Military Tackles E-Business Transformation Challenge

March 2002
By Maryann Lawlor
E-mail About the Author

Warfighter benefits from e-procurement practices.

The U.S. Defense Department is reviewing several organizational, role and mission options that will emphasize e-business and accelerate the transformation of the department’s business processes. A change in leadership within the department as well as President Bush’s Management Agenda, an effort led by the Office of Management and Budget, are two of the driving forces behind the changes.

Although many refer to online purchasing as e-commerce, department leaders prefer the term e-business. While e-commerce refers to conducting transactions using state-of-the-art technology, e-business is about transforming business processes and exploiting information technology to support those changes. The focus has shifted from building individual applications or stovepipes to creating technology-based applications that address the business needs of an entire end-to-end process. Department officials believe that this approach levels the playing field for companies that want to do business with military entities.

To facilitate this endeavor, the department has put into place a comprehensive e-business governance framework. It includes a department directive, a strategic plan, a senior oversight council and a supporting transformation toolkit.

Former Defense Secretary William S. Cohen initiated e-business efforts in his Defense Reform Initiative Report more than four years ago. The main goals were to save money and change the department’s procurement culture by adopting more efficient business practices, resulting in improved relationships between the department and vendors. Planners expected the benefits to reach beyond smoother procurement processes and enhance other functional areas such as health, personnel, systems acquisition, and science and technology.

In 2000, Department of Defense Directive 8190.2 outlined the plans and policies for e-commerce deployment. The directive also named the department’s chief information officer (CIO), currently John P. Stenbit, to oversee its e-business/e-commerce program.

President Bush’s Management Agenda has launched changes in business practices throughout federal government agencies as they implement transformation efforts. It focuses on five governmentwide initiatives, including one called Expanded e-Government. This program comprises approximately 23 cross-agency efforts in four categories: government to government, government to citizen, government to business, and internal government efficiencies and effectiveness.

According to Paul Grant, acting director of the e-Business/Knowledge Management Directorate, the Defense Department is a partner in many of these initiatives. The directorate supports the CIO and leads the CIO’s contribution to the department’s transformation and management of change effort.

“The governance structure for e-business in the Defense Department will have to accommodate this change in priority and focus as well as work together to present one view of the balanced score card that the Office of Management and Budget and the president expect for these efforts,” Grant relates. To accomplish this task, the department is a partner in several initiatives, including federal asset sales, international trade process streamlining, geospatial information one-stop, integrated acquisition systems, e-authentication, e-training and e-travel.

During the past several years, the department has instituted numerous programs that facilitate e-business. Information assurance and the Common Access Card are two projects that Grant classifies as “truly transformational.” Both will allow users to rely on a trusted, dependable and ubiquitous network and help build the foundation for network-centric operations.

“The scope of information assurance requirements range from traditionally classified information—top secret, secret, confidential, unclassified—to proprietary business or design information that belongs to one of our business partners to private information such as health and personnel records. Clearly, some require high protection and capabilities like those the Fortezza card can provide. However, most Defense Department e-business does not require that level of security. To support those functions, we are implementing the Common Access Card, or CAC, as a medium security token.

“The CAC is a multifunction instrument that replaces the traditional military identification card carried by our uniformed military. It will serve as a Geneva Convention card, provide positive identification of the cardholder and permit the digital signing and encryption of e-mail,” Grant explains. Ultimately, users will use their CAC to gain access to their building, secure office and local area network as well as to sign and encrypt e-mail digitally (SIGNAL, January, page 55).

The department’s efforts include several other technology-supported initiatives that facilitate e-business. For instance, the Defense Contract Management Agency used wide area workflow to process the first electronic Material Inspection and Receiving Report for contract payment in September 2000. These reports can now be entered, shipped and electronically input into the government system in a single day rather than the five- to seven-day cycle of the paper system.

Another example is the Joint Strike Fighter (JSF) Program Office’s deployment of the JSF flight clearance application, which facilitates the collaboration of more than 500 privileged users nationwide, connects two civilian contractors with military decision makers and enables the efficient process of writing, editing and approving flight clearance requests. The flight clearance approval process time was not only reduced from weeks to hours using the new system, but also now ensures a better coordinated flight clearance request, program officials maintain. Ultimately, the safety of test pilots and aircraft is improved because of the integrity and accuracy of the application, they add.

The Defense Reutilization and Marketing Service (DRMS) illustrates how business process time can be reduced significantly through the use of information technology. The service is responsible for worldwide logistical support of the U.S. military, including providing mission-essential items for deployments and combat. A worldwide inventory must be physically moved from one location to another based on fluctuating customer needs. Items must be made available to military, federal and donation screeners for on-site screening and ordering.

To make assets more visibly accessible, the DRMS went from moving property to moving data. In 1994 when the service went online, the Web site received an average of 2,000 hits per month. Today, it receives 5.6 million hits each month. In fiscal year 2000, users searched and submitted between 6,000 and 10,000 requisitions for property each month.

In addition to ongoing programs, prototypes are being developed that would enhance e-business. Product Data Markup Language is an extensible markup language vocabulary that would support the exchange of product information among commercial or government systems. The Electronic Portal Access Service, or EPASS, would include Web-based user authentication, user authorization, user profile maintenance and could serve as the portal for an application. User authentication would consist of a single sign-on capability using public key infrastructure certificates.

While e-business approaches have been implemented throughout the services and the department, some are administered by a single entity. In April 1998, the Joint Electronic Commerce Program Office opened under the auspices of the Defense Logistics Agency (DLA) and the Defense Information Systems Agency (DISA). Late last year, the name of the organization was changed to the Defense Electronic Business Program Office.

Although the name has changed, the roles the DLA and DISA play have not. The DLA continues to accelerate the coordination of business-cycle requirements and cross-functional integration, identify best business practices and provide industry outreach. DISA oversees the technical architecture, coordination of standards, development of technical solutions, design of enterprise licensing approaches, testing and systems engineering, and technical cross-functional integration.

The Defense Electronic Business Program Office directs several projects related to paperless procurement and finance activities. The automatic identification technology program supports the department’s logistics processes by collecting initial source data and reducing procurement processing time. Central contractor registration is the contractor data repository for the entire Defense Department. Contractors can search the department’s online solicitations through the Business Opportunities Web site.

In the field, commanders in chief, the services and government agencies can conduct collaborative planning and course of action refinements using an integrated data environment. This enhances situational awareness through data sharing and proactive planning that involves supply chain management processes. Another project, called Joint Total Asset Visibility, also supports ongoing activities by providing users with information about the location, movement, status and identity of units, personnel, equipment and supplies.

Perhaps most familiar to procurement officers is the office’s Department of Defense (DOD) Electronic Mall (EMALL) project. It is the single entry point for Defense Department personnel to find and purchase commercial items then track the status of an order. The EMALL features advanced search, order management and payment options capabilities. Access to regional EMALLs automatically adjusts product pricing based on the customer’s location and ships items from the closest distribution center.

To facilitate shopping, the EMALL currently is divided into three corridors: parts and supplies, information technology, and training. The parts and supplies corridor features more than 12 million items from Defense Department inventories and defense supply centers. All items are backed by a Defense Department contract. The DLA’s managed catalog includes items from 350 vendors that have long-term contracts with the agency. Commercial vendors include such diverse companies as 3M, Kennon Aircraft Covers and Rayovac.

On-demand manufacturing is the newest feature of the EMALL. It allows customers to initiate contact with potential suppliers for products that are not currently available. Customers can transfer information to suppliers online.

The information technology corridor offers commercial products, including hardware, software, replacement parts, batteries, cables and peripherals. Access to commercial vendors’ Web sites allows users to purchase customized hardware configurations, individual software licenses and special product packages.

Distance education has become a priority throughout the armed forces. In response, the EMALL’s training corridor enables users to enroll in courses. A variety of classes will be available throughout the United States, including courses in information technology, government and defense specialties, continuing education, and leadership. Training vendors currently include the Brookings Institution.

Use of the EMALL is expected to grow substantially in fiscal year 2002. For example, $6 million in sales took place through the portal in fiscal year 2001, a number that is expected to increase to $60 million this fiscal year. While approximately 20,000 customers used the EMALL last fiscal year, it is projected that 100,000 will use the portal in fiscal year 2002. The number of orders processed is expected to increase fivefold, from 5,000 to 25,000 this fiscal year.

Upgrades to the EMALL include power searching and express checkout and the integration of Ariba Incorporated’s Network Connect program, which allows users to access a broader vendor base.

Donald O’Brien, project manager of the EMALL, says the Web site has evolved during the past several years. “There has been a 50 percent reduction in the number of clicks required to order an item—from 10 to five. We have improved the process that shoppers use to communicate with the personnel who have the authority to spend the government’s money. We have ‘Quick Lists’ that a customer can make for those items that are ordered on a recurring basis,” he explains.

The EMALL also has helped realize some of the goals of increased accountability. Using Business Objects as the business intelligence tool, EMALL personnel can capture data at the transaction level. The information can be accessed easily to improve tracking and accountability, O’Brien relates. Customers or anyone in their management chain can perform ad hoc queries and drill down through the data for any analysis required, he adds.

Although it has been generally successful, the EMALL has had to overcome some problems. “The largest challenge has been linking into the various legacy systems that are used throughout the Defense Department. Efforts to replace or upgrade these systems can limit our ability to interface with them in the near-term,” O’Brien indicates.

To address this problem, the EMALL captures all data with each transaction and can provide it to any system ready to accept it. “We’ve also acquired WebMethods as a way to enhance our linkages outside the department,” he adds.

In general, vendors have been very supportive of the EMALL, O’Brien states, pointing out that companies that are more e-business-oriented understand that the Web site is another distribution channel and helps increase their sales.

However, he emphasizes that suppliers need to understand that availability via the EMALL does not mean every decision will be based on lowest price. “Today, service is very important to customers and becomes a major discriminator among the suppliers.

“Suppliers still need to market their capabilities to potential customers. Use of the DOD EMALL is optional. Unless an individual knows about the items and capabilities offered, they may not take advantage of its capabilities,” he maintains.

O’Brien advises that most of the Defense Department’s requirements will continue to be met through the supply system, which is entirely automated. The EMALL supports this acquisition approach in three critical areas. First, it can be used when an item is purely commercial and has not been assigned a National Stock Number (NSN). Second, if a customer wants to purchase an item with a specific manufacturer’s part number, and the part has been standardized into an NSN with other manufacturers’ part numbers, the purchaser may not be absolutely sure of receiving the desired item. In this instance, the EMALL can be used as a source. Third, a customer may turn to the EMALL when specialized services are required. “When a customer needs to interact with the sources of supply for other reasons such as faster delivery, the EMALL is useful,” O’Brien explains. For example, if the department’s supply system does not normally stock an item, it may be available on the EMALL. The customer can get it quickly, usually in less than 30 days. “One EMALL supplier delivers any item in their catalog by 10:00 a.m. the next day if the order is submitted by 3:00 p.m. Eastern Time,” O’Brien relates.

Grant believes the Defense Department’s future with e-business is bright. “As the new century progresses, the advancements made over the past few years will be magnified one hundredfold. More and more of the department’s components, business, industry, Congress and the public will begin to realize significant savings in cost and man hours and see the increased efficiency created by e-commerce,” he concludes.