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24–440 PDF 2006

S. Hrg. 109–272

FROM FACTORY TO FOXHOLE: IMPROVING DOD

LOGISTICS

HEARING

BEFORE THE

OVERSIGHT OF GOVERNMENT MANAGEMENT, 

THE FEDERAL WORKFORCE AND THE DISTRICT 

OF COLUMBIA SUBCOMMITTEE

OF THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

OCTOBER 6, 2005

Printed for the use of the Committee on Homeland Security 

and Governmental Affairs

(

(II)

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

SUSAN M. COLLINS, Maine, Chairman 

TED STEVENS, Alaska 

GEORGE V. VOINOVICH, Ohio 

NORM COLEMAN, Minnesota 

TOM COBURN, Oklahoma 

LINCOLN D. CHAFEE, Rhode Island 

ROBERT F. BENNETT, Utah 

PETE V. DOMENICI, New Mexico 

JOHN W. WARNER, Virginia 

JOSEPH I. LIEBERMAN, Connecticut 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK DAYTON, Minnesota 

FRANK LAUTENBERG, New Jersey 

MARK PRYOR, Arkansas

MICHAEL D. BOPP, Staff Director and Chief Counsel 

JOYCE A. RECHTSCHAFFEN, Minority Staff Director and Chief Counsel 

TRINA D. TYRER, Chief Clerk 

OVERSIGHT OF GOVERNMENT MANAGEMENT, THE FEDERAL 

WORKFORCE AND THE DISTRICT OF COLUMBIA SUBCOMMITTEE 

NORM COLEMAN, Minnesota, Chairman 

TED STEVENS, Alaska 

TOM COBURN, Oklahoma 

LINCOLN D. CHAFEE, Rhode Island 

ROBERT F. BENNETT, Utah 

PETE V. DOMENICI, New Mexico 

JOHN W. WARNER, Virginia 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK DAYTON, Minnesota 

FRANK LAUTENBERG, New Jersey 

MARK PRYOR, Arkansas

ANDREW RICHARDSON, Staff Director 

RICHARD J. KESSLER, Minority Staff Director 

NANCI E. LANGLEY, Minority Deputy Staff Director 

TARA E. BAIRD, Chief Clerk 

(III)

C O N T E N T S 

Opening statements: Page 

Senator Voinovich ............................................................................................. 1

Senator Akaka .................................................................................................. 4

WITNESSES 

THURSDAY, OCTOBER 6, 2005

Kenneth J. Krieg, Under Secretary of Defense for Acquisition, Technology, 

and Logistics, U.S. Department of Defense ....................................................... 7

Hon. Clay Johnson III, Deputy Director for Management, Office of Management and Budget .................................................................................................. 10

William M. Solis, Director, Defense Capabilities and Management, Government Accountability Office .................................................................................. 11

ALPHABETICAL LIST OF WITNESSES

Johnson, Hon. Clay III: 

Testimony .......................................................................................................... 10

Prepared statement .......................................................................................... 39

Krieg, Kenneth J.: 

Testimony .......................................................................................................... 7

Prepared statement .......................................................................................... 27

Solis, William M.: 

Testimony .......................................................................................................... 11

Prepared statement .......................................................................................... 41

APPENDIX 

Questions and answers submitted for the record from Mr. Krieg ....................... 54

(1)

FROM FACTORY TO FOXHOLE: IMPROVING 

DOD LOGISTICS 

THURSDAY, OCTOBER 6, 2005

U.S. SENATE, OVERSIGHT OF GOVERNMENT MANAGEMENT, THE FEDERAL WORKFORCE AND THE

DISTRICT OF COLUMBIA SUBCOMMITTEE, OF THE COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS, Washington, DC. 

The Subcommittee met, pursuant to notice, at 2:30 p.m., the 

Hon. George V. Voinovich, Chairman of the Subcommittee, presiding. 

Present: Senators Voinovich and Akaka. 

OPENING STATEMENT OF SENATOR VOINOVICH 

Senator VOINOVICH. Good afternoon. The hearing will please 

come to order. 

Today’s hearing is entitled, ‘‘From Factory to Foxhole: Improving 

DOD Logistics,’’ examines a somewhat arcane yet vitally important 

issue that affects the men and women of our Armed Forces. 

This is the fourth Subcommittee hearing Senator Akaka and I 

have held on the Government Accountability Office’s high-risk list 

and the third in our ongoing investigation into the management 

challenges facing the Department of Defense. As you know, the Department is the leading agency with eight areas on the high-risk 

list. In addition, there are six government-wide high-risk areas 

that DOD shares with all Federal agencies. 

Senator Akaka and I will be focusing our Subcommittee agenda 

on two of the DOD high-risk areas. Our first is the personnel security clearance process, which is an issue DOD shares with the Office of Personnel Management. Today’s hearing topic, supply chain 

management, is the second area where we will be dedicating our 

time and resources to guarantee that necessary improvements are 

made. 

Unfortunately, during Operation Iraqi Freedom, GAO found sev- eral examples of a mismanaged supply chain, including (1) a $1.2 

billion discrepancy in the material shipped to, and received by, the 

Army; (2) cannibalized equipment because of a lack of spare parts; 

and (3) a war reserve that did not adequately supply the warfighter 

with enough body armor, lithium batteries, up-armored kits for 

Humvees, and meals-ready-to-eat. This is surprising to me because 

I thought we had a stockpile of these meals. Based on these findings, I do not think anyone would disagree that the Department 

2

must improve the way it supplies the men and women of the 

Armed Services with critical life-supporting gear. 

In Ohio, I spoke with a constituent who said they were sending 

telescopic lenses for rifles to Iraq, because the soldiers did not have 

them. I think it is a tragedy that important supplies like this were 

not available at a time when it was needed. I understand that 

things have substantially improved since that time. 

My interest in investigating and improving the Department’s 

supply chain management process is governed by two important 

principles. First, with a budget of over $420 billion, which is a little 

less than we borrow each year to run the Federal Government. Second, with $77 billion worth of items in its inventory, the Department must be a better steward of the taxpayers’ money. In fact 

Secretary Rumsfeld has estimated that the Department wastes 5 

percent, or $20 billion a year, on redundant or outdated business 

practices. 

We’ve got something on the floor of the Senate today where we—

in terms of a system that deals with taking care—it’s supposed to 

be a computerized system where people can book airlines, and I 

just couldn’t believe it, $500 million, 7 years and it still doesn’t 

work. So there’s some problems there and I’m sure we’ll get into 

some of those systems. 

More importantly however, inefficient, ineffective and redundant 

steps within the supply chain have a direct and immediate impact 

on our soldiers on the battlefield. This is why we are here today. 

In other words, the current system impedes the Department’s ability to deliver the right items at the right time to the right place 

for the warfighter. 

Even though today’s hearing title implies a much broader focus, 

we must not lose sight of the fact that the supply chain management process, which is a key component of the Department’s logistics program, has been on the GAO’s high-risk list since 1990. 

That’s 15 years. That’s just too long for a process of this magnitude 

and importance to be mismanaged. 

Therefore, I’d like our witnesses to know that I am committed to 

working with them to ensure that the necessary improvements are 

made in the supply chain area, and that it is eventually removed 

from the high-risk list. Then we’ll set off the fireworks and have 

a big party. I’d like to do it before this President leaves office. Do 

you hear me? 

Fortunately, the Department is taking steps in the right direction. In July, the Department unveiled a plan to improve their supply chain management process. The plan contains a matrix consisting of 10 specific business practices that can be measured 

against three strategic goals, which include improvements in (1) 

asset visibility; (2) forecasting; and (3) distribution. 

I commend the Department for developing the supply chain management plan in an open and collaborative manner with GAO and 

OMB. When you get GAO, OMB, and the Department all working 

together, that’s a sign that you’ve got something really good underway. 

I would like to express my appreciation to OMB Deputy Director 

for Management, Clay Johnson, for facilitating this process. Clay, 

I want to thank you publicly for all the time that you have put into 

3

this plan. You have been very conscientious and I couldn’t ask for 

any more from you. Thank you once again. 

And I applaud the Bush Administration for the no-nonsense approach that you’ve taken on management issues. You don’t get 

credit for this, but this is the first administration that really has 

a management agenda: You rate agencies by giving them a green, 

red, and yellow. 

Mr. JOHNSON. You’re getting a green so far on this. [Laughter.] 

Senator VOINOVICH. However, now that the plan is developed, 

the Department must begin the more difficult task of implementation. As Chairman of the Oversight of Government Management 

Subcommittee I will conduct continued oversight on this issue. I 

want to make it clear that Senator Akaka and I are committed. We 

may not be having frequent hearings, but we’re going to have frequent visits to monitor the progress that’s being made. So often we 

get more out of meetings than when we have a public hearing. 

My goal today is to develop a clear understanding of the benchmarks and metrics that will be used to measure successful supply 

chain management improvements. I hope that in the testimony 

today it is clear that you have agreed on the metrics to judge the 

progress. In other words, here’s the baseline. I just listed several 

things that aren’t the way they’re supposed to be. Here’s the benchmarks, and how are we going to judge them as we move along 

whether or not we’re making progress? 

Mr. Solis, I really think, it is important that GAO continues looking at this issue. I think it’s real important that everybody understands what the issues are, including this Subcommittee, so that 

a year from now, we are all on the same page. I think it’s real important that we agree on what the metrics should be in terms of 

their performance. 

Our review will also include the ability for DOD, OMB, and GAO 

to continually collaborate on the implementation of the plan. It is 

evident that this triad created the momentum for writing the Department’s supply chain management plan, and continued collaboration will enable you to establish and maintain a framework of accountability necessary for successful implementation. Again, Mr. 

Solis, it would be nice if you keep working together as you go along 

on this issue. Too often, I think sometimes—and I don’t know what 

the rules are—but you represent us but it’s good to touch base and 

so forth. 

Mr. SOLIS. We do plan to continue that relationship with OMB 

and DOD. 

Senator VOINOVICH. Great. In addition, the unique partnership 

between DOD, OMB, and GAO has broader implications for outlining progress in each high-risk program area. Therefore, I applaud OMB and GAO for having the foresight to apply the DOD 

supply chain management model to the entire high-risk list by requiring affected agencies to development improvement plans. I’m 

optimistic that this exercise will have a positive impact on the performance of the 25 areas listed on the high-risk list. 

Perhaps improvements will lead to the elimination of more than 

three high-risk areas, thereby surpassing the number of programs 

removed on this year’s list. We congratulate you, Clay. If I had 

your job and I took the high-risk list and brought it down I would 

4

brag about it. So I think that if we can keep working on it, hopefully it really will be beneficial. 

Before I yield to Senator Akaka, I would like to thank each of 

our witnesses today, especially Under Secretary Krieg for his dedicated service to the Department, which began in 2001. Mr. Krieg 

came from the private sector, joined the Federal Government—and 

I’m not taking any shots at anybody that has left, but so often people come into the Department, start to really find out what’s going 

on and then they go back to the private sector. 

Mr. Krieg, I mentioned this to you when I met you in my office, 

I’m very grateful to you that you decided to stay on and take on 

this responsibility, because your performance is going to be so 

much better because you’ve got the experience under your belt from 

being in the Department of Defense. I would also like to thank 

your wife Ann and your two children Alan and Meredith because 

of the sacrifices they make. 

We had a meeting this morning with the Army Corps of Engineers and I never got a chance to thank them. We’ve got this 

Katrina thing out there and we keep hearing criticisms of FEMA 

and this group and that group. And these people are out there 24/

7, busting their backs, trying to do their job. You see on television 

criticism. Some of them haven’t seen their wives or their kids for 

a long period of time. I think that, Senator Akaka, I’m going to introduce a resolution on the floor of the Senate—I know we have differences of opinion, you and I don’t, but in terms of Katrina, maybe 

we do. But the fact of the matter is I don’t think we disagree that 

there are some very dedicated Federal workers that are out there 

doing the job, and we ought to let them know how much we appreciate what they’re doing for our country. 

Finally, Mr. Krieg, I’d like to congratulate Alan Estevez from 

your staff for winning the Service to America Medal in National 

Security. This is the first Partnership for Public Service that I’ve 

missed and I would have loved to have seen you present that to 

him that night. 

I now yield to my good friend and colleague, Senator Akaka. 

I think this is really important. As Ranking Member of the 

Armed Services Readiness Subcommittee, he has a vast background on the managerial intricacies of the Department of Defense, 

and I’m sure, Senator Akaka, because of that position you’ve got 

staff people that are really familiar with this area. I wanted to say 

that I’m going to use your encyclopedic knowledge to help in making sure that we do as good a job as we can in terms of oversight 

in regard to this very important issue for our country. 

Senator Akaka.

OPENING STATEMENT OF SENATOR AKAKA 

Senator AKAKA. Thank you very much, Mr. Chairman. It is no 

secret that it is a pleasure for me to partner with the Chairman. 

We have worked together very well. Our Chairman heads one of 

the most important Subcommittees, Government Management and 

the Federal Workforce, which is the essence of our government. So 

what we are doing together is trying to do all we can to improve 

whatever government. And I join him in working on that. And 

since he has mentioned Katrina, I just want you to know I just reVerDate 0ct 09 2002 13:44 Feb 17, 2006 Jkt 024440 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 C:\DOCS\24440.TXT SAFFAIRS PsN: PAT
5

turned last night from Louisiana, where I visited with Chairman 

Domenici and Ranking Member Bingaman of the Committee on 

Energy and Natural Resources. The three of us went there to look 

at the aftermath of Katrina and Rita, and I am saying this just to 

emphasize the comment that the Chairman made. I came away 

feeling that there are a lot of heroes in that area who sacrificed 

their time, even their lives, in saving people. I was able to speak 

to some of these people, and I saw a different view of what is there. 

However, we need to take the next steps in recovery, and one 

area is in the energy field by trying to bring the energy back up 

because it affects our whole Nation. 

Mr. Chairman, last month the Nation learned a painful lesson 

about the importance of logistics, and, again, this came up in our 

visit, too. After Hurricane Katrina struck, the National Guard responded with the largest domestic mobilization in history. Unfortunately, the Guard was under-equipped. According to Lieutenant 

General Blum, Chief of the National Guard Bureau, the Guard 

lacked sufficient trucks, radios, and night vision goggles to do their 

job properly. At the same time, food, water, and ice that had been 

pre-positioned in the region was stuck in warehouses. This is history. 

The Federal response to Katrina underscored three challenges of 

logistics: Asset visibility, forecasting, and distribution. 

Commanders must have the ability to: (1) see exactly what assets 

they have and where the assets are located; (2) accurately predict 

future needs; and, (3) quickly move supplies from factory to foxhole. 

Defense logistics requires balancing the roles of supplier to the 

warfighter with accountability to the taxpayer. 

DOD logistics has been on the Government Accountability Office 

High–Risk List since 1990, under various names, and the GAO has 

issued more than 72 reports in this area. While much more remains to be done, there have been some improvements. 

One improvement has been in distribution. In Operation Desert 

Storm, it took months to move supplies into the region before the 

invasion. Once the supplies got there, it was often difficult to determine what had been delivered. We heard many stories of troops 

tearing apart truckloads of supplies looking for particular items 

that they needed. 

In Operation Iraqi Freedom, we were able to move supplies into 

the region more quickly, and once we got there, we had much better accountability for what we had. One reason for the improved 

accountability was the increased use of Radio Frequency Identification, or RFID, to track these supplies. This is a critical improvement, and one that we need to continue to develop. 

Shortages of critical supplies, however, continue. In Desert 

Storm, we learned about shortages of desert camouflage uniforms 

and boots. In Operation Iraqi Freedom, we learned about the shortages of chem-bio suits, armored Humvees, and body armor. 

It is just plain wrong that family members of those fighting in 

Iraq and Afghanistan needed to purchase, in many cases, critical 

safety gear for loved ones. We included a provision in last year’s 

Defense Authorization bill requiring DOD to reimburse Service 

members, up to $1,100 per item, for protective equipment. The law 

required the Secretary of Defense to develop regulations for reimVerDate 0ct 09 2002 13:44 Feb 17, 2006 Jkt 024440 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 C:\DOCS\24440.TXT SAFFAIRS PsN: PAT
6

bursement by February 25, 2005, yet these regulations were not 

issued until yesterday, while the Senate was considering Senator 

Dodd’s amendment to expand this program. The amendment we 

approved yesterday will help to ensure that our warfighters have 

needed protective equipment. 

Such problems are why we are discussing DOD’s strategic plan 

today. 

Mr. Chairman, I am very pleased that the Office of Management 

and Budget and the GAO are working with DOD on the broad 

issue of defense logistics and have developed a measurable plan for 

improvement. 

The presence today of Mr. Johnson, who has been such a big 

help, Mr. Krieg, and Mr. Solis demonstrates the commitment to the 

request we made of OMB at our hearing last February that there 

be a clear strategy to review high-risk programs and get DOD off 

the high-risk list. I do want to add that I am especially pleased 

that Mr. Johnson has taken our request seriously, and I understand that all areas on the high-risk list are under close review by 

OMB. And I want you to know, Clay, that I really appreciate what 

you are doing. 

Again, I want to thank our witnesses as well as their staffs for 

bringing all of this about and helping us improve the system. 

Thank you very much, Mr. Chairman. 

[The prepared statement of Senator Akaka follows:]

PREPARED STATEMENT OF SENATOR AKAKA 

Thank you, Mr. Chairman. It is a pleasure partnering with you once again as we 

examine another high-risk government program. As you know, I also serve as the 

Ranking Member of the Armed Services Readiness Subcommittee, so this hearing 

is of particular interest to me. 

Last month, the Nation learned a painful lesson about the importance of logistics. 

After Hurricane Katrina struck, the National Guard responded with the largest domestic mobilization in history. Unfortunately, the Guard was under-equipped. According to Lt. General Blum, Chief of the National Guard Bureau, the Guard lacked 

sufficient trucks, radios, and night vision goggles to do their job properly. At the 

same time, food, water, and ice that had been pre-positioned in the region was stuck 

in warehouses. 

The Federal response to Katrina underscored three challenges of logistics:

• Asset Visibility, 

• Forecasting, and 

• Distribution.

Commanders must have the ability to: (1) see exactly what assets they have and 

where the assets are located, (2) accurately predict future needs, and (3) quickly 

move supplies from factory to foxhole. Defense logistics requires balancing the roles 

of supplier to the warfighter with accountability to the taxpayer. 

Department of Defense (DOD) logistics has been on the Government Accountability Office (GAO) High-Risk List since 1990, under various names, and the GAO 

has issued more than 72 reports in this area. While much more remains to be done, 

there have been some improvements. 

One improvement has been in distribution. In Operation Desert Storm, it took 

months to move supplies into the region before the invasion. Once the supplies got 

there, it was often difficult to determine what had been delivered. We heard many 

stories of troops tearing apart truckloads of supplies looking for particular items 

that they needed. 

In Operation Iraqi Freedom, we were able to move supplies into the region more 

quickly, and once we got there, we had much better accountability for what we had. 

One reason for the improved visibility was the increased use of Radio Frequency 

Identification, or RFID, to track supplies. 

This is a critical improvement, and one that we need to continue to develop. 

7

1The prepared statement of Mr. Kreig appears in the Appendix on page 27. 

Shortages of critical supplies, however, continue. In Desert Storm, we learned 

about shortages of desert camouflage uniforms and boots. In Operation Iraqi Freedom, we learned about shortages of chem-bio suits, armored Humvees, and body 

armor. It is just plain wrong that family members of those fighting in Iraq and Afghanistan needed to purchase, in many cases, critical safety gear for loved ones. We included a provision in last year’s Defense authroization bill requiring DOD to reimburse Service members—up to $1,100 per item—for protective equipment. The law 

required the Secretary of Defense to develop regulations for reimbursement by February 25, 2005, yet these regulations were not issued until yesterday, while we were 

considering Senator Dodd’s amendment to expend this program. The amendment we 

approved yesterday will help to ensure that our warfighters have needed protective 

equipment. 

Such problems are why we are discussing DOD’s strategic plan today. 

I am pleased that the Office of Management and Budget (OMB) and the GAO are 

working with DOD on the broad issue of defense logistics and have developed a 

measurable plan for improvement. 

The presence today of Mr. Johnson, Mr. Kreig, and Mr. Solis demonstrates the 

commitment to the request we made of OMB at our hearing last February that 

there be a clear strategy to review high-risk programs and get DOD off the highrisk list. I do want to add that I am especially pleased that Mr. Johnson has taken 

our request seriously, and I understand that all areas of the high-risk list are under 

close review by OMB. 

Thank you, Mr. Chairman.

Senator VOINOVICH. Thank you, Senator Akaka. That was a wonderful statement. 

We are fortunate to have three great witnesses today. Gentleman, it is the custom of this Subcommittee to swear in all witnesses. If you will stand, do you swear that the testimony you are 

about to give is the truth, the whole truth, and nothing but the 

truth, so help you, God? 

Mr. KRIEG. I do. 

Mr. JOHNSON. I do. 

Mr. SOLIS. I do. 

Senator VOINOVICH. Our witnesses this afternoon include Ken 

Krieg, Under Secretary of Defense for Acquisition, Technology, and 

Logistics. Mr. Krieg, we are honored to welcome you today; Hon. 

Clay Johnson, Deputy Director for Management at the Office of 

Management and Budget, who has been before the Subcommittee 

on many occasions. We really appreciate you being here today to 

show your concern for this issue; and William Solis, who is the Director of Defense Capabilities and Management at the Government 

Accountability Office. Mr. Solis, I am glad to have you here today. 

I have a great deal of respect for Comptroller General David Walker, but I like to see the people in the Government Accountability 

Office that handle the issue to testify before the Subcommittee because you are where the rubber meets the road. 

Mr. Krieg, if you will start the testimony. 

TESTIMONY OF KENNETH J. KRIEG,1 UNDER SECRETARY OF 

DEFENSE FOR ACQUISITION, TECHNOLOGY, AND LOGISTICS, 

U.S. DEPARTMENT OF DEFENSE 

Mr. KRIEG. Thank you, Senator. Chairman Voinovich, Senator 

Akaka, I know you are committed, as I am, to providing our 

warfighters with the best logistics support possible. That is why I 

am very pleased to take the opportunity to be here today to begin 

to outline the work that we have had going on in the Department 

8

and that OMB, GAO, and DOD are working together on supply 

chain logistics. 

The need to improve the DOD supply chain is clearly based on 

the strategic need. First, we need increased speed and agility in 

our military response, which means that our logistics processes 

must be as rapid and agile as our warfighters on the front line. 

Second, we need to adjust our sustainment to meet the needs of a 

coalition force that is much more mobile and distributed than ever 

before. This demands that we work more closely with both our customers and our suppliers to create more reliable and secure distribution systems. Finally, we need clear accountability for resources and outcomes. We need this particularly in logistics, which 

is funded primarily through operations and maintenance money 

and is distributed to every DOD facility and every DOD organization. 

Achievement of these objectives will enable DOD to transform its 

competitive advantage into a truly offensive weapon. This process 

will be driven by outcome performance and enabled by transparent 

accountability. 

Let me assure you that I have heard and the Department has 

heard your interest in this issue. We are developing and implementing an individual plan of action in partnership with OMB and 

GAO that we hope will produce—I believe will produce the type of 

results that will remove DOD’s supply operations from the highrisk list. This is not a list that anyone wants to be No. 1 on. We 

are also pursuing leading-edge commercial procurement practices; 

we are actively developing an integrated logistics transformation 

strategy; and we are improving our support to deployed forces with 

increased supply availability, reduced supply times, and smaller, 

more agile operational supply lines. 

I would like in just a couple of minutes to briefly summarize our 

current logistics posture and then follow up with highlights of the 

next steps. 

The current state of DOD logistics is strong and improving, particularly in terms of our core business, which is to project and sustain U.S. military power. 

Thanks in part to continued support from Congress, we have historically materiel availability to meet the warfighter needs. There 

are still problems, but overall the system is performing very well. 

We also have historically low back orders and cost recovery rates 

in organizations like the Defense Logistics Agency. 

When we look at the DOD supply chains, we can see that we are 

dealing with a huge business that has two fundamental responsibilities: First—and I share your views on these—we provide our 

warfighters—we need to provide our warfighters with the best support possible; and, second, we need to ensure that the taxpayers 

are receiving the best value for their money. 

To that end, we have made several logistics improvements to enhance both efficiency and accountability from 2001 to today. As you 

both noted, and obviously we are here today, we have built a set 

of initiatives that have accountabilities, that have metrics and that 

have timelines, and that are focused on improving asset visibility, 

forecasting and managing demand, and then improving distribution. 

9

To improve asset visibility, we have implemented, as Senator 

Akaka noted, Radio Frequency Identification on all loaded ocean 

containers and air pallets moving through our distribution system 

into Iraq and Afghanistan. We will continue to expand our program, and I would note, Senator Voinovich, that is the program 

that Alan Estevez led, and led to his award the other night. When 

combined with item unique identification, or every item has a number, if you will, and integrated in supply data management systems, we will lead DOD into an era of asset visibility across the 

enterprise. 

We are committed to employing best-in-class, not just in the Department of Defense, but best-in-class supply chains and supply 

chain practices. For example, for items in five key areas—food, 

fuel, medicines, clothing, and common shop materials—we use the 

commercial supply chains, hold very limited inventory inside the 

Department of Defense, and are realizing 24- to 48-hour turnaround times, response times. For those more military-unique 

items, we are moving towards consolidated purchasing and strategic buying practices, consistent with OMB guidance. 

We have improved that notion of factory-to-foxhole distribution 

capabilities by expanding the role of the Commander of U.S. Transportation Command to include synchronization of both the frontend and end-to-end distribution, not just port to port. 

More broadly, we have also implemented life cycle management 

and systems and notions like performance-based logistics for new 

weapons programs. These efforts place assets back in the hands of 

our warfighters much faster and will allow us to reduce inventory. 

The last thing I would note, before getting to the next steps, is 

that we are committed inside the Department to growing our people in this area. Obviously, the intellectual property that drives 

these kind of systems is so valuable, and I know of this Subcommittee’s hard work in that area. We thank you for that, and we 

hope that we will live up to the kind of standards you have set for 

us. 

Finally, I would like to touch on a few of our major initiatives. 

First, we have put some benchmarks and some measures into the 

performance plan, but we continue to look to the best of industry 

to provide benchmarking to improve our performance. 

Next, we plan to accelerate and expand several strategic initiatives, as I said, life cycle management, performance-based logistics, 

and Radio Frequency Identification. 

We also plan to build on successful application of our commercial 

supply chains and apply similar practices for war reserve consumable materials as well. This will enable us to draw upon the 

commercial market for surge requirements while also reducing our 

need to hold war reserve inventory. 

We also plan to develop strategic performance goals for our key 

logistics capabilities that will guide both capital investment and 

process improvement. 

Finally, I would like to note that we sent to you last week, which 

I am sure you have not had time yet to go through, our Enterprise 

Transformation Plan, which lays out the data strategies that support the kind of business processes we are talking about here, and 

obviously data is a huge enabling factor in driving better performVerDate 0ct 09 2002 13:44 Feb 17, 2006 Jkt 024440 PO 00000 Frm 00013 Fmt 6633 Sfmt 6601 C:\DOCS\24440.TXT SAFFAIRS PsN: PAT
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1The prepared statement of Mr. Johnson appears in the Appendix on page 39. 

ance throughout the system. We have plans, but the challenge is 

to turn these plans into action and those actions into outcomes. I 

believe our strategic actions are responsive to the needs of our customers, and we also need to be responsive to our ultimate funders, 

the American taxpayers, and consistent with the recommendations 

of GAO and OMB, and aligned with the intent of this Subcommittee. 

Thank you for having us. Thank you for staying in tune with us. 

Thank you for the challenges you will put in front of us in the 

years ahead. I look forward to working with you. 

Senator VOINOVICH. Thank you very much, Mr. Krieg. Mr. Johnson. 

TESTIMONY OF HON. CLAY JOHNSON III,1 DEPUTY DIRECTOR 

FOR MANAGEMENT, OFFICE OF MANAGEMENT AND BUDGET 

Mr. JOHNSON. Mr. Chairman, Senator Akaka, thank you for having me. I just have a few remarks. I am delighted to be here to say 

some really good things about the work that DOD has done on supply chain management. 

They have developed a plan to address the risks associated with 

supply chain management, which involves so much money at the 

Department of Defense, and a plan that can be used as a model 

for how the Department of Defense can and should and will address the risks in all the other high-risk areas, and how the rest 

of the government should lay out their plans for addressing the 

risks in their areas. It is a really fine plan. And one of the keys 

to its success, I think, is there are lots of metrics, there are lots 

of clear identification of what success means. Success will be when 

they have taken it from this level, that level, the response times 

from this to that. Very clear goals, measurable performance goals, 

and also a very clear definition of what has to be done by March 

of next year and September of the following year and so forth, and 

by whom and what is their phone number and what is their E-mail 

address. So lots of clarity and lots of accountability. Those are two 

of the four things that we have proclaimed as important in getting 

anything done, particularly in the management area, but it is probably true in life, that you need to have a real clear definition of 

success. You need to have clear accountability for a very clear action plan, for a detailed action plan, detailed management, true 

definition of success, and clear, unadulterated commitment to make 

it happen. All four of those components exist at the Department of 

Defense from the Secretary on down, and I have no doubt that Ken 

and his team are going to do a wonderful job of implementing this 

plan and show the rest of the Federal Government and Congress 

what is possible, how much method can be brought to the supply 

chain management madness at the Department of Defense. 

We talked earlier about the 25 items on the high-risk list. For 

6 of the 25 items, there are plans that have been worked on by the 

owner of the initiative with GAO, and a general plan has been 

agreed to, and it is in place, and the agencies are responsible for 

implementing that plan. For another 7 of the high-risk list items, 

11

1The prepared statement of Mr. Solis appears in the Appendix on page 41. 

there is a plan that has been developed. GAO is looking at that and 

addressing final issues and so forth. 

For another 9 high-risk items, there is a plan in development. It 

has not been finalized to the point where it can be brought into 

GAO, but GAO has been involved in initial discussions on those 

plans. 

There are two items that we are not yet tracking, and there is 

one item that we are not intending to track. That is the U.S. Postal 

Service. 

But, anyway, there is lots of progress, lots of activity across the 

Federal Government to look at these high-risk list items. But the 

supply chain management at the Department of Defense is—one 

plan has been wonderfully laid out. There is strong commitment, 

and I think it will be very interesting, as you said, sir, over the 

next 3 years, 3-plus years, before this President leaves, to see just 

how much can be accomplished, because I think there is a lot to 

be accomplished, and a lot will be accomplished, and I think DOD 

will be the better for it, but all the other high-risk list items will 

be better for it also. 

Senator VOINOVICH. That is very impressive, and we look forward to working with you, Clay. Again, if there are things that you 

need from us, you should let us know. 

Mr. Solis. 

TESTIMONY OF WILLIAM M. SOLIS,1 DIRECTOR, DEFENSE CAPABILITIES AND MANAGEMENT, GOVERNMENT ACCOUNTABILITY OFFICE 

Mr. SOLIS. Mr. Chairman, Senator Akaka, I appreciate the opportunity to be here today to discuss supply chain management within 

the Department of Defense and, more specifically, DOD’s plans to 

begin resolving problems and show progress toward the long-term 

goal of removing supply chain management from the list of highrisk areas. 

At the outset, I would like to thank the Subcommittee for its continued encouragement of OMB’s effort to work with the agencies 

over the next several years to reduce risk in each of the 25 areas. 

The active involvement of this Subcommittee is essential to ultimately ensuring DOD’s progress in addressing and resolving its 

high-risk areas, while enhancing public confidence in DOD’s stewardship of the hundreds of billions of dollars of taxpayer funds it 

receives each year. 

The message this afternoon is focused on two main points: First, 

I will discuss why we have listed DOD’s supply chain as a highrisk area; and, second, our assessment of DOD’s plan to improve 

supply chain processes. 

In summary, Mr. Chairman, DOD’s plan is a good first step in 

improving supply chain management in support of the warfighter. 

Notwithstanding this positive first step, the Department faces challenges and risks in successfully implementing its proposed changes 

across DOD and measuring progress. 

With regard to my first point, for 15 years DOD’s supply chain 

management processes have been a high-risk area needing urgent 

12

attention. In 1990, we began a program to report on government 

operations that were at high risk for fraud, waste, abuse, and mismanagement. The program serves to identify and help resolve serious weaknesses in areas that involve substantial resources and 

provide critical services to the public. That year, we identified the 

Department’s inventory management of supplies in support of 

forces as high risk due to a long history of problems such as excess 

inventory levels, inadequate controls over items, and cost overruns 

of logistics systems. Since then, our work has shown that the supply problems adversely affecting the warfighter—such as requirements forecasts, use of the industrial base, funding, distribution, 

and asset visibility—were not confined to the inventory management system, but involved the entire supply chain. 

Many of these problems reoccurred in OIF. For example, we 

noted that due to distribution and asset visibility issues, a backlog 

of material accumulated at distribution points and vehicles were 

cannibalized due to unavailability of parts. We also noted a $1.2 

billion discrepancy between material shipped to the theater of operations and material acknowledged as received. 

In regard to my second point, DOD’s plan to improve supply 

chain management, as I mentioned, provides a good start and 

framework for addressing some of the long-term systemic problems. 

However, the Department faces many challenges and risks in its 

efforts to improve the supply chain. Successful resolution of these 

problems will require DOD to diligently complete parts of the plan, 

fully implement the changes across the Department, and measure 

progress. In addition, resolution of these problems will require investment in needed information technology, a critical enabler that 

will provide the essential underpinning to improving supply chain 

processes. 

We used five criteria to assess DOD’s plan: Does it include a 

strong commitment by top leadership? Does it have sufficient capacity, that is, people and resources? Does the plan contain corrective actions, a program to monitor these actions, and a means of 

measuring progress? I will briefly touch on each one of these. 

First, in regard to the strong commitment by top leadership, the 

formulation of DOD’s plan and its endorsement by Ken Krieg is 

evidence of a strong commitment by top DOD leadership. However, 

it is important for DOD to sustain this leadership as it goes forward in implementing this multiyear plan. Because improving supply chain management may be one of several high-risk areas DOD 

will be addressing at one time, it may take the involvement of the 

Deputy Secretary of Defense or a Chief Management Official to ensure that a long-term departmentwide commitment is sustained. 

Second, in regard to capacity, DOD has the people and other 

resources to draw upon to resolve its supply chain management 

problems, but most of them are under the direction of the military 

services and DLA. Therefore, it is important for the Department to 

obtain the necessary resource commitments from these organizations. 

Third, in regard to the corrective action plan, DOD’s plan for 

improving supply chain management addresses root causes for 

problems in three key areas—requirements forecasting, material 

distribution, and asset visibility—that we frequently identified as 

13

impeding effective supply chain management. However, we are concerned about the time frames for completing some of the plan’s initiatives. For example, DOD’s milestones for implementing and improving information technology systems under it, Business Management Modernization Program are not specifically linked to improvements in the three focus areas, and until all these initiatives 

are substantially implemented across the Department, we will not 

know whether they provide effective solutions. 

Fourth, in regard to program monitoring, while DOD’s plan cites 

a general methodology for evaluating progress, the Department has 

not provided all the information needed for this to occur. For example, DOD has not specified all the metrics and systems to be used 

to track progress. Until it does, DOD cannot assure comprehensive 

monitoring of progress within the Department or validation by 

independent groups. 

Last, in regard to DOD’s ability to demonstrate progress in implementing corrective measures, DOD has the ability to demonstrate some progress in implementing the initiatives. However, 

it has not identified all of the metrics necessary to demonstrate 

how the initiatives are affecting supply to the warfighter. In addition, while DOD’s plan identified some viable overall supply chain 

management performance metrics, such as level of backorders and 

the amount of customer wait time, it does not have cost baselines 

or cost performance targets. Until DOD tracks the additional cost 

metrics and supply performance targets needed, it will be difficult 

to convincingly demonstrate progress in improving supply chain 

management. 

That concludes my statement. I would be happy to answer any 

questions. 

Senator VOINVOICH. Thank you very much, Mr. Solis. 

I will begin the questioning in reference to the last thing you 

said, Mr. Solis. 

Mr. Krieg, in the area of metrics and systems in place to monitor 

progress. Would you respond to what he just mentioned in terms 

of the feeling that maybe we are not yet there with the plan? 

Mr. KRIEG. Sure. I believe—and we have begun this work—that 

we will get continually smarter both about what matters and how 

you measure it, and then how closely you can track it and perform. 

So we have begun—we started with the baseline of the way the private sector thinks about success in supply chains—customer wait 

times, back orders, those kinds of issues. Many of those related to 

the way the Defense Logistics Agency does business with consumables and supply. 

And so we have started to build those out. We contract some of 

them. Some of them we contract with some depth. But there are 

others that we do need to build, and we have recognized that. Part 

of the Enterprise Transformation Plan talks about the data strategies that will support an ever growing ability to track and see and 

understand. Second, part of the work we have got under way in the 

Quadrennial Defense Review, which is our once every 4 years looking at strategy driving changes in the way we do work inside the 

Department of Defense, we have added a business practices portion 

to it this year. One of those business practices—and I co-chair that 

group with Duncan McNabb, who has been J–4, the Joint Logistics 

14

Director inside the Joint Staff. Duncan and I have been working 

on the supply chain. And so we have committed that we are going 

to go out to the next generation of benchmarking to really build the 

kinds of measures that will have us understand the relationship 

between what we say we are going to do and what the outcomes 

are. 

So I would say we have the given capabilities to do this, a recognition that data strategies and data systems providing that information as opposed to going out and asking for individual goals 

every time you want to know something, is clearly the management 

approach that we are headed on. 

Senator VOINOVICH. Do you think it is possible to have performance metrics in place in 3 or 4 months? 

Mr. KRIEG. I think what you will see, sir, is that there will be 

a growing set of metrics and a growing set of competencies as we 

learn how to go get data and we learn how to tie together the various pieces in terms of outcome. So I believe in 3 or 4 months we 

will show——

Senator VOINOVICH. I am interested in making sure the Department has metrics in place to measure their success. I have always 

said, if you can’t measure it, don’t do it. 

Mr. KRIEG. What gets tracked gets done. 

Senator VOINOVICH. Exactly. The other thing I would like to discuss is cost savings. People have been asking me why am I spending all this time on supply chain management, because they know 

it is going to be a major commitment. Do you have a cost baseline? 

Do you know how much money can be saved? Do you know what 

you are spending now? If this plan is implemented, are we going 

to be able to show taxpayer savings? In other words, we are working harder and smarter and doing more with less, doing more for 

the warfighter. 

Mr. KRIEG. The answer to your full question is no, I don’t know 

exactly what that is, but, yes, I believe that there is opportunity, 

and that is exactly, right, getting a common resource baseline, understanding—the answer is we can account for and we can show 

you in the budget lots of ways of looking at logistics. We are going 

to try to—we are going to come within the Department, and then 

along with these gentlemen within the government, to a common 

way of looking at this. 

What is the point? The point is everyone is doing things differently, and so you have to go together across the enterprise. We 

have got that work underway. I believe that is one of the really important parts to tying inputs, what we put in the budget, to outputs, what are the measures of success. When you can do that, 

then you have the tools to really measure performance and drive 

outcomes. 

Senator VOINOVICH. When I was Mayor of Cleveland, we did a 

comprehensive management study called the Operations Improvement Task Force. It took us 6 months to complete the study. We 

then went back to look at how much we saved the city. I understand it is not going to be easy to evaluate the Department in this 

manor but it is very important to understand financial savings to 

be able to measure success. 

15

Mr. KRIEG. I think the key to success there is not a one-time 

study to see what it looks like, but make it a part of the way you 

manage, and that is how it becomes the forefront in people’s minds 

over time. 

Senator VOINOVICH. Senator Akaka and I have been working on 

human capital issues for sometime now and have made it a priority 

in the Federal Government. Could you share with us the steps you 

have taken to incorporate human capital concepts into the plan, including the evaluation of your core competencies of your employees, 

succession planning in the event of retirements? I am really concerned about the issue of senior people taking early retirement. 

Could you comment on how you are identifying core competencies 

you need and what kind of succession plans are in place for those 

employees retiring? 

Mr. KRIEG. Let me tell you that today it is not in the plan you 

see in front of you because that was not the way we defined—that 

was not the way the high-risk plan defined the problem. That being 

said, the three of us committed that there was more to working on 

supply chain over time than just this plan. 

I agree with you, and so as I look at the organizations that comprise this—for example, I think one of the most advanced in thinking through this is the Defense Logistics Agency. It is now tracking 

its workforce, understanding—using combinations of client surveys 

and all the kinds of tools you would use to really build down the 

business process and human capital strategies and link those together over time. 

I would not contend that the entire Department of Defense supply chain is that advanced, but I believe that it is absolutely critical that we bring the human skills and human competencies along 

in order to perform over time. 

As you have noted so many times, if you look at the average age 

of the Department of Defense workforce, it is 471⁄2, 49, 50—it depends on how one looks at that—with an extensive average age of 

service. It is time to begin using—to drive that as a key performance responsibility of management, and I do believe that tools like 

the National Security Personnel System will have the tools. Now 

it is up to us——

Senator VOINOVICH. Mr. Krieg, if you were to do an analysis of 

your workforce to determine if you are lacking in core competencies 

to determine retirement perspectives. Who would do this for you? 

Mr. KRIEG. First of all, I would ask Frank Anderson, who is the 

President of the Defense Acquisition University, to pull this together using the—bringing the whole community together, the acquisition technology and logistics workforce. So we have started 

that. 

But I will tell you that looking down into the details, it will be 

part of charging each of the large management leaders like Keith 

Lippert in the Defense Logistics Agency with being able to do that. 

So we are going to try to set standards at the Department of Defense level; then put those managers in leadership positions in 

charge of understanding their data, understanding their performance, and getting back to us. 

So that is the technique we are going to use. It is a large workforce, and so managing it all from central, we need to set the 

16

standards, we need to set the requirements, and then we need to 

hold people accountable in that process. 

Senator VOINOVICH. I want you to know I am very interested in 

this area, and I will continue to follow-up with talking to you on 

this issue. As I have said before, we need qualified people to get 

the job done. 

Mr. KRIEG. Yes, sir. 

Senator VOINOVICH. Mr. Krieg, with all of the processes you plan 

to put in place, I am interested in seeing how you are going to ensure that they become part of the culture of DOD. I plan to stay 

on top of this issue, to make sure that long after you leave the Department the processes that we are discussing today are institutionalized. 

I have gone way beyond my time. Senator Akaka. 

OPENING STATEMENT OF SENATOR AKAKA 

Senator AKAKA. Thank you very much, Mr. Chairman. 

I want to thank our witnesses for their testimony, but before I 

begin my questions, I would like to make a few observations. 

It seems to me that defense logistics and its problems are longstanding, complicated, and directly tied to poor information systems, which is why I am pleased there is committed leadership by 

DOD and by OMB on this issue. However, previous attempts at improvement have failed because the plans were not institutionalized. 

Only through high-level commitment and strong oversight by Congress and OMB will this plan succeed. 

I also want to mention what the Chairman just talked about, 

human capital. It is true, as he said, that we will be facing a huge 

problem in the near future when the baby-boomers begin to retire. 

And we really need to work on that together. 

These are questions I have for Mr. Solis and Mr. Krieg. Mr. 

Krieg, you have testified about the expanded role of U.S. Transportation Command, TRANSCOM, in the distribution process. However, in August 2005, GAO reported that DOD has yet to finalize 

plans to define the role of TRANSCOM as the distribution process 

owner, or DPO, to improve the efficiency of the distribution process. 

Mr. Solis, can you please explain the importance of TRANSCOM 

to DOD logistics and describe the problems that GAO has found in 

this area? 

Mr. SOLIS. Senator, I would be glad to. During the initial phases 

of OIF, distribution and visibility, but particularly distribution, 

were some major issues in terms of not only getting the equipment 

and supplies in, but then distributing them to the tip of the spear, 

so to speak. In September 2003, the Secretary of Defense, recognizing this problem, designated TRANSCOM as the distribution 

process owner. With that, around December 2003, to my recollection, the initial joint distribution operations center was set up over 

in the Gulf. And since that time, it has been operating, and the 

flow of supplies has improved greatly. 

Our concern has been that distribution has been an ongoing 

problem going back to Operation Desert Shield and Desert Storm. 

And until that gets solved and codified and institutionalized into 

doctrine, for example, for the next operation, even though everyVerDate 0ct 09 2002 13:44 Feb 17, 2006 Jkt 024440 PO 00000 Frm 00020 Fmt 6633 Sfmt 6601 C:\DOCS\24440.TXT SAFFAIRS PsN: PAT
17

body around the table has agreed that this is a good way to operate, you may have different players, different personalities involved, and people aren’t going to know that this is the way that 

we did it before and it was successful. Until you institutionalize 

that, until you put it in the training and doctrine, that is where 

we see the problem for the next operation. 

Senator AKAKA. Thank you for that response. 

Mr. Krieg, what is the current status of the DPO directive? And 

when can we expect it to be finalized? 

Mr. KRIEG. I can’t give you an answer to the last question as to 

when, but let me tell you the status. Many of the decisions we 

made as we were going through this was to not write the directive 

until you had enough experience to know what it was that you 

were writing the directive about. There were lots of drafts that 

floated around, but we decided to keep that last step open until we 

had gotten more confidence on notions like the joint distribution 

approach—and I am going to apologize, I am not going to get the 

acronym right—the JD–DOC, making the joint logistics commander 

in the theater really responsible for seeing things. Those kinds of 

things are now coming into place. I was just with General 

Schwartz, the new commander. We were just making a joint briefing and discussion with the deputy as part of the Quadrennial Defense Review Business Practices that I co-chair, supply chain, institutionalizing the DPO, the distribution process center, and incorporating these new concepts that have been developed during wartime into doctrine are key goals that we have set out for ourselves. 

So I would expect—we are committed to doing that. We believe 

it is the right thing to do. Innovation in wartime is a key opportunity. Our challenge is to make the way you do business in wartime the way you try to build it into your structure. And so we 

agree with that approach. 

Senator AKAKA. I am glad to hear that and of your plans to bring 

that about. 

Mr. Solis, one of the reasons that DOD logistics was identified 

as high-risk is because of the excess inventory level. While supply 

inventory levels are down from 1990, they have been increasing 

again in recent years and are currently at $77 billion. 

My questions are: How much confidence does GAO have in the 

inventory numbers? And can you explain the reason for any doubts, 

if you may have them? 

Mr. SOLIS. Senator, as you know, over the years we have not had 

the ability to render opinions on DOD’s financial statements, and 

I don’t think that is any different today. I think the number itself, 

it is what it is, and that is the best number that is available at 

this point in time. But in terms of saying that is an absolute right 

number given the financial management problems that the Department has had and to say that is a good number, I don’t think we 

could absolutely say that. 

Senator AKAKA. As followup, Mr. Solis, how does GAO plan to 

monitor implementation of the plan and validate results? 

Mr. SOLIS. A couple of different things that we plan to do. One, 

obviously, we will look at each one of these initiatives in terms of 

where they are in terms of their progress as we go throughout the 

next year and a half or so. We will be sitting down with Ken’s 

18

folks, going through the metrics, the expected outcomes, to see 

where they are at on that. 

We also will be doing individual jobs which will look at the supply chain in total rather than just individual initiatives. And as 

you are aware, every 2 years we report out on the status of the 

high-risk series, which will be due in January 2007. 

So that is kind of our general game plan to follow-up on this, and 

we also have engaged the Department of Defense IG and the audit 

services of the individual Services to also cooperate and work with 

us on making sure that we have covered a number of things in 

terms of the high-risk area. 

Senator AKAKA. Mr. Johnson, although my time is up, let me ask 

how OMB will remain engaged on the implementation of this plan? 

And when can we expect to see results? 

Mr. JOHNSON. Well, on this particular supply chain plan, we 

talked about sitting down with DOD and the DOD branch at OMB 

and getting an update on what we have done and what we were 

supposed to do within the last 6 months and what did we do and 

how does it look and do we need to recalibrate where we are trying 

to go or action plan, or whatever. And so we will do that. 

We are available, I know DOD is available, GAO is available to 

keep you all informed in whatever fashion you all deem most appropriate about DOD’s progress on this. But we intend to stay in 

touch with them, and also then use their example to instill the 

same sort of discipline and follow-up with all the other high-risk 

areas. 

Senator AKAKA. Thank you. My time has expired, Mr. Chairman. 

Senator VOINOVICH. Thank you, Senator Akaka. 

Mr. Krieg, it is my understanding that each Service and Agency 

within DOD has its own supply chain management education programs. Since the Department’s supply chain management plan includes the development of a joint theater logistics program, will 

DOD create a joint logistical training program to ensure that the 

military and civilian employees in each of the Services are trained 

under the same curriculum? And if so, should these be combined 

under the distribution process ownership program established by 

the Secretary of Defense? 

Mr. KRIEG. Let me take that one for the record and get back to 

you with exactly where we are and where we are going, because 

I am not up to speed on that in particular. But, obviously, the more 

you move to a common business process, a data approach, and the 

more you have a common data system, then the way you train people and how you grow them should move in the same direction. 

So as a matter of principle, I would say yes, but I have not 

worked the training part of this yet, training and education part 

of this year to know—to be able to tell you where we are. 

I don’t know, Bill, if you have a sense. 

Mr. SOLIS. Senator, I know it has been a concept that has been 

discussed in terms of, for example, getting the Defense Acquisition 

University involved in that concept. I don’t know that it has gone 

any further than the discussion phase. I know in my discussions 

with the folks at TRANSCOM, they have been pushing this kind 

of a concept of a joint logistician, which, again, I think is, at best, 

in discussion and it may be at the conceptual stages at this point. 

19

But I think it is worth pursuing given the fact that if you go to 

a joint theater logistics management process or model, I think everybody needs to understand how you are going to work in a joint 

environment, particularly as it pertains to logistics. 

Senator VOINOVICH. My understanding is that each have a different system. Is that corrent? 

Mr. SOLIS. They are using different systems, yes. I think—again, 

I am going back to OIF. I know even within the Marine Corps 

there were two different supply systems, which caused a lot of 

problems. I think they have corrected that now. I think there are 

some differences in each of the supply systems. 

Senator VOINOVICH. And the concept here would be that they 

would be universally the same? 

Mr. KRIEG. I think if we can separate information system from 

data level, I think our notion is that you want to move to common 

data. Whether you put it in a single information system for all the 

Department of Defense, which is a fairly complex program management and development, or whether you want to have a limited 

number of systems that produce common data, thereby reducing 

the risk in implementation, it would tend toward the latter part, 

than to try to get one information system, because all the way 

across the Department of Defense as the exact same system, those 

are challenges to build them that way. 

Senator VOINOVICH. The thing is, and this is probably elementary, and you will say, ‘‘Why did you ask me this question?’’ But 

we had the Army and we had the Marines and we had the National Guard and we had the Reserves, and the other Services. It 

seemed like when I talked to our guys from Ohio that were there, 

they had their own stuff in terms of what they needed. 

Is there any communication back and forth between the Services 

as to the up-armor Humvees, for example? How does that all work? 

Mr. KRIEG. I do think there is—as we move to this joint theater 

distribution concept, where the joint logistics commander is integrating the needs of the various organizations in the field and then 

helping set the demand pattern and the flow pattern back to the 

United States and on back in the supply chain, you will begin to 

move that forward. There is a lot of communications among them, 

but there are also specific needs of each of the individual units and 

each of the individual Services. So you want to figure out how to 

get a common supply chain that can manage the differences, can 

allow a Service—because they have different equipment. So you 

want to be able to integrate the supply chain but still manage the 

different needs of the different Services in the field. So that is at 

least the concept, and I do believe over the last couple of years, 

there has been a significant improvement in the concept of joint 

theater logistics and its implementation. I don’t know what you 

have seen, Bill. 

Mr. SOLIS. Yes, in terms of Humvees and the up-armor Humvees, 

the requirements that come out are coming out as theater requirements. They are not, as far as I know they are coming out for specific Services, but they are also coming out as theater requirements. 

Senator VOINOVICH. One of the big criticisms that I have heard 

about Iraq is that we really didn’t understand the religions and 

20

curtural views of the people. But seting that aside, the preparation 

of going to war in Iraq and having the necessary supplies available 

to carry out the mission is an essential part of planning for war. 

Before we undertake these missions, we should have a pretty good 

idea of what it is that we need to be successful. 

In doing this, we have to assess what the various Services need. 

For example who determines how many up-armor Humvees each 

Service needs? Rather than having the individual Services purchase their own, should we have one group purchase for all of 

them? 

That is what we are trying to do, bring some sense to this and 

get systems in place so that we can do this efficiently? Last night, 

we had a vote on the floor of the Senate for additional funding for 

up-armor Humvees. I voted for it, which I ordinarily never do because I don’t want to spend more money. 

I was at a meeting sometime ago with Secretary Rumsfeld, to 

discuss up-armor Humvees. He said, ‘‘Well, we are doing the most 

we can at 250 a month.’’ And I said, ‘‘I know the people that manufacture these things, and they can do 450 a month.’’ Here is the 

Secretary of Defense, and he doesn’t know what the capacity is out 

there to get the job done. 

In my opinion, we could have delivered these Humvees a lot 

sooner had somebody really known what the details were in terms 

of the capacity to manufacture and deliver them. 

With continued oversight I am hopeful that we are going to get 

this done. 

Mr. KRIEG. We will be glad to come show you the details of how 

that proceeded and what we learned from it. I would note that—

and I am not trying to defend where we were with up-armor 

Humvees—it is important to understand the way we think about 

this that the needs in operation, the needs will evolve and change. 

The clear challenge, particularly in the kinds of wars, the kinds of 

events we will deal with in the future, the clear challenge of the 

supply chain is to be agile so we can react quickly to changes in 

need, changes in demand, and, therefore, changes in supply. That 

is going to be more the future than it was the past, and that is 

clearly the kind of challenge we ourselves have put in front of us, 

is to be able to react quickly. That is why understanding demand, 

being able to track it——

Senator VOINOVICH. In terms of demand, do you turn to the war 

fighter in the field to determine what is needed to get the job done? 

Mr. KRIEG. You want to push demand as far forward as possible. 

That is the clear lesson from business, the clear lesson here. And 

integrating operations planning and supply chain planning as part 

of the way you do business is one of the core challenges as we go 

forward. 

Senator VOINOVICH. Is there a section in the Defense Department that anticipates contingencies? 

Mr. KRIEG. It won’t tell you everything, trust me, but, yes, that 

is what planners try to do. They try to anticipate contingencies. 

They try to think through what the needs will be. They try to work 

back and say does the supply chain there perform. And making 

that supply chain more responsive is clearly one of the key challenges in a world where the competition is ever changing, if you 

21

will, and the need to change quickly is part of the strategic requirement. 

Mr. SOLIS. Senator, if I could add one other thing, as we noted 

in the plan, one of the high problem areas or root cause areas has 

been requirements for forecasting, and that has been a continual 

problem, whether it is during peacetime or during operations. And 

we noted in some cases where things like batteries or tires were 

sorely underestimated even in terms of initial needs because requirements had not been updated. And so I think that process is 

something that needs to continually be looked at, whether it is for 

tires, batteries, up-armor Humvees. In the case of up-armor 

Humvees, there was a change in theater requirement. In other 

cases where you had standing war reserve materials, some of those 

were woefully inadequate in terms of updating the models and 

things of that nature. 

So those requirements need to be constantly updated to make 

sure that the warfighter has what they need when they need it. 

Senator VOINOVICH. It would seem to me that within the logistics 

area you would have experienced people who had been through the 

mill, had previous experience, that would be asking the right questions of the people who are supposed to be coordinating supply 

chain management. 

Mr. SOLIS. And some do, and I think, again, from some of the 

work that we did recently—and we issued a report in April of this 

year—we looked at, again, things like batteries or wartime models. 

Some of those models had not been updated since 1999, and some 

of the uses for batteries had expanded beyond what was being used 

in 1999 from about, I don’t know, 10 items to about 50 or 60 different items. And so when they went to war, the demand had shot 

up tremendously based on an old model. 

So I think it is incumbent to make sure that we are always making sure that the requirements are as up-to-date whether it is for 

peacetime usage, war material usage, or whatever. 

Senator VOINOVICH. Senator Akaka. 

Senator AKAKA. Thank you, Mr. Chairman. 

Mr. Krieg, let me ask you a question that has bothered me for 

a while, and hopefully you have an answer. What do you see as the 

root cause or causes of the logistics problems that have plagued 

DOD for so many years, and how does the plan address these 

causes? 

Mr. KRIEG. Well, several things, and I think we have talked 

about a number of them. 

First of all, you need to understand what you have. So item visibility is really important so you know what you have and where 

it is. 

Second, you need to understand what it is you are going to need 

so that demand forecasting is really critical. 

Third, you have got to be able to link all of the people who are 

participating in what you want to have—what you now have and 

what you can produce so that they can all see that flow. 

I think that is the kind of plan—that knowledge of what you 

have, the knowledge of what you are going to need, and the knowledge of what you can produce—bringing those three together and 

the roles and responsibilities to make that happen are what supply 

22

chain is all about. And I do believe that we have tried in this plan 

at least to begin building those areas out. 

As Mr. Solis said, is this plan the end? No. This plan is the beginning, and we will learn as we go through it. But I think those 

are at least three of the key areas. 

Senator AKAKA. Would anyone else want to add to that list? 

Mr. SOLIS. I would echo that. Of course, in our plan we said 

three: Forecasting, visibility, and distribution. But in the largest 

context for us for the high risk, it has also been accountability and 

sustained commitment. And I think what I do like about the plan 

is that for each one of these items, initiatives, there is a name and 

an E-mail address clearly indicated for each one of those initiatives. So there is accountability. There are people that we can go 

to and say, OK, where are we with this? 

The other thing, I think, though, is sustained commitment, and 

I think we have that here. The question comes up—and I hope Mr. 

Krieg would stay around for a long time. Can that commitment be 

sustained after Mr. Krieg leaves? And I think that it is incumbent 

upon all the high-risk areas in terms of really dealing with the 

issue. 

Senator AKAKA. And I liked what you had said earlier, that we 

need to update whatever information we have on these items. 

Mr. Krieg, how does this plan relate to the DOD logistics transformation strategy and the commercial benchmarking road map? 

Mr. KRIEG. I would say that this part of the plan, this part of 

the high-risk series, is a part of the broader logistics road map. If 

you think about our overall logistics and supply chain responsibilities, we really have three kinds of economies we work in. We have 

a large-item, large capital management economy—the depots, the 

big weapons systems, the maintenance and sustainment of those 

systems. We have commodity supplies that the Defense Logistics 

Agency does. And then we have the way we distribute and sustain 

in an operation. All three of those are a little different. All three 

of them are dependent—success in operations is dependent on all 

three of them working together. 

So this concentrates on the inventory management part of the 

supply chain. The overall logistics transformation strategy would 

then bring in those other areas. And then I think lastly, adding to 

it, a part of continuous process improvement. How do you continually get better? How do you tighten your performance characteristic and make it more efficient? So we use a technique—we 

are beginning to build a technique out inside the Department—it 

is already alive and well in many parts of the Department—called 

Lean Six Sigma. It is a common commercial technique that allows 

you to both shorten your process, make your process more efficient, 

and then make your results more effective, quality management. 

And it puts both those techniques together, and I think it will be 

a critical part of driving this kind of change over time. 

Senator AKAKA. My last question is something that the Chairman and I have thought about and are always trying to find an answer. I would like to address this to Mr. Solis, although if any of 

you want to comment on it, that is fine, too. 

So here is the question: Are there areas in the improvement plan 

that are outside the span of control of Mr. Krieg? And how would 

23

the creation of a CMO, or chief management officer, affect the implementation of the plan? 

Mr. SOLIS. As I mentioned earlier, I think the one thing that a 

CMO does in this case is give you sustained management, as we 

have mentioned, for a 7-year period to make sure that you have 

sustained look-sees at the process of improving supply chain management. 

I think the thing with the CMO also, it does give the strategic 

point of view in terms of making sure that while Mr. Krieg is implementing some things over here, to make sure that we have 

things at the DOD level, at the Secretary level, that meet the goals 

of the Department as well. 

So I think it is important at some point maybe to consider having 

a CMO to make sure that those things are taken care of. 

Senator AKAKA. Mr. Krieg. 

Mr. KRIEG. We have had wonderful conversations about this, as 

I have with the Comptroller General as well. As I think the Deputy 

sent a note up here or testified in his hearing, we are going to look 

at that issue. We will consider it as time goes on, and we can talk 

about individual views over time as we work on this. But I think 

in my view, the Department of Defense, when it functions well, 

does have a chief operating officer. I believe it is the Deputy Secretary of Defense. I believe the Acting Deputy Secretary of Defense—you all can work on that part—does believe that he is accountable for that and does believe that it is his responsibility to 

look across all the tools of the Department. 

That being said, we also work with several important groups that 

help us do that—the Defense Business Systems Management Committee. You asked about commitment of the DOD management to 

information processes and information systems. The Deputy chairs 

that. It has got all the senior leaders—me, the Service Secretaries, 

Marty Schwartz at TRANSCOM, Keith Lippert at DLA—who come 

in and are working on this and we meet once a month on it. 

I have a Defense Logistics Board that looks within that context 

at logistics, Norty Schwartz, Keith Lippert, the Vice Chiefs. We are 

all committed to work this issue. 

And so while one person is important to have the leadership 

drive, it is important in an area as complex as this one to have all 

the parts of the leadership team pulling together because the 

changes are significant, they do cross—and in order to be really 

successful, there needs to be cultural and sustained ownership by 

those who are going to be there regardless of who the individual 

sitting in whatever the top box is. 

And so I think there is a lot we need to do, and I do believe that 

we are trying to put the kinds of broad-scale management tools and 

broad-scale management efforts in so we can integrate these kinds 

of changes over time. 

Senator AKAKA. Without leaving the Hon. Clay Johnson out, do 

you have any comments on this? 

Mr. JOHNSON. No, sir. [Laughter.] 

Senator AKAKA. Thank you. Mr. Chairman, my time has expired. 

Senator VOINOVICH. Thank you, Senator Akaka. 

I have additional questions, but I will submit them to you in 

writing. I would like to finish this by saying that I am really interVerDate 0ct 09 2002 13:44 Feb 17, 2006 Jkt 024440 PO 00000 Frm 00027 Fmt 6633 Sfmt 6601 C:\DOCS\24440.TXT SAFFAIRS PsN: PAT
24

ested in the metrics of this plan. Mr. Solis, has GAO determined 

what metrics you would use to measure whether or not we are 

making progress on the plan that has been put together? 

Mr. SOLIS. Well, specifically what I was talking about or referencing in the metrics themselves—and Ken shared or his folks 

shared some of the commercial benchmarks and also what is in the 

plan—give kind of a pulse check of the general health of the supply 

chain. What my comments were really going to, if you look at some 

of the initiatives that are there right now, for example, RFID, some 

of the expected outcomes that are listed, you talk about improved 

asset visibility, reduction of costs, things of that nature. But when 

you go to the metrics that are associated with that initiative, basically what you see are implementation dates. So you don’t really 

have a sense of—you have the expected outcomes, but you don’t 

have the associated metrics that would say this has worked or is 

not working from an outcome basis. 

So we are not prescribing necessarily what metrics to use, but 

what we are looking for is an outcome-based metric that would say 

here is how you are doing with this initiative. 

Senator VOINOVICH. Well, I would appreciate if you would continue to work with DOD so that a few months from now we could 

say that we have an agreement on the metrics to measure success. 

If there is a difference of opinion, then, of course, we will talk 

about it. 

Mr. SOLIS. Right, and I think we plan to, and we recognize that 

some of this is still in process, but that was our initial observation 

on the metrics. 

Senator VOINOVICH. Another issue is the human capital side of 

supply chain management. I really think it is important that you 

institutionalize what you are doing. 

I am also interested in looking at what the private sector is doing 

in this area. I do understand that there is probably not a private 

organization in the country that can even touch the Defense Department. But are there any companies—I guess probably a Wal–

Mart, that buy a lot of product and are constantly at how they distribute things. In fact, I heard a story that Sam Walton went bankrupt twice, and then he hired some guy that worked for the Army 

who went to work for him and put this logistics thing into place. 

That is when he started to make some money. 

But the question I have is: How long does it really take to do this 

transformation that we are talking about doing so that we are realistic about the goals that we are setting in terms of getting this 

done? 

Mr. KRIEG. I think it is a multiyear effort. If a company were to 

come from where we are and try to implement it, I don’t think the 

chairman of that corporation would say he would get it done in 2 

years. I think he would say it is a 5-, 6-, or 7-year effort. But I 

know we are not going from zero either. So we are at a running 

start, if you will, as we enter. But it is a complex—I like to think—

as I look at the Department of Defense, we are the size and complexity of a good-size country. And at our current size, we would 

be 24, 25, or 26 in the rank of countries in terms of gross domestic 

product. And we are that complex. 

25

So thinking through how one makes that kind of change on that 

kind of scale is an awesome task, and you have to hit the right 

things and build momentum over time. 

Senator VOINOVICH. Well, I think that gets back to the CMO bill 

that Senator Akaka and I introduced this year. I used to say when 

I ran for Mayor of Cleveland that there is not a Republican way 

here or a Democratic way, there is a right way and a wrong way 

on management issues. 

It seems to me that we need someone in the DOD who is there 

for a long period of time to oversee this tremendous transformation. 

Roger Kelick worked at DOD during the Clinton Administration. 

Mr. Kreig, you know Roger? During his time, he did a lot of good 

work, and after the Clinton Administration he was gone. I am concerned that if we are going to make the kind of changes that we 

want to make, I think we have to start to re-evaluate how we get 

things done in the country. 

We had a hearing several years ago, that focused on, is the government organized in a way to deal with the 21st Century. We 

have to start thinking about different ways of doing things. We 

have got to make certain adjustments. Any organization that 

doesn’t change with the times—look at any major corporation 

today—if they continued to operate the way they did 10 years ago, 

they would be out of business. 

I think that we need to change the thinking that we have always 

done it this way. There needs to be some thought given to a Chief 

Management Officer to handle the management issues. Someone 

who is there for a termal period, who is interested in getting it 

done right. 

I think the Administration would do a great favor to the country 

if they started to look at how we do things and determine if we are 

flexible enough and are we making adjustments to deal with some 

of the problems that we are going to be confronted with in this century? 

Mr. JOHNSON. There was an editorial in the Wall Street Journal

last week. Dan Henninger was talking about Katrina, but his 

premise was more of the same is unacceptable. And you are asking 

that question about everything we do, not about Katrina. And it is 

a very good question. 

Senator VOINOVICH. Thank you very much for testifying today. 

The hearing is adjourned. 

[Whereupon, at 4:10 p.m., the Subcommittee was adjourned.] 

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