Land Supply ChainStrategic Material Sourcing

Capability Summit

November 14, 2007

Perform

ance Transformation

Culture

Introduction: Chief, Tailored Support TeamTopics Covered

•Business Overview•KID campaign recap•Long Term Contracts and Warfighter Support•SMS Programs•Small Business Impact/Issues•TINA Implications for Industry•Value Engineering/Testing•SMS Web Site Demo

Break-Out Sessions

Capability Assessment

Land Supply ChainSMS Capability Summit

Perform

ance Transformation

Culture

Director, Land Supplier Operations

Business Overview

Land Supply Chain

Wheeled Vehicles

Tracked Vehicles

Batteries

Nuts & Washers

Converters

Tires

Small Arms

Non-NSN

Perform

ance Transformation

Culture

– 385K NSNs, 3 sites, $1.6B in sales

– Army/Marines …85% of demand- 4,100 + suppliers- 320K contract

actions- 24 integrated

supplier teams

Land Supply Chain FSCs(Preponderance of FSCs assigned to Land SC)

Perform

ance Transformation

Culture

COLS FSCs

1005 2540

1010 2541

1015 2590

1020 2610

1025 2630

1030 2640

1035 2805

1040 2815

1045 2825

1055 2910

1075 2920

1080 2930

1090 2940

1095 2990

2510 3030

2520 4910

2530

PHIL FSCs

5340

5341

5360

RICH FSCs

5110

5120

5180

6117

6135

6140

Perform

ance Transformation

Culture

The Nine IndicatorsImpacting Your Business

Order Fulfillment (Delivery)• Stock availability• Order quantity fill rate• Logistic response time• Time definite delivery

Planning• Attainment to plan

Financial• Aged accounts payable

These KPIs measure how we do business with you

Tech Quality (PQDRs)• Order quality

Procurement• Administrative lead time• Production lead time•Key Item Drivers (KID)•BO Reduction•Contract Delinquencies

Perform

ance Transformation

Culture FY08 SMSG Strategy

Objective:•Key business drivers on long-term contract •Prioritized approach to project selection

Target population: •FSC 5340 – hardware•FSC 1005 – small arms•FSC 3030 - belts•Weapon systems•Tires (ancillary support)

Building strategies that are directly linked to customer requirements

Focus on KID 1-4

Perform

ance Transformation

Culture

M2 .50 cal Machine GunSourcing NSN’s

5930-00-614-7461 SWITCH,EXTRACTOR5310-00-501-3623 NUT,PLAIN,HEXAGON5315-00-501-3524 PIN,SHOULDER,HEADLE5315-00-600-8919 PIN,ECCENTRIC1005-00-625-7592 BAR, TRIGGER1005-00-600-8934 SIGHT, FRONT5365-00-600-8920 BUSHING,MACHINE THR1005-00-657-3953 SLIDE ASSY, RETR5360-00-726-6134 SPRING,FLAT5315-00-600-8784 PIN,SPRING1005-00-550-4082 EXTENSION ASSEMBLY,1005-00-716-1302 LOCK,BREECH,MACHINE

Perform

ance Transformation

CultureBusiness Drivers on LTC

LTC Obligations for 1st Quarter FY08: $104,482,859.58

Coverage FY04 FY05 FY06 FY07

NIINs 47% 57% 70% 75%

Annual Demand Value 67% 71% 76% 80%

Annual Demand Frequency 62% 69% 72% 75%

GOAL FOR FY08- 1,549

90% OF FY08 FOCUS WILL BE ON KID 1-4 NSNs10% OF FY08 FOCUS WILL BE ON LOW DENSITY SYSTEMS

Perform

ance Transformation

Culture

Focusing efforts on small group of Key Item Drivers (KID)

Small population of items have a large impact on our business

Broadcast fax sent out to industry in September

Campaign Goals: •PR Production (Manual Awards): 4,000 / Mo•20% Reduction in KID 1-4 Open PRs•PRs > ALT•Open PR Workload•Awarded ALT

KID Campaign Recap

Perform

ance Transformation

Culture

KID Matrix

ANNUAL DEMANDFREQUENCIES

ARE

ANNUAL DEMAND VALUE =

$6,000 AND GREATER

ANNUAL DEMANDVALUE =

LESS THAN $6,000

150 AND GREATERALL ITEMS

1 2

20 - 149ALL ITEMS

3 4

4 - 19WSICs F,G,H,J,K,L,T

5 6

4-19WSICS

M,P,R,S, W, X, Y, Z , N

7 8

0 - 3ALL ITEMS

9 0

Perform

ance Transformation

Culture

KID Statistics

All NSNs

All Others = 95%(358,000)

KID 1-4 = 5%(17,000)

Total PRs on Hand

All Others = 79%

KID 1-4 = 21%

Total Backorders

KID 1-4 = 75%

All Others = 25%

Total Requisitions

All Others = 20%

KID 1-4 = 80%

4th Quarter FY07 Obligations for KID 1-4 NSNs: $265,719,805

Perform

ance Transformation

Culture

SMS targeting KID 1-4 items for FY08 projects

Ensures support for multiple years

Streamline ordering process

Reduce manual PRs on-hand

KID and SMS

Perform

ance Transformation

Culture

• Customer Operations Mission

• DLA Support to the Warfighter

• Benefits of LTC's

• Vendor Support to the Warfighter

War Fighter Support

Perform

ance Transformation

Culture

Strategic Material Sourcing (SMS)

Presented by Director, Procurement Process Support Directorate

Program Overview

14 November 2007

Perform

ance Transformation

Culture

Focus of the SMS Program

DLA directed by OSD to develop Enterprise strategy to reduce inventory by $340 M by end of FY 2011

The Strategic Material Sourcing (SMS) program is DLA’s umbrella initiative designed to facilitate the Agency’s efforts to meet this directive by:

Placing items of strategic importance on Long Term Contracts (LTCs) Developing initiatives to reduce depot inventory levels Reducing Administrative and Production Lead Times on these items Adopting best commercial practices wherever possible to Include developing strategic Alliances with Key Suppliers, such as, Strategic Supplier Alliances with our Sole Source Suppliers

Perform

ance Transformation

CultureGoal of SMS

1. Increase Number of NSNs covered by Long Term Contracts

2. Increase Percent of Long Term Contract Obligations

3. Lower Inventory Levels/Cost

4. Lower Administrative and Production Lead Times .

Perform

ance Transformation

Culture

How Are SMS NSNs Determined?

Sales Drivers – Sales Drivers – Pareto (80/20 percent rule) based on last 2 years of sales dataPareto (80/20 percent rule) based on last 2 years of sales data

Demand DriversDemand Drivers - - Pareto (80/20 percent rule) based on last 2 years of demand dataPareto (80/20 percent rule) based on last 2 years of demand data NMCS NMCS – NSNs which have historically impacted readiness – NSNs which have historically impacted readiness

Warstoppers – Warstoppers – Needed by the Services in case of wars or other contingenciesNeeded by the Services in case of wars or other contingencies Readiness ItemsReadiness Items – EC 1 WSIC items with PLT>179 and at least 1 Back Order in past 3 – EC 1 WSIC items with PLT>179 and at least 1 Back Order in past 3 yearsyears

Critical Items - Critical Items - Critical item code ‘Y’ with PLT>179 and at least 1 Back Order Demand in Critical item code ‘Y’ with PLT>179 and at least 1 Back Order Demand in past 3 yearspast 3 years

High Frequency Items - 100 or more annual requisitions in the past 12 months

Supply Chain Focus Items - Items important to initiatives and directives the Supply Chains are responsible for managing.

Total DLA Hardware NSN Population: 3.9 million

Total DLA Hardware NSN Population: 3.9 million

Focus on SMS: 335,715

Focus on SMS: 335,715

Perform

ance Transformation

CultureFY08 SMS Population

 

 FY08 SMS Drivers By Category By Supply Chain

GROUP NSNs % Aviation C&E Land Maritime

Sales 44,824 13.4% 26,426 1,655 3,096 13,647

Demand 88,678 26.4% 51,114 3,863 6,901 26,800

NMCS 8,671 2.6% 3,275 2,514 1,053 1,829

Warstopper 36,702 10.9% 11,476 3,070 8,644 13,512

Readiness 22,798 6.8% 14,682 1,561 1,885 4,670

Critical 4,353 1.3% 3,187 324 252 590

JRIMM 930 0.3% 158 103 144 525

Addbacks 83,846 25.0% 49,195 4,678 10,482 19,491

SC Focus 44,913 13.4% 5,927 1,312 10,870 26,804

TOTALS 335,715 100.0% 165,440 19,080 43,327 107,868

             

Perform

ance Transformation

Culture

Strategic Materiel SourcingExecution Plan

Total NSNs On LTC

0

50000

100000

150000

200000

FY03 Q

1

FY03 Q

3

FY04 Q

1

FY04 Q

3

FY05 Q

1

FY05 Q

3

FY06 Q

1

FY06 Q

3

FY07 Q

1

FY07 Q

3

FY07 Q

4

On LTC

131,444

Perform

ance Transformation

Culture

0%

25%

50%

75%

Fiscal Year Quarters

Perc

ent

ADV

ADF

ADV Goal

ADF GoalADV 53.5% 57.7% 55.0% 54.5% 53.6%

ADF 57.5% 55.4% 54.9% 59.1% 60.9%

ADV Goal 69.5% 63.0% 63.0% 63.0% 63.0%

ADF Goal 68.0% 63.0% 63.0% 63.0% 63.0%

FY06 FY07 Q1 FY07 Q2 FY07 Q3 FY07 Q4

SMS Annual Demand Value (ADV) & SMS Annual Demand Frequency (ADF)

•

ADV/ADF illustrates that the most strategic items are being placed on LTCADV/ADF illustrates that the most strategic items are being placed on LTC

Perform

ance Transformation

Culture

Total DLA Obligation Rate

50.0%

55.0%

60.0%

65.0%

70.0%

% o

f Tot

al O

blig

atio

ns

Actual LTC% 54.1% 57.5% 0.0% 0.0% 0.0% 0.0%

Goal 54.0% 56.0% 63.6% 63.6% 63.6% 63.6%

FY06 FY07 FY08Q1 FY08Q2 FY08Q3 FY08Q4

Placing items on LTC leads to improved support to the Warfighter… at lower administrative cost

Placing items on LTC leads to improved support to the Warfighter… at lower administrative cost

Total Long Term Contract Obligation Rate

Perform

ance Transformation

Culture

SMS Gross Inventory Savings

-$75-$50

-$25$0

$25$50

$75$100

$125

FY

99

FY

00

FY

01

FY

02

FY

03

FY

04

FY

05

FY

06

FY

07

FY

08

FY

09

FY

10

FY

11

Fiscal Years

An

nu

al S

avin

gs

(Mill

ion

s)

-$50

$0

$50

$100

$150

$200

$250

$300

Cu

mu

lati

ve

(Mill

ion

s)

Annual Savings Target Cumulative Savings

SMS Gross Inventory SavingsQ3 Revised Numbers*

Total Program Savings As Of June 2007 = $219 Mil

Perform

ance Transformation

Culture

SMS DLA Average Administrative Lead Time (ALT)

Average ALT

0

50

100

150

Day

s

ALT SMS Only 21 15.2 13 12.6 14.5 12.8 13.7 15.1 14.6

ALT non-SMS 65.6 49.2 49.3 59 61.2 62.5 65.4 62.1 57

ALT SMS not on LTC 79.5 64.9 71.1 84.3 70.7 71 64.8 61.6 54.3

ALT SMS on LTC 3.1 3 3 3.1 3.6 3.2 2.7 2.8 1.9

2002 2003 2004 2005 2006 07Q1 07Q2 07Q3 07Q4

FY07

Perform

ance Transformation

Culture

Average PLT

0

50

100

150

200

Day

s

PLT SMS Only 47.1 41.6 43.2 45.6 38.6 43.4 39.2 38.7 36.5

PLT non-SMS 62 53.8 55.1 64.5 65.5 67.8 63.3 61.2 57.1

PLT SMS not on LTC 108.1 102.2 120.3 129.2 113.8 115.7 111.5 94.8 75.4

PLT SMS on LTC 21.9 21.9 25.5 30.9 27.7 31.6 28.3 29 29.1

2002 2003 2004 2005 2006 07 Q1 07 Q2 07 Q3 07 Q4

SMS DLA Average Production Lead Time (PLT)

FY07

Perform

ance Transformation

Culture

The Road Ahead

 

  FY08 Goals

Supply Chain Net Award Goal Renewal Goal

LTC Obligation Percent

Aviation 1,697 650 64.4%

C&E 365 621 78.3%

Land 1,549 2,875 67.7%

Maritime 1,094 1,707 46.8%

Enterprise 4,705 5,853             

Perform

ance Transformation

Culture

Director, Office of Small Business Programs(800) 262-3272

Small Business Perspective

Perform

ance Transformation

Culture

Office of SmallBusiness Programs

Our Function: • Represent the interests of the small business community as new initiatives are developed• Look for opportunities for small business, HUBZone, 8(a) and Service Disabled set-asides• If the role of Prime Contractor is not indicated, support and develop contractual language to assure best possible representation as subcontractors• Do all of this while remembering that Customer Support is paramount

Perform

ance Transformation

Culture

The Role of Long Term Contracts (LTCs)

• Long term contracts provide many DSCC benefits:• Significantly reduces administrative lead times• Reduces manpower requirements• Offers stronger relationships between the contractor and DSCC• Frequently provides enhanced customer support

• LTCs can be more risky for the contractor:• Escalating material or other costs may not be adequately covered in the out years

• LTCs can reduce the number of competitors over time

Perform

ance Transformation

Culture

• Historical experience – how many small businesses are able to provide the parts and related services (Rule of Two)• Methods of determining interest/capability

• Industry Day• Market Survey – Very Important!!!!• Direct feedback to:

• Contracting Officer• Office of Small Business Programs

• Possible visits to potential contractors

How Set-aside Determinations are Made

Perform

ance Transformation

Culture

How to Compete?

• Small Businesses interested in acting as Prime Contractors on larger initiatives should:

• Gain a full understanding of the requirement• Assure they have the “right stuff”

• Impeccable past performance• Adequate financing • Strong support staff including Customer Service• Comparable experience – even if on a smaller scale• Robust IT infrastructure for parts acquisition, forecasting, item management, etc• Realistic pricing• Warehousing and distribution capabilities• Partners, if needed

Perform

ance Transformation

Culture

Things to Consider

• Mentor – Protégé Programs • Both the DoD or DLA Programs offer many benefits for the mentor and the protégé

• Start out on smaller initiatives and developing a track record of exceptional performance and customer support• Developing strong, positive relationships with key contracting personnel• Become the “go to guy” when support is critically needed

Perform

ance Transformation

Culture

Little Things are Important

• When submitting a proposal be sure to:• Read and understand the requirements• Adequately address each part of the solicitation• Remember neatness and accuracy count – this is your chance to show the evaluation team that your are fully capable• Be timely• Read and re-read your proposal – make sure that what you say in one part is not contradicted in another

Perform

ance Transformation

Culture

Final Thoughts

• Ask for clarification if you are not sure • Make good use of the time with the contracting team:

• Have a strong “pitch” • Emphasize what you can do for the Customer• Offer to host a site visit• Be a problem solver

• Never underestimate the importance of a strong Market Research response!• Utilize the Office of Small Business Programs

• The better we understand what you can do, the more likely we can successfully set-aside future acquisitions

DSCC SMALL BUSINESS TEAM1-800-262-3272 OR

COMMERCIAL 614-692-3541

PROGRAM PHONE614-692-XXXX

Director, DSCC Small Business Office - 3735

Small Disadvantaged Business and 8(a) Programs - 1288

Outreach and Woman OwnedSDB/8(a) Program Support - 4864

HUBZone - 3510

Javits/Wagner/O’Day Workshops(Blind & Severely Handicapped) - 1494

Service Disabled Veteran Owned - 7935

Opportunity Specialist - 7624

Perform

ance Transformation

Culture

Perform

ance Transformation

Culture

TINA

Requirements Under the Truth in Negotiations Act (TINA) in DoD

Presented by Director, Procurement Process Support Directorate

November 14, 2007

Perform

ance Transformation

Culture

Agenda

•TINA Background

•TINA Requirements for DoD

•DLA Policy Changes

Perform

ance Transformation

Culture

Truth in Negotiation Act (TINA) Background

•Truth in Negotiations Act (TINA) – Passed in 1962

–Requires cost or pricing data for use in negotiating contracts and modifications.

–Certify in writing that, the cost or pricing data submitted are accurate, complete, and current.

Perform

ance Transformation

Culture

What has Occurred?

•2001, Contracting Officer Determinations of Price Reasonableness When Cost or Pricing Data Were Not Obtained (DOD-IG Report):

–CO’s lacked valid exceptions and failed to require data in 32% of contracting actions reviewed.

–Inadequate documentation to support price reasonableness in 86% of actions reviewed.

–CO’s did not challenge items categorized as commercial and accepted catalog prices/price lists without analysis.

•2002, DOD Needs Better Guidance on Granting Waivers for Certified Cost or Pricing Data (GAO Report):

–Regarding type of data and analyses and outside assistance.

–Whether waivers should be granted in first place.

Perform

ance Transformation

Culture

Recent TINA Changes for DoD

• Section 817 of Public Law 107-314 (FY 2003 NDAA) established stricter TINA requirements for DoD--- Waivers now limited to the most exceptional cases:

– DoD can no longer waive the requirement for cost or pricing data solely because the price can be determined fair and reasonable without the data (therefore FAR 15.403-1(c)(4) does not apply to DoD).

– CO’s must request the cost data and the Certificate of Certified Cost and Pricing Data.

– If the company cannot comply, a Waiver may be granted but all of following must be met:

1. Property or service cannot reasonably be obtained without granting the waiver;

2. Price(s) can be determined fair and reasonable without the submission of cost or pricing data; and

3. There are demonstrated benefits to granting the waiver.

– Required Congressional reporting requirements for actions over $15 million.

Perform

ance Transformation

Culture

2007 Actions Affecting DLA

•February 20, 2007 – Senate Armed Services Committee letter to the USD(AT&L reiterating the statutory requirements from the FY 2003 NDAA).•March 23, 2007 – Director, Defense Procurement and Acquisition Policy (DPAP), memorandum to Departmental Deputy Assistant Secretaries and the Directors of Defense Agencies emphasizing that the standard to be met for granting a TINA waiver is extremely high•.July 19, 2007 – DLA’s PROCLTR 07-10 specified actions to be taken when an offeror or contractor refuses to provide cost or pricing data. Implemented IAW DFARS PGI 215.403-1(c)(4)(A)(1).•October 2007 - DLA’s new PROCLTR provided detailed guidance to incorporate PROCLTR 07-10 and other TINA-related procedures into DLAD.

Perform

ance Transformation

Culture

What PROCLTR 07-10 Covered

•Implemented DFARS guidance for FY 03 NDAA:–The three findings required for an HCA to grant an exceptional circumstances exception (waiver),

–DPAP guidance that a waiver should no longer be granted to a contractor business segment that normally performs Government contracts subject to, and in compliance with, TINA, and

–That pending and actual waivers granted should be reported to our DLA J-73 focal point at the earliest possible date, to enable timely reporting of these waivers to OSD immediately following the end of each fiscal quarterly period.

Perform

ance Transformation

CultureSummary

• DLA must comply with statutory and policy guidance

• Fair and Reasonable Pricing is a critical component for success

• High Visibility item for Congress and OSD

• We need your cooperation!

Perform

ance Transformation

Culture

Value Engineering/Source Development

http://www.dscc.dla.mil/programs/sdi/

Value Engineering

Perform

ance Transformation

CultureSmall Arms Challenges

Diminishing manufacturing base Develop priority list for sourcing efforts

First article and production lot failures Increased use of pre-award surveys Qualified source list Increased surveillance visits by DCMA

Perform

ance Transformation

Culture

M2 .50 cal Machine GunSource Development NSNs

1005-00-550-4060 LATCH,BOLT

1005-00-550-4081 COVER,SUB ASSEMBLY

1005-00-550-4082 EXTENSION ASSEMBLY,

1005-00-550-4094 SLEEVE,BUFFER TUBE

1005-00-600-8782 GUIDE,BUFFER SPRING

1005-00-600-8934 LOCK,BREECH,MACHINE

1005-00-600-8936 TUBE,HANDLE GRIP

1005-00-614-7583 PLATE,BACK

1005-00-625-7592 LOCK,BACK PLATE LAT

1005-00-626-1110 NUT,PLAIN,HEXAGON

1005-00-657-3953 PIN,SHOULDER,HEADLE

1005-00-716-1302 PIN,SPRING

1005-00-918-2617 PIN,ECCENTRIC

Solution:

Established website that provides a list of NSNs where DSCC would like

to develop additional sources.

1005-00-918-2618 KNOB

1005-00-927-7273 SPRING,HELICAL,COMP

5310-00-501-3623 SPRING,FLAT

5315-00-501-3524 BUSHING,MACHINE THR

5315-00-600-8784 SWITCH,EXTRACTOR

5315-00-600-8919 SIGHT, FRONT

5355-00-550-4062 FRAME HANDLE, LOWER

5360-00-200-5800 CAM, BREECHLOCK, MACH

5360-00-726-6134 BAR, TRIGGER

5365-00-515-2834 SLIDE ASSY, BELT

5365-00-600-8920 SLIDE ASSY, RETR

5930-00-614-7461 PLUG, MACHINE THREAD

Perform

ance Transformation

Culture

http://www.dscc.dla.mil/programs/sccs/index.html

SMS Web Site Demo