Defense to save $5 billion by 2018 with Logistics Help

Dec. 11, 2012
The Defense Logistics Agency is looking for cushion against pending fiscal cliff.

Nearly 400 industry, defense and military logisticians came together to discuss ways to provide more efficient logistics support to the military during the annual Defense Logistics conference and exhibition Dec. 4, in Arlington, Va.

DLA Director Navy Vice Adm. Mark Harnitchek spoke during his keynote address about the agency’s efforts to help the Defense Department meet its cost-saving goals.

“The bottom line is there’s going to be less money, not more, going forward, and every dollar we save on logistics is a dollar that goes back to the services for them to put into people, programs and new machines,” he said.

Harnitchek discussed DLA’s plan for saving $10 billion over the next five years and detailed some of the agency’s strategies for achieving savings.

“Our theme is ‘significantly improve performance to the warfighter while dramatically reducing costs,’ and my comptroller tells me $10 billion over five years is a lot of drama for DLA,” Harnitchek said. “So how are we going to do that? Well, it’s really not that difficult. You just have to figure out what the savings target is, where the opportunities are, plan and then go execute it.”

One new area DLA is pursuing includes conducting a strategic fuel review, Harnitchek said.

“You can’t hit a homer against a $40 billion material budget if you exclude half of it,” he said, referring to DLA’s fiscal 2012 sales of more than $40 billion, of which fuel sales accounted for about $20 billion.

“Not only do we buy and consume a lot of fuel, but we store a lot of it. We store it at 600 sites,” Harnitchek said.

The agency is working with the Air Force to expand the use of commercial jet fuel, which will not only help bring down the cost of the actual fuel, but costs associated with fuel storage and transportation as well, he said.

Other initiatives include expanding the use of reverse auctions, which increase competition by allowing qualified companies to bid openly online for government contracts.

While they will not work for every supply chain or commodity, reverse auctions work well on multiyear, multimillion dollar contracts and have become a very effective tool for DLA, Harnitchek said.

The agency also is taking a hard look at the amount of inventory and infrastructure it maintains.

“We’re looking at how much inventory we should keep so we don’t have an attic and basement full of repair parts we really don’t have a requirement for,” Harnitchek said. “We’re also looking at our inventory model, so that once the inventory and infrastructure are right-sized, we don’t fill up the attic and basement again.”

Harnitchek concluded his remarks with a call for industry partners to work with DLA to identify areas of potential cost savings for warfighters and taxpayers.

“When I meet with captains of industry from our supply chains, I tell them, ‘We’re all in this together.’ We need to be effective, as a team, so let’s work together at the strategic level and decide how we’re going to meet this challenge.”

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