Around the Corner
MLF 2011 Volume: 5 Issue: 10 (November/December)
Many would consider the latter half of 2011 as the calm before the storm—2012 being the storm. The warnings were posted and the storm chasers were out in front, warning of impending disaster. Fortunately, unlike the people who always appear on TV talking about riding it out, most forward-thinking companies have spent time preparing, posturing and focusing on being in the right place at the right time.
Military Logistics Forum magazine asked logistics service providers for their crystal ball gaze into 2012. We wanted to know what their views were on how not to do business as usual in the coming years, how they would adapt to the budget limitations that have been playing out, and what the future DoD/commercial partner picture will look like—the same as today or different?
Mark Hitch
AAI Logistics & Technical Services
Senior Business Development Director
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To be successful, you have to focus on how the U.S. Department of Defense and its commercial partners interact. Due to budgetary constraints and excess capacity in military depots, for example, the focus should be on providing a valuable resource. At AAI Logistics & Technical Services (LTS), we have successfully partnered with our customers for several years, and were recently recognized by the Letterkenny Army Depot as its 2011 Production Partner of the Year. Our primary focus in partnering with military depots is to assist them in performing their work better, and at a lower cost. This will continue to pay dividends in the future.
Respective to current budget limitations, AAI LTS is addressing these fiscal constraints with better buying power. AAI LTS pursues creative options that lower the cost of the services we deliver while retaining the thoroughness and quality customers require to protect their human and technology assets. Our experience with the performance based logistics contracting concept has taught us two important lessons with regard to the future. First, the acquisition cycle for this type of procurement is too long, and therefore cannot become the cost-saving, availability-guaranteeing solution that will address near-term budget gaps. Second and more importantly, certain elements of DoD/ commercial engagement are transferable to other contracting methods that can be accomplished in the near term.
For instance, AAI LTS has teamed with DoD using an aggregator model in which we greatly reduce transaction costs and a multitude of contact points for contracting, vending and support services. As such, this single focal point creates an advantage for DoD customers in cost reduction and simplification, all the while providing outstanding mission support. We are also a proponent of motivating the right behaviors, and contractual methods, such as incentives and shared savings, provide a venue for this valuable alignment. In short, AAI LTS is lowering the cost of sustainment through innovative business models and contracting methods.
Eric Mensing
APL Maritime Ltd
President and CEO, APL Maritime Ltd
Vice President of Government Affairs/Trade, APL Ltd.
One does not need to be a military theorist to recognize that the near future represents tremendous tumult for those doing business with DoD, but when it comes to meeting the services’ logistics needs, policy planners should protect the model that the Transportation Command and its maritime partners have developed rather than up-end it.
Since military operations began in 2002, the VISA ocean carriers have proven themselves to be one of the U.S. Transportation Command’s most valuable and creative partners. We have delivered 95 percent of all cargo moved to Afghanistan and Iraq, opened multiple routes into Afghanistan, moved entire units at once, and created innovative multi-modal supply chain solutions such as sea-air service. Our military partners can ask us to handle a movement from the interior of the United States to a firebase in Afghanistan and know the container will get where they want it when they want. This is an unqualified success and nothing should be done to undermine the factors that created it.
There is room for improvement within the existing structure, and the most fertile ground for change is within DoD. TRANSCOM and SDDC are best served when they can bundle transportation services into one contract, such as was proven by adding inland truck, sea-air and rail movements to the universal service contract. As many transportation services as possible should be included in this contract for ease of operation and integration. Containerizing as many shipments as possible will allow supplies to move through the most efficient and lowest cost networks there are. Refining contracting procedures to more closely mirror the process we use with our commercial customers, including changing the back room documentation process, bookings, etc., would be an important step in the right direction of improving efficiencies and driving down costs, as would be to simplify the billing process. Embracing the use of tracking tags on containerized shipments of DoD cargoes will save money by increasing supply chain visibility and reducing risk and pilferage.
If anything, DoD should be looking to involve its ocean partners in more of their logistics operations. We no longer just move boxes over water as was done in the early ’90s. Today we are providing point-to-point multi-modal operations in the world’s harshest and most complicated and dangerous environments, and in an efficient and low-cost manner.
Mary Ann Wagner
Cubic Global Tracking Solutions
President
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We at Cubic Global Tracking Solutions look forward to 2012 with optimism, tempered by the reality of the DoD budget picture. As a relatively new player—we began supporting DoD in our current corporate existence in January 2011—we believe that we will continue to grow as our capabilities become more widely known and the results recognized.
We are fortunate that our outlook is linked to operations rather than the uncertainty surrounding acquisition programs. However, that also means that as the withdrawal of U.S. forces in Iraq concludes and operation tempos in Afghanistan might begin to decline, direct DoD expenditures on our asset tracking and condition monitoring solutions could also decline.
Offsetting the potential decline in business associated with overseas combat operations, the Defense Department’s drive for logistics efficiencies is where our sights are set for the long term. Specifically, we are convinced that DoD’s multiple supply chains and related business processes can be made more efficient with our container tracking and monitoring service employing satellite tracking, intrusion detection and other environmental sensors, and our yard management system employing mesh networking to continuously track vehicles and other assets. In addition, we made our mesh solution available to licensees in November 2011. This release of a highly reliable, low power, dynamic network capability will likely be a game changer in the field of sensor networking. These sensors can be linked to monitor practically any condition, such as component wear, environment (heat, humidity), and handling (impact, shock).
Besides offering applications directly to the DoD markets, we are working with other companies through teaming, licensing and reseller agreements. These affiliations will create synergies by embedding Cubic Global Tracking Solutions into other offerings from original equipment manufacturers, other vendors and service providers.
In summary, we look to 2012 as a great year to be supporting DoD logistics!
Bill Marvin
IHS
General Manager and Partner Vice President
Over the past 16 years the DoD has made noble attempts to incorporate commercial practices into DoD business processes. Acquisition reform, performance based contracting, as well as, government industry partnerships are all results of these efforts. But in reality these efforts have still managed to embody a “government business as usual” approach when all is said and done. Government needs to embrace a commercial approach in a purist form and not always fall back on the mantra “we have to operate this way, we’re the government.”
Two areas of recent interest are counterfeit parts and material parts forecasting in the acquisition and sustainment process.
Recent hearings in the Senate have illustrated a systemic problem the DoD and the defense industry struggle with regarding counterfeit parts. The current practices the industry and government employ is simply not adequate and defined to develop a concurrent process that can be replicated on a daily basis.
As budgets are scrutinized and scaled down, the materials and parts acquisition process needs to look at successful commercial processes in use today. Corporate balance sheets and shareholder responsibility requires the private sector to develop refined methodologies in order to ensure the supply chain is as efficient as possible. A refined commercial practice includes the detailed examination of industry-specific price and cost behaviors and understanding why prices change. This detailed approach has proven more valuable than the use of general indicators of inflation and consumer/producer price indexes; as a result, the government acquisition process should require the examination of current and future costs as opposed to past amounts paid in previous acquisitions.
There is a need for a true renaissance in adopting commercial business practices and understanding that the status quo has not solved the problem; hence the continued need to introduce fresh ideas and business partners into the realm of government industry partnership. IHS Global Inc, a recognized leader in both the commercial and government supply chain, standards and parts management arena remain posed to work in tandem with clients to further the counterfeit and parts forecasting efforts in both the commercial and government trade space.
Ella Studer
KBR
Vice President of Stability & Sustainment Operations for North American Government and Logistics
There is no question that doing business in today’s government contracting market is not what it was 10 years ago. The playing field is much more competitive, the government has trended towards Firm Fixed Price, and the bottom line is the qualifying factor for a winning bid. Single source, winner-takes-all contracts have been replaced with multiple award task order contracts and competitively bid task orders. The acquisition process itself has most certainly changed as well, with solicitation timelines being stretched much further, and early game starting much earlier.
The government’s paradigm shift in its approach to procurement, from seeking the best overall package with the most offerings, to a demand for the lowest price provider is one that industry must not just echo. Industry must also be proactive in responding to a change in the entire business model and philosophy of government contracting. The DoD does not want the Mazerati with flashy bells and whistles, but opts instead for the Ford Edge, an efficient but cutting edge and innovative solution. The DoD is calling upon industry to collaborate with government and amongst one another to develop these innovative, cost saving solutions.
To survive in this new market, contractors must be adaptive, agile, and diversified, with a proclivity for outsidethe- box thinking. We must anticipate the needs of our customers, and align our goals and strategies with theirs to ensure a sustainable future. At KBR, we have also found success instilling a culture of operational excellence, and an adherence to our guiding principles and values. Where there is integrity, transparency and a commitment to providing high quality service, there will always be a successful partnership with clients and the ability to adapt to changing demands at any operational tempo.
Allan Manning
SAS
Senior Industry Consultant
The hard truth is that all of the military logistics and sustainment communities will be challenged to achieve their collective missions with significantly smaller budgets for the foreseeable future. As the military moves forward with planning decisions, much as is done in the commercial sector, efficiency must be considered on par with effectiveness. Given this scarcity of dollars, any decisions must be made with clarity and truthfulness and a full understanding of the implications and cause-and-effect of one decision versus another to the performance of the enterprise.
Fact-based decision-making: Fact-based decisions, informed decisions using data and rigorous analysis of information, are the only way for the services to achieve their mission objectives while being as efficient with their scarce budgetary dollars as possible. Since trustworthy data is at the core of data-driven decision-making, all barriers to expedient acquisition and sharing and usage of all relevant data must be eliminated. Many such barriers exist—technical or cultural or legal or contractual, or caused by the government or a contractor—and continue to hamper the DoD’s effective use of data. Whatever those barriers might be and whatever the source is irrelevant; all impediments to acquiring all data as expeditiously as possible must be removed.
Acceptance of compromise: Given the fact of declining budgets, it’s insanity to believe that all of the same missions in totality can be achieved across the board with fewer dollars to go around. As such, the services must learn to make decisions— supported with fact-based, data-driven analysis—and intentionally accept trade-offs and lower performance in certain logistics and sustainment sub-components that will allow achievement of overall success for the enterprise.
Meaningful metrics and measurement: In conjunction with intelligent trade-offs, leadership performance measurements should be adjusted, again using fact-based data-driven analysis, to intelligently identify the relevant performance metrics and incentivize organizational behavior with appropriate thresholds that align subcomponent performance with the overall enterprise performance objectives.
John Haima
SAIC
Senior Vice President/Business Development Director
Logistics and Engineering Solutions Business Unit
You can’t open a website or a magazine or a paper without a reference to the U.S. federal budget reductions and the need to reduce costs. Meanwhile the global war on terrorism and health care costs are placing increasing demands and costs on military logistics. The recently announced Air Force Materiel Command reorganization is representative of what I expect to see occurring throughout the military logistics domain in the coming year to further promote efficiencies. The contractor community has to be equally adaptive and innovative in delivering efficient solutions. The “old way” of throwing money and bodies at problems is unacceptable. Contractors are willing to take risks. The government should allow for the additional risk which comes from innovation.
One trend in military logistics that I think will continue in 2012 is supporting the rapid acquisition of systems. The rapid acquisition of hundreds of new military systems has created numerous parallel interim contractor logistics support processes and structures with tremendous redundancy in supply, warehousing, maintenance, labor and facilities. It is possible to collapse these structures into common support facilities and processes, thereby using government and contractor resources more efficiently—in essence, achieving efficiency by focusing on the enterprise vice the “rice bowls” of old. The military logistics community (both government and contractor) needs to be bold. Now is the time to deliver efficiency in a “new collaborative risk/reward environment” focused on the military logistics enterprise.
Deputy Secretary of Defense Ashton Carter and many leaders in the defense community have been highlighting the need for new ideas in military logistics for a while, but things could be moving faster. I am convinced that the defense contractor community can be innovative and adapt to the new reality. But the defense contracting community needs to be able to innovate as well to enable and encourage innovation. ♦