Pentagon's Logistics Chief Vows to Shave $13 Billion From Materiel, Operations Cost
Vice Adm. Mark Harnitchek, director of the Defense Logistics Agency, said the demand for much of the commodities DLA purchases is declining in tandem with the U.S. drawdown from Afghanistan. The trend mirrors the reeling in of logistics supply chains in the wake of every major U.S. war.
“In terms of the history of the military, this is really no different than what you see at the end of every conflict,” he said. “We’re going to be a lot smaller in terms of our people, our infrastructure, our inventory and our financial footprint. We have to be ready to significantly improve support at a whole lot less cost.”
DLA is the contracting agency for all the military's basic supplies, from weapons to fuel, and everyday items such as silverware and sandbags. Before the 9/11 terrorist attacks, the agency sold $18 billion to $20 billion worth of supplies to the military services. Sales peaked around fiscal year 2011 at $46 billion, Harnitchek said. That figure slid to around $40 billion in fiscal 2014 and will likely fall to around $35 billion for the current fiscal year, he said.
“The strategy is constantly evolving and we need to evolve with that,” he said.
Harnitchek has pledged to find another $13 billion in savings by 2019. DLA spends about $40 billion per year, most of which is the cost of the materiel it buys to sell the services. Operations costs will also fall, which for DLA is about $5 billion annually.
“There is a big effort here to right-size our inventory and then right-size the infrastructure that supports all those distribution chains,” he said.
Over the past two years, the agency has shed $5 billion worth of on-hand inventory from a total $15 billion of supplies and equipment, Harnitchek said. There has also been a corresponding downturn in demand for storage space because of that divestment, he said.
“If you don’t need the inventory, you certainly don’t need the World War II-vintage building it goes in,” he said. “We’ve taken the equivalent of about 45 football fields of covered storage out.”
Along with the downsizing of stockpiles, DLA is becoming more efficient at supplying troops, and doing so at a lower cost. He attributed the trend to a “relentless focus on basic business blocking and tackling and contract execution.”
“Buy enough, buy on time and making sure the contractor delivers the stuff,” he added.
DLA is also revamping the way it plans for future conflicts by reviewing how much it buys of certain supplies and how long it keeps them on hand depending on the items’ relative importance, Harnitchek said.
Half of the inventory DLA manages are things that are used in regular, easily predictable amounts, he said. The other half is made up of supplies and components that are important but seldom in demand or routinely called for, but in irregular amounts.
“It’s not that we have too much stuff that we’re holding onto,” he said. “We have too much depth of the things. ... We are re-looking at the models that tell us how much to keep and how long to keep it,” he added.
The transition in U.S. foreign policy focus from South Asia and the Middle East to the Asia-Pacific has also forced DLA to revisit how it prepositions supplies — particularly fuel — in that region, Harnitchek said. The entire network of fuel delivery in support of U.S. Pacific Command is being reworked to ensure ships and aircraft traversing the world’s largest ocean can gas up whenever necessary.
“That is the big commodity there, both because we use it in such great quantity … and the vast distances of the Pacific,” he said.
The agency already has moved prepositioned fuel stocks to the western Pacific based on consultation with combatant commanders in the region, he said.
DLA got a leg up last year when the Air Force switched from using military specification jet fuel to commercial, which allows the agency to purchase fuel for aircraft just about anywhere, he said.
“That, in terms of readiness and availability of fuel is really a game changer,” he said. “If you don’t have to use a military specification fuel, you’re a whole lot more flexible in terms of where fuel is, what sort of quantities to store it in, because … lots of folks refine and store jet fuel in great quantities.”
The agency has access to plenty of ships and aircraft to transport cargo worldwide, Harnitchek said. DLA works hand-in-hand with U.S. Transportation Command, Naval Sealift Command and a number of commercial partners to ensure U.S. military campaigns are well supplied anywhere on Earth. But distribution on the ground in potential war zones is often inadequate, he said.
Parts of Africa and Southeast Asia have few roads, dilapidated ports and airstrips and lack basic services like electricity.
“We have plenty of conveyance,” he said. “We have the machinery to take the department to war. The only wildcard is can we get there? Can we get in? That has been the lesson of Iraq and Afghanistan” he said. “In CENTCOM for the last twelve years its all been about, 'can you get there and is there infrastructure?'”