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29–514 PDF 2007

S. Hrg. 109–938

SUPPORTING THE WARFIGHTER: ASSESSING THE

DEPARTMENT OF DEFENSE SUPPLY CHAIN

MANAGEMENT PLAN

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

SECOND SESSION

JULY 25, 2006

Available via http://www.access.gpo.gov/congress/senate

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 

MICHAEL L. ALEXANDER, Minority Staff Director 

TRINA DRIESSNACK TYRER, Chief Clerk 

OVERSIGHT OF GOVERNMENT MANAGEMENT, THE FEDERAL 

WORKFORCE AND THE DISTRICT OF COLUMBIA SUBCOMMITTEE 

GEORGE V. VOINOVICH, Ohio, Chairman 

TED STEVENS, Alaska 

NORM COLEMAN, Minnesota 

TOM COBURN, Oklahoma 

LINCOLN D. CHAFEE, Rhode Island 

ROBERT F. BENNETT, Utah 

PETE V. DOMENICI, New Mexico 

JOHN W. WARNER, Virginia 

DANIEL K. AKAKA, Hawaii 

CARL LEVIN, Michigan 

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 

EMILY MARTHALER, Chief Clerk 

(III)

C O N T E N T S 

Opening statements: Page 

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

Senator Akaka .................................................................................................. 3

WITNESSES 

TUESDAY, JULY 25, 2006

WITNESSES 

Alan F. Estevez, Assistant Deputy Under Secretary of Defense, Supply Chain 

Integration, U.S. Department of Defense ........................................................... 5

William M. Solis, Director, Defense Capabilities Management, U.S. Government Accountability Office .................................................................................. 6

ALPHABETICAL LIST OF WITNESSES

Estevez, Alan F.: 

Testimony .......................................................................................................... 5

Prepared statement .......................................................................................... 23

Solis, William M.: 

Testimony .......................................................................................................... 6

Prepared statement .......................................................................................... 35

APPENDIX 

Questions and responses for the Record from Mr. Estevez .................................. 55

(1)

SUPPORTING THE WARFIGHTER: ASSESSING 

THE DEPARTMENT OF DEFENSE SUPPLY 

CHAIN MANAGEMENT PLAN 

TUESDAY, JULY 25, 2006

U.S. SENATE,

SUBCOMMITTEE ON OVERSIGHT OF GOVERNMENT

MANAGEMENT, THE FEDERAL WORKFORCE,

AND THE DISTRICT OF COLUMBIA,

OF THE COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 10:05 a.m., in 

room SD–342, Dirksen Senate Office Building, Hon. George V. 

Voinovich, Chairman of the Subcommittee, presiding. 

Present: Senators Voinovich and Akaka. 

OPENING STATEMENT OF SENATOR VOINOVICH 

Senator VOINOVICH. The hearing will come to order. Today’s 

hearing entitled ‘‘Supporting the Warfighter: Assessing the DOD 

Supply Chain Management Plan,’’ is the second hearing that Senator Akaka and I have held on the Department of Defense’s Supply 

Chain Management Improvement Plan and the third hearing we 

have held on DOD business practices. 

The hearing will focus on the progress that DOD has made in developing and implementing the Supply Chain Management Improvement Plan since the Subcommittee’s last hearing on October 

6, 2005. I am interested to learn if DOD has identified and implemented valid performance metrics and data to use in measuring 

progress over the long term. Finally, the hearing will examine the 

extent to which the Supply Chain Management Improvement Plan 

is integrated with other DOD logistic strategies, concepts, and 

plans. 

I would reiterate that our interest in investigating and improving 

the Department’s supply chain management is guided by two principles: First, with a budget of well over $400 billion and a supply inven- tory of $77 billion, the Department must be a good steward of the 

taxpayers’ money. I would note that Secretary of Defense Rumsfeld 

once estimated that the Department wastes 5 percent of its budget, 

over $20 billion a year at current budget levels, on redundant or 

outdated business practices. 

Second, inefficiant, ineffective, and redundant steps within the 

supply chain can have a direct and negative impact on our soldiers 

2

on the battlefield. The current system impedes the Department’s 

ability to deliver the right items at the right time to the right place 

for the warfighter. According to GAO, the demand for certain items 

in the war reserve exceeded availability during Operation Iraqi 

Freedom. I know things have improved since then, but as a result 

of the war reserves, they did not have enough vehicle generators, 

tracks for tanks, body armor, lithium batteries, ready-to-eat meals, 

tires, up-armored, high-mobility, multi-purpose wheeled vehicles, 

and kits to meet the demand in the field. We all are familiar with 

that. We must do all we can to ensure that the men and women 

of the armed services have the supplies that they need. 

At the first Subcommittee hearing in October 2005, Under Secretary of Defense Ken Krieg provided an overview of the current 

logistics structure at DOD and summarized the Department’s ongoing efforts to improve and enhance the efficiency and accountability 

of the supply chain. In addition, Secretary Krieg outlined the next 

steps for the Department, which was to develop metrics and benchmarks to measure DOD’s supply chain management progress. 

I commend the Department for developing the Supply Chain 

Management Improvement Plan in an open and collaborative manner with the Office of Budget and Management and the Government Accountability Office. I am pleased that the plan includes 

baseline data and several metrics that can track short-term 

progress in the supply chain process. I also appreciate the fact that 

you have spent time with my staff and Senator Akaka’s staff, and 

I want you to know that they are going to be spending more time 

with you. 

However, it has now been a year since the plan was developed, 

and these short-term metrics were intended to be phased out and 

replaced by long-term metrics. Mr. Estevez, I am interested to 

learn if the Department has begun to implement those long-term 

metrics to ensure that this plan is driving change in the supply 

chain. 

In addition, there are at least five DOD strategic plans that address logistics and business operations, including Quadrennial Defense Review, the Logistics Transformation Strategy, the Focused 

Logistics Road Map, and the Enterprise Transition Plan. Some of 

those plans address supply chain management while others do not. 

Mr. Solis, I would like to learn from you where the Department has 

made clear links between these various plans. Without clear links 

between these plans, DOD runs the risk of duplicative and inefficient operations. 

I would like our witnesses to know that we are committed to 

working with them to ensure that necessary improvements are 

made in this area. Supply chain management has been on the GAO 

high-risk list since 1990. Sixteen years is far too long for a process 

of this magnitude and importance to be mismanaged. With the continued collaboration of GAO, OMB, and DOD, as well as continued 

congressional oversight, I am confident that supply chain management can be removed from the high-risk list. I am going to bring 

a bottle of champagne when we announce that. 

I would like to thank both of our witnesses for coming today. 

Alan Estevez is the Assistant Deputy Under Secretary of Defense 

for Supply Chain Integration. Thank you for coming. Bill Solis is 

3

the Director of Defense Capabilities Management at the Government Accountability Office, Mr. Solis, it is good to see you again. 

I would now like to yield to my good friend and colleague, Senator Akaka, for his opening statement. Senator Akaka. 

OPENING STATEMENT OF SENATOR AKAKA 

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

in welcoming our witnesses, and I want all of you to know that it 

is a pleasure to work with the Chairman on these and other issues 

in our Subcommittee. And I am glad to have Mr. Estevez, who 

leads DOD’s Supply Chain Integration Initiative, and, of course, to 

see Mr. Solis again, who has long guided GAO’s oversight of this 

critical DOD program. And so we have been working together and 

trying to improve the general government management of our 

country. 

The Chairman and I intend to move DOD’s supply chain management off of the GAO high-risk list, as he has mentioned. It has 

been on there since 1990. Now, we are making solid progress, and 

I thank our witnesses for the important roles they are playing in 

this effort. 

I am especially pleased that Mr. Estevez is with us today for a 

couple of reasons. First, as the head of Supply Chain Integration, 

you are central in identifying the capabilities and gaps in supply 

chain management, which is so important in trying to improve 

what we are doing. And, second, I would like to point out that you 

were last year’s recipient of the Service to America Award for National Security. And I tell you that because I was honored to be at 

the ceremony as the presenter of the 2005 Federal Employee of the 

Year Award, and I am so happy that there are such awards. Again, 

congratulations. 

Today’s discussion will help us better understand where DOD is 

going on supply chain management. Inefficiencies in DOD business 

operations impact our men and our women in uniform. I know from 

reviewing today’s written testimony that progress has been made. 

However, having worked on DOD business modernization as the 

ranking member of the Armed Services Readiness Subcommittee, I 

also know the road ahead is rough and that the short-term goal of 

meeting certain milestones by 2008 may not be achieved. 

Supply chain management is not a regional issue. Moving material forward and expediting replacements without building unnecessary stockpiles impacts overseas and domestic operations equally. 

Until DOD builds on its strengths while addressing deficiencies 

within logistics system, our Armed Forces are at risk. 

DOD logistics programs and operations account for close to onethird of DOD’s budget, and the Chairman mentioned $400 billion 

as the budget. Logistics and supply chain management, which includes the purchase of equipment and spare parts, as well as their 

maintenance and transport, are part of the Operations and Maintenance account that supports critical portions of DOD’s readiness 

and quality-of-life programs. 

O&M funding also covers a wide range of activities, such as 

depot maintenance, environmental restoration, base operations, 

and the training of U.S. forces. Therefore, we must ensure that 

O&M funds are spent wisely or else the ability of our military to 

4

meet present and future challenges will be impaired. And being the 

Ranking Member on Readiness, I am being very careful about that. 

That is why it is so important that we have initiatives with credible and achievable short- and long-term metrics that are linked together. Developing programs, setting objectives, and establishing 

benchmarks are only part of the solution to improving supply chain 

management and moving it off the high-risk list. 

One new program developed as a result of the Supply Chain 

Management Improvement Plan is the Joint Regional Inventory 

Materiel Management Initiative (JRIMM). I am very proud that 

the U.S. Pacific Command, PACOM, was chosen to lead this new 

program. So JRIMM, once fully implemented, will provide distribution services to all military commands on Oahu. The principles of 

JRIMM focus on a single joint logistics system to eliminate duplicative activities and inventory, leverage distribution platforms, and 

improve shipment loads and routes. And all of these need to be examined. 

I support DOD on this effort, and I am confident PACOM’s experience will increase requirements forecasting, asset visibility, and 

material distribution—three key areas of improvement identified 

by GAO as central to supply chain management processes. 

Having spent time with combatant commanders, I know that 

they will not accept a comprehensive logistics system unless they 

are confident that the men and women under their commands will 

have what is needed to carry out their missions. To paraphrase 

you, Mr. Estevez, without the right equipment in the right place 

and at the right time, our Armed Services cannot do their jobs. And 

I thank you for that. 

DOD’s management and integration challenges demand longterm attention and sustained leadership. One critical benchmark 

will be how successfully DOD aligns its logistic supply management initiatives to the Department’s fiscal year 2008 budget submission. I am sure Clay Johnson at OMB will let us know how 

DOD is doing in that regard. 

So, Mr. Chairman, I want to thank you for holding this hearing. 

This is really key for our country and government management, 

and I look forward to working with you and with our witnesses on 

this continued partnership. 

Thank you very much, Mr. Chairman. 

Senator VOINOVICH. Thank you, Senator Akaka. I think we are 

very fortunate to not only have you as the Ranking Member of the 

Subcommittee, but your extensive background on the Armed Services Committee gives you an even broader perspective on what we 

are dealing with today. I suspect, that you have been dealing with 

this a lot longer than I have. 

I would like the witnesses to limit their statements to 5 minutes 

or less. You all know that your statements will be included in the 

record. 

It is the custom of our Subcommittee to swear in our witnesses. 

If you will please stand, I will swear you in. Do you swear that the 

testimony you are about to give this Subcommittee is the truth, the 

whole truth, and nothing but the truth, so help you, God? 

Mr. ESTEVEZ. I do. 

Mr. SOLIS. I do. 

5

1The prepared statement of Mr. Estevez appears in the Appendix on page 23. 

Senator VOINOVICH. Thank you. 

Mr. Estevez, thank you again for being here today, and we look 

forward to your testimony. 

TESTIMONY OF ALAN F. ESTEVEZ,1 ASSISTANT DEPUTY 

UNDER SECRETARY OF DEFENSE, SUPPLY CHAIN INTEGRATION, U.S. DEPARTMENT OF DEFENSE 

Mr. ESTEVEZ. Thank you, sir. Chairman Voinovich, Senator 

Akaka, thank you for the opportunity to appear before you and discuss the current status of the Department of Defense’s efforts to 

address areas of risk in the Department’s supply chain processes. 

I welcome the opportunity to do so as we are implementing a comprehensive Supply Chain Management High-Risk Improvement 

Plan to improve the level of logistics support we are providing to 

our warfighters and to increase the return on investment for that 

support to the American taxpayer. 

Today, I will highlight recent actions the Department has undertaken to improve our supply chain management. Before I do that, 

first I would like to thank Senator Akaka for the compliment, and 

also you, Senator Voinovich, I know also a compliment to be in the 

hearing with Mr. Krieg last October for winning that award, which, 

as I said, when I received that award, really belongs to the men 

and women of our services that are actually implementing and 

driving those programs. 

I would like to compliment the respective staffs and the staffs of 

the Government Accountability Office and Office of Management 

and Budget who have worked with the Department in addressing 

the supply chain management high-risk area. 

DOD logistics is a $151 billion a year operation supporting our 

forces around the world, keeping 15,000 aircraft, 300 ships, 30,000 

combat vehicles, fulfilling their mission. Unlike our commercial 

counterparts, DOD logisticians are called upon to support operations on short notice, for an indefinite period, in parts of the world 

such as the mountains of Afghanistan or the desert of Al Ambar 

Province, in which we have little or no existing presence or capabilities. We have also supported unplanned disaster relief efforts, 

including along our own Gulf Coast. Under such circumstances, 

there will always be areas of risk. 

Even as we continue to support multiple operations around the 

world, we have made tremendous progress in transforming DOD logistics. I will provide an update on our accomplishments. 

A primary measure of performance of a logistics system is customer wait time, that is, how long it takes from the time a 

warfighter orders an item until they receive that item. I am 

pleased to report that we have seen a 33-percent decrease in customer wait time from fiscal year 2004 through April 2006, from an 

average of 24 days to 16 days. 

The designation of the U.S. Transportation Command as the distribution process owner has already led to significant benefits in 

aligning the Department’s distribution process. For example, average customer wait time to Iraq and Kuwait has decreased from 22 

days in March 2005 to 121⁄2 days in June 2006. 

6

1The prepared statement of Mr. Solis appears in the Appendix on page 35. 

DOD is a leader in the implementation of radiofrequency identification technology, and the DOD Radio Frequency Identification 

(RFID) network is providing the warfighter with unprecedented 

visibility of incoming shipments. We continue to drive our implementation of this leading-edge technology. 

We have seen excellent results in applying continuous process 

improvement to our maintenance depots, and lean techniques used 

in our distribution depots have improved processing times for air 

pallet builds from over 85 hours to an average of 35 hours. 

The recommendations of the Base Realignment and Closure 

Commission reinforced the key programs highlight in our HighRisk Improvement Plan. Initiatives such as our Joint Regional Inventory Materiel Management program and our Strategic Commodity program will help us to achieve real benefits under our 

BRAC transformation. 

We continue to develop an overarching logistics strategy. To that 

end, we are conducting a job logistics capabilities portfolio test to 

better integrate the warfighter’s requirements and refine the focus 

of our logistics strategy. The results of that test, along with the 

operational support lessons learned and initiatives contained in our 

high-risk improvement plan, will be incorporated into the comprehensive logistics strategic plan. 

Change management begins at the top, and our senior leaders 

are deeply involved. As you know, Ken Krieg, the Under Secretary 

of Defense Acquisition, Technology, and Logistics, and Jack Bell, 

the Deputy Under Secretary of Defense for Logistics and Materiel 

Readiness, receive regular updates on our progress. 

Ultimately, the proof of this process will be in the translation of 

these initiatives into improved performance and better risk management. We are committed to measurably improving logistics support to our military forces. 

Thank you, and I would be happy to answer any questions you 

may have. 

Senator VOINOVICH. Thank you, Mr. Estevez. Mr. Solis. 

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

Mr. SOLIS. Chairman Voinovich, Ranking Member Akaka, thank 

you for the opportunity to discuss our views on DOD’s progress in 

addressing issues related to improvement in supply chain management. At the onset, I would again like to thank the Subcommittee 

for its oversight of this important issue, which, as the Chairman 

mentioned, affects military readiness, the safety and well-being of 

our military members, and the investment of billions of dollars. 

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 hundreds of billions of dollars of taxpayer funds it receives each year. I would also like to mention that OMB’s and 

DOD’s continued commitment and involvement remain essential in 

resolving the DOD supply chain issues we will discuss today. 

7

As requested, my comments will focus on three issues: First, 

DOD’s progress in implementing the Supply Chain Management 

Improvement Plan; second, its progress in incorporating performance measures for tracking and demonstrating improvement; and, 

third, the extent to which the DOD Supply Chain Management Improvement Plan is aligned with other logistics plans across the Department that address aspects of the supply chain. 

Regarding progress and its Supply Chain High-Risk Plan, since 

October 2005, DOD has continued to make progress implementing 

the 10 initiatives in its Supply Chain Management Improvement 

Plan, but it will take several years to fully implement all of these 

initiatives. DOD’s stated goal for implementing this plan is to demonstrate significant improvement in supply chain management 

within 2 years of the plan’s inception in 2005, but the time frames 

for substantially implementing some of the initiatives are currently 

2008 or later. 

While DOD has generally stayed on track, it has reported some 

slippage in the implementation of certain initiatives. Factors such 

as the long-standing nature of the problems, the complexities of the 

initiatives, and the involvement of multiple organizations within 

DOD could cause the implementation dates of some initiatives to 

slip further. 

Regarding progress on supply chain metrics, DOD has incorporated several broad performance measures in its Supply Chain 

Management Improvement Plan, but it continues to lack outcomefocused performance measures for many of the initiatives. Therefore, it is difficult to track and demonstrate progress toward 

improving the three focus areas of requirements forecasting, asset 

visibility, and materiel distribution. Although DOD’s plan includes 

four high-level performance measures that are being tracked across 

the Department, these measures do not necessarily reflect the performance of the initiatives and do not relate explicitly to the three 

focus areas. Further, DOD’s plan does not include cost metrics that 

might show efficiencies gained through supply chain management 

improvement efforts. 

In their effort to develop performance measures for use across 

the Department, DOD officials have encountered challenges such 

as a lack of standardized, reliable data. Nevertheless, DOD could 

show near-term progress by adding what we call intermediate 

measures. These measures could include outcome-focused measures 

for each of the initiatives or for the three focus areas. 

Last, regarding the alignment of the DOD high-risk plan with 

other logistics plans, DOD has multiple plans aimed at improving 

aspects of logistics, including supply chain management, but it is 

unclear how these plans are aligned with one another. The plans 

were developed at different points in time for different purposes, 

and in different formats, so it is difficult to determine how all the 

ongoing efforts link together to sufficiently cover requirements forecasting, asset visibility, and materiel distribution, and whether 

they will result in significant progress towards resolving this highrisk area. 

Also, DOD’s Supply Chain Management Improvement Plan by 

design does not account for initiatives outside of the direct oversight of the Office of the Secretary of Defense, and DOD lacks a 

8

comprehensive strategy to guide logistics programs and initiatives. 

DOD is in the process of developing a new plan, referred to as a 

‘‘To Be’’ roadmap, for future logistics programs and initiatives. This 

roadmap is intended to portray where the Department is headed in 

the logistics area, how it will get there, and what progress is being 

made toward achieving its objectives, as well as to link ongoing capability development, program reviews, and budgeting. However, 

until the roadmap is completed, GAO will not be able to assess how 

it addresses the challenges and risks DOD faces in its supply chain 

improvement efforts. 

In closing, the plan alone will not resolve the problems we identified in the DOD supply chain. While we recognize the difficulties 

and long-term nature of dealing with this issue, measurable and 

sustained progress will be needed not only to remove the high-risk 

designation, but provide Congress and DOD stakeholders at all levels with the confidence in DOD’s supply chain. 

Mr. Chairman, Senator Akaka, that concludes my statement. I 

will be happy to answer any questions. 

Senator VOINOVICH. Thank you very much. 

Mr. Estevez, I understand that you created a Supply Chain Logistics Working Group to assess the cost and performance outcomes 

of DOD logistics. This group has developed short-term metrics as 

well as long-term benchmarks and metrics based on industry 

standards that will allow you to measure your effectiveness. 

Has the Department been able to measure success based on 

those short-term metrics? And has the Department begun to implement the long-term metrics? 

Mr. ESTEVEZ. Senator, let me address that in two ways. 

We have obviously shown some results, customer wait time being 

a primary metric of the logistics system. It is analogous to a commercial metric called order fulfillment lead time, which a commercial company would use to measure whether you are delivering the 

material they need in an industrial capability or you are delivering 

the material you need to sell in the case of a Wal-Mart. We are 

showing measurable improvement in that. 

Now, the initiatives that we are implementing are still in microcosm. They are still too small to have direct effect. But things that 

TRANSCOM is doing as the distribution process owner, things that 

our depots are doing are helping to drive that wait time down, plus 

the fact that we have a more robust capability of delivering material to places like Iraq and Afghanistan as the capacity of the network has increased. 

That metric is going to be both a short-term and a long-term 

metric. That is probably the key metric of how the logistics system 

performs. The ultimate outcome of that is operational availability. 

In other words, are the platforms, the weapons systems that you 

are giving us the dollars to buy and sustain up to the operational 

capacity so they can perform their mission? 

There are lots of other facets that feed into operational availability, whether I have a trained mechanic to fix that platform, as 

well as the logistics system that is feeding the parts into that. So 

that is where we get into an issue of whether you can track an initiative right back to that operational availability or which of these 

9

initiatives are affecting the driving down of that customer wait 

time. 

I think that is our real challenge versus do we have the right 

metrics. I would argue that we have, in fact, identified the right 

metrics to measure the logistics performance. 

Senator VOINOVICH. The challenge that the Department has is it 

has to distribute supplies all over the world. 

Mr. ESTEVEZ. That is correct, sir. 

Senator VOINOVICH. I would suspect that this exacerbates the 

problem of trying to develop an efficient supply chain process. You 

are so busy just getting the stuff out there that you do not have 

the chance to sit back and look at the process. 

On the other hand, because it is happening every day, you really 

get a chance to see whether or not something is being accomplished. 

The question I have is this, and I asked this of Mr. Krieg. Do 

you have the people you need to improve the supply chain process? 

Have you brought on new people to do this? Or have you pulled 

people away from other things that they were doing in order to 

work with you? Could you identify for me the management team 

that you have in place to get the job done? 

Mr. ESTEVEZ. I personally have a staff member dedicated to focusing on this effort. She is also working some other issues as well 

that feed into this effort, some of the initiatives that are embedded 

in this. Likewise across the military services, we are working with 

the people who are actually implementing these programs and also 

managing the logistics processes across the military services. 

So, my counterparts across the military services, the one- and 

two-star generals or SES members that oversee the supply management portions of their service, are focused on directing these efforts. They recognize the value from driving this change, but simultaneously, as you just mentioned, they are managing the ongoing 

support. So we are doing this change while we are sustaining our 

current efforts. 

Senator VOINOVICH. Do you think that is adequate to get the job 

done? I am interested in Mr. Solis’ observation. Mr. Solis. 

Mr. SOLIS. I know there are other folks in the Department that 

are also working on this. We have not really looked in terms of the 

capacity for the Department to do this. We have looked at what 

they have provided us, but we have not looked at the capacity behind it to do the plans that they have put out. 

Senator VOINOVICH. I want to make sure that you have people 

dedicated to this. Who are staying on top of this issue. 

What is your reaction to that? 

Mr. ESTEVEZ. Senator, each of these initiatives is a major program in and of itself, with folks dedicated across my staff and the 

military service staffs that are focused on implementing these initiatives. The fact that those are knowledgeable people that are executing responsibilities across the supply chain, I frankly think, is 

beneficial to our ability to drive these initiatives because they understand both the flaws in our process and what needs to be done 

to fix that process. 

10

So they are dedicated and focused on driving these implementations because they understand truly the benefits that they will derive from an end goal implementation. 

Senator VOINOVICH. I would like to have a list of who is working 

on it, what their capacity is, and I would also like to know particularly if they are political appointees or whether they are civil service individuals. 

Mr. ESTEVEZ. I would be happy to do that, obviously for the 

record, sir, to give you a definitive list. 

Senator VOINOVICH. Mr. Estevez, I am very concerned about the 

whole issue of moving forward with change and the time it is going 

to take to get some of these things done. What concerns me a great 

deal is that I know that transformational change is not going to get 

done in 2 years. I am worried that after this Administration is 

gone, how are we going to continue to make sure that this gets 

done? If this has been on the GAO high-risk list for 16 years, there 

has to be some reason why it has not been done. I would be interested to know how often the Department has taken on improving 

the supply chain management over the last 16 years. 

Senator Akaka. 

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

Estevez, and Mr. Solis. I want to thank our witnesses again for 

working with us on moving supply chain management off the highrisk list, and this is what we are trying to do here. This is not an 

easy undertaking, no question about that, and it will not happen 

overnight. 

I also know it is hard for the public to appreciate fully how efficiencies in DOD’s supply chain could impact them in the future. 

For example, Mr. Estevez, you explained that, in addition to supporting the armed services at home and abroad, the Department is 

engaged in disaster relief efforts throughout the world. Mr. 

Estevez, while I know DOD is unable to determine in advance the 

location or the type of disaster relief that may be needed, can you 

explain how DOD addresses the challenging and complexities of 

balancing logistical support to the troops on the one hand and on 

the other hand while being on call for disasters? 

Mr. ESTEVEZ. A couple of facets to that. Obviously, in disaster, 

one of the things that we tap to provide support is our lift capability, C–17s, C–5s, our military lift capability. They are obviously 

being used to support our forces. We are able to swing our airplanes around to support disaster relief, plus to charter commercial 

aircraft on a reimbursable basis to provide that. 

Much of the supply that is used for disaster relief is either commercial supply, for instance, medical equipment that we buy under 

contracts, that we buy direct from vendors, we do not stock that 

in the warehouse, so there are surge clauses in those contracts, and 

we are able to draw on that capability. MREs, we stock mealsready-to-eat, we stock a certain amount of those. We are able to 

draw those down while replenishing those, making sure we do not 

hit a bottom point where we feel like we are putting our own forces 

in danger. Other types of meals, we are able, again, to buy off the 

commercial market under existing contracts and just surge those 

capabilities. 

11

In point of fact, for this hurricane season we are actually engaged with the Federal Emergency Management Agency (FEMA) to 

provide that kind of support to them on an as-needed basis. But 

we do have the capacity to do that kind of dual operation. 

Senator AKAKA. Mr. Estevez, would you provide us with a more 

complete description of what the joint logistics capabilities portfolio 

test entails, as well as its time for completion? And would you also 

explain how it will affect the supply chain plan and what we call 

the ‘‘To Be’’ roadmap? 

Mr. ESTEVEZ. The joint capabilities portfolio test is top-downdriven, driven by Secretary England through Mr. Krieg. We are 

doing tests, similar tests, in a number of other areas aside from logistics. It is an outgrowth of the Quadrennial Review, and really 

the intent is to get a better management assessment structure so 

that we can determine what programs to focus on in the joint environment. As you know, the military services support programs that 

support their particular service, but when you come to the tradeoff in resources to implement joint programs, those decisions in the 

current environment tend to peak at the top. 

So this is to put that governance structure in place, trade off the 

capabilities for the combatant commanders, feed in the different 

initiatives that we are doing, the initiatives that are under the 

Supply Chain Management Plan, the initiatives that TRANSCOM 

may be implementing under their distribution process owner capability, distribution process ownership, look to determine whether 

we need other process owners in additional logistics areas to drive 

that kind of focus that we are getting out of TRANSCOM today, 

and really, as you assess that whole governance process, determine 

the trade-offs, put a structure in place to weigh capabilities against 

each other. The outcome of that will be the strategic plan with the 

initiatives in the high-risk plan as a component of that overarching 

strategic plan. 

Hopefully I have answered your question. 

Senator AKAKA. Yes. Mr. Estevez, regarding the ‘‘To Be’’ roadmap, when will it be completed? And do you foresee any significant 

delays? 

Mr. ESTEVEZ. We expect to be getting initial results of the joint 

capabilities test in late winter or early spring next year, the February time frame. And at that point we will be able to start congealing the roadmap by—I hesitate to give you an end date for 

completing that. I would expect sometime next year. 

Senator AKAKA. OK. Thank you. 

Mr. SOLIS. If I could add, I think originally, the ‘‘To Be’’ roadmap 

was originally supposed to coincide with the President’s 2008 budget submission, and I think that was going to be very helpful in 

terms of tying programs to resources. And if it is going to be delayed beyond that, I think that becomes somewhat problematic because then you get beyond the budget submission period, and then 

you have to wait maybe another year to see whether these programs can really be funded and how are they going to be funded, 

because I think that is really key. But I think that any delay beyond the budget year or the budget submission period, you probably would then have to wait another year to really see if DOD 

could execute some of these programs. 

12

Senator AKAKA. Thank you for that explanation. 

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

Senator VOINOVICH. To follow up on this discussion. I am sure 

the Administration is already working on the 2008 budget. 

Mr. Estevez, are the initiatives you are implementing in the 2007 

budget? 

Mr. ESTEVEZ. Some of the initiatives are covered in the 2007 

budget. Some of them are not. It depends on the start date. 

Senator VOINOVICH. Can you let me know which intiatives are 

covered and which are not? 

Mr. ESTEVEZ. Absolutely. Again, if I could take that for the 

record and give you the detail of that. 

Senator VOINOVICH. Yes. 

Mr. ESTEVEZ. Some of them, Senator, if I might add, are not really resource-intensive type programs. They are basic blocking, tackling, process-focused programs. 

Commodity management or JRIMM, for example, are changing 

the process that don’t entail putting dollars in the budget. In point 

of fact, they should relieve focus from the budget. 

Senator VOINOVICH. As I mentioned earlier, I am concerned that 

the people involved are so busy making sure that the process is 

supplying the warfigher that they do not have time to effectively 

manage the process. 

Do you understand what I am saying? You have people that are 

helping you, and it is good that they have the experience and they 

understand what the motivation is. But I want to know how many 

of them have been around a while. I will never forget, I had a chief 

of staff when I became governor. I recognized right away that he 

was so busy putting out fires that we needed to move him out of 

the management of the operation. We put together cabinet clusters, 

and then I had individuals that I put in charge of those cabinet 

clusters. So every day I knew that somebody got up early in the 

morning and stayed late at night to make sure that the management changes and the transformation were accomplished. 

I find it hard to believe that you are going to be able to get this 

done and have these people doing both jobs. 

Mr. ESTEVEZ. Well, again, there is a mix. Let me use the example of radiofrequency identification. Each of the services has folks 

that are dedicated—I am trying to figure out how to roll that out 

and implement that across their departments. DLA has a program 

manager through headquarters, program managers at their distribution depots that are going around figuring where to put readers and how best to change the business process to take advantage 

of this technology that is going to help us downstream. 

Now, some of those people are also involved in operating the 

depot because they are the people who would know how to fix that 

business process. 

Senator VOINOVICH. This is an automated inventory system so 

you know that you are not selling stuff that you are buying. Right? 

Mr. ESTEVEZ. That is correct, sir. 

Senator VOINOVICH. So everybody agrees that this is the best 

technology? Where did you get that technology? 

Mr. ESTEVEZ. That technology is a standard enterprise resource 

planning tool that most commercial companies have already——

13

Senator VOINOVICH. So a Wal-Mart would have a similar system? 

Mr. ESTEVEZ. Yes, actually, Wal-Mart built their own, but a good 

segment of the top 50 Fortune companies would be using that kind 

of software. 

Senator VOINOVICH. The software has already been tested? 

Mr. ESTEVEZ. Absolutely, sir. Same with our RFID implementation. We are using the same technology that Wal-Mart is implementing today. 

Senator VOINOVICH. Are you getting any help from the private 

sector? Do you have a private sector task force that you bounce 

ideas off of and that can give you some insight into things? 

Mr. ESTEVEZ. Again, it varies by program. RFID, I am working 

very closely with the Procter & Gambles, Gillettes, Wal-Marts of 

the world who are implementing these programs. Many of them are 

in your State, as a matter of fact, of the leading-edge companies. 

And some of that has paid off in that——

Senator VOINOVICH. Are they doing this for pay or are they doing 

this pro bono? 

Mr. ESTEVEZ. They are doing it pro bono. 

Senator VOINOVICH. Great. I would suggest that the Department 

continue to use these outside exports, as well as people within the 

Department who are knowledgable about the supply chain process 

to bounce ideas off of. I think that this would help to DOD implement the plan faster. 

Mr. ESTEVEZ. I could not agree more, and we are going out and 

benchmarking amongst leaders in supply chain management in the 

commercial sector and have great relationships out there to draw 

on. 

Senator VOINOVICH. Mr. Solis, have you had a chance to observe 

what they are doing in this area? You mentioned you were not familiar with the personnel issues. 

Mr. SOLIS. Right. 

Senator VOINOVICH. You have just been looking at whether or 

not the short-term metrics have been achieved. 

Mr. SOLIS. Right. I guess another perspective that I would offer 

related to that, as we mentioned, there are a lot of different plans 

that are out there, and from what we see, there is not a clear linkage of how all those plans interrelate, particularly with the supply 

chain plan. And I would only offer that until you get some overarching plan that says this is the direction we are going to go, 

which may be the ‘‘To Be’’ roadmap you are going to have a lot of 

folks that may or may not be working toward a common direction. 

It is not clear in terms of how all these plans link together. 

So the question comes up: How do you better utilize all these resources that may be working on all these other different plans that 

are out there? And maybe there is a better way to do that once you 

have your ‘‘To Be’’ roadmap or your joint portfolio test completed. 

Senator VOINOVICH. I would like to followup on what you are 

saying. You mentioned these various plans that the Department 

has. Has anybody really sat down and dissected those plans to see 

just how they all interrelate with each other and that there is not 

duplication? 

14

Mr. ESTEVEZ. In point of fact, there is some overlap between differing plans. Let me give you an example: the Enterprise Transition Plan, which is broader than the logistics area. 

For the logistics area, it overlaps with some of the initiatives 

that are in the High-Risk Management Plan, but the milestones 

that are in there are, in fact, the milestones that we have given 

them because visibility is a key component of the Enterprise Transition Plan——

We work closely together in the coordination of the area of logistics, not just me but the other SESes that are my counterparts in 

logistics. So the items that are related to supply chain that are in 

the Enterprise Transition Plan are, in fact, programs that we are 

driving——

Senator VOINOVICH. So the enterprise transition group is looking 

at the overall transformation of the Department. You are a piece 

of that? 

Mr. ESTEVEZ. That is correct, sir. 

Senator VOINOVICH. OK. Senator Akaka. 

Senator AKAKA. Thank you, Mr. Chairman. 

Mr. Estevez, the initiatives in the Supply Chain Management 

Improvement Plan require buy-in from the services and investment 

of funding resources. In some cases, this will require investments 

of both procurement and O&M funds from the services. 

How do you plan to obtain the necessary funding commitments 

needed from the services? 

Mr. ESTEVEZ. For those programs that require funding—and, 

again, not everything requires resources—I am working with the 

services, my counterparts in the services, to ensure that they are 

putting in sufficient funds to move those programs along. I am also 

working with the Comptroller and PA&E to ensure that there is 

sufficient funds should the services have issues as they move 

through their own funding process. 

Senator AKAKA. I am asking this because I know the services 

care about their own funding, and I was interested in how you plan 

to work that out. 

Mr. Estevez, I understand that the U.S. Transportation Command is completing a contract that it will use private logistic providers for both internal U.S. as well as overseas supply shipments. 

Do you know if other commands are taking this particular approach? 

Mr. ESTEVEZ. The contract that I believe you are talking about 

is called the Defense Transportation Coordinators Initiative, and it 

is not moving overseas at this point It is just for domestic shipments. TRANSCOM is the coordinator of transportation for the Department, so this would be a first step. Other combatant commands 

control the transportation within their regions, if it is not coming 

from the United States and managed by TRANSCOM. 

Now, after we do this initiative in the United States, there are 

opportunities overseas. TRANSCOM will certainly work with the 

other commands. 

Now, in the case of Oahu, under the JRIMM initiative, we are 

looking at how to synchronize the capability of transportation on 

the island in support of the forces that we have out there as part 

of the JRIMM. 

15

Senator AKAKA. Now that you mention that, Mr. Estevez, I am 

delighted that PACOM was chosen to take the lead by having the 

first JRIMM program. Our staff had an opportunity to meet with 

Navy Commander Bob Boudreau of PACOM and Deputy Commander Mike O’Brien at the Defense Distribution Center at Pearl 

Harbor, when Senator Voinovich and I held our NSPS field hearings at Fort DeRussy in April of this year. Their briefing and tour 

provided firsthand knowledge of how JRIMM is providing physical 

distribution services for all the combatant commanders on the island of Oahu. 

You mentioned that the pilot program of the Navy in San Diego 

yielded a 40 percent reduction in what you termed ‘‘touches.’’ What 

are your expectations and projections for JRIMM over the next 2 

years? 

Mr. ESTEVEZ. I think we will have at least the same results that 

we had in San Diego. In fact, going back to Senator Voinovich’s 

earlier question, we had a commercial group vet what we were 

doing in that to give us advice that, yes, this is standard commercial practice, this is the way you should go about it, you are doing 

the right things. 

So we should continue, just as we did in San Diego, to see a decrease in what we call customer wait time, the time it takes to provide an ordered piece of equipment to the user of that equipment. 

With the decrease in the amount of inventory that you need to 

carry because you are carrying buffer today, just because the customer wait time is not assured, and that is exactly what JRIMM 

will provide. So we expect to achieve at least the same results that 

we are achieving in San Diego. 

Mr. SOLIS. Senator, if I could add? 

Senator AKAKA. Mr. Solis. 

Mr. SOLIS. I think those are things that we would like to see, and 

we would like to actually see those defined a little bit better in the 

actual initiative itself in terms of specifics. I think those are all 

things that, again, when we talk about measurable pieces, recognizing the challenge of trying to put that together, Mr. Estevez or 

the Department could come back and say here are things that we 

have actually done in terms of reducing cost or inventory, or whatever the case may be. I think that would be helpful. 

Senator AKAKA. In particular, Mr. Solis, what are your expectations on JRIMM, and do you believe that significant gains in better 

logistic response times and reduced inventory can be achieved 

through this initiative? 

Mr. SOLIS. Conceptually, from what I have seen and what I have 

heard, intuitively, it tells me it is something that is good. But, 

again, what I would ask is that at some point in time, we be able 

to see the metrics or the measures by which we can look at and 

say that there is actual progress being made. 

Again, intuitively, conceptually, and some of the things that we 

have seen and heard, yes, it would lend me to believe that it is a 

good initiative. But I think the proof in the pudding would be that 

you would want to see some specific measures that go behind those 

things. 

Senator AKAKA. Thank you, Mr. Chairman. 

16

Senator VOINOVICH. Getting back to the issue of calculating cost 

savings, what is your capability? 

Mr. ESTEVEZ. We are, by initiative, capable of doing that over 

time. Some of them we have a more robust ability to make that 

projection than in others. And, of course, not every one of those initiatives is geared at cost savings. Some of those are geared at better operational capability for the force, which is, of course, our 

main goal. 

Again, RFID—since I happen to have my fingers on that one 

pretty closely. I think we are preliminary to be able to do a projection. We did, in fact, do a business case analysis on RFID that projected a cost savings across the Department of best case $1.7 billion, worst case $70 million, depending on how it is achieved. I do 

not want to call it an ‘‘academic exercise,’’ but it was based on projections. 

Now that we are implementing and we are gathering metrics as 

we are implementing, as we are able to do that, we will be able 

to get a better cost savings assessment. The same thing with something like JRIMM. As we can identify what inventory we can push 

back to the national level, how we can flow that inventory, we will 

better be able to make those cost trade-offs in identifying the cost 

savings. 

Senator VOINOVICH. I suspect that your private sector people 

have been able to calculate savings that they have made as a result 

of the work that they have done. 

Mr. ESTEVEZ. Some yes and some no, Senator, amazingly enough. 

Now, their businesses are slightly different than ours. In the case 

of a Wal-Mart, they are interested in item on shelf to sell to a consumer. I am interested in that as well, but I am more interested 

in making sure the platform flies at the end of the day, so I may 

carry slightly more inventory than they would carry. And the cost 

of stock-out is just greater for us than it would be for them. 

Senator VOINOVICH. What have you done in the area of forecasting? 

Mr. ESTEVEZ. We have a great program called readiness-based 

sparing, and what readiness-based sparing does, again, it uses 

those commercial software tools that we were talking about earlier 

with some additional tools that some of the venture capital folks 

have developed that are more robust. We need the data from an 

SAP type, an ERP tool that we are using. But what that does is 

it can take—should we be carrying the engine as a spare or should 

we be carrying the part of the engine as a spare? And should we 

be carrying that at the tactical level or should we be holding that 

at the national level? It helps balance that forecastability. 

Navy is moving out very strongly in that, but each of the services 

has a pilot program to implement that because, again, they see the 

benefit to themselves of that operational availability at the end of 

the day. 

Senator VOINOVICH. During my time in Congress, I have seen so 

often that we override the Department in regards to decisionmaking. So often money and importance of a job is judged by the 

jobs that are being generated in our respective States. You get this 

tremendous pressure to continue to do things that may not be the 

best thing for the Department in terms of money. I have an upVerDate 0ct 09 2002 13:40 Jul 16, 2007 Jkt 029514 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 C:\DOCS\29514.TXT SAFFAIRS PsN: PAT
17

armor operation in Ohio. Information has come back about these 

Humvees are a little dangerous, that they roll. 

Are you able to analyze the initiatives and make adjustments if 

necessary? 

Mr. ESTEVEZ. Let me address that from a logistics perspective. 

The logistics system receives information on demand as it is occurring. Our ability to analyze all that demand varies. So, an army 

item manager looking at requirements for up-armor would see the 

requirement for that. Then it is a matter of turning—so that is almost immediate. And that is a matter of what is the surge capability of the industry in order to support that. 

If it is a particular part that starts breaking, you might not identify that component needs to be made more reliable because you 

are replacing that constantly, longer than you would like. But, 

again, it depends on the component and the system. An aircraft 

component, the folks that manage those parts at Wright-Patt, or in 

Philadelphia for the Navy, are pretty good at identifying when they 

are hitting demand outside the bounds. 

The other thing we are doing in that regard is, of course, we are 

going to something called performance-based logistics programs 

where the manufacturer is required to sustain those platforms, so 

it behooves them because the cost burden now goes to them to replace parts that they did not expect to replace to increase the reliability of those components. And we have been very successful in 

doing that. 

Senator VOINOVICH. I remember one instance a couple of years 

ago in one of our closed sessions, I asked Secretary Rumsfeld a 

question regarding the demand for up-armored Humvees. He said 

it was X, and I said: That is not true, it is Y. I just wondered if 

somebody had better information that we could have known what 

the capacity really was at the time. 

Mr. ESTEVEZ. In the case of an up-armor, the folks at Tank Automotive Command, a subcomponent of Army Materiel Command up 

in Detroit, follow that pretty closely. So they should have been able 

to answer that question. Those are their contracts. 

Senator VOINOVICH. So do you think the problem in this particular case was that he just did not have the information but 

somebody did? 

Mr. ESTEVEZ. I really do not want to answer that, sir. 

Mr. SOLIS. Senator, if I could offer some perspective also on this, 

we did some work, actually visited the facility that you are talking 

about, which I believe is in Fairfield, Ohio. 

Senator VOINOVICH. Right. 

Mr. SOLIS. We talked to the folks there, and part of it, the requirements are coming out of theater, and some of these are what 

are called ‘‘urgent requirements’’ that come out of theater, and then 

it goes to the Department. And then once the requirement is validated, then the funding has to be provided everything else has to 

be set aside. 

I think in the case of the facility up there, I think part of the 

issue was what was your current capacity, as opposed to what is 

your max capacity. I think there was some of that that was going 

back and forth, and I think that is part of the problem the industrial base faces, is trying to understand what the requirements that 

18

are coming down are. And I think TACOM was trying to work with 

them, but I think, again, the funding and everything else that 

needs to come with that was not always there. 

Senator VOINOVICH. I think the Department needs to do a better 

job at forecasting and understanding demand. 

It seems to me that the Department should be able to provide 

Congress with information on exactly what they need to purchase. 

This would make it harder for Congress to spend on items not 

needed. 

The other question I have is regarding the war on terrorism. 

How have we changed the way we allocate our resources to better 

protect the U.S. and the world from terrorism. For example, is 

more money going to public diplomacy? 

Mr. ESTEVEZ. Sir, I can really only answer——

Senator VOINOVICH. Or is that above your pay grade? [Laughter.] 

Mr. ESTEVEZ. Again, I can only answer that from a logistics perspective because it is above my pay grade. Of course, we are looking at what our needs are and trying to plan out our needs accordingly. I will say the Department only wants to buy what we believe 

we need. 

Senator VOINOVICH. Senator Akaka. 

Senator AKAKA. Thank you, Mr. Chairman. And in a sense, following up on this line, and also in the private sector, Mr. Estevez, 

both you and Mr. Solis discussed the need to incorporate best practices from the private sector. I know from my experiences as Chairman of the Postal Service Subcommittee that the U.S. Postal Service and the United Parcel Service, for example, are leaders in logistics. 

What is the status of DOD’s efforts to incorporate commercial 

benchmarks for supply chain performance? And how is DOD working with the private sector on that? 

Mr. ESTEVEZ. We are letting a contract to go out and do some 

benchmarks against the commercial sector based on our benchmarks against our metrics. Again, going back to my earlier statement, you really cannot benchmark against Wal-Mart because they 

are in a different business line. That is not to say we cannot learn 

lessons from some of the good things that Wal-Mart does, but when 

it comes to the benchmarking, it really comes down to what is an 

industrial activity doing, and there is really no one to benchmark 

against when it comes to deploying and sustaining a force in the 

field. So it is how do you segment those benchmarks. But we are 

letting a contract to do that. 

Concurrently, as I said, I certainly am working closely with the 

commercial sector, including folks like United Parcel Service, on 

how they do their business, and they are more than willing to open 

up and show us things that we can learn and have, in fact, implemented in the past and will continue to do so. 

Senator AKAKA. Mr. Solis, do you believe that DOD is on the 

right track in this regard? And what more could be done to further 

the incorporation of the private sector best practices into the supply chain management process? 

Mr. SOLIS. Well, again, I think in terms of adopting or trying to 

look at commercial benchmarks, I think that is a worthwhile endeavor to do. We talked about this the last time we were here in 

19

testimony, and there was some thought that maybe we would be 

further along. And I think that is part of the issue that I keep coming back to, is that where we stand today versus where we were 

a few months ago or last year or where we hope to be in the future. 

And I think that is where, again, with regard to any of the metrics, 

whether it is for the initiatives or commercial benchmarks, I think 

we would like to see progress so that we can measure where they 

are in relation to the high-risk issues that we are talking about. 

Senator AKAKA. Mr. Estevez, large retailers have significantly reduced inventory because of gains in inventory management. One 

step in this process is to require suppliers to provide advanced 

shipping notifications with strict delivery times. To facilitate this 

time-sensitive coordination, there has been an increase in businesses specializing in promoting efficiencies between suppliers and 

their customers. 

I would add that this is being done in Hawaii by the Matson 

Lines, for example. Warehouse space has been reduced significantly 

because the timing is so good. Matson comes in with containers, 

and by 7:30 in the morning merchandise is delivered to the stores. 

They do not need the warehouse space; they put it right on the 

shelves. 

Mr. Estevez, I know that JRIMM is intended to inject efficiencies 

into the supply chain process, but what other steps is DOD taking 

to manage its huge inventory of items? 

Mr. ESTEVEZ. We have a number of programs, Prime Vendor 

being the one that jumps out at me, that essentially is delivery 

from the commercial sector direct to the user at DOD, without storing that material. It has to be commercially available material, and 

we tend to use the same networks that the private sector company 

would use to distribute to a Wal-Mart or a Target or a CVS. So 

those are excellent programs for us. 

Let me recognize retailers have more regular demand on items 

than the Department may have. You have to look at industrial activities to really get a better analogy, except for those consumable 

items that I just discussed. So Prime Vendor would be one. 

Under our BRAC transformation, we are moving—the Defense 

Logistics Agency is changing its depot structure so that we are 

going to ensure that our network works better to support our industrial depot maintenance activities where we are rebuilding material. We have looked at programs. We have something called Industrial Prime Vendor where material, again, is delivered directly 

to the shop floor without going through a warehouse. 

We are privatizing things like tires so that we are not storing 

tires which previously were held in warehouses—they take up a lot 

of warehouse space. This gives you better circulation, the newest 

technology. 

So we do have a number of programs that do exactly what you 

asked, and, of course, we work with companies like Matson as well 

in doing those types of things. 

Senator AKAKA. Yes. Let me follow up, Mr. Estevez. Wouldn’t 

better inventory management lead to less outsourcing of logistics 

and supply chain activities? 

Mr. ESTEVEZ. I think you have to have a mix. I think most commercial companies have a mix between their own internal procVerDate 0ct 09 2002 13:40 Jul 16, 2007 Jkt 029514 PO 00000 Frm 00023 Fmt 6633 Sfmt 6633 C:\DOCS\29514.TXT SAFFAIRS PsN: PAT
20

esses and what they outsource. I do not expect us to be outsourcing 

our key supply depots, and obviously we will not be outsourcing 

some of our maintenance capability. But the flow in for that material—and you have to assess what material you are talking about, 

and where the commodity is commercially available and the surge 

capability is there, we do not want to store it. We want to receive 

it direct. 

Senator AKAKA. Well, I thank you both for your responses. No 

question we are moving in the right direction. 

Mr. Chairman, thank you very much. My time has expired. 

Senator VOINOVICH. Thank you, Senator Akaka. I really appreciate your being here. 

As you know, Mr. Estevez, Senator Akaka and I are concerned 

about how we continue this transformation. Maybe it is being pretty selfish, but I am around here at least until the end of 2010, and 

depending on who is in the majority, either Senator Akaka or I are 

going to be Chairman of this Subcommittee. We plan to continue 

to work on this issue. One thing that I do not want to see happen 

is that once the Administration changes, we lose any progress that 

has been made. Frankly, the private sector has had some of these 

initiatives in place for a number of years. Why are we so far behind 

the private sector in utilizing some of the resources that are out 

there? Why haven’t we been on our toes? 

What is being put in place to guarantee that this transformation 

that we are working on is going to continue. Because I do not expect that this is going to get off the list in 2009, and hopefully we 

will be closer to it in 2010. I am real concerned and that is why 

I want to know who is working on this and how long they have 

been with the Department. I am even interested in knowing when 

they are eligible to retire. 

Mr. ESTEVEZ. I am eligible in, I believe, 2012, Senator. I enjoy 

my job and want to be cracking that bottle of champagne with you 

at the removal of this from the list. 

Senator VOINOVICH. Well, can I ask you one other question? How 

long have you been with the Department? 

Mr. ESTEVEZ. Twenty-five years, sir. 

Senator VOINOVICH. OK. How come we did not do this 5 years 

ago, 10 years ago? 

Mr. ESTEVEZ. There are a variety of facets that we have done 

that have laid the foundation for what we are doing today that 

were done in the past. So it is not that we were sitting idle in different areas. And some things we tried. The time was not right. It 

failed in part sometimes because our systems were not up to par 

in order to enable us to do that. That still remains an issue. Defense Logistics Agency has had a successful implementation of 

their ERP. The other military services are in various stages of implementing theirs. And they really do enable the ability to do some 

of the things that we are doing. 

Again, some of it is just basic blocking and tackling. I can only 

answer for my time in my chair, and I really hesitate to secondguess what went on prior. But I do want to emphasize that people 

were not sitting on their hands. We were doing some of the 

foundational work that has enabled us to start driving this change. 

21

Senator VOINOVICH. Well, it appears that you have been empowered to do it. Is part of the problem maybe that you were not empowered to do it before? 

Mr. ESTEVEZ. Again, I will go back to that you do need the leadership commitment to do this. I believe we have that. I cannot say 

that we did not have that in the prior Administration, however, but 

I know we have it right now. 

Senator VOINOVICH. Are your people excited? 

Mr. ESTEVEZ. Yes, they are. 

Senator VOINOVICH. Good. 

Mr. ESTEVEZ. Absolutely. 

Senator VOINOVICH. Senator Akaka, anything else? 

Senator AKAKA. Mr. Chairman, let me follow up here. 

Senator Voinovich makes a good point in wanting to know what 

kind of team is working on supply chain management. When I 

heard him mention that, I was thinking of other parts of government where committees or commissions deal with issues, like this 

area. 

So given the move toward joint logistics, could you give more detail as to how this high-risk area is integrated into the DOD Business Modernization Plan? 

Mr. ESTEVEZ. Well, the supply chain management piece of the 

Enterprise Transition Plan, the Business Modernization Plan, is 

driven by our requirements. So while Mr. Brinkley would be driving the governance over what systems get implemented and the architecture of those systems, they are designing to our requirements 

and putting systems in place to meet the requirements laid out by 

the functional logistics community for our piece of that plan. 

The Enterprise Transition Plan addresses other areas, like procurement, financial management, that the logistics system is a user 

of versus the driver of those requirements. For the requirements 

related to logistics, we are the functional drivers of those, and they 

relate to our milestones and our needs. 

Senator AKAKA. And I am assuming from what you are saying 

that this is integrated into that plan. 

Mr. ESTEVEZ. Absolutely. I am very comfortable working with 

those folks on what they are doing. 

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

Senator VOINOVICH. Thank you. This has been a good hearing, 

and we really appreciate your being here. And, Mr. Estevez, we 

want you to know that we want to help you in any way that we 

can, and if there are some things that we should be doing that you 

think will help, we want to hear from you. 

Mr. ESTEVEZ. Thank you, sir. 

Senator VOINOVICH. The hearing is adjourned. 

[Whereupon, at 11:27 a.m., the Subcommittee was adjourned.] 

(23)

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Æ


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