By Jon Harper, National Defense
Faced with the need to meet growing demand for the products and services it provides, the Defense Logistics Agency plans to strengthen its ties with industry.
DLA is tasked with managing a massive global supply chain for the U.S. military and other agencies. Last year alone, it provided more than $30 billion worth of goods and services to warfighters, including repair parts, clothing and consumables such as fuel and food. It oversees nine supply chains and supports more than 2,300 weapon systems.
Over the past six to eight months, there has been “an increasing demand that we’re seeing within DoD … across all the different commodities that we support,” said Michael Scott, deputy director of logistics operations, in an interview with National Defense.
He attributed the uptick to the push for enhanced military readiness that is being spearheaded by Secretary of Defense Jim Mattis and other Pentagon leaders.
While most of the supply chain is running smoothly, “there’s always somewhere our source is having difficulties or we’re having trouble finding a source, or [intellectual property] has been sold to another party and we don’t know who that is,” said Matthew Beebe, DLA’s director of acquisition.
To deal with some of the procurement challenges it’s facing, the agency plans to publish a new industry engagement plan in March.
Beebe declined to delve into the specifics of the plan prior to its finalization and publication, but he previewed some of its key themes.
It recognizes the value of enhancing existing relationships with industry, he said. “Communication and interaction is a central part of it,” he said. “A lot of it is going to recognize the value of their feedback and … the fact that we need to understand that feedback and adapt as appropriate, which I wouldn’t say that we have historically been particularly good at.”
Additionally, the plan will include a push to look for new business partners that might not already be on the agency’s radar. It will also address the need for DLA and industry to work together as partners to mitigate the risks that threaten the supply chain and military readiness, he noted.
As part of this effort, the agency seeks to improve its “market intelligence” to have a better picture of the vendor landscape. Rather than waiting until problems emerge, DLA officials want to know ahead of time where capabilities reside, how the commercial market is responding to demands and adjusting their manufacturing patterns, what interests may be domestic versus offshore, and what is being bought and sold, Beebe said.
The agency deals with a lot of aging weapon systems, he noted.
“With that comes issues where maybe we haven’t sourced things for a long period of time, intellectual property may have been moved around [or] sold to other companies or other interests,” he said. “That’s where we end up struggling a little more.”
This trend is most prevalent in the aviation community where sole sourcing is common, he noted. Some companies are scooping up intellectual property rights for key items and then jacking up the price when they are most urgently needed by the Defense Department.
“We at times reverse engineer the items to develop those specifications so that we can work with some other manufacturer or work on the competitive market,” he added. Having better awareness of IP ownership across industry would mitigate the problem by enabling the agency to plan ahead, he noted.
In recent years, the agency has taken steps to increase the speed of contracting. It cut the amount of internal reviews and regulations by more than 90 percent, Beebe said.
It now takes on average about 50 days for items to be put on contract during the source selection process. Many of them are on contract within a single day or a couple of weeks, he noted. That is a marked improvement relative to how quickly the process moved several years ago, he added.
Ninety-two percent of the contracts that DLA awards are done in a competitive market, and about 80 percent of the dollar value of its contracts are competitive, Beebe said. Approximately 75 percent of them are long term.
“In many cases those are multiple award long-term contracts so that we have some redundancy or options built in where if one [supplier] is struggling to meet demand there is another or others who can potentially step up,” he said. That is especially important when dealing with a commodity that has a very large readiness impact or surge requirement.
Many contracts are indefinite delivery/indefinite quantity. Others are focused on “outcome-based” solutions, he said.
“Rather than saying I need a menu of things that I can buy when I need them, it’s more of: how are we going to support a service maintenance depot so that every time the mechanic reaches into a bin whatever he needs is ready and available?” he said. “We’ve built contracts and strategies with incentives to provide that sort of outcome.”
For contracts with prime vendors, there is often an expectation that DLA is going to order some number of pre-priced items, but the contractor is tasked to come up with sourcing and delivery solutions so that as requirements change they are able to adapt quickly, he noted.
“We also do a lot of work through … different contingency contracts when it’s something that we need to turn on quickly but we don’t need day to day,” Scott said. “We are going to end up doing more and more of that.”
In fiscal year 2017, DLA did business with approximately 12,000 companies, about 80 percent of which were small businesses, Beebe said.
“We get about 2,500 new small businesses each year that come in sometimes only for a single award and then drift away again, and then others get repeat awards and become a future partner of ours,” he said. “Establishing relationships with that community is the key to how we look at positioning ourselves to avoid those [supply chain] risks or concerns.”
Many items that the agency buys, such as fuel, food and medical supplies, have a robust commercial market. Beebe noted that DLA continues to look for ways to make it easier for companies to do business with the agency.
“Are we putting unique requirements on that causes industry to shy away because it doesn’t fit their business model? Is there some way we can adapt to take greater advantage of the competition that may exist in the private sector?” he asked.
The agency is investing in new technologies to enhance situational awareness and improve the efficiency of its vast logistics network. DLA’s Strategic Plan 2018-2026 — which is separate from the forthcoming industry engagement plan — highlighted the need for predictive technology.
By combining big data analytics, automation and artificial intelligence, the agency can ensure sustained supply chain visibility and communication between interested parties, the document said.
“Through employment of trend analysis and predictive algorithms, DLA is able to consistently predict and position the right logistics solution on time,” it added.
Scott said the agency is continually looking for ways to refresh its IT capabilities. “We absolutely see that as one of the keys to the agility and the success of our agency and what we do.”
Scott and Beebe’s offices are jointly sponsoring the development of new business decision analytic tools to help DLA’s workforce gain better insight into different suppliers, pricing, quality of items and so forth. The agency plans to deploy the technology soon, he said.
The Defense Department expects to use advanced computing and artificial intelligence, among other so-called “third offset” capabilities, to stay ahead of peer adversaries and improve business practices. Scott said DLA will continue to invest in such tools as the technology advances.
“We definitely will be staying in sync with all of that,” he said. “We have other areas where we’re looking to see just how far the big data and machine [learning] can go with [office of the secretary of defense] reform initiatives. We’re looking for things that can be further automated and our operations made even more efficient.”
Three-D printing is another advanced technology that seems promising for the logistics community, he said. It could enable warfighters and others to print spare parts or other items at the point of need instead of having them delivered through the traditional supply chain.
“There’s no doubt in my mind it will become a major method of sourcing things in the future,” Scott said.
It has already been used on a limited basis to print some of the less complex items in the inventory, he noted. However, for some items it can take a long time to create each part and it can also be costly, he noted.
The technology needs to improve when it comes to speed and reliability before it can be more widely employed, he said.
“I’ve got to be able to have a technical data spec that … I can hand off to anyone or to DoD servicemen on a ship or wherever they might be, so they can print that part and it’s consistently produced” the way that it needs to be, Scott said. “That is another big challenge in that area. We’re working through it but we’re still a little early for some of that more complex stuff.”
Those aren’t the only issues surrounding 3D printing that must be resolved, Beebe noted. DLA will also have to decide what business model it will use in the future.
“Are we buying the data and then printing ourselves? Are we buying the printing services? Is it being printed at one location and still shipped, or is the signal being sent to a distant printer?” he asked.
“It’s not only the technology but it’s also then the business model of how to make it work.”