Defense Logistics Modernizes Commercially

U.S. Air Force personnel unload cargo from a C-17. A new database system based on commercial hardware and software will allow the Defense Logistics Agency to process requisitions and ship material to customers much faster than was possible in the past.

A wide-ranging commercial hardware and software upgrade initiative for the Defense Logistics Agency offers the promise of greater efficiencies, lower cost and new capabilities that may actually help predict and act on customer needs. The upgrade program is replacing several disparate systems with a single requisition and delivery system using commercial hardware and software with established performance records and familiarity among many agency users.

The Defense Logistics Agency’s (DLA’s) business systems modernization program, known as BSM, has been operating in a limited form for several months. It already has achieved significant efficiencies by streamlining both processes and accountability. Director of enterprise transformation Allan A. Banghart, DLA, Fort Belvoir, Virginia, explains that consolidating long-obsolete database systems into a commercial off-the-shelf (COTS) solution will do more than merely make life easier for agency operators. It also offers the potential for significantly improving timely support to the warfighter.

“At the core of this [initiative] is to ensure that America’s warfighters have all the materiel that they need to sustain their materiel readiness so they can prevail in combat,” Banghart says. “If we don’t do that right out of the gate, then we are wasting our time because that’s what this is all about—readiness for the warfighter.”

A second goal is to reduce the cost of logistics service. The BSM program, along with the DLA’s other transformational initiatives, should realize savings of $1.8 billion that can be returned to the services.

The DLA is the manager of materiel and services for the U.S. armed services. It manages 4.6 million different line items and processes about 40,000 requisitions each day. The agency writes about 4,000 contract actions daily for a total of $25 billion of business annually. The agency’s own logistics encompass supply chain management, materiel procurement and warehousing at 22 sites worldwide. The agency provides almost 90 percent of the services’ repair parts and all of their food, fuel, energy, medical, construction and clothing materiel.

The BSM program handles the back-office management of all of the DLA’s non-energy materiel. This encompasses procurement, demand planning, order fulfillment, and financial and technical data management. Banghart describes the system as transparent to the customer. The customer relationship management (CRM) element reaches out to the customer, while the supply relationship management (SRM) element addresses the supply chain and performs the actual integration of the supply chain. A distribution management planning system optimizes the physical placement of the material in its worldwide destinations. The end-to-end system includes financial and procurement activities.

The rationale for implementing the BSM is not difficult to defend. The DLA’s 4.6 million items were being managed on six separate and unique legacy systems. These systems largely were designed in the 1960s and built in the 1970s. Just one system, the materiel management system, features more than 6 million lines of code. In addition, four other legacy systems handled procurement.

The major step in consolidating the six legacy logistics systems is to move all the materiel into the BSM backbone, Banghart says. The four financial systems also will be folded into the single BSM system. These consolidations must be achieved without breaking the logistics chains running on the legacy systems.

The first release took place in July 2002. Known as concept demonstration, this step proved that the system could run the U.S. Defense Department’s logistics “web of functions” in a COTS environment, Banghart relates. For the past 17 months, the agency has managed 170,000 line items, including procurement and materiel positioning activities, in that end-to-end environment, he states.

With its interim solution, Release 1.1, the agency is on track to increase the dollar amount of these activities tenfold over the next few months. The result will be an increase in the amount of sales orders processed from $300 million to just under $3 billion. The number of users will triple from 390 to almost 1,300, and more than 80,000 line items will be added. “We are committing a large additional portion of the business to BSM,” Banghart declares.

In July, the program will have another large information technology upgrade. That upgrade will be “wrung out” for three months, after which the remaining DLA line items and activities will be incorporated “in a very disciplined and structured fashion,” Banghart offers. By January 2006, the agency should have completed the switch from legacy systems to the BSM.

Banghart explains that commercial products from SAP and Manugistics form the heart of the BSM program’s COTS portfolio of applications. The program is built around SAP-based public-sector modules that serve as the backbone for the enterprise resource planning. The agency uses several Manugistics applications for planning. These include NetWORKS Collaborate, NetWORKS Strategy, NetWORKS Demand and NetWORKS Fulfillment.

In addition, the AMS product PD2 is being used for concept demonstration. Banghart states that PD2 will not be carried forward into future releases. The agency will use its legacy system until SAP delivers its public-sector procurement solution.

The DLA recently awarded a contract for its distribution planning management system, which will have a COTS backbone. Another part of the transformation, CRM, will use the SAP suite of CRM capabilities.

Key among the hardware are HP Superdomes, which serve as the database servers. Banghart explains that the DLA has contracted with Lockheed Martin to be the BSM’s hardware service provider, and these machines are run by Lockheed Martin in the company’s server farm in Denver. The hardware uses the HP-UX 11I operating system and Oracle database software.

Other Unix servers include HP 7400s and HP 8400s for operations and high-availability clusters. For Web servers and portal/proxy server operations, the system uses Compaq DL 580s and DL 380s running Windows 2000. The agency uses Defense Information Systems Agency (DISA) pipelines for connectivity.

DLA personnel will tie into this Web-based system through their existing desktop PCs. Banghart explains that the BSM does not provide a lot of intelligence at the desktop level. Rather, users reach out to Denver to use the BSM applications.

The Windows environment will represent the biggest change to the DLA user, Banghart offers. Shifting from a standard block-data-entry format to a point-and-click environment will make entry easier, he points out. Many users are familiar with Windows and will adapt readily. Others who are used to the old green-screen block system will need to adjust, but they will find greater efficiencies once they master the new system.

Information assurance should not be a problem with the consolidation of all six legacy systems, Banghart notes. All materiel systems access is behind a firewall, and a team of experts focuses exclusively on preventing any penetration of that firewall. Similarly, the well-known vulnerabilities inherent in COTS software would be sealed off by this firewall. “They have to get to them,” Banghart says of hackers and cyberspace saboteurs who may attempt to access the software vulnerabilities. “We have a pretty tight system.”

Organizationally, the single database will be accompanied by data integrity and clean financial reports, Banghart shares. The agency’s legacy systems were maintained under separate financial and physical management. Under the consolidated approach that characterizes the BSM, the physical count cannot be altered without also changing the financial ledger.

Speed of operation will improve dramatically. The legacy systems employed batch processing. When a customer sent a requisition, it might take 12 hours for DLA personnel to even source the requisition to a depot for issuing. Under the existing BSM system, operators consistently have been sustaining times of less than 40 minutes for the past several months. In some cases, requisitions have been processed in as little as seven minutes, Banghart says.

Delivery confirmation times also have been reduced. Banghart reports that, in some individual cases, as little as 17 hours have passed from the time the DLA received a requisition to the time the customer electronically confirmed delivery.

One of the new capabilities that the BSM enables is time-definite delivery. This allows the agency to move materiel to cus tomers closer to the time that it is needed instead of simply resorting to a “first-in, first-out” priority system for requisitions. For example, if a customer does not want a requisition delivered for several weeks or for a month, the agency can flow the materiel to the customer time-phased as requested. On the procurement front, the SAP solution will provide speed, agility and the ability to monitor supplier performance, Banghart explains.

The commercial software includes new embedded collaborative demand planning capabilities that allow the DLA to work more cooperatively with the customer. What Banghart describes as extremely sophisticated demand planning tools provide a better understanding of a customer’s future requirements. This capability goes beyond predictive approaches that are based solely on past performances.

The collaborative demand planning, which is in the Manugistics NetWORKS software, will provide “a profound understanding” of what the customer’s requirements may be, Banghart offers. The agency then can contact its vendors to alert them to potential future requisitions and time frames. Vendors accordingly can schedule their production runs so that they can flow the materiel either to the DLA or to the customer directly.

Banghart relates that collaborative demand planning did not exist in the DLA’s legacy systems. “Having the best commercial collaborative demand planning capabilities out there is huge. The ability to gain a profound understanding of your customer’s future requirements is something that doesn’t exist in Defense Department legacy systems today. The DLA and the services all are moving to deploy that capability.

“It is the absolute keystone event in synchronizing the supply chain,” he warrants.

Changing from six legacy systems to a single entity is part of transforming the agency’s core business model. Accordingly, business processes are being re-engineered, and many of these have been embedded in systems. One of the key changes that the BSM will bring to the DLA is in basic information flow. This includes metrics, reports and key performance indicators.

“When you go from legacy processes to commercial processes, you are going to see some process changes,” Banghart allows. “This is not going to be an issue where we run into a brick wall in any area.”

Above all, cultural changes must occur. Banghart reports that customer and user satisfaction with the BSM, which was surveyed last year, is fairly high. More than 75 percent of the customer and user communities are either satisfied or very satisfied with the initiative.

“I am tremendously positive about the progress that we have made over the past 17 months and the adjustments that we have made to the program,” he declares. “We have some real traction—not only in BSM but across the rest of the transformation. We have the bulk of the timeline and the bulk of the lessons learned behind us. There is no question in anybody’s mind in the leadership here that this is going to be successful.”