The Defense Logistics Agency is prepared to continue its world-class support in the face of fiscal uncertainty, DLA Director Navy Vice Adm. Mark Harnitchek said April 15 at the 30th Annual National Logistics Forum in Washington.
“At DLA, we’re meeting this new fiscal reality with one simple idea: We are going to significantly improve performance and dramatically reduce cost by reducing inventory, delighting our customer, and being audit ready,” Harnitchek said during his keynote address.
The theme for this year’s forum was “Operationalizing the DoD-Industrial Partnership: Realizing Better Buying Power and Joint Force 2020.” Harnitchek opened its second day with an address to more than 300 Defense Department and logistics industry leaders. He detailed some of the initiatives DLA has undertaken to meet its goals.
“We have a mandate from the secretary of defense to be audit ready. By doing that, DLA is finding waste and lost inventory that we can divest ourselves of and save money,” he said. “By delighting our customer, we are no longer deciding what the customer needs. We are letting them tell us. This helps us keep inventory down and again, helps cut costs.”
Decreasing the time it takes to award contracts to less than a year is one tool DLA is using to reduce costs, the admiral said. He said he would like the agency’s industrial partners to see if they can speed up as well.
“Nothing at DLA takes more than a year,” he said. “The increased time costs too much and creates too much inventory. But in turn, I need the industry to take a similar turn on how long it takes to make things. It needs to be ready quicker.”
Harnitchek said building strong relationships with the agency’s industrial base is the way to weather the current fiscal storm. Former Secretary of Defense Leon Panetta made communication between DoD leaders and their private-sector partners a propriety during his tenure.
“The secretary told us to talk to industry,” Harnitchek said. “He meant senior leaders talking to senior leaders, because we are the ones who make strategy. We have to have an operational partnership before we need to have one, and that relationship needs to exist at the contracting officer level and at the senior level.”
DLA’s senior leaders meet with industry leaders in Captains of Industry meetings regularly to discuss what is going well and what processes or programs need to change. One success story of this initiative Harnitchek highlighted was the idea to stop repacking a part DLA bought into special packing material. DLA agreed, and in the end, not repacking saved the agency $150-$200 million, he said.
These partnerships have to be mutually beneficial to be successful, Harnitchek said. If a successful program is harming an industry, DLA has to be ready to change course.
“Another example of successful industry relationships is reverse auctions. For contracts over $150,000, we use these and have saved $2.2 billion in no-kidding savings,” he said. “But for industries like clothing and textile, where there are a lot of small businesses and family-owned businesses, the pressure for cost reduction was ultimately harmful to the industry. It meant we had to weigh the short-term cost savings with the long term health of the industry. So, we listened to the industry and stopped doing the reverse auctions, because it didn’t make good fiscal sense or good partner sense.”
That kind of collaboration is crucial during a time of decreasing fiscal resources, Harnitchek said.
“Things get tough when we don’t have a good relationship,” he said. “It’s tough in good times and worse in bad. We have to figure out how to weather this financial storm together. The budget we have isn’t getting any bigger and we need to work together to figure it out.”
After his keynote, Harnitchek participated in the forum’s Fireside Chat, one of the event’s most popular workshops, which also included a representative from each of the military services, the Joint Staff and U.S. Transportation Command.
The panel agreed that the way forward for DoD logistics is all parties working together to innovate and create ways to do the same amount of work with less resources and money. Harnitchek said personal relationships are crucial to that effort.
“This is going to hurt,” Harnitchek said. “It’s going to be an elevator ride to the bottom as opposed to an escalator ride, and the only way to meet and defeat the challenge is to cultivate personal relationships.”
To illustrate his point, Harnitchek pointed to the Northern Distribution Network, which kept supplies flowing to Afghanistan when Pakistan closed its border with the country in 2011.
“We had to get the agreement of 15 nations and stitch that together with private industry,” he said. “Had we not already had those strong personal relationships in place, it never would have worked.”
He pointed to other logistical feats that were possible only because of the relationships with private industry already in place, including the 2010 earthquake in Haiti, the 2011 tsunami in Japan, and Hurricane Sandy in 2012.
“The reason we were able to provide logistics assistance during those major events is because senior leaders already had those strong relationships with their industry counterparts,” he said.