
We also need to work to ensure that information systems
involved with logistics can communicate with each other.
Personnel in the field are being forced to find tedious, manual
work-arounds to exchange information between different computer
systems. Computers working in joint operations cannot always
automatically exchange needed data.
The Defense Department needs to formulate a unified,
comprehensive strategy to address future logistics
capabilities. It has been promised since we started these
hearings that the Department was working toward that goal. I am
particularly concerned that the ``To Be'' roadmap, which was
supposed to provide this strategy, is still not complete, even
though it was supposed to be released last February. Without a
long-term strategy, all of the links in the supply chain--the
Defense Logistics Agency, the Transportation Command, and the
combatant commands--are likely to end up with their own
approaches which may not be consistent.
As Chairman of the Armed Services Readiness Subcommittee, I
know that the failure to modernize business processes
contributes greatly to all of DOD's high-risk areas. These
areas also have to be removed from GAO's High-Risk List. I look
forward to continuing to work with Senator Voinovich, as well
as the Office of Management and Budget and the Department of
Defense, to work toward this goal.
With that, it is my pleasure to have several witnesses here
today from DOD that can give us a broader look at the work
being done to improve logistics at the Department. I want to
commend you all for your commitment to creating not just a
joint force but one that is integrated in its efforts as well.
I also want to welcome back Mr. Solis, who has come before
this Subcommittee again to give us GAO's perspective on this
important issue. And I look forward to hearing from each of you
today.
I am so delighted to have Senator Voinovich here, and I ask
him for his statement.
OPENING STATEMENT OF SENATOR VOINOVICH
Senator Voinovich. Thank you, Senator Akaka. Let me begin
by thanking you for holding the Subcommittee's third hearing on
the Department of Defense's supply chain management. This
Subcommittee is very fortunate to have Senator Akaka's
leadership. Not only with his experience on this full Committee
but his experience on the Armed Services Committee, you are
able to bring both perspectives to this issue.
Supply chain management, as many of you know, has been on
the GAO high-risk list since 1990, 17 years is far too long. My
continued interest in investigating and improving the
Department's supply chain management is guided by two
principles.
First, with a budget of well over $400 billion and
resources in the supply chain amounting to more than $162
billion, the Department must be a good steward of taxpayer
dollars. As I have noted in the past, former Secretary of
Defense Don Rumsfeld once estimated that the Department wastes
5 percent of its budget--more than $20 billion a year at
current budget levels--on redundant or outdated business
practices. Based on my experience as a former mayor and
governor, I believe it is more like 10 percent rather than 5
percent.
Second, and arguably more important given Operation Iraqi
Freedom, inefficient, ineffective, and redundant steps within
the supply chain can have a direct and negative impact on the
warfighter. We must assure that the current supply chain system
at the Department has the ability to deliver the right items,
at the right time, to the right place to our soldiers in the
battlefield.
Since our last hearing in July 2006, we have seen
noticeable progress, as I said, in this high-risk area. I have
been pleased with the Department's continued commitment to
improving supply chain management.
At the Subcommittees's request, the GAO has released two
reports critiquing the Department's supply chain management.
The first report, released in January of this year, takes a
hard look at the supply chain management improvement plan and
overall logistics planning within the Department.\1\ In this
report, GAO found that the plan continues to lack outcome-
focused performance metrics as well as overall cost metrics for
each of the 10 initiatives in the plan.
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\1\ The GAO Report entitled ``DOD's High-Risk Areas, Progress Made
Implementing Supply Chain Management Recommendations, but Full Extent
of Improvement Unknown,'' January 2007, appears in the Appendix on page
83.
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Since the Subcommittee began working on this issue over 2
years ago, we have continued to press upon the Department the
need to develop long-term performance and cost metrics. I am
disappointed that after several requests, including personally
asking Deputy Secretary England, the Department has not put
forth these important measures. These metrics are essential for
this Subcommittee to provide effective oversight of this issue
and will be vital in the next Administration. I think the
Department has a very good plan underway. I am hoping that the
next Administration will embrace it. But I want to know what
metrics can the Subcommittee use to determine whether or not
the Dpartment is indeed following the plan that was put in
place.
Mr. Bell, I am interested in your opinion on the
Department's ability to measure the success of the supply chain
management plan absent these performance objectives.
The second GAO report,\1\ which is being released in
connection with today's hearing, focuses on Joint Theater
Logistics, an initiative in the supply chain management
improvement plan that centers on getting the right supplies
into a combat theater in a timely manner. Mr. Solis, I look
forward to your remarks on the findings within this report and,
more importantly, from our DOD witnesses on how the Department
intends to implement the recommendations.
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\1\ The GAO report entitled ``Defense Logistics, Efforts to Improve
Distribution and Supply Support for Joint Military Operations Could
Benefit from a Coordinated Management Approach,'' June 2007, appears in
the Appendix on page 245.
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Key support components of Joint Theater Logistics include
the Defense Logistics Agency and U.S. Transportation Command.
General Schwartz, my staff recently visited USTRANSCOM, and
they were pleased with the information provided and the
processes established under your leadership. It seems to me
that successful implementation of the Joint Deployment
Distribution Operations Centers and the current transformation
of the information technology architecture to support supply
chain management will go a long way toward improving supply
chain management. Success will depend in part, however, upon
the services' willingness to accept these initiatives.
General Schwartz, given your responsibility as the
distribution process owner, with responsibility for overseeing
Department-wide distribution of assets, I question whether or
not you have the necessary authority to carry out the mission
that has been given to you. I look forward to hearing from you
and General Dail on how you will work together to ensure that
assets are made available to our men and women in uniform
without delay.
Given the complex nature of supply chain management and the
need for business transformation within the Department, it is
imperative that the Department, I believe, have a Chief
Management Officer, and I have been batting that ball back and
forth with Mr. England for a long time. I am pleased to see
that language was included in the Fiscal Year 2008 Defense
Authorization bill, which is currently being debated on the
Senate floor. This language is a step in the right direction to
ensure continuous top-level attention to management issues at
the Department. And the reason why Senator Akaka and I are so
strong on this is that from our experience--and I know, Senator
Akaka, from my experience as mayor--transformation is not done
in 2 or 3 years. In many instances, transformation may take 5
to 6 years if you are going to institutionalize it and put it
in concrete. And I keep saying to the people, Ken Krieg and
company that have worked on this so far, I would like to have
some guarantee that all this work that I did is not going to go
down the tubes when the next Administration comes into office.
And it would be comforting to me to know there is somebody
there that is smart, knows the system, and is going to stay on
top of it to make sure that your hard work bears fruition for
the Department of Defense.
I just want you to know that I am very grateful for your
presence here today, and I am grateful for the conscientious
effort that you have made to take this on, something that has
been around too long. Thank you, Senator.
Senator Akaka. Thank you, Senator Voinovich.
It is my pleasure now to welcome Jack Bell, Deputy Under
Secretary for Logistics, Department of Defense; General Norton
Schwartz, Commander, U.S. Transportation Command; Lieutenant
General Robert Dail, Director, Defense Logistics Agency; and
Bill Solis, Director, Defense Capabilities Management,
Government Accountability Office.
It is the custom of this Subcommittee to swear in all
witnesses, so will you please stand and raise your right hand?
Do you solemnly swear that the testimony you are about to give
to this Subcommittee is the truth, the whole truth, and nothing
but the truth, so help you, God?
Mr. Bell. I do.
General Schwartz. I do.
General Dail. I do.
Mr. Solis. I do.
Senator Akaka. Thank you. Let the record note that the
witnesses responded in the affirmative.
Although statements are limited to 7 minutes, I want all of
our witnesses to know that their entire statements will be
included in the record. I understand that all witnesses from
the Department of Defense will be submitting a joint statement
for the record, but each would like to also make brief remarks.
So, Mr. Bell, will you please proceed with your statement?
STATEMENT OF HON. JACKSON P. BELL,\1\ DEPUTY UNDER SECRETARY OF
DEFENSE, LOGISTICS AND MATERIEL READINESS, U.S. DEPARTMENT OF
DEFENSE
Mr. Bell. Thank you, Chairman Akaka and Senator Voinovich.
Thank you for this opportunity to appear before you today. I am
honored to have appearing with me General Norton Schwartz, as
you have indicated, Commander of the U.S. Transportation
Command and the Department's Distribution Process Owner; and
Lieutenant General Bob Dail, the Director of the Defense
Logistics Agency. I also welcome this opportunity to appear
with Bill Solis of the Government Accountability Office.
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\1\ The joint prepared statement of Mr. Bell, General Schwartz, and
Lieutenant General Dail appears in the Appendix on page 27.
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As in recent years, we come before you today to report to
you the progress the Department of Defense is making to reduce
risk and to institutionalize the improvements that we are
making in our supply chain management processes. In the
interest of time, I will summarize my written testimony and
highlight our efforts to support our deployed warfighters and
the progress that we have made since the last hearing in July
2006.
Before we address those areas, I want to compliment your
staffs, the staffs of the Office of Management and Budget, and
the staffs of the Government Accountability Office for their
support of our efforts.
As we have indicated, DOD logistics is a very large and
complex business involving over a million uniformed, civilian,
and contract employees. This effort did account for $160
billion in spending in fiscal year 2006, shaped significantly
by our Global War on Terror operations. Our military forces are
deployed to some of the most difficult environments and some of
the most remote parts of the world, significantly accelerating
the equipment maintenance and RESET requirements. Our supply
chains operate across international boundaries where we have
little or no military presence.
In Iraq and Afghanistan, our supply chain operates over
enemy-challenged ground lines of communication, adding
significantly both to the cost of our equipment and the
personnel needed to provide security.
Nonetheless, in January through May of this year we moved
almost 80,000 troops and over 280,000 short tons of materiel
fully supporting the requirements in Iraq and Afghanistan. And
we are today processing approximately 6,000 requisitions each
day for our Army and Marine Corps troops there.
In supply chain operations, a primary output metric of
performance is customer wait time--how long it takes from the
time a customer orders an item until it is received. Last year,
we reported that we had achieved a 33-percent reduction in
customer wait time from fiscal year 2004 through April 2006,
from an average of 24 days to 16 days. Since then, we have
achieved another 6-percent decrease in wait time, despite the
surge of our deployed forces and despite continuing
difficulties with our ground lines of communications. Where
possible, key commodities and components are now stocked
forward and delivered as soon as they are requested.
While supporting the warfighting effort, we continue to
make improvements in our supply chain operations, and I would
like today to highlight three areas of focus.
First, we are continuing to institutionalize the supply
chain operations improvement plan efforts. These include
initiatives to integrate transportation operations across DOD,
to achieve global asset visibility both for our inventories and
for our in-transit shipments, and to consolidate inventory
management and supply and storage activities. General Schwartz
and General Dail will report on some of these key initiatives.
Second, we are integrating life cycle management principles
into our acquisition and sustainment programs. This effort
focuses on improving equipment reliability and reducing the
long-term, cost-effective support for a system as part of an
integral process during the acquisition approval steps.
Finally, we are developing the concept of joint logistics
portfolio governance. The intent of portfolio governance is to
coordinate development of related logistics capabilities across
the Department, to improve interoperability, to minimize
capability redundancies and gaps, and to maximize cost-
effectiveness. The logistics portfolio management test should
be completed later this year.
The results of our life cycle management initiative, the
logistics portfolio test, and our supply chain management
improvement efforts all will be incorporated in the
Department's logistics strategic plan, called the ``Logistics
Roadmap.'' The development of this Logistics Roadmap should be
completed by the summer of 2008.
Based on the significant progress that DOD has made in
supply chain management, in December 2006, the Under Secretary
of Defense for AT&L requested that GAO remove supply chain
management from its high-risk list. GAO declined, stating that
DOD has not yet met key requirements for removal from the high-
risk designation. Based on our progress to date, DOD believes
we have met and are meeting these requirements. Key output
metrics and data system support are being put in place, and
performance improvements are already showing in these metrics.
The institutionalization of key initiatives is testament
that we have the will, we have the commitment, and capacity to
address these challenges on an ongoing basis, transcending
leadership changes. We will continue to work with the GAO to
earn their support in removing supply chain management from
their high-risk list.
In closing, DOD appreciates the opportunity to explain our
progress in improving supply chain management. Following the
testimony of my colleagues, I will be happy to answer any
questions. Thank you.
Senator Akaka. Thank you very much, Mr. Bell. General
Schwartz, your testimony.
GENERAL NORTON A. SCHWARTZ,\1\ COMMANDER, U.S. TRANSPORTATION
COMMAND, U.S. DEPARTMENT OF DEFENSE
General Schwartz. Mr. Chairman, Senator Voinovich, it is a
privilege to be with you today representing the more than
152,000 people that are a part of the U.S. Transportation
Command family. Our core mission is to provide outstanding
support to the warfighter and the Nation by rapidly delivering
combat power and sustainment to the joint force commander. We
also redeploy our forces home and provide the utmost care in
moving our wounded troops to more advanced medical facilities
here, in Europe in the case of the current missions, or in the
United States.
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\1\ The joint prepared statement of Mr. Bell, General Schwartz, and
Lieutenant General Dail appears in the Appendix on page 27.
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In our role as the distribution process owner, USTRANSCOM
serves as the quarterback of the joint deployment and
distribution enterprise. We lead a collaborative effort within
the Defense Logistics Community to develop and pursue system-
wide distribution process improvements to increase the
precision, the reliability, and the efficiency of the DOD
supply chain that you referred to earlier. When fully
developed, this enterprise will aid us in fulfilling our
fundamental obligations and keeping our promises to our
warfighters in the Nation today and tomorrow.
Mr. Chairman, one of the enterprise initiatives I would
like to bring to your attention is the Defense Transportation
Coordination Initiative (DTCI). DTCI is an effort to increase
the effectiveness and efficiency of DOD freight movements in
the continental United States--the lower 48, if you will.
USTRANSCOM, in partnership with General Dail and the Defense
Logistics Agency and the military services, is currently
selecting a transportation services coordinator to manage these
DOD freight movements. This coordinator will have visibility of
CONUS freight movements enabling load consolidation, use of
more efficient intermodal means of transportation, and
importantly, more intelligent scheduling. These improvements
will increase the precision and reliability of freight
movements leading to increased customer confidence, cost
savings, and not unimportant, increased and more effective
workforce management.
Use of a single coordinator will also help us gather the
metrics that you and we seek collectively to drive continual
process improvements in our distribution system. With the
planned contract award next month, we are now only weeks away
from implementation and look forward with great anticipation to
the very positive changes I believe that DTCI will have on DOT
transportation, writ large.
Just as DTCI will improve commercial transportation, our
Joint Deployment and Distribution Operations Center concept is
improving integration of this from the strategic to the
tactical level. Creation of the so-called JDDOC was the first
major distribution process owner initiative and addressed the
longstanding need to improve integration of strategic, that is,
national partner activity here in the United States and that
which is occurring in theater under the supervision of the
combatant commander. JDDOC has since matured into a critical
node for improved end-to-end distribution.
Let me give you an example. Let me compare two moves of the
10th Mountain Division to the Central Command AOR, one in 2005
and one in 2006.
The 2005 move was planned entirely by air--that is, the
movement of their helicopter assets--and it ran into a number
of problems, including weather delays, customs lead time,
commercial to organic transload requirements, materiel
visibility, and limited jet fuel in some locations. Thinking
that there must be a better way, the DDOC, the Central Command,
the European Command, many players, the services, worked
together to develop an air and sea solution, that is, something
called in the industry ``intermodal solution.'' That included a
transload operation at Rota Air Base in Spain. And by using
this multi-mode approach, we were not only faster, sir, we
actually delivered 4 days sooner than the 2005 scenario, and it
cost the taxpayers $2 million less to execute.
I would argue that this kind of thing is an example of
precise, reliable, and efficient delivery to the warfighter.
And in retrospect, this multi-modal solution may seem self-
evident, but solutions do not always present themselves linking
the supported combatant commanders to the distribution national
partners without having one entity as the quarterback of the
process. The result of these efforts is that each geographic
commander now has one of these operations centers, and the
concept is being codified in doctrine, policy, and training.
The DDOC continues to mature, and later this year we will
publish the third edition of the template, which will
incorporate, sir, performance metrics and guidance for the
geographic combatant commanders on how we collectively can
execute this mission.
Finally, sir, in 2006, Under Secretary of Defense Krieg
designated our command as the functional proponent for radio
frequency identification and related automatic information
technology in the Department. Under this designation, we will
prepare and execute an implementation strategy and draft the
corporate approach for active and passive RFID, satellite
tracking, use of bar codes, and other asset visibility
technologies.
We have recently published the concept of operations for
this to improve the overall performance for the warfighter, and
our goal is to publish the implementation plan this fall, which
will address both asset visibility and your considerations in
terms of improving the supply chain.
Mr. Chairman and Senator Voinovich, I am grateful for the
opportunity to testify today, and I would be happy to discuss
these very important issues that you have tracked for so many
years. Thank you, sir.
Senator Akaka. Thank you very much, General Schwartz.
General Dail, your testimony.
LIEUTENANT GENERAL ROBERT T. DAIL,\1\ DIRECTOR, DEFENSE
LOGISTICS AGENCY, U.S. DEPARTMENT OF DEFENSE
General Dail. Good afternoon, Chairman Akaka, Senator
Voinovich, and distinguished Members of the Subcommittee. I am
Lieutenant General Robert Dail, Director of the Defense
Logistics Agency. It is my privilege to appear today and
represent the more than 21,000 men and women of the agency who,
for more than 40 years, have provided responsive global
logistics support to America's Armed Forces in peace and in
war. We are a combat enabler, a supporting organization,
dedicated to improving warfighter support to the combatant
commands and supporting the ongoing combat operations in Iraq
and Afghanistan.
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\1\ The joint prepared statement of Mr. Bell, General Schwartz, and
Lieutenant General Dail appears in the Appendix on page 27.
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I am here today to talk about how we accomplish our mission
through close collaboration with the military services, the
combatant commands, the distribution process owner and with
General Schwartz, to my right, at U.S. Transportation Command.
We are a link between our warfighters and the great American
industrial base.
DLA is an integral part of the military logistics system.
The Army, Navy, Air Force, Marine Corps, and Coast Guard rely
on DLA supply centers to source and provide food, fuel, medical
supplies, clothing, construction and barrier material, and we
also provide more than 90 percent of aviation, land, and
maritime weapons systems spare parts. We receive, store, and
issue DLA and military service assets at our distribution
centers located across the continental United States, Hawaii,
and in key en route infrastructure locations overseas. Our
Defense Reutilization and Marketing Service is a key partner in
the reuse or disposal of property no longer required by the
individual military services.
In recent years, DLA and the U.S. Transportation Command,
the Department's strategic mobility provider and life provider,
and as its distribution process owner, have forged a very
strong partnership that seamlessly connects warfighters'
requirements with the American industrial base. This
partnership, part of the USTRANSCOM's DPO charter, helps
synchronize key DOD supply chains, ensuring that material
arrives in theater, on time, to the warfighters who need it.
The past 2 years have been very busy for the Defense
Logistics Agency, U.S. Transportation Command, and the military
services as we have worked to transform and employ new methods
and capabilities to manage DOD's supply chains.
I have listed and discussed the various joint supply chain
initiatives in my formal written statement to the Subcommittee:
The Joint Deployment and Distribution Operations Centers
(JDDOCs) that General Schwartz mentioned; the Joint Regional
Inventory and Materiel Management Initiative that, Mr.
Chairman, you mentioned in your opening statement. These are
initiatives that we have undertaken with the various combatant
commands.
The Radiofrequency Identification Technology initiatives
and the Integrated Data Environment, Global Transportation
Network Convergence Initiative that we have undertaken with the
U.S. Transportation Command, and the Integrated Logistics
Partnerships that we have begun just recently in 2006 to
partner with the military services that promise great savings
and economy while increasing output tremendously. Each of these
initiatives has improved readiness and response times. They
have provided warfighters the agility that they require to be
successful wherever they operate around the world.
Finally, Mr. Chairman, the Defense Logistics Agency remains
committed to ensuring that America's fighting forces are the
best equipped and supplied of any force in the world. We pledge
to use America's resources wisely while continuing to support
high levels of readiness in the military services. Our Nation
and our freedom depend upon it.
I thank you, Mr. Chairman, and Senator Voinovich, for your
leadership, in making sure our Armed Forces continue to be
strong.
This concludes my statement, and I look very much forward
to answering your questions.
Senator Akaka. Thank you very much, Lieutenant General
Dail.
Now we will hear from Bill Solis.
STATEMENT OF WILLIAM M. SOLIS,\1\ DIRECTOR, DEFENSE
CAPABILITIES MANAGEMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE
Mr. Solis. Chairman Akaka, Senator Voinovich, thank you for
the opportunity to provide an update on the progress made by
the Department of Defense for resolving longstanding problems
with supply chain management. The challenges to successfully
improving the management of DOD's vast and complex supply chain
network are formidable, and your active involvement has been
and will continue to be vital to keeping attention focused on
this important aspect of DOD's business and logistics support
operations.
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\1\ The prepared statement of Mr. Solis appears in the Appendix on
page 49.
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My comments will focus on four issues: First, DOD's overall
progress in implementing its supply chain management
improvement plan; second, its progress in implementing joint
theater logistics, one of the 10 initiatives in DOD's plan;
third, I will discuss other recent work we have completed on
aspects of supply chain management; and fourth, and finally, I
will address broader, though related, issues of defense
business transformation, logistics governance, and strategic
planning within DOD.
Regarding DOD's supply chain management plan, DOD has shown
progress in developing and implementing its improvement
initiatives, which are intended to address three main focus
areas: Requirements forecasting, asset visibility, and material
distribution. As previously mentioned, DOD has established
Joint Deployment Distribution Operations Centers in each
geographic combatant command, following the reported success of
the first such operation in Kuwait. DOD has also reported
initial success with a storage and distribution initiative
known as Joint Regional Inventory and Material Management. In
March 2007, the DLA was tasked to be the lead proponent for the
continued worldwide implementation of this initiative.
Furthermore, in the Defense Transportation Coordination
Initiative, DOD has taken numerous actions to incorporate the
lessons learned from a prior prototype program and, moreover,
has taken positive steps to adopt best practices employed by
other public and private organizations.
Despite these examples of progress made, since the last
hearing before this Subcommittee in July 2006, we have not seen
significant changes in how DOD proposes to measure the impact
of these initiatives in its plan. As before, the plan contains
four overarching performance measures, but these are not well-
linked with the individual improvement initiatives or the three
focus areas, limiting DOD's ability to fully demonstrate the
results achieved through its plan. Furthermore, some of these
initiatives are in their early stages, with full implementation
several years away.
Regarding joint theater logistics, we found in our recent
work that DOD has not taken a coordinated and comprehensive
management approach to guide and oversee this initiative.
Rather, development and implementation of joint theater
logistics has been fragmented among various DOD components
largely because of a lack of specific goals and strategies,
accountability for achieving results, and outcome-oriented
performance measures.
Further, DOD faces challenges that hinder specific joint
theater logistics efforts to improve distribution and supply
support to the warfighter. For example, initiatives to improve
the coordination of surface transportation assets, mainly
trucks, in a theater of operations face challenges such as
potential duplication of responsibilities, the unavailability
of information technology tools, and unclear lines of command
and control.
Despite the benefits attributed to the Joint Deployment
Distribution Operations Center in Kuwait, effective management
of supply distribution across the theater has been hindered by
ongoing problems in achieving asset visibility. Senior military
commanders in Kuwait attributed these problems to a lack of
interoperability among information technology systems that make
it difficult to obtain accurate and timely information on
assets in the theater.
We also found continuing problems with container management
that hinder asset visibility and impede DOD's ability to
effectively manage logistics operations and costs. Some
challenges that DOD faces with container management include the
application of radio frequency identification tags on
containers in the supply chain, compliance with container
management processes, and the return of commercial containers
to maritime carriers.
Our other recent work has identified continued systemic
weaknesses in aspects of DOD's supply chain. In February, we
reported that problems continue in managing Army's
prepositioned stocks. Despite recent efforts to improve
requirement setting, the Army has not yet determined the
reliable requirements for secondary items and operational
project stocks.
In March, we reported that the military services are
experiencing difficulties in estimating the length of time
between the initiation of a procurement action and the receipt
of spare parts into the supply system for equipment and weapons
systems.
In April, we reported continuing problems in Air Force's
inventory management practices, hindering its ability to
efficiently and effectively maintain its spare parts inventory
for military equipment.
Specifically, from fiscal year 2002 through 2005, an
average of 52 percent, or about $1.3 billion, of the Air
Force's secondary on-order inventory was not needed to support
on-order requirements. Further, about 65 percent, or about
$18.7 billion, of on-hand inventory was not needed to support
required inventory levels. We calculated that it also costs the
Air Force from $15 million to $30 million a year to store its
unneeded items.
Finally, I would now like to turn to broader issues
affecting supply chain management. Transforming and improving
defense business operations are integral to resolving supply
chain management operations. Because of the complexity and
long-term nature of the business transformation, we have stated
that DOD needs a Chief Management Officer with significant
authority, experience, and a term that would provide sustained
leadership and the time to integrate DOD's overall business
transformation efforts. Based on our work, pending legislation,
and other recent studies, it is clear that a broad-based
consensus has emerged that the status quo is no longer
acceptable.
As our work on joint theater logistics indicated, DOD may
also need to re-examine fundamental aspects of logistics
governance and strategy. The diffused organization of DOD's
logistics operations, including separate funding and management
of resources and systems, complicates DOD's ability to adopt a
coordinated and comprehensive approach to joint theater
logistics. In this respect, joint theater logistics may serve
as a microcosm of some of the challenges DOD faces in resolving
supply chain management problems.
In the governance area, DOD has been testing, as mentioned,
a new approach to managing joint capabilities as a portfolio,
but key decisions are still to be made on how to implement this
approach. In addition, DOD plans to develop an overarching
logistics strategy, but has delayed the completion of that
strategy until sometime next year.
In closing, DOD officials believe that the commitment they
have demonstrated to resolving supply chain problems, including
the development of the plan and making progress in implementing
initiatives, justifies removing this area from our high-risk
list. In preparing the January 2007 biennial update to the
high-risk list, we decided that notwithstanding the positive
steps taken by DOD to address problems, supply chain management
should remain on our high-risk list until DOD can successfully
demonstrate improvements in requirements forecasting, asset
visibility, and materiel distribution. The work we have
completed since January 2007 reaffirms our decision to retain
supply chain management as a high-risk area.
We look forward to continuing our work with the Department
to provide an accurate appraisal of the progress toward the
goal of successfully resolving problems that have hindered
effective and efficient supply chain management.
Mr. Chairman, Senator Voinovich, this concludes my prepared
remarks. I will be happy to answer any questions.
Senator Akaka. Thank you very much, Mr. Solis.
General Schwartz, according to GAO, the Department has
bought out over 25,000 containers that were accumulating
detainment fees. This cost taxpayers about $203 million, and
now the containers belong to the Department of Defense. In
addition to this, we have lost over 54,000 containers.
What do you plan to do with all of these containers? Do
you, for example, plan to sell any of these to recoup some of
those costs?
General Schwartz. Mr. Chairman, let me address that by
first articulating how we got to where we are at. You are quite
right that this is an area that has been difficult to manage.
Let me take you back to October 2001 and try to describe
the picture of missions beginning to occur in Afghanistan. It
is a landlocked country. It is not a country with a lot of
developed transportation infrastructure. There isn't a single
oil refinery anywhere in the country, for example. And so we
were very much in an expeditionary mode in that time frame,
beginning combat operations. And so containers were used for
many different things there. They were used for storage. They
were used for places for people to sleep. They were used for
force protection purposes. You can imagine the various uses.
And so unquestionably there was a large number of detained
containers that belonged to carriers that were put to use in
ways that commanders on the ground felt was necessary in order
to accomplish their missions.
Now, with that as background, we beam forward several
years. The current numbers that I have for containers in the
Central Command AOR is there are about 110,000 government-owned
containers, about an additional 30,000 which are leased, and
then there are about 4,400 which are under detention, i.e.,
carrier owned but in our possession, about 3 percent. That is
at least a third of where we once were.
So how did we make the improvements over time from a
completely expeditionary mode to something more in the
sustainment mode and to where we are now driving the numbers
down further? Two major things. In the early days, sir, we did
not have a dedicated element to manage containers in the
theater, nor did we have software that would do this. We do
now. We have a dedicated container management element in
Central Command that works, both the management, the training
of people in logistic elements in the various commands in
Afghanistan and in Iraq, and likewise maintains the database.
So what we have done is dedicate resources to managing both the
assets and the problem.
To conclude, sir, your question about what do we do with
those assets we own, as you are aware, the government maintains
a certain number of assets, whether it be airplanes or ships or
containers or pallets for loading airplanes in reserve for
those moments when we might be called upon to surge. So we will
maintain in reserve status a number of containers so that we
don't run into the scenario we had in Afghanistan again, that
instead of sending carrier containers into an austere area, we
will send government-owned containers.
Second, the excess amount of containers, what we will try
to do, frankly, is find folks who we can lease them to for use,
and we can get them back if that is necessary. So there is a
business piece to this in terms of making them available to
industry for use, and then there is a part to it for having a
reserve so that we don't again fall into the situation where we
don't have enough containers, that we have to use commercial
ones to do our mission.
Thank you, sir.
Senator Akaka. Thank you, General Schwartz. I am wondering
though, did these containers make it to their destinations?
What were in those cointainers, and were they empty when we
lost them?
General Schwartz. Sir, I am sure it is some of all of the
above. It is important to understand that, again--and you have
traveled to both Afghanistan and Iraq. I know both of you have.
You will see containers being used for a number of functions.
For sure there are no more carrier containers that are out
there being used for storage and so on. But I think it is key
to understand that we got on top of this once we recognized how
severe the problem was, and I believe that we are on the
glidepath here not only to correcting the problem in the short
term, but having a longer-term posture which is correct for the
Armed Forces.
Finally, sir, I think it is important to recognize that
much of the container detention was not dry goods. These were
refrigerated containers. And, again, if you think back to the
Afghanistan scenario, there was not permanent cold storage in
Afghanistan. And so one of the things that occurred was use of
refrigerated containers to store foodstuffs for our troops that
we now are building some temporary sort of permanent cold
storage to compensate. But that occurred several years after
the initiation of combat operations.
Senator Akaka. Thank you. We will have another round.
Senator Voinovich, your questions.
Senator Voinovich. Mr. Solis and Mr. Bell, I am concerned
that the substantial progress that we have seen in the supply
chain management will be lost with the change in leadership due
to a new Administration. We are running out of time. In your
opinion, does the supply chain management improvement plan that
you have worked very hard on, have the necessary metrics in
place to institutionalize the progress made and ensure that no
time is lost with the change in leadership?
Mr. Bell. Thank you, Senator Voinovich. We are concerned
about several levels of institutionalizing the progress that we
have made, and we are focusing on those areas. For example, for
the distribution process owner authorities, we have worked very
diligently to get approval of the internal direction, the
directive, and the instructions that are necessary to
institutionalize that function to transcend administrations.
That process has been completed. The coordination is done. We
expect those to be signed up within the next 2 weeks. They are
both up in the Under Secretary's office and the Deputy
Secretary's office for signature.
Similarly, we are working on institutionalizing the
introduction of metrics for measuring supply chain performance.
One of the functions of the joint logistics portfolio
governance test has been to test the use of metrics across the
entire supply chain from the vendors actually all the way
through the theater logistics commands and theater support
logistics to the end user, and customer wait time and time-
definite delivery and perfect order fulfillment are key output
metrics that we believe as a result of the governance test we
can institutionalize.
The next component, though, to institutionalize them is we
have to have certain enabling capabilities such as global asset
visibility, which we are working on with our RFID, both sensor-
based and satellite-based. We have to develop those
capabilities to have real-time visibility in where our assets
are so that we can measure how we are performing in terms of
customer wait time or perfect order fulfillment.
We think there are some challenges involved in that
process, but we are making significant progress, we believe, so
that it will not only transcend the change in political
administrations, but will also transcend the normal rotation of
military leadership in some of the key joint functions.
Senator Voinovich. Mr. Solis.
Mr. Solis. I would offer that as it pertains to the plan,
there are still----
Senator Voinovich. Mr. Solis, Deputy Secretary England has
asked for Supply Chain Management to be removed from the GAO
high-risk list. Was a lack of metrics a reason for not removing
a supply chain?
Mr. Solis. Well, I think that is part of it. I think there
are other reasons, as I mentioned in my oral statement. But
pertaining to that, I think six of the ten initiatives do not
have any outcome measures that are associated with it. Also, I
think nine of the ten initiatives still do not have any cost
metrics. And so it becomes difficult for us or anybody else to
measure how they are doing on the particular initiatives.
Let me be clear. Each one of these organizations here has
their own internal metrics, but the linkage of their metrics,
as it relates to the plan, as it relates to the initiatives in
the plan, and how it relates to the four overall metrics in the
plan is not clear. And that is why we talk about the lack of
metrics. It becomes difficult to measure the progress, as it
pertains to these particular initiatives.
Senator Voinovich. You just heard from Mr. Bell. What is
your comment about what he just indicated? And has there been
any communication in the last several weeks or months dealing
with what he just talked about in terms of metrics?
Mr. Solis. Well, I know we have committed to get together
and talk as we have in the past. We will continue to have these
discussions, probably even shortly after this hearing.
Senator Voinovich. Well, one of the things that I was
pleased about and I know Senator Akaka was pleased about is
that we requested that the Department of Defense, the
Government Accountability Office, and the Office of Budget and
Management come together and develop kind of a consensus on
what the plan should be. And from what I understand, that has
come along quite nicely. But what you are saying is that in
some of these areas, you just have not had a meeting of the
minds.
Mr. Solis. Well, DOD has a plan, but again, some of the
initiatives are still a ways off and, in fairness, some of them
are just beginning. Also, in our view, they are still lacking
the outcome measures that we would like to see so that we can
better see where they are in terms of the progress.
Senator Voinovich. I would like to have you prepare a
list--some of that is in your testimony, but prepare a list,
get it over to Mr. Bell, have him respond to it, and see if we
cannot stay on top of this so that maybe 6 months from now,
when you come back, you can all say that you have worked
something out and that you agree on it.
Is RFID working out as well as you believed it would? What
kind of help did you get from the private sector?
General Schwartz. Senator, if I may at least lead, RFID has
a number of applications. It has applications in terms of in-
transit visibility, containers that are moving and so on. It
also has applications in terms of inventory management, and
General Dail can address that in greater detail. But an
important notion here is that while--I have been to
Bentonville, Arkansas, we will soon visit Best Buy, and there
are very fine companies out there employing various aspects of
RFID, whether it be passive or active or otherwise.
The one thing to appreciate, there are some differences
about our business models, if you will. In the end, Wal-Mart
stores don't move--ours do. And so there are some differences
here that one has to accommodate. Nonetheless, they are a
powerful example to us, and we are pursuing putting the right
kind of RFID on the right purpose.
For example, active tags cost at the moment $65 apiece.
They are expensive. They hold lots of data. You can put one on
a container, and it can tell you every single box that is in
the container.
Passive tags, on the other hand, are maybe 65 cents apiece,
and at that kind of economics, you can maybe put a passive tag
on every box. And General Dail can use that in his warehouse if
he chooses to.
The key point here is that there are different kinds, and
it is important to apply the right kind of technology to the
right problem. And I think in the case of Wal-Mart, if you have
been reading the literature, they implemented a passive ID
strategy, and they have been adjusting this a little bit. They
discovered that it was not producing the outcome that they
desired.
So there is still some experimentation going on, sir, and
very importantly, we are committed to this. Our plan for
executing this on behalf of the Department will be certainly
available for your perusal in the September time frame, and it
will include both the in-transit segment and the inventory
management segment.
Senator Voinovich. Could I ask just one more question,
Senator Akaka, to follow up on that?
Senator Akaka. We will have a second round. Thank you,
Senator Voinovich.
Mr. Bell, your testimony says that the Logistics Roadmap
plan will now be complete next summer.
Mr. Bell. Yes, sir.
Senator Akaka. This is more than a year after what we were
told last year. You say that it will be released after
finishing up the logistics capability portfolio management
tests. Why does a document that will contain ``planned and
desired capabilities'' have to rely on this current test?
Mr. Bell. One of the reasons is that the concept of
portfolio governance is a different concept of how we work
towards support of the joint warfighting effort in dealing with
the current authorities that we have within the Department of
Defense in which there are significant Title X authorities that
are vested with the services, and the question is how do we
integrate those most effectively.
The governance concept looks at taking a cross-department
view of the development of capabilities. We think it is
critical in terms of the Logistics Roadmap that we adopt that
cross-department view of governance in developing our
capabilities going forward, and that is the reason we made the
decision to defer completion of the roadmap until we could see
the extent to which we could apply this governance concept in
getting to a joint approach to the whole Department's
capabilities.
Senator Akaka. Since it has been delayed for over a year
because of testing of one new capability, what is to stop it
from being delayed again? Can you commit to this Subcommittee
that you intend to have the roadmap by next summer?
Mr. Bell. We certainly do intend to do that. We think this
delay, while it seems to be unusually long for a single-
capability view, is actually a critical step forward in
developing a joint approach to governance as the DPO concept
has been, as the defense logistics executive concept has been.
Otherwise, we obviously would not have deferred completion of
the roadmap until we had finished this test.
Many elements of the so-called Logistics Roadmap are well
developed. Many of the metrics in terms of output metrics of
supply chain performance we believe are falling into place. We
can develop the capabilities to measure performance against
those metrics. While we have some disagreement with GAO
regarding metrics associated with specific improvement
initiatives within the overall improvement plan, I believe GAO
would acknowledge that, in terms of supply chain overall
performance metrics, we are focused in the right direction.
So many of the elements of the Logistics Roadmap are well
in place, and we think with the addition of this concept of
joint governance across departmental lines, it will be a
significant improvement in our capabilities.
Senator Akaka. I understand that TRANSCOM is working on an
internal plan called Theater Enterprise Deployment and
Distribution (TED2). Is the TED2 document related to the
Logistics Roadmap currently under development at DOD, General
Schwartz?
General Schwartz. Chairman, it is indirectly related, but
it is an independent initiative, and it is an example of what I
would call portfolio management with a small P and a small M,
not the capital P, capital M that the Secretary was addressing.
What we are doing is recognizing that in the theater there
are multiple systems. Senator Voinovich mentioned that some
cannot talk to one another; they don't interact easily in terms
of data transfer and so on. This particular initiative is
producing results in terms of narrowing down the numbers of
systems and making sure that, in fact, they are interoperable.
A case in point: We currently have two port management
systems. One is called the Worldwide Port System. It is an
Army-developed product. And then there is a system called the
Global Air Transportation Execution System (GATES), which is an
Air Force product.
Now, where we all came from, services develop their own
systems, and at one time there was not the emphasis on assuring
interoperability and so on. And what we are doing is converging
these two to a single port system so that if Marines arrive or
Army arrives or Air Force arrives, we will be operating
essentially the same piece of software. That is the kind of
portfolio management I am doing as the distribution process
owner, and it applies, at least indirectly, to this notion that
you referred to earlier.
Mr. Bell. If I may, in fact, those kinds of portfolio views
across the Department in terms of developing interoperable
capabilities is exactly what the overall portfolio governance
test is about.
Senator Akaka. I have a final question, but before I ask
it, let me ask Senator Voinovich whether you have any further
questions.
Senator Voinovich. Yes, I do.
Senator Akaka. Will you proceed?
Senator Voinovich. Thank you. Mr. Bell, your tenure will
end with this Administration. Is that right?
Mr. Bell. Yes, sir.
Senator Voinovich. General Schwartz, how many years do you
have left in your current job?
General Schwartz. Sir, at least until the summer of 2008 I
think is what the Secretary has indicated.
Senator Voinovich. General Dail.
General Dail. Sir, I am intending to stay in this position
for an indefinite period until my period of service is over. I
would certainly think spring of 2009.
Senator Voinovich. General Schwartz, you have been in your
position for how many years?
General Schwartz. Almost 2 years, sir.
General Dail. Sir, I was his deputy for 2 years and then
moved to DLA just this past year. I have been in my job about
10 months.
Senator Voinovich. One of the things that really disturbs
me is the change of responsibilities is much too quick in the
military. I remember Wright-Patterson Air Force Base where
people would come in 3 years and then out they go. This does
not really lend itself to transformation.
Do you have civilians that are underneath you that are
going to be around for a while? I would like to know how long
you are going to be in each of your positions and who are the
people that report to you and how long are they going to be
around.
When you put together your plan to reform or transform, do
you have a list of things based on the potential to save money?
Did you approach them with the idea of saving money, or did you
look first to see what the low-hanging fruit was and then
thought, well, we can knock these off easy and we will get on
with the other ones after we have done the easy stuff?
General Schwartz. I have to answer yes to both.
General Dail. It is a combination.
General Schwartz. It really is. We are, Senator Voinovich,
taking a concerted business case approach to this, and that is
why use of satellite technology, for example, has application
in a place like Pakistan, where we are moving cargoes from
Karachi into Afghanistan over a ground line of communication
without any military footprint whatsoever. And so that is a
place where a satellite tracking capability perhaps has an
application. But it is expensive, and so you are not going to
do that on a line of communication over which you exercise
exclusive control.
So the bottom line is our approach to this, as I indicated
earlier, is to apply the right technology to the right problem,
and it has to have a business case.
Senator Voinovich. When you started this project, if I
asked you do you have a number that you thought you might save
as a result of putting this new system in place, and then to be
able--so you can compare? You said $65 for one gizmo and 65
cents for what you called passive.
General Schwartz. Right.
Senator Voinovich. Have you got those numbers on a piece of
paper so you can compare them?
General Schwartz. I can provide that for you for the
record, sir.\1\ I think it is accurate to say that our initial
motivation on this was to provide in-transit visibility. An
example, on December 21, 2006, sir, if you would buy your wife
a gift off the Internet for Christmas, you get a tracking
number, and you put that into one of the websites for the major
transportation carriers, and you can see that box coming to
you. As long as you can see that gift coming to you, on
December 23 you are probably not going to buy your wife a back-
up gift just in case the first one you ordered does not make it
because you do not want that to occur.
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\1\ Copy of the ``Business Case Analysis for Radio Department of
Defense Passive Radio Frequency Identification,'' submitted for the
record by General Schwartz appears in the Appendix on page 307.
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Believe it or not, supply sergeants operate exactly the
same way, and so the initial purpose of this was to provide
that visibility of that product moving through the supply
chain, so that we changed behavior at the receiving end.
So part of this was behavioral, was transformation
organizationally, and so on. There is a business case for RFID,
and I will be happy to provide that to you for the record, sir.
General Dail. Sir, if I can just add one comment, the
Chairman mentioned earlier about the Joint Regional Inventory
Materiel Management Initiative we have in Pearl Harbor that
will support all four of these service components on the Island
of Oahu. When we entered into the next phase, which we will
again this coming fiscal year, our intent is to take
radiofrequency identification technology and, with the help of
General Schwartz and his command, instrument up the island. And
then I will purchase some additional stock and position it at
Pearl Harbor.
We think, as we have discussed with the services, that the
return, because of the confidence level that it will have with
visibility of stock on the island and coming from the United
States en masse in horizon lines coming into the State, that we
will be able to get that replenishment on the surface
transportation and not have to use air transportation and
military aircraft. And that will save the services $2 to $3
million a year, and we think that is a business case that for
the first time we have been able to apply to an actual
initiative that we have been able to do together at USTRANSCOM
and the Defense Logistics Agency.
So I think sometimes we do take low-hanging fruit, but
sometimes I think we have been able to apply a business case to
an initiative and a new way of doing business on the island of
Oahu.
Senator Voinovich. Finally, if I asked you what equipment
you now have in Iraq--humvees and Strikers and so on and so
forth--could you tell me what you have there?
Mr. Bell. I think we could provide that report to you, sir,
from the services.
Senator Voinovich. Do you have any idea what percentage of
the equipment that we have in the total Defense Department is
there--15 percent, 20 percent, or 50, 75, 80 percent? Does
anybody know that?
Mr. Bell. Rather than guessing, I would rather take that as
a question for the record if we could.
Senator Voinovich. I would like that very much. Thank you.
Senator Akaka. Thank you, Senator Voinovich. Let me get
into a third round, and this is for the three of our DOD
witnesses. When we eventually begin redeploying forces in Iraq
and Afghanistan, this moment will present a significant
logistical challenge since we have been there for several years
now and moved many assets there.
What planning, if any, have you done to ensure that we have
the logistics capability to leave the theater and return our
assets back to the United States? Mr. Bell.
Mr. Bell. Yes, sir. It is obviously fair to say that we
have extensive planning activities currently underway
throughout DOD addressing that question so that when the time
comes and the decision is made to begin to draw down forces
that we will have put in place the capabilities logistically to
do that in the right order with the right amount of equipment
coming down in the right sequence.
That effort has been underway for some time and is being
discussed at all levels, both in CENTCOM in Iraq as well as at
the Pentagon.
Senator Akaka. General Schwartz.
General Schwartz. Sir, I would concur with that. I would
say that our objective--and this is really Central Command's
objective--is to execute a retrograde, the redeployment,
whatever that turns out to be, with the same precision that we
would execute a deployment.
To take you back a few years, during the roll-up for Desert
Shield/Desert Storm, materiel returned to the United States
without good visibility, went to the wrong port, materiel was
lost. We will not repeat that exercise. And one of the things
we are doing, Mr. Chairman, in cooperation with the Army
Materiel Command--General Ben Griffin is a case in point. The
Congress appropriated roughly $15 billion to the Army to
execute RESET of equipment. My promise to Ben Griffin was he
would not lose a vacancy on a RESET line because I did not get
the piece of equipment back to him on time. And so we, as a
result of working the RESET program, have sharpened our focus
and our procedures, are making sure that stuff that is heading
westbound arrives at the right port, has the right
transportation plan back to the forts and so on.
I am not Pollyannish about the challenge this will be. This
will be a major undertaking. But I am confident that we have
the procedures in place and the commercial and organic military
capacity to make it happen.
Senator Akaka. General Dail.
General Dail. Sir, I would echo the comment that General
Schwartz made about our entire focus would be on ensuring that
we support Central Command's, Admiral Fallon's plans to execute
whatever operations that he would undertake. Defense Logistics
Agency is a largely contractual operation, so we have already
begun planning about what kinds of capabilities we would need
to increase to support a redeployment of some sort in the
future. In our case, Defense Reutilization and Marketing
Service, which deals with the reuse, disposal, proper handling
of hazardous materials, those kinds of movements and retrograde
operations back to the continental United States or some other
locale that may have a vendor that may want to procure some
retrograde material or scrap, to the point where we may want to
increase some of our other contractual capabilities in Kuwait
and some other areas to support a precise redeployment of
capability. We are linked at this point in time with the proper
folks in U.S. Central Command, U.S. Transportation Command.
Senator Akaka. Mr. Solis, GAO did not make any
recommendations relating to container management, yet I see it
as one of the more interesting parts of your report. Do you
think that container management is just a symptom of overall
management issues?
Mr. Solis. Well, from my perspective, I think it has been a
longer-term problem, and I would even go back beyond 2001. When
I think back to the first Gulf War, you heard a term referred
to as ``Iron Mountains,'' and those were referring to not only
just the equipment, but all the containers that were piling up.
So this is, again, one of the reasons why we felt it was
something that needed to be addressed in the longer term.
As we looked at this, we first reported on the problems
back in 2003 about the containers and the lack of visibility.
As our current work has shown, there is still a problem.
However, there are efforts by the Department and TRANSCOM to
try to get a handle on it. I think what we are going to do is
probably track that as it moves to see how this pans out over
the next several months or year to see if they get a hold of
this.
Senator Akaka. Do you think the container problem has been
solved?
Mr. Solis. I think it remains to be seen. In fact, one of
the enablers to track this, of course, is the RFID tagging
system. And as we mentioned in our JTL report, there are still
inconsistent applications, such as whether the tags are on
there and whether the information on the tags is accurate. And
so I think there are still issues related to whether they are
going to be able to track those containers given the processes
that are currently in place.
As General Schwartz mentioned, Afghanistan is another
issue, and it could be problematic just in terms of the
geographics itself. So, again, I think it remains to be seen
over the next several months or so to see how the handle will
be--how they will get a handle on this in terms of dealing with
the issue.
Senator Akaka. Finally, let me ask Mr. Bell--and I am
tagging this onto a question that Senator Voinovich asked, too.
I would like to end with a question about sustainability of the
Department's efforts in supply chain management. In less than
18 months, there will be a new Administration running the
Department of Defense. What steps are you taking now to ensure
that progress made so far does not end when the civilian
leadership turns over at the Pentagon?
Mr. Bell. Thank you, Chairman Akaka. Several important
steps we have underway. As a team here, we are focusing in our
overall supply chain management efforts to institutionalize all
of the key elements of the improvement program, and you have
heard different elements of that described today.
On a personal basis, within my shop, I have identified and
designated a Principal Deputy, Assistant Deputy Under Secretary
of Defense, who is well known to you, Alan Estevez, who has
reported to you frequently, who will have the responsibility
for managing the transition on the carry-through on all of the
items that we have in implementation. And Mr. Estevez, as you
know, has been intimately involved in the whole supply chain
improvement program during this period.
We are also working with the other commands to make sure
that the elements that we need to have in place get
sufficiently documented so that when there is a transition
occurring in Administrations, our plan is to have a transition
handover book available for the new Administration that
identified all the new initiatives and all of the key points of
contact within the Department of Defense that are working on
these initiatives.
Senator Akaka. Thank you very much. Senator Voinovich.
Senator Voinovich. General Schwartz, to improve end-to-end
supply distribution, the Secretary has designated your command
as the Department's Distribution Process Owner. However, GAO
has noted instances of overlapping roles and responsibilities
in the Department that the Department clearly define the
responsibilities and authorities of the DPO in relation to
other players in the distribution process as an issue of chain
of command.
This past April, the Defense Business Board recommended
that DOD take steps to clearly identify decisionmaking
authority for supply chain integration and to clearly define
responsibilities and authorities for all players in the supply
and distribution process.
To what extent do the DPO responsibilities and authorities
need further clarification? Do you have the necessary authority
to break through the stovepipes in DOD's supply chain and
logistics system in order to improve the efficiency of the
overall system? In other words, once you get it done, are you
in a position where you could make it happen? Do you have the
authority?
General Schwartz. I do. As a practice, sir, I do not assert
dominion. You can accomplish certain things by brute force, but
it seems to me that the approach that we have followed is,
again, to try to make the case for those things we think are
needed, and sometimes there is a bit of friction, and I will
admit that openly. But I must tell you that we have not failed
to do something that we were committed to do. We have overcome
all resistance. For example, recently the Joint Requirements
Oversight Council approved our expeditionary port-opening
capability. There was some resistance from the services on that
initiative. We overcame that because we were persistent.
I think it is important that, as Secretary Bell mentioned,
we have our charter document, which is over 10 years old that
has not been updated, that soon will be signed out by the Under
Secretary and the Deputy. The DPO instruction is soon to be
approved, and I would say more importantly, frankly, that
responsibility now resides in the Unified Command Plan. And,
Senator Voinovich, the Unified Command Plan has the President's
ink on it, and everybody gets that.
So I think this is in part a matter of authorities that are
documented. I think they very soon will be in an end-to-end
fashion. And it is also a matter for us to be persuasive, that
this is the way to proceed. And I must tell you--and General
Dail can confirm this--that the services recognize the
pressures they are going to face in a declining--in a post-
Operation Iraqi Freedom environment. And so they are looking
for ways to be prudential and more efficient.
What our obligation is is to make a case that is compelling
and they will follow our lead. That is what we have seen thus
far. In those cases where we have to compel cooperation, the
Deputy Secretary has been more than receptive of accomplishing
that task on our behalf.
General Dail. Senator, I would like to add that, in
addition to the authorities that he spoke to, I think it is
something that you mentioned earlier about a succession
strategy and making sure that you have people that continue to
stay on long enough to understand what the intent and what the
vision is for the DOD supply chain. I served for General
Schwartz at U.S. Transportation Command, and my movement to the
directorship at DLA--the relationship that we enjoy
professionally has made it a lot easier to build these
capabilities and these initiatives together. And I think that
when we provide a business case, something that is of value to
the military services, they have come forward and willingly
have asked to participate in these improvements and in these
initiatives.
Senator Voinovich. So you use the power of the obvious
benefit.
General Dail. Yes, sir.
Senator Voinovich. But if that does not work, you can use
other methods.
General Dail. Absolutely, sir.
Senator Voinovich. Yes. What was the receptivity to the
Business Board's recommendations? And if they were well
received, how long do you think it will take you to respond to
them?
General Schwartz. Sir, in fact, I, General Dail, and the
Secretary met with the Business Board 3 weeks ago, and as I
understand it, they are going to brief the Deputy Secretary on
the result of that interaction tomorrow afternoon at lunch. And
we have an obligation, the three of us do, within a matter of
weeks to get back to the Secretary after tomorrow's session
with our take on that session.
I think the bottom line is there was fundamentally violent
agreement. There is a view that the board has had over time
that there should be sort of a King of Logistics, if you will,
either a Joint Logistics Command or other such solutions. I
personally do not favor that. But beyond that one area of
disagreement on how much purview one individual should have in
uniform, I think there is agreement with their fundamental
argument that we need to document the authorities, we need to
make sure that this process improvement mechanism and the
supply chain oversight mechanism is well institutionalized. And
that is what we will tell the Secretary.
Senator Voinovich. And you will get back to the Board, in
other words, the Board will come back to them and say here is
what we have done as a result of that, and so you will get some
feedback from them so they know how you are responding to it.
General Schwartz. Yes, sir.
Senator Voinovich. I would just like to finish on this
note. I think that you mentioned that the pressure is going to
be on the Defense Department, and I think that is a very good
observation. I think one of the things that the American people
have not recognized is because of the war in Iraq and
Afghanistan, the tripling of the amount of money that we spend
for the 22 agencies and the Homeland Security, that an enormous
amount of money has gone out, and that the nondefense
discretionary budget has been squeezed pretty hard. And there
is going to be a lot of pressure to get back to putting more
money in that area because of the fact that some are concerned
about the fact at this stage of the game that maybe we are
eating our seed corn and not doing some things that we ought to
be doing in terms of our competitiveness.
So I think that the more you can get that message out, the
better, and it would be wonderful if, as a result of your work
that you or maybe your successor can come in here and say, hey,
we really got on this thing, and we are saving this money, and
it is really working.
There are a lot of folks out there that really are kind of
losing faith in our management. I think one of the reasons why
we had such a tough time on the immigration bill is that people
just did not believe that we were securing the border. Then
after we had the fiasco with the passports, they said again we
cannot seem to get things done. And I think we need to restore
people's faith, I think, in the management of this government,
and I made that very clear to Clay Johnson, who is in charge of
Management over at OMB.
So good luck, and thank you very much for your effort. I
think it is one of the most worthwhile things maybe you will
have something to do with.
General Schwartz. Sir, all I can tell you, in our small
bubble, we are committed to restoring people's faith in our
integrity and in our capacity to manage this.
Senator Akaka. Thank you very much, Senator Voinovich.
I want to thank our witnesses for appearing today. Removing
supply chain management from GAO's high-risk list is an
important task, as you all well know. Inadequate management
puts not only our tax dollars at risk but, more importantly,
the safety of our warfighters serving overseas.
I find some of the examples cited by GAO very concerning.
Issues like container management are only a symptom of a larger
challenge that the Department faces. I look forward to
continuing to work with the Department of Defense in the future
on this issue. I know that Senator Voinovich and I are
dedicated to getting supply chain management off the high-risk
list.
The hearing record will remain open for 1 week for
additional statements or questions other Members may have
pertaining to this hearing.
And with that, let me say thank you again, and the hearing
is adjourned.
[Whereupon, at 4:12 p.m., the Subcommittee was adjourned.]
A P P E N D I X
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