Amid War, DOD Revamps Supply Chain Operations

The Department of Defense accelerates an initiative aimed at replacing complex and inefficient procurement and logistics systems with collaborative, Web-based supply chain management procedures and software.

As the United States escalates its war on terrorism in Afghanistan, the Department of Defense is accelerating an initiative aimed at replacing complex and inefficient procurement and logistics systems with collaborative, Web-based supply chain management procedures and software.

The effort, DOD officials said last week, could cut DOD procurement and logistics costs by hundreds of millions of dollars annually and reduce from days to weeks the time it takes the military to procure and transport weapons and other supplies to the battlefield.

The initiative—called the Collaborative Defense Department—is focused on rewriting the so-called Super Regulation guidelines that govern materials management practices across the DOD. Although the initiative has been under way at a low level since the spring, the conflict in Afghanistan—particularly the pressure its putting on the military to react quickly to a new type of highly mobile enemy—is forcing the DOD to move faster.

On Wednesday, two-star generals and equally high-ranking officials from other DOD agencies responsible for supply chain operations will meet for the first time to discuss the proposed changes to the Super Regulations, also known as Super Regs, according to James Eccleston, assistant deputy undersecretary for defense, who is responsible for supply chain integration. Eccleston declined to disclose the location of the meeting for security reasons.

Agility and flexibility

The Afghanistan mobilization has "definitely accelerated the process," said Eccleston at the Pentagon, in Washington. "In this new environment of asymmetric threats, of terrorism, of not knowing where your enemy is, it really forces us to understand that agility and flexibility are very important. Where we used to be able to spend days, weeks or months gearing up for a battle, we literally have to condense that time into days and weeks. [Defense] Secretary [Donald] Rumsfeld has told us, Guys, weve got a new dynamic out there right now. Weve got to do everything we can to combat it."

Eccleston said the DOD expects to have the new materials management Super Regs in place sometime next year.

The Super Regs will consist of supply chain management best practices and tools that military branches and DOD agencies should embrace when revamping procurement, distribution and other supply chain processes.

The new collaborative supply chain processes that DOD agencies will be encouraged to embrace include strategic sourcing, demand planning, collaborative planning forecasting and replenishment, order management, available-to-promise, and collaborative product development, said Robert Luby, supply chain and operating systems practice leader for PricewaterhouseCoopers, in Washington. The DOD has hired PwC to help draft the new materials management Super Regs.

Many of the new recommended supply chain best practices will borrow from Web-enabled applications that have already been deployed by isolated DOD branches and agencies. The Defense Logistics Agency, for example, has deployed an e-procurement application, dubbed DOD e-Mall, which uses Oracle Corp. applications, Ariba Inc.s Ariba Commerce Services Network and enterprise application integration tools from WebMethods Inc. to allow for online purchasing of indirect materials.

Another DLA project, DOD, is an online search engine that allows DOD suppliers to find out about and respond to procurement requests. It uses Oracle applications and Autosys scheduling tools from Computer Associates International Inc. In addition, DLA is currently deploying SAP AG R/3 enterprise resource planning applications and Manugistics Group Inc. supply chain planning tools.

Such online, collaborative systems are still relatively rare in the military, however, Eccleston said. "Military logistics [processes] are still very stovepipe-oriented, where you have different folks from different organizations responsible for different parts of the pipeline," Eccleston said. That makes for frequent and costly delays. For example, he said, today if a helicopters landing gear broke, the information would first be entered into a maintenance system, where it might remain for 30 to 60 days before being reported out to a procurement system.

"What were trying to do with this collaborative defense initiative is to make it so those in the supply chain who need to know whats going on with that landing gear get the information and can act on it right away," Eccleston said.

Besides getting equipment to fighting forces quicker, doing so could produce big savings at the DOD, which spends $82 billion annually on supply chain operations. PwC and Ecclestons group have calculated that deploying collaborative supply chain processes and systems throughout the DOD would cut raw materials inventory costs by between 25 percent and 40 percent and work-in-progress inventory costs by between 20 percent and 30 percent.

In addition, PwCs Luby said, logistics procurement support costs could be cut by between 23 percent and 25 percent in discretionary programs and by 10 percent in mandatory programs.

Eccleston acknowledged that getting all branches of the military and DOD agencies to quickly embrace the new materials management Super Regs will be a challenge. But observers last week were hopeful that the Collaborative Defense Department initiative could improve defense readiness and cut costs.

"The Super Regs will legitimize what has always been possible under emergency situations," said Paul Strassmann, the DODs former chief IT executive. "If DOD really needs something and the appropriate OK is received from the appropriate levels, procurements can be started and completed within 24 hours," said Strassmann in New Canaan, Conn.