Leading the Business Revolution

kpeters@govexec.com

Looking for spare parts? Extra boots for the troops? Medical supplies before your next big deployment? Shopping has never been easier at the Defense Logistics Agency, the military's combat support agency.

Through innovative contracting, reengineering and the expansion of an electronic shopping network, the agency charged with providing parts and supplies to war fighters is doing so more effectively, in less time and for less money.

DLA's success in streamlining the acquisition process has drawn accolades from Defense Secretary William Cohen, who singled out DLA for praise in the Defense Reform Initiative released last November, and Vice President Al Gore, who credited DLA with raising standards for customer support in government.

Earlier this year, DLA turned its electronic shopping network into a true "mall" by linking separate "stores" with a single search engine. Customers register at a single Internet then browse vendor catalogs for products, check depot stock at DLA, and then place an order electronically. Customers can easily compare prices and delivery times offered by different vendors to get the best price possible.

DLA's previous version of the electronic mall was more like a strip shopping plaza than a full-fledged mall, says Navy Capt. Gwilym Jenkins Jr., DLA's acting executive director for procurement, who was selected for promotion to rear admiral this spring. Customers had to register separately for access to each vendor product list, making shopping much more cumbersome.

The new mall offered 2.6 million items in May, and was expanding its selection weekly. Business has been brisk, says Jenkins. The mall soon will link with non-DLA stores as well, including the General Services Administration's GSA Advantage Web site.

The electronic mall is key to the Defense Department's goals for electronic commerce, which includes creating a paper-free system for weapons support and logistics by 2001.

Prime Program

One of DLA's most successful programs has been its prime vendor program, under which the agency contracts with a single vendor to manage and supply certain items in a particular region. The backbone of the program is electronic data interchange-the computer-to-computer exchange of data in a standard format. EDI networks can update inventories automatically, issue materiel releases against purchase orders, send invoices to customers, pay suppliers, generate bills and provide shipment information.

Under the pharmaceutical prime vendor program, for instance, vendors provide drugs directly to the military, eliminating the need for managing large inventories at military facilities. Pharmaceuticals are generally shipped hours after an order is placed.

The prime vendor program has also been used extensively to provide troops with combat clothing and food at military facilities. Under the Subsistence Prime Vendor Program, contractors assume responsibility for inventory management and transporting food to military facilities, much the way a supplier supports a restaurant. The prime vendor program was also modified to manage military clothing. Because military clothing is unique and not produced commercially, DLA had to tailor contracts to ensure enough clothing would be in stock at contractor-owned and operated facilities to meet military needs.

"Our prime vendor program has been very successful," says Jenkins. "We call it the prime vendor gold rush. We are inundated with requests to expand the program."

Prime vendor contracting practices will be applied to other areas in the future, such as maintenance supplies, dental, optical and laboratory supplies, selected repair parts and wood products, Jenkins says.

The savings associated with prime vendor contracts are substantial, he says. To date, in the more mature programs, such as those for pharmaceuticals, medical supplies and food, DLA has documented a reduction of $700 million since 1995 in the value of inventories DLA previously maintained before prime vendor took effect.

"That's money we don't have tied up in inventory," Jenkins says. "We don't have labor touching it. We're not maintaining it."

Crucial to the success of the prime vendor concept is the requirement that contractors be able to meet surge requirements. Should U.S. troops be deployed overseas on short notice, vendors must be able to gear up quickly to handle dramatically increased orders.

"Every contract we enter into has a surge and sustainment provision in it," says Jenkins. Contractors are evaluated on their ability to meet those requirements. "We're designing and working into our contracts as much flexibility as possible. We're going to long-term, indefinite-quantity contracts, negotiating a minimum buy," he says.

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