DLA Wants Buyers, Sellers To Share More Information.

• Author: Erwin, Sandra I.
• Position: Defense Logistics Agency

Outdated contracting techniques and lack of communication between Defense Department purchasing agencies and private-sector vendors are among the reasons why military customers often wait longer for deliveries and pay higher prices than commercial buyers.

The organization that manages military supplies, the Defense Logistics Agency (DLA), has introduced plans to modernize its business practices in order to keep up with advances in commercial logistics systems. Last month, the agency kicked off a five-year $400 million modernization effort, aimed at updating computer systems.

But, in reality, the agency's attempts to improve its performance have been hampered by its inability to predict demand trends and to buy supplies accordingly, officials said. DLA's 40,000 employees oversee the distribution of nearly $90 billion worth of inventory for the military services.

Most recently, DLA announced it would set up "strategic supplier alliances" with major vendors. These arrangements, restricted to vendors that have sole-source contracts worth $100 million or more with DLA, are designed to enable the agency to predict the demand for specific items and take advantage of commercial vendors' buying clout in their respective markets.

Rear Adm. Dan Stone, Navy supply corps officer and DLA director of logistics, told reporters last December that the supplier alliances will "reduce the number of actual contract and pricing actions from thousands to literally a handful a year; rely on agreed-upon cost and price baselines, performance commitments, information sharing, long-term price commitments and reductions and much more.

The results, he said, "will include decreased response times, lower administrative costs and much better service for DLA's customers."

The military services, the DLA customers, could end up saving half the amount that they will pay for supplies during the next decade, Stone said.

Brig. Gen. Darryl Scott, deputy assistant secretary of the Air Force for contracting, also touted the advantages of these supplier alliances. The Air Force, he said, will be able to lower costs by reducing the amount of inventory that typically is needed under the traditional business model. One of the suppliers that will be setting up an alliance with DLA, Honeywell Corp., will help the Air Force reduce lead time on spare parts from an average of 90 days to about 25 days, said Scott.

One industry official who spoke with National Defense on condition that he not be quoted by name said that DLA's efforts in this arena are "steps in the right direction," but that the agency still has a long way to go before it can regain credibility with its customers. "Most of those programs they come up with [at DLA], focus on the symptoms, rather than the problem," said the industry source, who works for a large defense contractor. "They are not capturing all the demand, and they are not getting a good forecast for that demand. And they are not supplying to the demand."

Initiatives such as prime-vendor programs and strategic-supplier alliances still fall short of being able to predict aggregate global demand trends for military supplies, he said...