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News | Nov. 20, 2015

Smart Storage

By Emily Tsambiras, DLA Distribution DLA Distribution

The most efficient solution to a business problem isn’t always the most cost effective. But when it comes to storage and distribution, Defense Logistics Agency Distribution has discovered that performance-based logistics provides the best value for the agency, its customers and vendors.

Performance-based logistics relies on commercial industry to support and sustain materiel readiness and focuses on outcomes rather than individual transactions. PBL contracts can motivate manufacturers to produce premium quality products, saving customers money by reducing the number of necessary repairs, which also decreases parts and labor expenses, said Joe Faris, director of DLA Distribution’s Business Development Office in New Cumberland, Pennsylvania.

The idea isn’t new to the Department of Defense. The military services have been using PBL contracts to set performance metrics on unit equipment for several years. DLA has also started combining item-support contracts for weapons system parts into single performance-based agreements. Now, DLA Distribution is taking the concept one step further by expanding DLA’s weapons system acquisition strategy to include organic storage and distribution on major end items and repair parts for co-located industrial maintenance activities.

“It was a natural evolution for DLA to expand on the success of PBLs by leveraging existing storage, distribution and transportation capabilities to drive best value to DoD,” Faris said.

In the beginning, early PBL models frequently fragmented storage and distribution functions for industrial customers. Contracts were established mandating items be housed by the manufacturer until requested, and typically a warehouse was contracted from a third-party logistics provider, with that cost passed on to the military customer.

DLA’s first venture into integrating storage and distribution functions into PBLs occurred as part of an agreement between DLA Aviation and General Electric to support the Air Force’s F-series engines at Tinker Air Force Base in Oklahoma City, Oklahoma.

Rather than moving the engines and repair items from a GE-contracted, third-party logistics provider to the Air Force’s maintenance activity on Tinker AFB, DLA Aviation approached DLA Distribution regarding the storage and distribution of these assets through its Oklahoma City distribution center, also located on Tinker AFB.

To avoid a redundancy in warehousing capabilities, the organizations brainstormed how DLA Distribution could provide storage and distribution and allow GE to cut the cost of using a third-party provider. With warehouse space available at the distribution center and transportation contracts already in place, the concept was deemed viable.

In November 2014, a memorandum of understanding was signed by former DLA Aviation Director Air Force Brig. Gen. Mark Johnson, DLA Distribution Commander Army Brig. Gen. Richard Dix and GE’s general manager of military customer services. The MOU established that DLA would perform supply chain management, materiel procurement and distribution in support of the F-101, F-110 and F118-100 engine programs.

Since the initiative’s June 1 launch, DLA Distribution has provided storage and distribution for approximately 140 separate parts accounting for a total of 23,500 items. 

Incorporating DLA Distribution’s infrastructure into PBLs has ultimately reduced weapons system program costs by reducing duplicate storage and distribution costs paid by customers, Faris said. Another benefit is shortened delivery times, since repair parts are acquired from an on-base distribution center, rather than an off-base, third-party warehouse.

“The goal is to establish a single storage and distribution belly button for customers,” Faris said.

The merger also provides a single audit-readiness solution. As items are integrated into DLA Distribution’s warehousing systems, a verifiable inventory is created and controlled on a DoD-accountable record that is fully auditable.

Faris said his team hopes to take advantage of other potential partnerships by regularly meeting with industry leaders and weapons system program managers to encourage DLA Distribution inclusion in upcoming PBL contracts. 

The activity is also partnering with the Marine Corps’ Light Armored Vehicle program to support maintenance shops in co-located areas such as Barstow, California, and Albany, Georgia. That initiative is set to launch in fiscal 2017.

“This integrated approach can leverage the core competencies of the services, industry and DLA to deliver cost-effective performance levels. We’re eliminating redundancies in the network and fully utilizing DoD’s existing infrastructure,” Faris said.