[Senate Hearing 111-877]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 111-877
 
   HIGH-RISK LOGISTICS PLANNING: PROGRESS ON IMPROVING DEPARTMENT OF 
                    DEFENSE SUPPLY CHAIN MANAGEMENT

=======================================================================


                                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 ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 27, 2010

                               __________

        Available via the World Wide Web: http://www.fdsys.gov/


       Printed for the use of the Committee on Homeland Security
                        and Governmental Affairs




                  U.S. GOVERNMENT PRINTING OFFICE
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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

               JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan                 SUSAN M. COLLINS, Maine
DANIEL K. AKAKA, Hawaii              TOM COBURN, Oklahoma
THOMAS R. CARPER, Delaware           SCOTT P. BROWN, Massachusetts
MARK L. PRYOR, Arkansas              JOHN McCAIN, Arizona
MARY L. LANDRIEU, Louisiana          GEORGE V. VOINOVICH, Ohio
CLAIRE McCASKILL, Missouri           JOHN ENSIGN, Nevada
JON TESTER, Montana                  LINDSEY GRAHAM, South Carolina
ROLAND W. BURRIS, Illinois
EDWARD E. KAUFMAN, Delaware

                  Michael L. Alexander, Staff Director
     Brandon L. Milhorn, Minority Staff Director and Chief Counsel
                  Trina Driessnack Tyrer, Chief Clerk
         Patricia R. Hogan, Publications Clerk and GPO Detailee


  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
MARY L. LANDRIEU, Louisiana          SCOTT P. BROWN, Massachusetts
ROLAND W. BURRIS, Illinois           LINDSEY GRAHAM, South Carolina
EDWARD E. KAUFMAN, Delaware

                     Lisa M. Powell, Staff Director
                     Roger Yee, Legislative Fellow
                Evan W. Cash, Professional Staff Member
             Jennifer A. Hemingway, Minority Staff Director
           Sean M. Stiff, Minority Professional Staff Member
                      Aaron H. Woolf, Chief Clerk
                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Akaka................................................     1
    Senator Voinovich............................................     2

                               WITNESSES
                         Tuesday, July 27, 2010

Alan F. Estevez, Principal Deputy Assistant Secretary of Defense 
  for Logistics and Materiel Readiness, U.S. Department of 
  Defense........................................................     5
Jack E. Edwards, Director, Defense Capabilities and Management, 
  U.S. Government Accountability Office, accompanied by William 
  M. Solis, Director, Defense Capabilities and Management, U.S. 
  Government Accountability Office...............................     7

                     Alphabetical List of Witnesses

Edwards, Jack E.:
    Testimony....................................................     7
    Joint prepared statement with Mr. Solis......................    34
Estevez, Alan F.:
    Testimony....................................................     5
    Prepared statement...........................................    19
Solis, William M.:
    Testimony....................................................     7
    Joint prepared statement with Mr. Edwards....................    34

                                APPENDIX

Background.......................................................    52
Questions and responses for the Record from:
    Mr. Estevez..................................................    58
    Mr. Edwards..................................................    71


   HIGH-RISK LOGISTICS PLANNING: PROGRESS ON IMPROVING DEPARTMENT OF 
                    DEFENSE SUPPLY CHAIN MANAGEMENT

                              ----------                              


                         TUESDAY, JULY 27, 2010

                                 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 2:31 p.m., in 
room SR-418, Russell 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 afternoon everyone. This hearing of the 
Subcommittee on Oversight of Government Management, the Federal 
Workforce, and the District of Columbia is called to order.
    Aloha and welcome to our witnesses and guests. I would like 
to thank you all for joining us here today for this hearing, 
which is on High-Risk Logistics Planning: Progress on Improving 
the Department of Defense Supply Chain Management.
    Senator Voinovich and I have held several hearings on the 
Department of Defense (DOD) supply chain management, an issue 
critical to making sure our brave men and women serving in 
Afghanistan, Iraq, and elsewhere have what they need to be safe 
and successful. At our most recent hearing in July 2007, DOD 
was making progress, but there were still challenges that 
needed to be addressed. Three years later, DOD's supply chain 
management still remains on the Government Accountability 
Office's High-Risk List, where it first appeared in 1990.
    It is true that DOD's logistics operations are complex and 
extend throughout the world, but we must remain focused on 
moving forward to resolve the remaining weaknesses. 
Longstanding issues such as inefficient inventory management, 
poor responsiveness to war-fighting requirements, and weak 
demand forecasting result in high costs.
    In May 2010, the Government Accountability Office (GAO) 
reported that the Defense Logistics Agency (DLA) had over $1 
billion worth of excess spare secondary inventory in fiscal 
year 2008. We must exercise better stewardship over taxpayer 
money.
    Even more importantly, DOD's supply chain management is 
essential to our military forces. It is critical that DOD 
effectively supply our warfighters, who risk their lives every 
day, with the right materiel in the right place at the right 
time.
    DOD supply chain management still suffers from inadequate 
strategic planning. DOD must formulate a comprehensive and 
integrated Strategic Plan that addresses all of DOD's current 
and future logistics capabilities and challenges. This is vital 
to give senior leaders a means to effectively guide logistics 
programs across the Department and measure results.
    DOD has produced multiple strategic plans over the years 
aimed at improving supply chain management. However, it is 
unclear how these plans align with each other. The plans also 
lack some key elements. For example, at this Subcommittee's 
urging, DOD released a Logistics Roadmap in July 2008. 
According to GAO, the Roadmap failed to identify the scope of 
logistic problems, lacked outcome-based performance measures, 
and did not clearly define how the Roadmap would be 
incorporated into the overall DOD decisionmaking processes.
    In September 2009, Senator Voinovich and I sent a letter to 
Deputy Secretary of Defense William Lynn expressing our 
continued concerns about DOD's ability to effectively and 
efficiently deliver critical supplies to military personnel. We 
also noted that DOD still had not included outcome-based 
performance measures in the Roadmap more than a year after its 
release. DOD responded that the Department was developing a 
2010 Logistics Strategic Plan that would update the Roadmap and 
address GAO's findings. DOD recently released this plan. 
Although it includes specific logistics measures and key 
initiatives, I am concerned with how it can be used to achieve 
DOD's supply chain management goals.
    Despite the remaining challenges, I do commend DOD for 
making progress on important issues. For example, the Joint 
Regional Inventory Materiel Management Initiative on the Island 
of Oahu, in my home State of Hawaii, has proven a success. It 
improves support to the warfighter by reducing customer wait 
times, providing better asset visibility, eliminating duplicate 
inventories, and streamlining delivery of parts to end users. 
The principles learned with J-RIMM have now been applied to 
other key areas, such as the Inventory Management and Stock 
Positioning Initiatives at the Defense Logistics Agency.
    Again, I want to thank our witnesses for being here today 
to discuss the 2010 Logistics Strategic Plan and what DOD is 
doing in working toward removing supply chain management from 
GAO's High-Risk List.
    Senator Voinovich has championed this issue for many years 
and he is due much of the credit for the progress that has been 
made. With that, I would like to call on Senator Voinovich for 
his opening remarks. Senator Voinovich.

             OPENING STATEMENT OF SENATOR VOINOVICH

    Senator Voinovich. Thank you, Senator Akaka. Thank you very 
much for holding this hearing.
    This is, I think, the fourth hearing that we have had in 
the Subcommittee on this issue, and over the years, I have met 
with people at the Department of Defense and in my office and I 
am glad to see that some progress has been made in this. As I 
said to Lieutenant General Durbin when he was in to see me 
recently, I would really like to know from the time that former 
Under Secretary of Defense Ken Krieg was involved just what we 
have accomplished. Are we more efficient? Have we saved any 
money? Are we working harder and smarter?
    I will say this, that last month, I had the opportunity to 
travel to Iraq, and while I was in Baghdad, we visited with 
Lieutenant General Kenneth Hunzeker and Lieutenant General 
Robert Cone, and they briefed the delegation on the gradual 
transition of personnel and equipment out of Iraq. I was 
encouraged by how the Department is addressing the great 
challenge posed by the simultaneous drawdown in Iraq and surge 
in Afghanistan. For those tasked with delivering the right 
materiel to the right place at the right time, sustaining more 
than 100,000 troops in Afghanistan, poses a great challenge to 
everyone.
    I just saw the route used to get equipment out of Iraq and 
to Afghanistan. I can't believe the way they have to go in 
order to get it in there, because they can't go through Iran, 
so they have to go all over the moon.
    As the supply chain increasingly shifts to Afghanistan, the 
Department will face a critical test to determine whether the 
dangerous logistical gaps that emerged during the early days of 
Operation Iraqi Freedom have been closed and whether progress 
will continue in the areas of requirements forecasting, asset 
visibility, and materiel distribution. Again, I was impressed 
that they seemed to know where everything was. They had it 
categorized as either going to Afghanistan, coming back to the 
United States so that we can do some rehabilitation to it, and 
they are going to leave stuff in Iraq.
    The Department must have an effective strategic plan that 
decisionmakers can use to prioritize, coordinate, fund, and 
account for the hundreds of existing supply chain initiatives.
    In anticipation of this hearing, Senator Akaka and I sent a 
letter to the Department in September 2009 in which we posed a 
number of questions about the new Administration's supply chain 
management priorities. We focused on shortcomings in the 
Logistics Roadmap that were identified by a January 2009, and 
Senator Akaka has already mentioned this GAO report.
    The response that we got back from Dr. Ashton Carter, Under 
Secretary of Defense for Acquisition, Technology and Logistics 
indicated that a new DOD Logistics Strategic Plan would soon be 
issued and would serve as an update of the existing Roadmap. 
And again, I am being repetitious, but we are really interested 
to know about the Department's approach to strategic planning 
in this area. You had the Roadmap. Now you have the Logistics 
Strategic Plan. How do they relate to each other? Mr. Estevez, 
you have been around here for a while and I will be interested, 
because you were there at the beginning of this, how does this 
kind of segue into the Strategic Plan that you folks have put 
together?
    Finally, I look forward to hearing from the Department 
about the measurable improvements in the supply chain 
management that have resulted from several years of concerted 
effort. I would like you to brag a little bit, Mr. Estevez. 
What increased supply chain efficiencies can the Department 
demonstrate? What cost savings? Most importantly, though, how 
are deployed personnel better able to accomplish their missions 
as a result of past logistics planning? These are the real 
questions that have to be asked.
    I am glad that Mr. Solis will aid in the discussion by 
providing insight into how many of the initiatives contained in 
the Department's logistics planning documents are being applied 
in the field, particularly in Afghanistan.
    When we started with this, Secretary Rumsfeld said we would 
save about $26 billion if we managed the supply chain right, 
and you know that this function has been on the High-Risk List 
since 1990. For the new people on board with the Obama 
Administration, I have to say that if I were the President of 
the United States, one of the things that I would do is look at 
this High-Risk List to see how I could impact it and get items 
off the list. DOD supply chain management, I think, is one of 
the most important things that we need to get off the list and 
I am prayerful that you all understand that and you will give 
it the very best that you have.
    I am pleased that there has been some continuity here, 
because one of the things that bothered me, and one of the 
things Senator Akaka and I have been trying to do is to get 
everybody to put together some kind of a strategic plan over a 
5- or 6-year period, because transformation takes a long time. 
I know that because I was a mayor and I was a governor. It just 
takes a long time. And so often around here, one Administration 
comes in, they have a plan. The next generation comes in and 
they start all over again. But it appears we have continuity, 
and I am going to be really interested to hear from you how 
this thing is moving along and where do you see the light at 
the end of the tunnel.
    Thank you very much, Senator Akaka, for holding this 
hearing.
    Senator Akaka. Thank you very much, Senator Voinovich.
    Now you have heard the history of our work along these 
lines, and the reason for the history is it is changing, but we 
want to move it as quickly as we can here.
    I would like to at this time recognize and introduce our 
panel, so it is my pleasure to welcome Alan Estevez, Principal 
Deputy Assistant Secretary of Defense for Logistics and 
Materiel Readiness, and Jack Edwards, Director of Defense 
Capabilities and Management at the Government Accountability 
Office. Mr. Edwards is accompanied by William Solis, also 
Director of Defense Capabilities and Management in the 
Government Accountability Office. Mr. Solis, it is good to see 
you again, always.
    Mr. Solis. Thank you.
    Senator Akaka. It is the custom, as you know, of this 
Subcommittee to swear in the witnesses, so I ask you to please 
stand and raise your right hands.
    Do you solemnly swear that the testimony you are about to 
give this Subcommittee is the truth, the whole truth, and 
nothing but the truth, so help you, God?
    Mr. Estevez. I do.
    Mr. Edwards. I do.
    Mr. Solis. I do.
    Senator Akaka. Thank you. Let the record show that the 
witnesses answered in the affirmative.
    I want our witnesses to know that although your remarks are 
limited to 7 minutes, your full statements will be included in 
the record.
    Mr. Estevez, will you please proceed with your statement.

  TESTIMONY OF ALAN F. ESTEVEZ,\1\ PRINCIPAL DEPUTY ASSISTANT 
SECRETARY OF DEFENSE FOR LOGISTICS AND MATERIEL READINESS, U.S. 
                     DEPARTMENT OF DEFENSE

    Mr. Estevez. Thank you, Chairman Akaka and Senator 
Voinovich. Thank you for the opportunity to appear before you 
to discuss the current status of DOD's supply chain management 
and logistics processes and to review with you the efforts we 
have taken to address areas of risk. As you mentioned, I have 
been here for all four of the hearings and we are dedicated to 
doing this, like both of you do.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Estevez appears in the Appendix 
on page 19.
---------------------------------------------------------------------------
    DOD has made significant measurable progress over the past 
3 years, since the Department was last before this 
Subcommittee, and I believe my testimony today will show our 
continued dedication toward implementing a comprehensive end-
to-end logistics strategy that provides effective support for 
our deployed warfighters and provides value to the American 
taxpayers who pay for that support.
    Before I address those areas, I would like to compliment 
your respective staffs, your Office of Management and Budget 
(OMB), and GAO, who continue to work with us in addressing the 
Department's supply chain management. I would also like to 
specifically acknowledge from GAO, both Bill Solis and Jack 
Edwards. Our collaboration has contributed significantly to the 
successful improvements in the Department's supply chain and 
logistics support.
    The DOD supply chain is unparalleled in its scope of 
operations and the complexity of its mission. Over one million 
uniformed civilian and contract employees support all aspects 
of the Department's supply chain, managing $90 billion in 
inventory, processing over 117,000 national orders for materiel 
daily, keeping 15,000 aircraft, 285 ships, and 30,000 combat 
vehicles capable of fulfilling their mission, and in many cases 
performing this mission while deployed in harm's way.
    The DOD logistics mission is to provide globally 
responsive, operationally precise, and cost effective joint 
logistics support for the projection and sustainment of 
America's warfighters. Every day, DOD logisticians support 
troops forward deployed in some of the world's demanding 
environments and are frequently called upon to support 
operations on short notice in parts of the world where we have 
little or no presence.
    Most notably today, DOD logisticians are key enablers to 
simultaneously executing the drawdown of our forces in Iraq and 
to providing full spectrum support to our mission in 
Afghanistan. Since the President announced the Iraq drawdown 
time line, we have systemically been responsibly drawing down 
our force in Iraq. To date, we have moved out 32,000 pieces of 
rolling stock, closed over 300 bases, and are on track to bring 
the force down to 50,000 troops by August 31, 2010. This has 
been accomplished by simultaneously sustaining and rotating the 
remaining force in Iraq, no small feat. At the same time, we 
have moved the majority of the 30,000 troops and their 
equipment to Afghanistan as the President directed last 
December while providing the needed sustainment in food, fuel, 
medical supplies, construction materials, clothing, and spare 
parts.
    I just returned from Afghanistan 2 weeks ago, along with 
Dr. Carter, I might add, who was looking at the logistics lay-
down. Every place I visited, the troops and their commanders 
reported that, for the most report, they are receiving the 
materiel as they need it, when they need it.
    Since the troop increase was announced, we have moved over 
17,000 relocatable buildings to house our forces. We are 
meeting a 1.1 million gallon-a-day demand for fuel for United 
States and coalition forces while feeding 435,000 meals a day 
to U.S. troops on the ground. In addition to moving the force, 
their equipment, and their needed supplies to a landlocked 
country, we have also moved approximately 4,000 mine-resistant, 
ambush protected all-terrain vehicles (MATVs), and a 
significant number of Mine resistant Ambush Protected (MRAP) 
variants to protect our forces as they perform their mission. 
We are sustaining the readiness of all MATV and MRAP vehicles 
at over 90 percent, and that is with battle damage as the major 
factor in decreased readiness.
    Even with this enormous challenge on our plate, DOD 
logisticians were still able and ready to support disaster 
relief earlier this year in Haiti.
    Since we last appeared before this Subcommittee, we have 
issued the DOD Logistics Strategic Plan incorporating our major 
supply chain initiatives. This plan is synchronized and 
consistent with both the 2010 Quadrennial Review and the DOD 
Strategic Management Plan published in July 2009. It 
incorporates logistics-related priorities, outcomes, goals, 
measures, and key initiatives depicted in the DOD Strategic 
Management Plan while adding more detailed information relating 
to logistics strategy. Actual progress against each of the 
plans' top-level performance targets will be collected and 
reported via the DOD Chief Management Officer level dashboard 
and reviewed quarterly.
    The Logistics Strategic Plan incorporates and builds on our 
previous efforts, including the 2005 Supply Chain Improvement 
Plan and the 2008 Logistics Roadmap, while simultaneously 
guiding our future actions as there are successes and 
improvements in the three GAO supply chain high-risk areas: 
Forecasting, asset visibility, and distribution.
    With respect to forecasting, we have made considerable 
progress in plan accuracy with the measurement of forecasting 
demand when compared to actual need. The Defense Logistics 
Agency (DLA), which satisfies 95 percent of customer demands, 
has seen demand forecast accuracy improve by 24 percent for key 
items. That is complemented by improvements we have seen in our 
readiness-based sparing efforts, which use analytics to 
establish inventory levels and locations to maximize readiness.
    Using a commercial readiness-based sparing tool, the Navy 
is currently determining aviation on-board spares for several 
of its aircraft carriers and has noted $216 million in cost 
savings per carrier for the six carriers outfitted and a 50 
percent reduction in high-priority requisitions. This was 
achieved during a 7 percent increase in operational tempo 
flight hours.
    In the area of asset visibility, we continue to use active 
Radio Frequency Identification (RFID) technology, to provide us 
with needed visibility for our critical cargo moving to Iraq 
and Afghanistan. At DLA's Defense Distribution Depot-San 
Joaquim, where we are using passive RFID, we have seen a 62 
percent decrease in receiving process errors for small parcel 
shipments on passive RFID-enabled receiving lanes, and at Pearl 
Harbor, we have seen a ten-day reduction in response time for 
our most critical requisitions.
    The Distribution Process Center is driving process 
improvements that have significantly enhanced overall materiel 
distribution for our deployed forces and in the United States. 
For example, the Defense Transportation Coordinator Initiative 
has produced $91 million in cost avoidance in key 
transportation expenses while on-time delivery is running 
better than 96 percent.
    In closing, as we press forward with executing the 
Logistics Strategic Plan, the Department remains committed at 
the most senior levels to addressing our supply chain processes 
in order to support our warfighters at best value for the 
taxpayer. We continue to make real and measurable improvements 
to that end.
    Again, I thank you, Mr. Chairman and Senator Voinovich, for 
the opportunity to testify today on the important issues 
associated with the DOD supply chain and logistics and I will 
be happy to answer any of your questions.
    Senator Akaka. Thank you very much, Mr. Estevez.
    Mr. Edwards, will you please proceed with your statement.

TESTIMONY OF JACK E. EDWARDS,\1\ DIRECTOR, DEFENSE CAPABILITIES 
AND MANAGEMENT, U.S. GOVERNMENT ACCOUNTING OFFICE, ACCOMPANIED 
    BY WILLIAM M. SOLIS, DIRECTOR, DEFENSE CAPABILITIES AND 
       MANAGEMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. Edwards. Mr. Chairman and Senator Voinovich, thank you 
for this opportunity to discuss DOD's progress and challenges 
in strategic planning to resolve longstanding problems in the 
supply chain management area.
---------------------------------------------------------------------------
    \1\ The joint prepared statement of Mr. Edwards and Mr. Solis 
appears in the Appendix on page 34.
---------------------------------------------------------------------------
    As you are aware, supply chain management and other 
logistics functions are critical to supporting military forces 
in Iraq, Afghanistan, and elsewhere. Also, they constitute a 
substantial investment of resources. I am here today with my 
colleague, Bill Solis, that you mentioned earlier. Our GAO 
reviews cover supply chain management and other logistics 
areas. Mr. Solis's work tends to focus on the Combatant 
Command's and supporting the warfighter in operational 
situations. I am responsible for issues such as inventory 
management and also weapon system sustainment.
    As requested, we will focus on three issues today: One, 
DOD's prior strategic planning efforts; two, key elements in 
the new plan; and three, opportunities to improve that plan.
    Regarding DOD's prior efforts, DOD has issued strategic 
plans for logistics and supply chain management since at least 
the 1980s. The 2008 Logistics Roadmap that we have been talking 
about is one example of such a plan. While it documented goals, 
joint capabilities, objectives, and numerous initiatives and 
programs, we found that it was missing some elements that we 
would expect in a strategic plan. Those missing elements 
included things that you just mentioned earlier, such as 
outcome-based performance measures and descriptions of problems 
and capability gaps. We recommended to DOD that it include 
these missing elements in future updates to the Roadmap and DOD 
concurred with that, and we have had discussions with them.
    Earlier this month, DOD issued its new Logistics Strategic 
Plan, our second issue that we would like to discuss. The new 
plan identifies the Department's logistics mission and its 
vision. It also reiterates Department priorities that have been 
stated in important documents such as Quadrennial Defense 
Review and in the Strategic Management Plan for business 
operations. The Logistics Strategic Plan contains high-level 
goals. There are four of those, and for each one of the goals, 
it has success indicators, performance measures, and key 
initiatives. And the goals and initiatives that are mentioned 
in there, many of those we have investigated in the past and we 
have identified some of those needing management attention.
    While all four goals do touch on supply chain management, 
goal four explicitly deals with that issue. The discussion of 
goal four very briefly lists four success indicators, three 
performance measures, and 12 key initiatives.
    Now that we discussed some of what the plan has, let us 
move to the third area or third topic, and that is 
opportunities that we see that might help move this plan along 
a little more. The opportunities fall into two general 
categories or types. First, the plan lacks detailed information 
on how and when the goals and initiatives will be achieved. For 
example, the plan does not identify performance targets or 
timetables. It does not include logistics problems or 
capability gaps. And also, there is no mention made of what 
types of resources are going to be required in order to 
implement this plan.
    The other area of improvement concerns addressing the 
absence of linkages between DOD's DOD-wide Logistics Strategic 
Plan and the service-specific and other types of plans and 
activities for accomplishing and improving supply chain 
management. Similarly, it is not clear how this plan will be 
used within DOD's existing logistics governance framework to 
help make budgetary and other decisions.
    The continued absence of important details from the 
Logistics Strategic Plan may make it difficult for DOD to 
efficiently implement this plan and to fulfill the Department's 
vision of providing a cost effective joint logistics support 
for the warfighter.
    Mr. Chairman and Senator Voinovich, Mr. Solis and I would 
be happy to answer any questions that you have at this time.
    Senator Akaka. Thank you very much, Mr. Edwards.
    Mr. Estevez, I commend DOD's efforts to improve the 
efficiency of its logistics processes, but the recently 
released 2010 DOD Logistics Strategic Plan is intended to 
provide strategic direction on future logistics improvement 
efforts. Would you please describe the plan's goals and key 
measures and how the plan will be used by senior leadership in 
the logistics decisionmaking process?
    Mr. Estevez. I will be happy to, Senator. Thank you. Let me 
start off by saying the Logistics Strategic Plan encompasses 
the gamut of logistics activities, more than just the supply 
chain activity that we are focused on, because it is a holistic 
continuum if you look at it. You can't have a good logistics 
system unless you have a good supply chain.
    It has four goals in it. First, there is support for the 
warfighter, support for our deployed forces and what is going 
on in our current contingency operations.
    Second, related to that is management of the contractor 
workforce that we have out there and doing that better in the 
future. We all know that we have had some problems in the past 
and we believe we have got our arms around that going forward, 
but not just for this contingency, for future contingencies 
past this one. So we put in a process. We put in planning 
processes out at our CoComs, recognizing that we are going to 
have a contractor workforce on the battlefield with us going 
forward.
    Third, is looking at the acquisition process for our 
weapons platforms and building in a sustainment capability so 
that when you design a platform, you are thinking about the 
long-term operating costs of that platform and what you need to 
do today in the acquisition process. Acquisition people tend to 
focus on it until it is bought and then my folks worry about it 
after that. But the design affects the long-term costs, so we 
are trying to instill logistics and sustainment thought into 
the early part of that process, and Dr. Carter recently signed 
out a memo to the service acquisition executives ensuring that 
at Defense Acquisition Boards, we will be discussing 
sustainment strategies as well as the acquisition strategy for 
a particular platform.
    And fourth, are the initiatives related to the supply 
chain.
    Inside that and for each of those, we have what the 
measures of our success will be, and then there are initiatives 
under each one of those goals. Frankly, under each one of those 
initiatives, there will be sub-targets that will relate up to 
the higher target.
    I co-chair with the Director of Logistics for the Joint 
Staff, Lieutenant General Kathy Gainey, something called the 
Joint Logistics Board, which brings together the senior 
logisticians in the Department of Defense from the service 
staffs, from the service Materiel Commands, from U.S. 
Transportation Command, and from the Defense Logistics Agency, 
and at that board we discuss how we are going forward and the 
issues that we need to resolve to make all those things come 
into compliance, and then the services manage their budgets and 
how they do their business underneath that structure.
    Senator Akaka. You last mentioned about the supply chain, 
Mr. Estevez. What are some of the major supply chain management 
challenges that DOD still needs to address?
    Mr. Estevez. Let me start off by saying, and it is going to 
be mostly in the area of inventory management and procurement 
of that inventory. So our ability to forecast demand needs to 
be better. We have a number of initiatives, things like I 
discussed in my opening statement, readiness-based sparing, to 
do that. We are drafting, as required in last year's National 
Defense Authorization Act, a comprehensive Inventory Management 
Strategy. We are using that opportunity to actually go after 
some focused areas so that management not only of the forecast, 
and the forecast should be better at our industrial activities, 
at our maintenance depots, in other words, than out in the 
deployed force, where things like environment and battle damage 
and unintended consequences change the demand plan accuracy. 
But collaboration between the buyers, the Defense Logistics 
Agency and the Materiel Commands, and the users of that 
materiel, that is probably No. 1.
    Using our systems, and we have issues in some of our 
systems--DLA probably has the best Enterprise Resource Planning 
(ERP) that is out there--other services are working to 
implement--to gather the data needed to more timely affect 
buys, so that we don't buy more than we need. Even though that 
materiel may be consumed down the road, it is a lost 
opportunity cost that the money could have gone to something 
more important. So that is probably the biggest area that I say 
that we can really affect big change to the benefit of both the 
warfighter and the taxpayer.
    The final area we continue to work on is visibility. We 
have pretty good visibility, and frankly, I think our inventory 
accuracy is as good as anyone out there in the commercial 
sector, given the amount of materiel we have and given the fact 
that we deploy to places like Helmand Province, where tracking 
it can be difficult. But we continue to work those processes, 
as well.
    Senator Akaka. Thank you. Let me call on Senator Voinovich 
for his questions.
    Senator Voinovich. I guess the first question I would have 
is that you got started with this process. You had the Roadmap. 
Now you have the Strategic Plan. The Department has been 
criticized in terms of including outcome-based performance 
metrics in strategic planning documents and, GAO says, failed 
to include adequate outcome-based performance metrics in both 
the Roadmap and Logistics Strategic Plan. Why is this the case 
and how can this be remedied? Although I can't believe that, 
Mr. Estevez, if I said to you, how have you judged your 
performance over the last several years and what criteria did 
you use? Now, I know that one of the criteria is customer wait 
time, but what would you point to to show what metrics were 
used to evaluate the performance of your operation in achieving 
the goals that were set? And do you have a difference of 
opinion with GAO in terms of their analysis of the issue of 
metrics that you are using?
    Mr. Estevez. Let me start at the top of that, how I would 
measure, and as you pointed out, customer wait time has been 
our consistent measure throughout. But I would go past that to 
readiness and a customer satisfaction metric. So if I look at 
our capabilities, if I look at the performance of a logistics 
system as what it is doing right now in sustaining our forces 
and deploying our forces to Afghanistan, which is about as hard 
a place as we could have picked to go to war, short of 
Antarctica, maybe----
    Senator Voinovich. In fact, this morning on the plane 
coming in, I had a public document that shows the circuitous 
route you have to go through. It is just amazing. OK. Go ahead.
    Mr. Estevez. And there are dangerous countries around there 
that we are going through and diplomatically problematic 
countries, to say the least. So nonetheless, and let me just 
give you an example, in May of this year, the Marines in 
Helmand had a fire in their supply support activity, in the 
activity that sustains a good chunk of the Marine forces. There 
are other ones in Helmand Province. A massive fire destroyed a 
big chunk of the materiel that was there. Nonetheless, we were 
able to reconstitute that in pretty much no time and we had a 1 
percent uptick in readiness while we were doing that 
reconstitution to the point where--and I was talking when I was 
there 2 weeks ago--to the Marine Logistics Command, a Marine 
one-star on the ground, who told me he had to put the brakes on 
the logistics system for pushing the supplies to him so that he 
could target the supplies he really needed right now and get 
them out into the field. That, to me, shows a logistics system 
that is working the way it is supposed to work for our deployed 
forces. I can likewise give you good stories on Iraq----
    Senator Voinovich. Have you ever sat down with anybody that 
was in Iraq in the beginning to kind of compare and contrast 
the situation that you had there versus what you have in 
Afghanistan?
    Mr. Estevez. In fact, today, and I guess he wasn't there 
right at the beginning, the Director of Logistics for General 
Rodriguez, the U.S. Forces Director of Logistics, was also 
General Petraeus's Director of Logistics and is still there in 
Afghanistan, in Iraq in the 2007 and 2008 time frame. So that 
is not the beginning. And certainly I am around many 
logisticians who were there and it is leaps and bounds better 
than we are doing.
    There are a number of reasons for that. Some of those are 
political reasons and some of those are just that we are 
looking long and that we have learned lessons and we are more 
flexible and more adaptable, and that is all good. To me, going 
forward, the trick is to codify those good things so that we 
incorporate them, recognizing that you don't want to get down 
to fighting the last war, the next war, and everything has to 
be dynamic. And frankly, if you go to the commercial sector and 
look at great supply chains, they have to adapt, as well.
    But there is a massive difference between what we were 
doing early on and what we are able to do right now in 
Afghanistan and what we are doing drawing down, including 
putting in depots and looking at those capabilities.
    Going back to your measurements, that would be how I would 
say, yes, we are doing great. With that said, I would also say 
GAO has some legitimate arguments that there are areas we could 
do better. I would call those the efficiency areas, more of the 
business operations versus direct support for the warfighter. 
Again, that is my No. 1 metric.
    But I will go back to those things I talked about. Forecast 
accuracy, we could do much better and we are driving to do 
that. Some of those are not necessarily outcome-based metrics, 
so it is customer readiness is the outcome-based metric. I need 
a cross-metric underneath that and driving that relationship is 
not as easy as one would like in our business.
    So, I think you had a third question in there that I may 
not have answered.
    When I look at the way these plans have been drafted, we 
drafted the first plan to address some of the things that were 
laid out on the High-Risk List and we are still driving to 
those initiatives and they are consistent over time. As you 
point out, this is a complex area and transformation is not 
overnight. I wish it was, so I wish we could get off this list 
more than anyone probably out there right now.
    Second, the Roadmap was a list of all initiatives across 
the Department, not just the ones directed at that list. They 
are encapsulated inside the Strategic Plan. So there is a 
continuum of efforts as we move forward, and I personally think 
this is a pretty good plan. Mr. Edwards has laid out some areas 
where we could improve. We will look at those going forward. 
But as I have discussed with him, I would also look at the 
initiatives and how we are doing and driving them underneath, 
the cost savings that we are garnering, the increases in the 
response time, etc., and I think that is what we need to be 
measured on.
    Senator Voinovich. In my next round of questions, I will 
give you an opportunity, Mr. Edwards and Mr. Solis, to comment 
on what Mr. Estevez had to say.
    Senator Akaka. Thank you. Yes, we will have another round 
here.
    Mr. Edwards, DOD supply chain management has been on the 
GAO High-Risk List for 20 years. DOD, GAO, and this 
Subcommittee have been committed to this issue. Can you tell us 
what key factors GAO plans to examine when deciding whether to 
retain DOD supply chain management in its upcoming High-Risk 
List series update?
    Mr. Edwards. Thank you, Mr. Chairman. We have mentioned 
some of those issues in the past, and also Mr. Estevez has 
mentioned some of them. We have had numerous conversations. You 
have urged us to talk to one another. Recently, Mr. Estevez and 
I met with Beth McGrath, Deputy Chief Management Officer, to 
discuss what types of steps might need to go forward. We 
recognize that there are some issues that are still out there, 
such as visibility over some of the assets, also looking at the 
supply chain projections of what are we going to need into the 
future. And Mr. Solis will talk about some of the things that 
he has recently observed in some of his trips to Iraq and 
Afghanistan to complement the things that I am talking about.
    But as we move forward, one of the things that we are 
particularly looking for, Mr. Estevez has mentioned that they 
will be issuing a mandated report that was part of the National 
Defense Authorization Act of 2010. In that report, DOD is 
required to address eight issues, and among those issues are 
some of those very things that originally led DOD to have the 
supply chain management or initially, at least, the inventory 
part of supply chain management put onto the High-Risk List. So 
we hope to see that plan when it comes out and hope that some 
of these issues will be addressed.
    Mr. Solis. Could I just jump in here just a little bit, 
too?
    Senator Akaka. Mr. Solis.
    Mr. Solis. I think a couple other things, just very 
quickly, and I think Mr. Estevez alluded to one. I think we can 
focus on Iraq and Afghanistan, and let me say, I think for 
Iraq, I think in terms of the briefings that you got, Senator 
Voinovich, I am in agreement that I think the drawdown is 
moving ahead as scheduled and I think everything from the 
disposition of equipment to the movement of personnel, those 
things, I think, are on time and moving quite well.
    I think Afghanistan, I think from my view and some of the 
work that we have done, the preliminary work, granted, it was 
back in December, we still have to see how that is going to 
turn out. I have some different things in terms of some of the 
unit readiness pieces that I have picked up which I testified 
about. Again, that was back in December. We are at a different 
point in time and we are going to be taking a look at that. So 
again, we will be looking at that in terms of making the 
assessment of the high risk.
    I think the other piece, and I haven't thought this through 
completely, but the other thing I think, not only just for 
logistics but particularly the supply chain, in terms of the 
workforce, that has become a contractor workforce, particularly 
for the current operation. When you look at the transportation, 
the distribution, that is all becoming very integral in terms 
of the fuel and supplies. How is that going to be built into 
future operations?
    And so I think the kind of thing that Mr. Estevez talked 
about in terms of codification of these kinds of things, I 
think are the kinds of things that we are going to be looking 
for, as well.
    Senator Akaka. Mr. Solis, distribution of materiel to 
deployed forces in Afghanistan presents distinct challenges due 
to the country's location, infrastructure, and its terrain. 
Would you please discuss some of these key challenges.
    Mr. Solis. And again, as Mr. Estevez alluded to, 
Afghanistan is probably the worst nightmare for a logistician 
to try to plan an operation, and so by many accounts, they have 
done a great job. In terms of some of the challenges going into 
this, I mean, there were things like limited visibility over 
shipments. I think there is limited RFID capability coming out 
of Pakistan. I think on the Northern distribution route, 
because of security concerns by other countries, there is 
limited visibility over that. It takes a number of days to get 
those shipments from the United States through those different 
routes. And then when they get within country, there are even 
periods of time where they may have to wait outside the gates 
because of security considerations. So there is a long stretch 
of time just to get the equipment and supplies in.
    I think in terms of just working in the North Atlantic 
Treaty Organizations (NATO) environment, our priorities are not 
necessarily the other NATO countries' priorities in terms of 
getting key equipment or key supplies within a particular base.
    There were limits on the infrastructure at the air fields, 
the ramp space. Some of that was going to be taken care of 
during the surge, but there were some other things that were 
not going to be addressed during the surge. We still had 
reports of some units, and this is going back to the prior 
surge, to the spring and the summer, that still had not 
received all of its equipment and supplies. Again, we haven't 
looked at that going forward, and let me say I have attended 
different drills or planning conferences where I think the 
Department and the Army and the Marine Corps have sat together 
to figure out how they are going to do this. So we are going to 
have to take a look at that as to how it is working.
    But I think there are a number of challenges. Afghanistan 
is so much different than Iraq in terms of those challenges, 
but I think there are a number of things that are there that 
could limit the ability of the supply chain to work 
effectively.
    Senator Akaka. Thank you very much, Mr. Solis.
    Senator Voinovich, do you have further questions?
    Senator Voinovich. Yes, I do.
    You have heard the testimony of Mr. Estevez. Your testimony 
is very impressive, Mr. Estevez, about what has happened. On a 
scale of 1 to 10, Mr. Edwards, going back to, say, 2006 or 
2007--you pick the date and tell me where it is--what would you 
rate the improvement in their performance in terms of the 
supply chain management challenge?
    Mr. Edwards. I think I would rather defer this one to Mr. 
Solis. He has had a lot more of the time over in Afghanistan 
and he is better positioned to answer the specific issue about 
how Afghanistan has changed, if that is all right with you, 
Senator.
    Senator Voinovich. That is fine. I mean, I go back to 
anecdotal stuff, when we were buying and selling supplies at 
surplus, not having a lot of the equipment that was needed for 
the warfighter, etc. That was really awful. So, Mr. Solis, why 
don't you share with me what you think is really going on and 
if they really wanted to do a better job, where would you focus 
in on?
    Mr. Solis. Well, let me just start, again, with the plan, 
if I may first. The plan itself, I think was alluded to, that 
there are metrics out there. In fact, one of the things that I 
still think is lacking are overarching metrics. I will give you 
one example.
    One of the things that is in the plan is cost effective, 
yet I can't find anything in the plan----
    Senator Voinovich. Wasn't that the same thing you had to 
say about the Roadmap?
    Mr. Solis. Yes, sir.
    Senator Voinovich. OK.
    Mr. Solis. And so let me say this. I was pleased to see a 
lot of the overarching plan that is there today covers a lot of 
the same things that we have recommended that the Department 
look into beyond just the supply chain, planning for the use of 
contractors in future contingencies, not just Iraq and 
Afghanistan, looking at their business processes for urgent 
needs, supply chain management. So there are a lot of things 
that are very positive in that plan from maybe the priorities.
    But it is hard even there to tell which are the largest 
priorities. It is hard to tell which ones are going to provide 
the most cost effective solutions. For example, I think RFID--
--
    Senator Voinovich. I was just going to ask about that.
    Mr. Solis [continuing]. Is one that has a dual purpose, an 
increase in visibility and potentially providing cost 
effectiveness. And we are still looking for some of that. And I 
think those are the kinds of things that if they were added to 
the plan, and I know those are things that are going to be 
added, I think, at some point, according to even the latest 
version I see now, I think it would go a long way in terms of 
the plan itself. And I think that would be very helpful in 
terms of Members of Congress, different folks who have vested 
interests, decisionmakers, about how the Department is doing 
overall with respect to a lot of the initiatives and the goals 
now that they have set out in this plan.
    So I think there are still things, there are still some 
details, particularly the metrics. I think another one might be 
in terms of how they will continue to evaluate this, which is 
one of the things that we talk about in any plan, you have to 
be able to evaluate it. But again, there are a lot of things 
out there in this current plan that I see as positives in terms 
of the priorities and the kinds of things that they are going 
after. But I don't know--and one more, if I could give--in the 
planning part for future contingencies, I think the metric is--
all the contractor equities will be reviewed, but it doesn't 
say by when. It doesn't say how it is going to be done. So I 
think there are some of these details, and even if it was in an 
appendix somehow or something where folks could look at that, I 
think that would help a lot.
    Senator Voinovich. How often do the two of you talk, Mr. 
Estevez and Mr. Solis and Mr. Edwards?
    Mr. Solis. We talk quite a bit.
    Mr. Estevez. We do talk quite a bit.
    Mr. Solis. In fairness, I think we have a running 
conversation on different things. We agree and disagree on 
different things. I try to tell them where I think things are 
moving well. I think, again, the Iraq drawdown is moving pretty 
well. I still am not sure about Afghanistan. I mean, I know 
there are a lot of positives that are happening there. Don't 
get me wrong. But I think in terms of is it as good as it could 
be or are we doing the things--everything that we should be 
doing, I think that--and we are doing some work that will try 
to shed some light on the current efforts.
    Senator Voinovich. One of the things that Senator Akaka and 
I have done on a couple of instances is we have really worked 
with GAO and the agency that GAO is reviewing. I think in the 
whole Department of Homeland Security, for example, the 
question was, are they moving forward, are they making 
progress, in integrating the Department's functions? We had 
hearings where DHS said, we are doing one thing and GAO said 
DHS was doing another thing and there wasn't a meeting of the 
minds. So we have been trying to get them together to kind of 
get a consensus on what needs to be done. A more narrow 
initiative would be security clearance process, which we are 
hoping gets off the GAO High-Risk List.
    But the fact is that the agency and GAO have sat down. They 
have talked to each other. They have reconciled some 
differences. They have a plan. There is a meeting of the minds 
as to what needs to be done, and then you have something that 
you can look at and there is an agreement on what the metrics 
should be. Now, I am sure that is a lot of work, but it seems 
to me that if you haven't gone through that exercise, you ought 
to begin it and figure out just here is what we are doing, and 
you talk to each other and try to get, as I say, some meeting 
of the minds in terms of what the metrics are going to be and 
what is going to be accomplished, and from my selfish point of 
view and Senator Akaka's and the country's, when are you going 
to get off the High-Risk List and what is it going to take in 
order for it to happen?
    Mr. Solis. And I would say again, I think for us, we can 
make the recommendations. I can talk to Mr. Estevez. 
Ultimately, Mr. Estevez, and the Department have to decide 
which route they are going to go.
    Senator Voinovich. Yes, and the other thing I am interested 
in knowing if you are not able to hit your targets, is it 
because you are not getting the budget support that you are 
supposed to be getting from the Department, or are we doing 
something over here in Congress that is standing in your way. 
What are the hurdles that you are having to get over, that if 
you didn't have those hurdles, you could be moving at a quicker 
pace than you currently are?
    Mr. Estevez. Let me just address a couple of things there. 
If you go back in time when we first developed the High-Risk 
Implementation Plan, Mr. Solis, I, and OMB, crafted that 
together, and at one point, we were meeting probably quarterly, 
if not more. We are not quite at that point now, though we see 
each other quite often. When the Secretary announced his effort 
to drive efficiencies in the Department, I asked both of these 
gentlemen to come over and meet with me and look for ideas on 
where we could do it. So there is definite collaboration going 
on inside the Department.
    When we agree, that is easy. When we disagree, we disagree 
on some of the metrics, we are going to go where the Department 
needs to go. And we think we are doing the right thing. So it 
is not that I am trying to not do what GAO says. It is where we 
have a disagreement over technique.
    For some of the things, I would love to get a cost metric. 
That is easier said than done, on how you put a cost on 
management of inventory inside the Department. It is easy if 
you are Wal-Mart. Your hold time versus your sales, it is done. 
For us, holding a bunch of inventory that I am holding for war 
reserve, I am holding inventory that I bought for economic buy, 
so I bought more than we needed over the objective, we are 
holding Navy inventory. We have weapons systems that are raging 
that we are just going to hold on to. So it is a more difficult 
thing.
    On the other hand, I would also say in that case, for 
example, that I would rather have the inventory that I might 
need for that person in Iraq or Afghanistan than not have it. 
It is worse not to have it.
    So there are areas where we need to work through. We 
continue to work with GAO on honing the metrics. As you know, 
we made a run at getting off the list back when Ken Krieg was 
the AT&L. Mr. Solis and I were over at OMB pushing through 
that, didn't quite get there. Nonetheless, my view is the work 
that we are doing is not about a list. It really still goes 
back to what is right to do for the warfighter or what is right 
for the taxpayer. I would love to get off the list at the same 
time that we are doing that.
    Senator Voinovich. Well, I would encourage you to get 
together a little bit more and try to dot the ``i''s and cross 
the ``t''s and move ahead, not only for the betterment of the 
warfighter, but I think that with the financial situation that 
we have in our country today, with this unbelievable national 
debt, with budgets that are not being balanced, the American 
people finally are realizing that last year, out of every 
dollar we spent, we borrowed 41 cents.
    I mean, our fiscal situation is really ratcheting up and I 
think that in terms of our Defense Department, there is going 
to be a lot more scrutiny about what you are doing, how 
efficient you are, what are you doing with your budget, with 
acquisitions and what are some of the tradeoffs and so forth. 
The big light, I think, in the next several years is going to 
be more on you than ever before. The more that you can 
demonstrate progress, the better. And you have made progress. 
The efficiencies that you brought to bear, which are important 
to the warfighter, will need to continue.
    Second of all, you need to try to identify the cost savings 
to the Department that have resulted from supply chain 
improvement efforts. For example, we started out with this and 
today we are over here. And I don't mean fudge on the numbers, 
but to be able to identify, these are specific things that you 
can do, even though, as you point out, that may be difficult on 
occasion.
    Mr. Estevez. And I would say that my guidance from the 
Secretary, from Secretary Lynn and certainly from Secretary 
Carter, who I see daily, is to do just that. So we will take 
you up and I will work with these gentlemen to press forward, 
sir.
    Senator Voinovich. Thank you.
    Senator Akaka. I want to thank you very much.
    Let me just follow this up. Of course, there is no question 
that whatever the troops need, we need to move them. The supply 
chain has to be used and we just hope that it gets there in a 
timely manner.
    During the last discussion, talking about metrics, let me 
just ask this question. Can you tell us how your efforts and 
the metrics being used to gauge effectiveness of these actions, 
can you explain a little more about that? What do you do with 
those metrics?
    Mr. Estevez. Sure, and again, different initiatives have 
different looks. Every one of them were, every single 
initiative to drive cost out versus an initiative to drive 
effectiveness. We are calculating the savings. So something 
like the Defense Transportation Coordination Initiative (DTCI), 
we have identified savings out of the transportation accounts. 
Those are real savings that the services accrue. And people are 
getting their stuff faster, so that is a true benefit.
    Even in areas like movement to Iraq, for every 500 MRAPs 
that we move what we call intermodal move--most MRAPs we were 
flying in out of Charleston direct into Afghanistan, a fairly 
expensive move but important to get those vehicles out there 
for the force. Once we had enough on the ground, we moved to 
something we called intermodal movement. So we move them 
through countries in the Middle East where we then fly them on 
a leg. You can turn the airplane that much faster put more on 
the ground. It is actually operationally more effective in 
getting more MRAPs on the ground, and $55 million for every 500 
MRAPs moved.
    That is one of the ways, even though in January when we 
looked at it and said, to close the force, there is no white 
space. How are we going to move all these MATVs, which was the 
contract in August, over 4,000 on the ground being used in 
Afghanistan today. But we managed to squeeze them into the flow 
at a rate that they are out there, plus other MRAPs. We moved 
from what we thought was going to be 500 a month to, at some 
points, 1,200 a month being fielded in Afghanistan, and 
calculating cost savings while they are doing it.
    So it is a variety of things, looking at readiness, if it 
is a direct readiness output, like the readiness base sparing, 
and calculating those cost savings. Now, what happens, of 
course, is that in the services, they take those savings and 
apply them to other places. I don't necessarily see them in the 
logistics budget because that is not where they are. They are 
operation and maintenance, or operational and support account 
savings. Those monies can be fluctuating. If it is a direct 
acquisition program, then we can calculate that, or if it is in 
the working capital fund, I can see how that moves around. So 
it is tracking those things, customer wait time, readiness, 
either savings or cost avoidances would probably be the three 
areas that I look most.
    Senator Akaka. Well, I want to thank you very much. We have 
further questions that we will send to you. But I want to thank 
you for appearing here today.
    As we have heard, supply chain management is critical and 
directly affects our men and women in uniform in the field. The 
Department of Defense must continue to improve its ability to 
deliver the right materiel to the right place at the right 
time. Although much progress has been made in addressing the 
DOD supply chain management weaknesses, many challenges remain, 
and I am so glad to hear that you continue to talk to each 
other.
    As always, I want to thank Senator Voinovich, who has been 
a leader on this issue. While our time together grows shorter 
with each passing week, we have a joint commitment to improve 
supply chain management and remove it off the GAO's High-Risk 
List.
    The hearing record will be open, as I said, for 2 weeks for 
additional statements or questions that other Members may have.
    This hearing is adjourned.
    [Whereupon, at 3:35 p.m., the Subcommittee was adjourned.]


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