Global Presence Meets Customer Demand
GLOBAL PRESENCE MEETS CUSTOMER DEMAND
By DoD policy, AAFES is designated the primary source of non-subsistence resale
on Army and Air Force installations. This extends to forward deployments and contingency
operations in Iraq, Afghanistan and all the countries where U.S. troops are deployed.
By Marty Kauchak
The Army and Air Force Exchange Service has retail outlets in Iraq and neighboring nations where soldiers can buy quality goods and services at low, competitive prices. This boosts the quality of life for deployed soldiers in Southwest Asia, while AAFES also continues to serve its other customers—retirees, active duty and Reserve component members and their families—at bases and stations across the continental United States (CONUS).
The AAFES Logistics Division ensures the system’s worldwide facilities have the right products at the right place and the right time. “We deliver goods and services to our military members and their families, wherever they are located in an efficient and effective manner,” said Dale Bryan, senior vice president of AAFES Logistics.
The division’s responsibilities will be enhanced by a number of modernization programs that are in progress or about to be started throughout its logistics network, Bryan said.
Global Reach
AAFES is a multi-channel retailer offering products to its authorized customers through its 3,100 facilities worldwide, along with catalog and online sales.
The joint military activity operates under a unique public-sector business model and charter. By Department of Defense policy, AAFES is designated the primary source of non-subsistence resale on Army and Air Force installations. This policy extends to forward deployments and contingency operations in Iraq, Afghanistan, Kuwait and all the countries where U.S. troops are deployed.
The system’s earnings are used to build new stores and renovate existing facilities without expense to the federal government, and to supplement morale, welfare, and recreation (MWR) programs. AAFES customers see the system’s earnings at work on military facilities through youth services programs, Armed forces recreation centers, arts and crafts facilities, aquatic centers, concerts and other post functions and golf courses.
The scope of the AAFES logistics network can also be gleaned from the organization’s product portfolio. In 2006, the Exchange Catalog and Online store offered customers more than 25,000 items through the online site(http://aafes.com), thousands of items from vendor partners and hundreds of thousands of items from ExchangeOnlineMail.com partners.
During fiscal year 2006, the organization had $8.9 billion in revenue and $427 million in earnings. In 2006, $232 million in AAFES earnings supported MWR programs.
The system’s revenue stream and ability to meet its customers’ demands are made possible by a dynamic global network.
Hub-and-Spoke Concept
AAFES Logistics’ global network consists of four large CONUS-based distribution centers (DCs) and eight outside- CONUS centers supported by both the division’s own private fleet and commercial carriers. More than 3,600 logistics team members support the network, which has a familiar operational design.
“In general, we use a hub-and-spoke concept and maximize flow,” explained Steve Richardson, vice president of AAFES Logistics. As products enter the U.S., the division deconsolidates and moves products to its regional DCs. Since the Logistics Division also procures many made-in-America products, it utilizes its East and West Coast DCs as consolidation points to feed the overseas warehouses, which serve as deconsolidation and break-bulk points. “We maintain limited items in the overseas DCs,” said Richardson.
The division has extended its network to support warfighters deployed to Iraq and neighboring nations.
“For the Middle East, we have a few paths depending on the military footprint,” Richardson said. Anything north of Tallil [Air Base Iraq] comes over land, down through Turkey and Jordan. Tallil and south re-supply comes up through Kuwait. Afghanistan re-supply entails live unloads after dispatching from the port of Karachi, Pakistan. Facilities in Qatar and UAE receive door-to-door deliveries.
“To make all this seamless takes a concerted effort with not only AAFES but our key logistics service providers,” said Richardson.
The logistics team’s network and ability to manage its supply chain will be enhanced by various projects during the next three to five years.
Network for the Future
Infrastructure adjustments, technology upgrades and other efficiencies will be introduced to keep AAFES competitive with its private-sector counterparts and meet its customers’ expectations, officials said.
The Logistics Division’s distribution network is evolving in response to the DoD Global Repositioning Initiative for overseas facilities, and the 2005 Base Realignment and Closure Commission (BRAC) process for U.S. bases and stations.
In July 2010, Fort Gillem, Ga., is scheduled to close. AAFES Logistics will vacate the Atlanta Distribution Center (ADC) premises prior to that, and the 2.7 million square feet of lost warehouse space will not be replaced. Of the 10 businesses the ADC currently supports, AAFES will also realign the distribution functions to other AAFES CONUS distribution centers or logistics service providers.
“To prepare those facilities, we just completed a state-of-the-art flow system at Dan Daniels Distribution Center in Newport News, Va.,” Bryan said. “We are evaluating similar project requirements for our Waco, Texas, location and our Sharpe Army Depot facility [65 miles south of Sacramento], Calif.”
DoD’s evolving overseas infrastructure consolidation impacts the Giessen, Germany, distribution center. Plans under consideration include the facility’s relocation to the Germershiem, Germany, area by 2012. The existing Korea DC at Camp Market and Okinawa DC at Camp Kinser may also be affected.
“Our customers are moving around,” said Richardson. Indeed, while DoD facilities overseas are consolidated, those in the U.S. are growing significantly in response to redeployed forces under the Global Repositioning Initiative. “We have modeled the end position and our existing DCs are in solid alignment with DoD’s end position.”
Network technology enhancements include the recently launched, two-year, warehouse management suite upgrade project, and the planned replacement of the warehouse management system, labor management system, yard management and slotting tool.
AAFES is also well along into the installation of the Oracle Retail Enterprise Suite, which is expected to have far-reaching benefits in support of retail best practices in merchandising, allocation, replenishment, forecasting, pricing, inventory management and supply chain management.
In 2008, AAFES Logistics will deploy a voice-pick technology in its repack and bulk locations. The technology used in contemporary warehousing environments involves the use of a small, man-wearable, wireless computer with software that speaks commands to an operator and recognizes his or her responses. Benefits include increased pick accuracy rates, decrease in safety incidents, decreased training times, and improvements in job satisfaction.
A vendor to supply the voice technology application has not yet been selected.
AAFES’ Transportation Management System (TMS) is a server-based, stand-alone, Web-enabled system that will eventually manage the entire domestic freight operation. TMS will optimize and consolidate loads, provide visibility, tracking and reporting functions, and complete other tasks when it is fully deployed.
The system’s performance to date has demonstrated the efficiencies that may be gained from a properly managed and designed technology upgrade. “The continued roll-out of our Transportation Management System has reduced transportation spending over $500,000 annually, with more to come,” Richardson said. Alpharetta, Ga.-based Infor supplies the TMS software.
The civilian and military logistics communities are eyeing the increased use of active and passive radio frequency identification (RFID) technologies to improve the efficiency of inventory tracking and management. Conceptually, materiel from shipping containers to items found on store shelves could be fitted with an RFID tag to bolster supply chain management.
While AAFES currently affixes RFID tags to its containers in the Middle East, wider use of this application beyond shipping containers does not appear likely until the cost-benefits of the technology improve. “I believe the day will come when RFID tags are applied to every bag of candy or toothbrush. But at this time the application remains cost prohibitive for everyday unit-level commerce,” said Richardson.
Also on Logistics’ horizon is an effort to gain efficiencies in its private vehicle fleet. “We recently concluded an optimization study of the AAFES private fleet, and over the next five years we will implement the results with an expected benefit of $6.2 million through growth and repositioning of assets,” he said.
In addition to technology, air, surface and ocean carriers are another foundation of AAFES Logistics’ global network.
Logistic Providers’ Insights
Maersk Line, Limited (MLL) is the largest U.S.-flag ocean carrier and the largest surface carrier of U.S. government cargo. The line provides ocean transportation, inland trucking and distribution services for many types of dry and refrigerated AAFES cargo. MLL’s global network of 110,000 transportation and logistics professionals in 125 countries enables the line to serve the trade routes that are part of AAFES supply chain requirements for remote and main bases around the world.
“While AAFES provides products similar to many retailers, the location of the eventual customer in many cases is unlike other consumers,” said Rick Boyle, vice president, U.S. Flag Liner Business, MLL. “AAFES operates the exchanges where the service members are located, sometimes in hostile environments where transportation infrastructure is challenging. This requires close collaboration and communication between AAFES and the logistics provider to ensure we deliver what is expected, where it is expected, and when it is expected. This is critical to ensure quality-of-life for the troops is maintained.”
Interactions between MLL and AAFES logistics staff at all levels are the primary methods by which the line ensures that it responds to AAFES logistics and transportation environment. Boyle provided one example of the carrier-customer interaction. “As part of that interaction with AAFES’ logisticians, MLL aligns our cargo visibility and management systems to provide electronic data interface [EDI] message information into AAFES’ logistics systems.”
EDI is one of several other Logistics Division technology enablers. “We are a leader in electronic data interface usage throughout the supply chain and we utilize global positioning system for our private fleet,” concluded Richardson.
For its part, a second logistics carrier, UPS-Supply Chain Solutions (SCS), operates two consolidation points as cross-dock air freight operations for AAFES vendor shipments moving internationally. “Vendor purchase orders are routed into either Atlanta or Sacramento, depending on vendor location,” said Susan Rosenberg, UPS spokesperson. She added, “Once merchandise arrives at the UPS-SCS facility, it is sorted by country with systems to label directly to worldwide destination, and process for movement.” International locations include Germany, Italy, United Kingdom, the Azores, Honduras, Japan, Okinawa, Korea, Turkey, Iraq, Kuwait, United Arab Emirates, Qatar, Kyrgyzstan and Afghanistan.
The wide range of products in the UPS-SCS network includes clothing, sporting goods, housewares, toys, electronic games, linens and domestics. Vendor product is moved within 48 hours of arrival at a UPS-SCS location. “In addition, UPS coordinates cosmetic vendors with appropriate hazmat labels, documentation and processing. With limited shipment quantities on some items, they can be sorted with other commodity loads built for the designated destinations. Special attention is given to fingernail polish and fragrances,” added Rosenberg.
A separate UPS-Supply Chain Solutions facility in Atlanta processes vendor freight to build loads for AAFES-booked ocean shipments to DoD active address codes in Germany. Upon arrival at European ports, volume is trans-loaded for delivery to a UPS Frankfurt operation for additional sorting and coordinated delivery with the air shipments.
“In recognition for efficient transportation management, vendor coordination and information exchange, AAFES presented UPS-SCS with a ‘Logistics Exceptional Service Award in Support of OEF/OIF in 2007,” said Rosenberg. ♦