Page 1 GAO-12-883R Defense Logistics

August 3, 2012

The Honorable Carl Levin 

Chairman 

The Honorable John McCain 

Ranking Member 

Committee on Armed Services 

United States Senate 

The Honorable Howard P. McKeon 

Chairman 

The Honorable Adam Smith 

Ranking Member 

Committee on Armed Services 

House of Representatives 

Subject: Defense Logistics: DOD Has Taken Actions to Improve Some Segments of the Materiel 

Distribution System

The Department of Defense (DOD) operates a complex, multibillion-dollar distribution system for 

delivering needed supplies and equipment to U.S. forces across the world. DOD's goal in 

operating its global distribution system is to deliver the right item to the right place at the right 

time, and also at the right cost. The materiel distribution system covers multiple legs, from the 

movement of supplies in the continental United States to tactical movement on the battlefield, 

and must be capable of reaching its military customers whether they are located on large, wellestablished bases or at small, remote outposts. As we have reported, the federal government is 

facing serious long-term fiscal challenges, and DOD may confront increased competition over 

the next decade for federal discretionary funds.1 Given the fiscal environment DOD must 

operate in now and into the future, the distribution of supplies and equipment to the warfighter 

must be performed as effectively and efficiently as possible to ensure the best use of limited 

resources. Strategic guidance issued by the Secretary of Defense in January 2012 emphasized 

that DOD must continue to reduce the cost of doing business, in particular finding further 

efficiencies in overhead, business practices, and support activities.2

Since 1990, GAO has identified DOD supply chain management as a high-risk area, with 

materiel distribution as one focus area for improvement.3

 

1

GAO, The Federal Government’s Long-Term Fiscal Outlook: January 2010 Update, GAO-10-468SP (Washington, 

D.C.: March 2010); and 21st Century Challenges: Reexamining the Base of the Federal Government, GAO-05-

325SP (Washington, D.C.: February 2005).

Our prior work, for example, has 

2

Department of Defense, Sustaining U.S. Global Leadership: Priorities for 21st Century Defense (Jan. 5, 2012).

3

This high-risk area was originally identified in 1990 as DOD inventory management. In 2005, it was expanded to 

DOD’s management of its entire supply chain, which includes three focus areas for improvement: requirements 

United States Government Accountability Office

Washington, DC 20548
Page 2 GAO-12-883R Defense Logistics

identified challenges DOD faced in distributing materiel to the warfighter in Iraq and 

Afghanistan, which contributed to shortages of some critical items and limited DOD’s ability to 

track the status and location of cargo shipments. In its high-level logistics and supply chain 

management plans,4 DOD highlighted the need to improve materiel distribution and identified 

various improvement initiatives, but in our prior work we found that these high-level plans did 

not specify how DOD would integrate, guide, and measure the outcomes of these various 

improvement initiatives. In July 2011, we recommended that DOD develop a comprehensive 

corrective action plan for improving materiel distribution, and we identified key elements that we 

believe should be included in such a plan to maximize its usefulness.5 However, DOD did not 

concur with that recommendation, citing ongoing improvement efforts as sufficient. In particular, 

DOD highlighted Distribution Process Owner Strategic Opportunities (DSO) as one such effort. 

According to the department, DSO began in 2008 and its main goals are to dramatically reduce 

enterprise-level distribution costs and improve distribution service levels to the warfighter. DSO 

comprises five distinct improvement efforts, including four that have been implemented and are 

ongoing and one, strategic network optimization, that is still in development and is now 

considered a stand-alone effort. Within DOD, U.S. Transportation Command (TRANSCOM) and 

the Defense Logistics Agency (DLA) have had key roles and responsibilities for developing and 

implementing DSO. Table 1 summarizes the five DSO improvement efforts.

Table 1: DOD’s Five DSO Improvement Efforts

Effort Description Status

Process improvement Removing unnecessary wait time from distribution 

processes across the supply chain

Ongoing

Strategic surface optimization Increasing container utilization and appropriately 

shifting cargo from 20-foot containers to 40-foot 

containers

Ongoing

Strategic air optimization Increasing aircraft utilization and optimizing use of 

lift options, such as using commercial (rather than 

military) aircraft when appropriate

Ongoing

Supply alignment Properly configuring inventory levels at forward 

supply depots located nearer to the customer

Ongoing

Strategic network optimization Designing the optimal number, location, and 

function of supply chain sites

a In development

Source: TRANSCOM and DLA.

a

Strategic network optimization began under DSO and is currently being managed as a stand-alone effort.

 

forecasting, asset visibility, and materiel distribution. For our most recent update, see GAO, High-Risk Series: An 

Update, GAO-11-278 (Washington, D.C.: February 2011).

4

These include DOD’s Supply Chain Management Improvement Plan (2005), Focused Logistics Roadmap (2005),

Logistics Roadmap (2008), and Logistics Strategic Plan (2010).

5

Specifically, our recommendation stated that DOD's corrective action plan for materiel distribution should (1) identify 

the scope and root causes of capability gaps and other problems, effective solutions, and actions to be taken to 

implement the solutions; (2) include the characteristics of effective strategic planning, including a mission statement; 

goals and related strategies (for example, objectives and activities); performance measures and associated 

milestones, benchmarks, and targets for improvement; resources and investments required for implementation; key 

external factors that could affect the achievement of goals; and the involvement of all key stakeholders in a 

collaborative process to develop and implement the plan; and (3) document how the department will integrate these 

plans with its other decision-making processes; delineate organizational roles and responsibilities; and support 

department-wide priorities identified in higher-level strategic guidance (such as the Strategic Management Plan and 

Logistics Strategic Plan). See GAO, Defense Logistics: DOD Needs to Take Additional Actions to Address 

Challenges in Supply Chain Management, GAO-11-569 (Washington, D.C.: July 28, 2011).
Page 3 GAO-12-883R Defense Logistics

Because of continuing congressional interest in GAO’s high-risk areas, including DOD supply 

chain management, this report was prepared under the authority of the Comptroller General to 

conduct evaluations on his own initiative. This report provides an assessment of DOD's 

implementation of DSO and the results achieved. Our specific objectives were to assess the 

extent to which (1) DOD has developed and implemented DSO consistent with results-oriented 

management practices and (2) DSO has made improvements to DOD’s materiel distribution 

system and addressed supply chain management challenges identified as part of our work 

related to this high-risk area.

 

To assess the extent to which DOD developed and implemented DSO consistent with resultsoriented management practices, we reviewed key planning documents and met with agency 

officials to obtain further information on its management and execution.6 We assessed the 

extent to which these planning documents showed evidence that DOD had incorporated key 

characteristics of results-oriented management practices.7 To conduct our analysis, three team 

members concurrently conducted independent assessments of the planning documents to 

determine whether the characteristics for each improvement effort were addressed, partially 

addressed, or not addressed. Next, the team members compared the three sets of observations 

and discussed and reconciled any differences. Once consensus was achieved, assessments for 

each improvement effort were rolled up into one comprehensive assessment for each 

characteristic. We considered the characteristic addressed when the planning documents 

generally incorporated all parts of the characteristic. We considered the characteristic partially 

addressed when the planning documents generally incorporated at least one or more parts of 

the characteristic. We considered the characteristic not addressed when the planning 

documents did not incorporate any part of the characteristic. Because strategic network 

optimization is still under development, we reviewed it separately from the implemented efforts.

To assess the extent to which DSO has made improvements to DOD’s materiel distribution 

system and has addressed issues identified in our past work, we obtained and analyzed 

performance data and reports from TRANSCOM and DLA, including information on cost 

avoidances and shipment delivery times. We assessed the reliability of the cost avoidance and 

shipment delivery time data by reviewing related data documentation, analyzing the 

methodology used to determine DSO improvements, and interviewing and obtaining written 

comments from knowledgeable TRANSCOM and DLA officials. We determined that the data 

were sufficiently reliable for our purposes to assess the extent to which DSO has made 

improvements to DOD materiel distribution. We also reviewed planning documents and 

interviewed Office of the Secretary of Defense, TRANSCOM, DLA, and service officials to 

determine the scope of DSO improvement efforts across DOD’s materiel distribution system. 

Additional information on our scope and methodology is provided in enclosure I.

 

6

According to TRANSCOM officials, the two main planning documents for DSO were Distribution Process Owner 

Strategic Opportunities Fiscal Year 2008 Report (Sept. 26, 2008) and DPO Strategic Opportunities Recommended 

Implementation Plan: Process Improvement, Strategic Surface Optimization, and Strategic Air Optimization (Sept. 30, 

2009).

7

Our prior work has identified six desirable characteristics that help establish a comprehensive, results-oriented 

management framework to guide the development and implementation of improvement efforts. The six characteristics 

of the results-oriented management framework are: (1) mission statement; (2) problem definition, scope, and 

methodology; (3) goals, objectives, activities, milestones, and performance measures; (4) resources and investments; 

(5) organizational roles, responsibilities, and coordination; and (6) key external factors that could affect the 

achievement of goals. See GAO, Combating Terrorism: Evaluation of Selected Characteristics in National Strategies 

Related to Terrorism, GAO-04-408T (Washington, D.C.: Feb. 3, 2004); Depot Maintenance: Improved Strategic 

Planning Needed to Ensure That Air Force Depots Can Meet Future Maintenance Requirements, GAO-10-526

(Washington, D.C.: May 14, 2010); and DOD’s 2010 Comprehensive Inventory Management Plan Addressed 

Statutory Requirements, But Faces Implementation Challenges, GAO-11-240R (Washington, D.C.: Jan. 7, 2011).
Page 4 GAO-12-883R Defense Logistics

We conducted this performance audit from November 2011 to August 2012 in accordance with 

generally accepted government auditing standards. Those standards require that we plan and 

perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that the evidence obtained 

provides a reasonable basis for our findings and conclusions based on our audit objectives.

Results in Brief

DOD incorporated results-oriented management practices into the planning and development of 

the four ongoing DSO improvement efforts. Additionally, it appears that DOD is incorporating 

those practices into its planning for the fifth effort—strategic network optimization—which is still 

under development. On the basis of our assessment of DOD’s key planning documents and 

other information for the process improvement, surface optimization, air optimization, and 

supply alignment efforts, we found that DOD addressed the six characteristics found in the 

framework. For example, DOD identified the main purpose of the improvement efforts, their 

scope, and the resources needed to execute individual efforts. Preliminary observations of 

DOD's planning for strategic network optimization indicate that agency officials are also 

incorporating results-oriented management practices for this effort. For example, DOD has 

developed a mission statement and established mechanisms to coordinate with stakeholders. 

However, because planning is still underway for strategic network optimization, we were unable 

to fully assess the extent to which DOD has used result-oriented management practices to

develop and implement this improvement effort. For example, DOD has not yet decided how to 

implement the effort nor developed specific performance measures to assess progress.

The implemented DSO efforts have improved some segments of DOD’s materiel distribution 

system, but these efforts were not intended to address all challenges that DOD faces in materiel 

distribution and that we have identified in our past work. When DSO began in 2009, the 

department emphasized two overarching goals: (1) achieve $500 million in cost avoidances and 

(2) improve shipment delivery times by 25 percent by 2012.8 With regard to the first goal, DOD 

has reported cost efficiencies through increasing utilization of containers, pallets, and aircraft; 

shifting more cargo to larger containers; and positioning supplies closer to overseas customers. 

According to DOD, these efficiencies led to over $490 million in cost avoidances. With regard to 

the second goal, DOD reported better shipment delivery times for a limited number of 

customers. For example, TRANSCOM’s process improvement effort led to better delivery times 

on 31 (6 percent) of DOD’s approximately 500 shipping lanes.9

 

8

Cost avoidance refers to costs that DOD would have incurred if the DSO initiatives had not been implemented. 

Shipment delivery time, also known as logistics response time, measures the time from submission of a requisition for 

an item to the delivery of the item to a retail supply organization, such as an Army supply support activity.

TRANSCOM and DLA have 

been institutionalizing some improvements from the four ongoing DSO efforts into their business 

operations. For example, DLA has revised its model for determining the types and amount of 

inventory to position at forward locations to factor in transportation costs. The institutionalization 

of these improvements could result in additional efficiencies to DOD’s materiel distribution 

system. In addition, following DOD’s initial implementation of DSO, the Distribution Process 

Owner Executive Board set a new goal in February 2012 for DSO to achieve another $500 

million in cost avoidances by the end of fiscal year 2015, and TRANSCOM is pursuing new 

9

Shipping lanes are defined by the location of the military customer, the mode of transportation used to deliver 

requisitioned supplies, and the location of the supply source. For example, DOD operates a shipping lane that 

delivers repair parts to customers in South Korea by means of U.S. military aircraft from Defense Depots located in 

the continental United States.
Page 5 GAO-12-883R Defense Logistics

initiatives to meet this updated goal.10 Although DOD has achieved some positive results from 

its DSO efforts, the initiative was not developed with the intent to address all challenges that 

DOD faces in its materiel distribution system, including some that we have identified in our prior 

work on supply support to the warfighter. For example, DOD reported better delivery times for 

some customers in three geographic combatant commands as a result of DSO, but often did not 

meet its delivery standards for shipments to those commands. Additionally, DSO was designed 

to improve the distribution operations of TRANSCOM and DLA, which does not include tactical 

movement of supplies and equipment within theaters of operation, such as Afghanistan.

We are not making any new recommendations in this report.

Background

The performance of DOD's materiel distribution system relies on many stakeholders, each with 

different responsibilities, systems, and processes. Two key stakeholders are TRANSCOM and 

DLA. With annual operating expenses of over $13 billion, TRANSCOM delivers supplies and 

equipment to major hubs across the globe and often across oceans, whether by air or by sea. In 

fiscal year 2011, TRANSCOM shipped more than 700,000 tons of cargo by air and nearly 800 

million cubic feet of cargo by sea. DLA purchases and provides the majority of the spare parts 

needed to maintain weapon systems and other military equipment. The agency also supplies 

food, water, fuel, and many other necessities. DLA manages 5 million supply items at 26 

distribution centers worldwide while processing over 100,000 requisitions for supplies every day.

DOD’s materiel distribution system includes four segments—intracontinental movement, 

strategic movement, theater movement, and tactical movement. (See fig. 1.)

 

10The Distribution Process Owner Executive Board is the senior decision-making forum charged with implementing 

initiatives in this area. The board is chaired by the TRANSCOM Commander, and members include the Deputy Under 

Secretary of Defense for Logistics and Materiel Readiness; General Services Administration; the Director of the Joint 

Staff J4; the DOD Deputy Chief Management Officer; and the Director of the Defense Logistics Agency. Other DOD 

stakeholders—such as the combatant commands and military services—also provide representatives.
Page 6 GAO-12-883R Defense Logistics

Figure 1: Four Segments of DOD’s Materiel Distribution System

• Intracontinental movement. This segment includes movement from the materiel’s point 

of origin (e.g., DLA warehouse or service installation) to a port of embarkation (e.g., 

seaport or aerial port in the United States). DLA and the military services normally 

perform distribution functions in this leg.

• Strategic movement. This segment, also known as the intertheater leg, includes 

movement from the port of embarkation to the port of debarkation in another geographic 

combatant command’s area of responsibility (e.g., Kuwait aerial port in the U.S. Central 

Command area of responsibility). TRANSCOM normally performs distribution functions 

in this leg.

• Theater movement. This segment, also known as the intratheater leg, includes 

movement from the port of debarkation to the point of need, which is a physical location 

designated by the geographic combatant commander as a receiving point for materiel for 

subsequent use or consumption (e.g., a major base in Afghanistan, such as Bagram 

Airfield). The geographic combatant commander is responsible for movement in this leg. 

TRANSCOM can also provide distribution support in this leg. 

• Tactical movement. This segment includes movement from the point of need to the 

point of employment, which is a physical location designated by the commander at the 

tactical level where materiel consumption occurs (e.g., a forward-operating base in 

Afghanistan). The geographic combatant commander assigns responsibility to a military 

service for movement in this leg.

Two organizations within DOD have important oversight roles and responsibilities for supply 

chain management and materiel distribution—the Under Secretary of Defense for Acquisition, 

Technology and Logistics, and TRANSCOM. The Under Secretary of Defense for Acquisition, 

Technology and Logistics serves as the principal staff assistant and advisor to the Secretary of 

Defense for all matters relating to defense logistics, among other duties. The Under Secretary 

has also been designated as the department’s Defense Logistics Executive with overall 

responsibility for improving and maintaining defense logistics and the global supply chain 

system. In addition, in his capacity as the Defense Logistics Executive, the Under Secretary of 

Defense for Acquisition, Technology and Logistics has the responsibility, in coordination with the 

Chairman of the Joint Chiefs of Staff, to prepare any directives, instructions, and decision 

memos, and to suggest legislative changes, in his area of responsibility. TRANSCOM, in 

addition to its responsibilities for transporting supplies and equipment in support of military 

operations, has been designated as DOD’s Distribution Process Owner with responsibility for 
Page 7 GAO-12-883R Defense Logistics

overseeing the overall effectiveness, efficiency, and alignment of DOD-wide distribution 

activities.11 According to the Office of the Secretary of Defense, that role extends to the first 

three legs of distribution and does not include the fourth—tactical movement. We have 

previously reported that excluding this portion of the distribution process from TRANSCOM’s 

Distribution Process Owner responsibilities leaves a fragmented process without any 

comprehensive oversight or visibility across all four levels of the distribution system.12

TRANSCOM—in its role as the Distribution Process Owner—began DSO in 2008 as an effort to 

identify opportunities to significantly improve the performance of DOD-wide distribution 

processes. This effort was intended to identify an actionable set of opportunities—approximately 

five—that would generate substantial cost avoidances and significant improvements in the DOD 

supply chain. A DSO project team began a process for identifying potential opportunities to 

pursue. The team first developed criteria for defining a potential “strategic opportunity.” Some of 

these criteria included falling within the scope of authority granted to the Distribution Process 

Owner; being based on strategies and processes proven to generate results in leading supply 

chains and applicable in the DOD environment; having a plausible path to implementation; and 

being able to produce measurable improvements. The next step in the process was to identify 

possible opportunities for improvement. The team identified performance gaps; held 

brainstorming sessions with relevant transportation stakeholders; conducted literature reviews; 

assessed the feasibility of the opportunities; and analyzed potential cost avoidances and 

performance improvements. Using this process, the DSO project team identified over 38 

possible opportunities and, by September 2008, had narrowed the list down to five actionable 

efforts. In March 2009, the Distribution Process Owner Executive Board approved DSO for 

implementation.

Although TRANSCOM initially developed and centrally managed DSO, the responsibility for 

implementing the individual efforts evolved. Currently, TRANSCOM is providing oversight for the 

first three efforts—process improvement, strategic surface optimization, and strategic air 

optimization—and DLA is responsible for overseeing supply alignment. Strategic network 

optimization has become a stand-alone effort. DLA, in collaboration with the military services, is 

involved in the planning for this effort, which is expected to begin implementation in October 

2013. According to DOD officials, the Office of Supply Chain Integration within the Office of the 

Under Secretary of Defense for Acquisition, Technology and Logistics is overseeing the effort.

DOD Used Results-Oriented Management Practices to Develop and Implement DSO

Our assessment of planning documents and other information for the four DSO improvement 

efforts that have been implemented determined that DOD incorporated results-oriented 

management practices into the development and implementation of these efforts. Specifically, 

our analysis showed that the process improvement, surface optimization, air optimization, and 

supply alignment improvement efforts addressed the six characteristics of a results-oriented 

management framework. The results of our assessment of these four implemented efforts are 

summarized in table 2. Although development of the fifth DSO effort—strategic network 

 

11According to DOD Instruction 5158.06, Distribution Process Owner (DPO) (Sept. 11, 2007), the process owner “has 

the responsibility for coordinating, sustaining, and improving processes; coordinating the creation of new processes, 

where appropriate; and being accountable for their outcomes. Process owners advocate improvements for and 

across all DoD Components for effectiveness, efficiency, and alignment relevant to a particular process.” See also 

DOD Directive 5158.04, United States Transportation Command (USTRANSCOM) (Sept. 11, 2007).

12GAO, Warfighter Support: DOD Has Made Progress, but Supply and Distribution Challenges Remain in 

Afghanistan, GAO-12-138 (Washington, D.C.: Oct. 7, 2011).
Page 8 GAO-12-883R Defense Logistics

optimization—is still underway, DOD’s planning process to date also appears to be 

incorporating results-oriented management practices.

Table 2: Characteristics of Results-Oriented Management Practices Used in Four DSO

Characteristics

Improvement Efforts 

That Have Been Implemented

GAO assessment

(1) Mission Statement: A comprehensive statement 

that summarizes the main purposes of the plan.

Addressed

The four implemented DSO efforts generally 

included comprehensive statements that identified 

the main purposes of each respective plan.

For example, the process improvement effort’s 

comprehensive statement is to reduce unnecessary 

downtime (namely, delays or redundancies) in endto-end distribution processes that will enable DOD to 

synchronize and optimize elements of its distribution 

system.

(2) Problem definition, scope, and methodology: 

Presents the issues to be addressed by the plan, the 

scope of its coverage, the process by which it was 

developed, and key considerations and assumptions 

used in the development of the plan.

Addressed

The four implemented DSO efforts generally 

identified problems to be addressed (e.g., identifying 

potential cost avoidances and efficiencies), the 

scope of coverage, and the methodology by which 

each effort was developed.

For example, the strategic surface optimization effort 

determined that surface transportation of materiel 

was not as efficient as it could be and that if DOD 

better-utilized containers to transport cargo, it could 

potentially save as much as $105 million per year. 

The DSO team identified potential opportunities for 

cargo consolidation and shipment delivery-time 

improvements within the U.S. Central Command, 

the U.S. European Command, and the U.S. Pacific 

Command areas of responsibility.

(3) Goals, objectives, activities, milestones, and 

performance measures: The identification of goals 

and objectives to be achieved by the plan, activities or 

actions to achieve those results, as well as milestones 

and performance measures.

Addressed

The four implemented DSO efforts identified a 

comprehensive goal of achieving $500 million in 

cost avoidances and improving shipment delivery 

time by 25 percent by the end of fiscal year 2012. 

Each improvement effort identified specific 

objectives/targets tied to the comprehensive goal, 

including how shipment delivery-time improvements 

will be measured. 

For example, the strategic air optimization effort 

identified objectives of up to $123 million in cost 

avoidances and up to 10 percent improvement to 

shipment delivery times by 2012. In addition, the 

supply alignment effort identified a potential to 

achieve up to $241 million in cost avoidances and a 

5 to 15 percent improvement to shipment delivery 

times.
Page 9 GAO-12-883R Defense Logistics

Characteristics GAO assessment

(4) Resources and investments: The identification of 

costs to execute the plan and the sources and types of 

resources and investments, including skills and 

technology and the human, capital, information, and 

other resources required to meet the goals and 

objectives.

Addressed

The four implemented DSO efforts generally 

identified resources and investments needed to 

reach their goals or desired end states.

For example, the strategic air optimization effort 

identified a onetime needed investment of up to $15 

million over 3 years to develop and implement 

increased weight and volume utilization of aircraft 

and to institutionalize air optimization processes 

across DOD’s distribution operations.

(5) Organizational roles, responsibilities, and 

coordination: The development of roles and 

responsibilities in managing and overseeing the 

implementation of the plan and the establishment of 

mechanisms for multiple stakeholders to coordinate 

their efforts throughout implementation and make 

necessary adjustments to the plan based on 

performance.

Addressed

The four implemented DSO efforts generally 

identified key stakeholders or organizations that 

have roles in coordinating, implementing, or 

executing these efforts.

For example, DLA is the lead organization for the 

supply alignment effort and coordinates with 

stakeholders that include the Defense Distribution 

Centers, the General Services Administration, 

TRANSCOM, and other DOD supply chain 

management officials at locations outside the 

continental United States.

(6) Key external factors that could affect the 

achievement of goals: The identification of key 

factors external to the organization and beyond its 

control that could significantly affect the achievement 

of the long-term goals contained in the plan. These 

external factors can include economic, demographic, 

social, technological, or environmental factors, as well 

as conditions that would affect the ability of the agency 

to achieve the results desired. 

Addressed

The four implemented DSO efforts generally 

identified key external factors, such as coordinating 

with stakeholders/organizations that are not under 

the control of the respective effort’s lead 

organization (e.g., TRANSCOM or DLA).

For example, TRANSCOM officials said that as part 

of their process improvement effort, they needed to 

get cooperation from other DOD or federal 

organizations that play a role in DOD’s distribution 

system. By getting cooperation from the General 

Services Administration for distribution of hazardous 

materials to Afghanistan, DOD was able to improve 

shipment delivery times. Without cooperation from 

organizations outside of TRANSCOM’s direct 

control, officials said that they are limited in the 

amount of shipment delivery time improvements that 

DOD is able to realize. 

Source: GAO analysis of DOD data.

Note: The four DSO improvement efforts included in this assessment are process improvement; strategic surface optimization; 

strategic air optimization; and supply alignment.

The descriptions of the individual improvement efforts below provide illustrative examples of 

how results-oriented management practices were incorporated into the development and 

implementation of DSO. 
Page 10 GAO-12-883R Defense Logistics

Process Improvement Incorporated a Comprehensive Statement and Pilot Testing

The DSO planning team addressed the first and second characteristics of results-oriented 

management practices by developing a comprehensive statement describing the purpose of the 

process improvement effort, and by refining a methodology to accomplish the effort’s purpose 

that was ultimately applied to other locations. The process improvement effort focuses on the 

removal of unnecessary wait time from distribution processes. According to DSO planning 

documents, unnecessary wait time often develops within supply chain centers as they modify 

their formal business practices or adopt informal norms that become standard operating 

procedures. Therefore, the purpose of the process improvement effort as identified in DSO 

planning documents is to remove unnecessary wait time and rapidly deploy those improved 

processes across the supply chain.

As part of their effort to refine the methodology to remove unnecessary wait time, the DSO team 

conducted a pilot test in Europe and applied the general methodology from the results of the 

pilot to other locations. For example, TRANSCOM officials identified a 2-week delay in 

processing orders at a facility that held and shipped hazardous materials to Afghanistan. 

Officials said that the amount of time it takes to pack materiel into containers for most orders at 

the facility is generally about 20 minutes. However, officials noticed that in some cases, certain 

batches of orders would take more than 2 weeks to arrive at the warehouse for the cargo to be 

retrieved and packed. In concert with officials at the organization running the facility, the DSO 

team assessed the potential causes for the delay and attributed it to some of the order 

processing procedures at the facility. Specifically, the standard operating procedure at the 

facility was to process orders in batches—that is, when individual orders were received by the 

facility, the individual orders would be processed as a group. In some cases, the facility would 

receive an individual order that was complicated and required more time to process because of 

the nature of the materiel. Because the processing procedures dictated that the orders be 

processed in batches, the relatively easy orders would be delayed while the more-complicated 

order was processed. To address this concern, rather than having orders sent in batches, 

TRANSCOM officials said once an order is processed it is sent to the warehouse for packing 

rather than waiting for the entire batch of orders to be processed. As a result of this and other 

process improvements, TRANSCOM officials reported that the time it takes to process, pack, 

and ship hazardous materials from the facility to Afghanistan had dropped from 36 days in June 

2011 to 11 days in April 2012.

Strategic Surface Optimization Identified Clear Goals and Estimated Resources

As part of the planning and implementation of the strategic surface optimization effort, the DSO 

team addressed the third and fourth characteristics of results-oriented management practices by 

developing goals and identifying resources and investments necessary to achieve these goals. 

The strategic surface optimization effort focuses on consolidating cargo in the continental United 

States for certain customers into well-utilized, mix-packed 40-foot containers rather than purepacked 20-foot containers.13

 

13According to Marine Corps officials, 40-foot containers generally cannot be used for cargo being moved to forwardoperating bases in tactical environments.

Pure packing refers to filling a container with cargo intended to 

arrive at a single destination, while mix packing refers to filling a container with a mix of cargo 

that is intended for multiple destinations. Mixed containers are often shipped to a regional 

location outside of the continental United States, where the container’s contents are unpacked, 

sorted, and shipped to their final destination within that region. According to DSO planning 

documents, the goal of this effort is to improve the utilization of containers and packing 
Page 11 GAO-12-883R Defense Logistics

processes, which the planning documents originally estimated could improve the speed of 

delivery by up to 5 percent and result in potential cost avoidances of $52 million to $105 million 

per year through reduced shipping costs. To implement initiatives within this DSO effort, the 

DSO planning documents estimated that the resources and investments necessary to facilitate 

the improvement totaled approximately $7 million to $10 million over a 3-year period. According 

to the DSO planning documents, this investment would institutionalize the use of 40-foot 

containers as a common operating practice for surface shipments. TRANSCOM officials said 

that the consolidation of materiel into 40-foot containers saves money and improves delivery 

speed at the strategic level. For example, TRANSCOM officials said that, on average, 20-foot 

pure-packed containers take 10 days to fill prior to shipping, while 40-foot mix-packed 

containers take 1.5 days to fill. In addition, TRANSCOM officials said that 40-foot containers 

have twice the capacity of 20-foot containers but only cost slightly more per container to 

transport.

Strategic Air Optimization Identified Inefficiencies and Modified Existing Metrics

The DSO team addressed the second and third characteristics of results-oriented management 

practices by determining that potential cost avoidances could be achieved through the 

increased utilization of pallets on air shipments and by modifying pallet utilization metrics. The 

strategic air optimization effort focused on selecting the best mode of air transport service (e.g., 

military versus commercial carriers) on the basis of customer requirements and the amount of 

traffic bound for a specific destination. According to DSO planning documents, DOD officials did 

not always optimize cost when using air to ship cargo as some planes were not fully utilized. 

Increasing utilization of the pallets on aircraft could potentially reduce air transportation costs 

and, in some cases, improve the speed of delivery. The DSO planning documents identified 

specific goals for initiatives conducted under this DSO effort, such as potentially avoiding up to 

$123 million in air cargo costs. To illustrate how the strategic air optimization effort could 

improve efficiency and potentially cut costs, TRANSCOM analyzed aircraft utilization at the four 

major aerial ports of embarkation in the continental United States14 and identified that changing 

the metrics used to gauge performance could increase pallet utilization. For example, 

TRANSCOM officials found that aerial porters at Dover Air Force Base were measuring the 

number of pallets being transported on aircraft but not measuring how much materiel was on 

each pallet. According to TRANSCOM officials, shifting the focus to building fuller pallets 

resulted in 3,200 more tons being shipped on 121 fewer aircraft missions.

Supply Alignment Established Clear Organizational Roles

The DSO team addressed the fifth characteristic of results-oriented management practices by 

defining the roles of stakeholders; and addressed the fourth characteristic by developing a 

model to determine the appropriate amount of resources needed to implement this effort 

globally. The supply alignment effort focuses on adjusting inventory levels at forward supply 

depots in order to account for transportation costs. According to DSO planning documents, by 

stocking the right types and amounts of inventory at forward supply depots, DOD could 

potentially minimize distribution costs and improve customer-service levels. During the 

development of specific initiatives in this DSO effort, the DSO planning documents noted that 

coordination would be necessary for multiple organizations—such as DLA, TRANSCOM, the 

General Services Administration, and the services. To identify the type and quantity of supplies 

needed at forward supply depots, DLA developed an Economic Movement Quantity model that 

 

14The four aerial ports of embarkation are: Dover Air Force Base, Delaware; Joint Base McGuire-Dix-Lakehurst, New 

Jersey; Travis Air Force Base, California; and Naval Air Station Norfolk, Virginia.
Page 12 GAO-12-883R Defense Logistics

is based on July 2010 demand data for supplies at locations outside the continental United 

States. DLA officials stated that implementation of the model’s results began in July 2011 and 

involved purchasing additional inventory and repositioning existing inventory, including the 

acquisition of $60 million in up-front investments of cash and equipment from TRANSCOM and 

the Army.

Preliminary Observations Indicate Planning for Strategic Network Optimization Is Incorporating 

Results-Oriented Management Practices 

Preliminary observations of DOD's planning for strategic network optimization indicate that 

agency officials are incorporating results-oriented management practices. The strategic network 

optimization effort is being designed to improve logistics efficiencies in DOD’s distribution 

network and reduce transportation costs by storing materiel at strategically located DLA supply 

sites (see enc. II). Because planning is still underway for strategic network optimization, we 

were unable to fully assess the extent to which DOD has used result-oriented management 

practices to develop and implement this improvement effort. Our preliminary observations are 

summarized in table 3.

Table 3: Preliminary Observations on DOD's Incorporation of Results-Oriented Management Practices into 

the Planning of the Strategic Network Optimization Improvement Effort

Characteristics Preliminary observations

(1) Mission Statement: A comprehensive statement 

that summarizes the main purposes of the plan.

This effort’s mission statement is to optimize the 

DOD global storage and distribution network while 

continuing to meet customer requirements at the 

best value and provide timely, agile, and effective 

support to the warfighter.

(2) Problem definition, scope, and methodology: 

Presents the issues to be addressed by the plan, the 

scope of its coverage, the process by which it was 

developed, and key considerations and assumptions 

used in the development of the plan.

Officials defined the problem as being significant 

constraints on supply chain performance including 

location, function, and capacity of supply sites and 

routes. The scope is identified as sourcing, storage, 

and distribution centers inside and outside the 

continental United States. The methodology

includes three potential courses of action for 

developing strategically placed sourcing and 

distribution centers inside and outside the 

continental United States, as well as global and 

domestic centers for the disposal of materiel.

(3) Goals, objectives, activities, milestones, and 

performance measures: The identification of goals 

and objectives to be achieved by the plan, activities or 

actions to achieve those results, as well as milestones 

and performance measures.

Objectives include (1) leveraging joint collaboration 

across DOD to implement a more efficient strategic 

network that supports the warfighter; and (2)

optimizing the global storage and distribution 

network that provides responsive and cost-effective 

service. 

Milestones identified by DLA officials include (1) 

computer simulation of the effort’s model in summer 

2012; and (2) development of DOD budget 

documents that will identify projected cost savings in 

fiscal year 2014. 

DLA officials said that specific performance 

measures are being developed.
Page 13 GAO-12-883R Defense Logistics

Characteristics Preliminary observations

(4) Resources and investments: The identification of 

costs to execute the plan and the sources and types of 

resources and investments, including skills and 

technology and the human, capital, information, and 

other resources required to meet the goals and 

objectives.

Resources and investments include onetime 

implementation costs totaling about $52.1 million, 

according to DLA (Army: $6.4 million; Navy: $0.2 

million; Air Force: $4.1 million; Marine Corps: $1.1 

million; and DLA: $40.3 million).

(5) Organizational roles, responsibilities, and 

coordination: The development of roles and 

responsibilities in managing and overseeing the 

implementation of the plan and the establishment of 

mechanisms for multiple stakeholders to coordinate 

their efforts throughout implementation and make 

necessary adjustments to the plan based on 

performance.

Lead organization: DLA

Stakeholders: Collaboration by the Army, Navy, Air 

Force, and Marine Corps. Stakeholders fund 

implementation costs and are projected to realize 

savings from this effort.

(6) Key external factors that could affect the 

achievement of goals: The identification of key 

factors external to the organization and beyond its 

control that could significantly affect the achievement 

of the long-term goals contained in the plan. These 

external factors can include economic, demographic, 

social, technological, or environmental factors, as well 

as conditions that would affect the ability of the agency 

to achieve the results desired. 

External factors identified by DLA officials that 

could affect the achievement of the effort’s goals 

include (1) adoption of business rules for acquisition 

of materiel by stakeholders; (2) DLA’s reliance on 

the services to provide accurate cost savings data; 

and (3) collaboration with stakeholders outside of 

DLA’s control.

Source: GAO analysis of DOD data.

In its planning process for strategic network optimization, DOD appears to be addressing the 

characteristics of results-oriented management practices. For example, DOD appears to be 

addressing the first characteristic by developing a mission statement. According to DOD, the 

mission of this effort is to optimize the global storage and distribution network while continuing 

to meet customer requirements at the best value and provide timely, agile, and effective support 

to the warfighter. Additionally, DOD appears to be addressing the fifth characteristic by 

establishing mechanisms for stakeholders to coordinate planning efforts. For example, DLA 

officials said that they lead a planning team that meets biweekly, thus enabling stakeholders to 

raise and address concerns associated with this effort. Representatives on this team include 

officials from TRANSCOM, the Joint Staff, and all the services. In addition, DLA officials said 

that the Joint Logistics Board15 and the Distribution Process Owner Executive Board serve as 

governing structures for strategic network optimization and are venues where DOD’s senior 

leadership are regularly briefed on its progress and can also raise concerns. Overall, DLA’s 

planning and development processes for strategic network optimization appear to be factoring in 

input and relevant concerns from its stakeholders, including the services. For example, DLA 

initially estimated cost-savings projections16 to be approximately $596 million across the 

services for strategic network optimization for fiscal years 2014 to 2018. However, DLA officials 

said that upon further consultation with the services and other DOD components, DLA obtained 

revised data and updated its cost savings projections to approximately $476 million.

 

15The Joint Logistics Board is co-chaired by the Assistant Secretary of Defense for Logistics and Materiel Readiness 

and the Joint Staff Director for Logistics, J-4.

16According to DLA officials, the projected cost savings for the strategic network optimization improvement effort are 

estimates of potential reductions from the operations and maintenance budgets for the services and DOD 

components.
Page 14 GAO-12-883R Defense Logistics

Although these examples reflect characteristics of results-oriented management practices, we 

were unable to fully assess this effort because planning is still underway. For example, DOD 

officials told us that the latest report on the implementation and cost-savings projections for 

strategic network optimization is still under review, and a decision on how to implement the 

effort has yet to occur. Similarly, DLA officials told us that they were in the process of 

developing specific performance measures for strategic network optimization, and that these 

measures would incorporate input from the services.

DSO Has Led to Some Improvements but Does Not Address All Materiel Distribution 

Challenges

DOD Reported Transportation Cost Avoidances Attributable to DSO

DOD has reported that implementation of DSO resulted in transportation cost avoidances. 

When the Distribution Process Owner Executive Board approved implementation of DSO in 

2009, it set a goal of achieving $500 million in cost avoidances by the end of fiscal year 2012.17

As of April 2012, TRANSCOM and DLA reported that the implemented DSO initiatives had led 

to over $490 million in transportation cost avoidances. According to DOD, two DSO efforts—

strategic surface optimization and strategic air optimization—resulted in approximately $481 

million in cost avoidances, and a third effort—supply alignment—resulted in about $9.5 million in 

cost avoidances. DOD has established processes for calculating, validating, and reporting DSO 

cost avoidances on a regular basis. For example, according to TRANSCOM, the DSO team 

uses a methodology—agreed upon by distribution stakeholders including TRANSCOM, DLA, 

General Services Administration, combatant commands, and the services—to calculate cost 

avoidances resulting from a DSO initiative. After the cost avoidance has been calculated, 

TRANSCOM’s financial office validates the cost-avoidance number or works with the DSO team 

to correct it. The DSO team then publishes its cost-avoidance totals in a monthly report.

TRANSCOM and DLA attribute most of their reported cost avoidances to increased use of 40-

foot containers and greater utilization of container capacity in general; increased utilization of 

pallet and aircraft capacity; and positioning supplies closer to overseas customers. These 

improvements are discussed in greater detail below.

• Strategic surface optimization. This improvement effort has led to increased use of 

40-foot containers and greater utilization of container capacity, particularly for some 

cargo shipments to Afghanistan, Iraq, and Kuwait. According to TRANSCOM, 40-foot 

containers are more cost-effective than 20-foot containers; they provide at least double 

the allowable space and 12 percent more allowable weight, while incurring only a slightly 

higher cost per container and significantly less cost per pound or per cubic foot. Since 

implementation began in January 2009, the percentage of 40-foot containers shipped to 

U.S. Central Command has increased between 22 and 100 percent for shipments from 

some DLA and General Services Administration locations. Greater use of 40-foot 

containers, along with more-fully utilizing available space and weight capacity in both 40-

foot and 20-foot containers, has reduced the average transportation costs per container. 

Overall, the strategic surface optimization effort has resulted in approximately $197 

million in cost avoidances, according to TRANSCOM.

 

17The minutes of the Distribution Process Owner Executive Board’s March 2009 meeting stated that the goals for 

DSO were to be achieved by January 2012. However, according to TRANSCOM, the board’s goals were 

subsequently understood to be achieved by the end of fiscal year 2012.
Page 15 GAO-12-883R Defense Logistics

• Strategic air optimization. Under this improvement effort, DOD has increased 

utilization of pallets and aircraft for shipments out of the four major aerial ports of 

embarkation in the United States. Since implementation began in August 2010, 

TRANSCOM reports that pallet utilization has increased between 2 to 10 percent at the 

four major aerial ports, while aircraft utilization has increased between 2 to 7 percent. 

More-fully utilizing available capacity of pallets and aircraft at these four locations has 

reduced the average cost per pound for air cargo. Overall, the strategic air optimization 

effort has resulted in approximately $284 million in cost avoidances, according to 

TRANSCOM.

• Supply alignment. The supply alignment effort aims to reduce transportation costs by 

optimizing the amounts and types of safety-level supplies18 located at DLA distribution 

centers outside the United States. By optimizing the amounts and types of safety-level 

stock at forward locations, DLA can deliver those supplies to its overseas customers by 

means of theater transportation assets, and then replenish its stock levels by surface 

transportation from the United States. According to DLA, this process is less expensive 

than delivering supplies to overseas customers by air from the United States. Since 

implementation began in July 2011, DLA reports that supply alignment has allowed DOD 

to avoid transportation costs of approximately $9.5 million.

The implementation of these DSO efforts has reduced some costs for transportation, but other 

factors can offset the financial benefits of DSO. According to TRANSCOM, DSO cost 

avoidances accrue to the services’ overseas contingency operations budgets and allow the 

services to fund other priorities. For example, the supply alignment effort enables DOD to 

reduce transportation costs by shipping more cargo on surface routes, which is less expensive 

than transporting cargo by air. Additionally, according to TRANSCOM, transportation 

efficiencies obtained through implementing DSO initiatives—such as using more 40-foot 

containers—could lead to reductions in transportation rates charged to the services and other 

customers. However, other factors—including higher fuel prices, expenses incurred by 

commercial contractors, and DOD actions to encourage use of military transportation19—also 

affect transportation rates and can offset the financial benefits of DSO. Service officials stated 

that it is unclear to what extent DSO has affected transportation rates in recent years, and in 

some cases officials have actually seen transportation rates increase. However, they added that 

it is possible that the DSO cost avoidances had kept the rates from increasing any further. 

TRANSCOM and DLA officials told us that they are institutionalizing into their business 

operations some of the improvements from the ongoing DSO efforts. For example, according to 

TRANSCOM officials, the command has revised its business processes to better utilize pallet 

and container space, and to use more cost-effective 40-foot containers for shipping cargo to 

overseas locations. TRANSCOM also has incorporated certain DSO-related metrics into 

executive-level briefings to provide visibility to commanders. For example, according to 

TRANSCOM officials, these briefings now include aircraft and pallet utilization rates, which were 

 

18Safety levels are the amount of stock that is to be kept on hand in case of minor interruptions in the resupply 

process or fluctuations in demand.

19According to TRANSCOM, DOD sets some air transportation rates according to what commercial companies 

charge for similar services, in order to encourage use of DOD-operated air services. Because these rates do not 

always cover all transportation costs, DOD uses a dedicated funding account to pay for the difference. Any DSO 

initiatives that make these air transportation services more efficient could reduce the amount DOD must pay out of its 

dedicated funding account to cover the difference between the actual costs incurred and DOD’s air transportation 

rates, but they would not necessarily reduce DOD’s rates.
Page 16 GAO-12-883R Defense Logistics

not previously tracked and reported. Additionally, DLA has incorporated into its business 

operations the revised model it used to optimize the positioning of safety level supplies at 

overseas locations. According to DLA officials, the model will continue to assess demand levels 

and transportation costs to achieve an optimal design for the positioning of safety-level supplies, 

whether they be at overseas distribution centers or sites in the United States. The 

institutionalization of these DSO improvements could result in additional cost avoidances and 

better delivery performance along some segments of the distribution system. In addition, 

following DOD’s initial implementation of DSO, the Distribution Process Owner Executive Board 

set a new goal in February 2012 for DSO to achieve another $500 million in cost avoidances by 

the end of fiscal year 2015. According to TRANSCOM officials, the DSO team is pursuing new 

initiatives to meet this goal, such as minimizing the number of aircraft flights to locations outside 

of the United States by consolidating cargo from multiple locations within the United States.

DOD Reported Better Delivery Times for Customers on a Limited Number of Shipping Lanes as 

a Result of DSO

DOD also reported that the implemented DSO efforts have contributed to better delivery times 

for some customers. When the Distribution Process Owner Executive Board approved 

implementation of DSO in 2009, it set a goal of improving shipment delivery times by 25 percent 

by the end of the fiscal year 2012. According to DOD, TRANSCOM’s process improvement 

effort and DLA’s supply alignment effort led to better delivery times for customers on a limited 

number of shipping lanes and from certain overseas distribution centers. These improvements 

are discussed in greater detail below.

• Process improvement. According to TRANSCOM, the DSO process improvement 

effort, which includes efficiency concepts from the strategic surface optimization and 

strategic air optimization efforts, improved shipment delivery times ranging from 7 to 40 

percent on a limited number of shipping lanes to customers in three geographic 

combatant commands—U.S. European Command, U.S. Pacific Command, and U.S. 

Central Command. TRANSCOM estimates that 31 shipping lanes were affected by this 

improvement effort. These lanes represent a small number—approximately 6 percent—

of DOD’s 500 shipping lanes worldwide. TRANSCOM officials told us they targeted for 

improvement those shipping lanes that had the greatest potential for increasing delivery 

performance within a geographic combatant command—such as those with poor 

delivery performance and those with distribution partners willing to undergo change. 

TRANSCOM officials cited a number of initiatives under the process improvement effort 

that contributed to improved shipping delivery times across the three geographic 

combatant commands. For example, in an effort to maximize container and pallet 

utilization, as well as reduce the time cargo spends at the source of supply, the U.S. 

European Command adopted new procedures to consolidate cargo bound for different 

customers and to better align its distribution operations with commercial transportation 

schedules. Process improvements in the U.S. Pacific Command included reconfiguring 

warehouse operations to more-quickly receive and process cargo, as well as better 

consolidating cargo into containers at a U.S.-based distribution center. Furthermore, for 

shipments to Afghanistan in the U.S. Central Command, DOD increased the efficiency of 

floor operations and set goals for how quickly shipments should be processed and 

packed at their U.S.-based supply warehouse.

• Supply alignment. DLA reported improvements to delivery performance for some 

customers as a result of supply alignment. Specifically, DLA data show average delivery 

times improved for shipments from seven distribution centers outside the continental 
Page 17 GAO-12-883R Defense Logistics

United States. According to DLA, these improved delivery times, ranging from 6 to 43 

percent at the affected distribution centers as of April 2012, resulted from positioning 

some safety-level supplies closer to overseas military customers, rather than from DLA 

centers in the United States.

Since the Distribution Process Owner Executive Board approved DSO for implementation in 

March 2009, DOD has placed greater emphasis on achieving cost avoidances through DSO 

and less emphasis on reducing shipment delivery times, according to TRANSCOM. 

TRANSCOM no longer tracks shipment delivery-time improvements specifically resulting from 

DSO,20 and the Distribution Process Owner Executive Board has not set a new goal for 

improving delivery times to coincide with the goal of $500 million in cost avoidances to be 

achieved by the end of fiscal year 2015. Although the board did not set a new goal for improving 

delivery times, shipment delivery times continue to be a consideration. For example, 

TRANSCOM has a metrics branch that regularly analyzes shipment delivery times along the 

first three segments of the distribution system, assesses performance against DOD’s timedefinite delivery standards, and coordinates with distribution stakeholders to address 

performance gaps as they occur. Additionally, TRANSCOM officials stated that future cost 

avoidance initiatives to be conducted as part of the DSO improvement efforts will include an 

assessment of delivery times.

DSO Was Not Designed to Address All Challenges DOD Faces in Materiel Distribution

Although DSO has had some positive results, it was not designed to address all challenges that 

DOD faces in materiel distribution. In prior reports, we have identified challenges in the 

distribution of supplies and equipment to the warfighter, most recently in Afghanistan.21 For 

example, we found that DOD did not always meet time-definite delivery standards for shipments 

to Afghanistan. Time-definite delivery is a key metric the department uses to track supply chain 

performance over time. According to DOD guidance, time-definite delivery standards are 

designed to provide customers with the assurance that, in a specified level of probability, they 

will receive items ordered through DOD’s logistics system in a definite period. TRANSCOM 

officials stated DOD has set a goal that 85 percent of shipments22 transported on shipping lanes 

to the geographic combatant commands meet established time-definite delivery standards.

However, from December 2009 through March 2011, surface shipments of supplies to 

Afghanistan did not once meet this goal for time-definite delivery, and commercial air shipments 

from the United States met the goal only six times over that time frame.

As previously stated, DOD has improved delivery performance on a limited number of lanes in 

three combatant commands—U.S. European Command, U.S. Pacific Command, and U.S. 

Central Command. However, overall time-definite delivery performance for shipments to those 

combatant commands is varied. In the 31 months between October 2009 and April 2012, which 

includes the time frame of DSO implementation, DOD often did not achieve its goal for meeting 

 

20According to TRANSCOM officials, the DSO team tracks the delivery-time improvements resulting from DSO 

initiatives for a period of 6 to 10 months following implementation of a process change to confirm that the 

improvements are enduring. Because the last major initiative to improve shipment delivery times was concluded in 

the summer of 2011, the DSO team is no longer tracking the delivery time effects of DSO initiatives.

21GAO-12-138.

22According to TRANSCOM, delivery times are tracked for wholesale requisitioned items, primarily supply classes II 

(e.g., clothing), IX (e.g., repair parts), III (e.g., packaged petroleum), and IV (e.g., construction materials), with 

unplanned direct vendor deliveries removed from the data.
Page 18 GAO-12-883R Defense Logistics

time-definite delivery standards (see fig. 2). Specifically, on a monthly basis, DOD met the 85-

percent goal twice for the U.S. European Command and seven times for the U.S. Pacific 

Command, but did not meet its 85 percent goal for the U.S. Central Command.23 According to 

TRANSCOM officials, several factors affect DOD’s delivery time, including which mode of 

transportation is used. For example, surface delivery, while cheaper, is generally much slower 

than air delivery. Therefore, shipping more cargo by surface could lead to lower costs but also 

longer delivery times.

Figure 2: Percent of Shipments Meeting Time-Definite Delivery Standards

DSO has contributed to improvements in the first three segments of distribution (intracontinental 

movement, strategic movement, and theater movement), but was not designed to optimize the 

entire distribution system. DSO was specifically designed by TRANSCOM, as the Distribution 

Process Owner, to improve the efficiency and effectiveness of the first three distribution 

segments, but its scope does not include efforts or initiatives specifically targeting the fourth 

segment of distribution—tactical movement. In our report on distribution challenges in 

Afghanistan, we found that DOD’s oversight of the distribution of supplies and equipment to the 

warfighter across all four distribution legs is fragmented.24 TRANSCOM officials acknowledged 

that because DSO focuses on the first three segments, the ability of DSO to optimize DOD’s 

entire distribution system is limited.

 

23According to TRANSCOM officials, while DOD has often not met its overarching 85-percent goal for this time 

period, some specific shipping lanes are meeting the goal. For example, according to documents provided by 

TRANSCOM, specific shipping lanes to U.S. Central Command—such as commercial air shipments to Afghanistan 

and Qatar—met the 85-percent goal in March and April 2012.

24GAO-12-138.
Page 19 GAO-12-883R Defense Logistics

Agency Comments and Our Evaluation

In oral comments on a draft of this report, officials from the Office of the Assistant Secretary of 

Defense for Logistics and Materiel Readiness acknowledged that the DSO initiatives do not 

address distribution or transportation tracking beyond TRANSCOM’s responsibilities. The 

officials also stated that the TRANSCOM-led Joint Deployment and Distribution Enterprise25

governance structure conducts quarterly performance metric reviews with the combatant 

commands and military services to review distribution performance data to the point of use. 

According to the officials, these meetings are used to investigate and correct abnormalities that 

occur in the tactical segment of the distribution process, which result in the combatant 

commands and military services resolving distribution issues affecting multiple components and 

providing result-oriented management practices in the tactical distribution segment.

Our review focused on the implementation of DSO and the results achieved, and we did not 

assess the activities of the Joint Deployment and Distribution Enterprise governance structure

as part of this review. According to DOD joint doctrine, the department uses the Joint 

Deployment and Distribution Enterprise to deliver joint end-to-end movement of forces and 

sustainment from point of origin to the designated point of need—the first three legs of 

distribution. In our prior report on distribution problems in Afghanistan, we found that 

TRANSCOM, which leads the Joint Deployment and Distribution Enterprise, did not have full 

oversight of the distribution of supplies and equipment to the warfighter, and only monitored 

performance metrics for distribution along the first three legs of the distribution system.26

Accordingly, we made recommendations in our prior report aimed at providing more 

comprehensive oversight of the materiel distribution system, but DOD disagreed. Specifically:

• We recommended that the department revise the instructions for the Distribution Process 

Owner to provide clear guidance on how TRANSCOM is to oversee the overall 

effectiveness, efficiency, and alignment of DOD-wide distribution activities, to include the 

fourth leg of distribution. The department disagreed, stating that distribution from the theater 

to tactical level (point of need to point of employment) is not the responsibility of 

TRANSCOM.

• We recommended that the Secretary of Defense direct the U.S. Central Command to direct 

U.S. Forces-Afghanistan to provide regular reports to TRANSCOM on delivery performance 

for shipments within Afghanistan. The department disagreed with the need for U.S. Central 

Command to provide TRANSCOM metrics relating to the fourth leg of distribution for the 

reasons stated above.

• We recommended that the Secretary of Defense direct the Commander of TRANSCOM to 

incorporate the delivery performance reports from U.S. Forces-Afghanistan into the 

command’s review of distribution metrics, in order for TRANSCOM to measure the 

performance of DOD’s entire distribution system. The department disagreed with the need 

for U.S. Central Command to provide TRANSCOM metrics because it said TRANSCOM 

already tracks time definite delivery standard metrics that include logistics response time.

 

25According to DOD joint doctrine, the Joint Deployment and Distribution Enterprise is the complex of equipment, 

procedures, doctrine, leaders, technical connectivity, information, shared knowledge, organizations, facilities, training, 

and materiel necessary to conduct joint distribution operations. The Joint Logistics (Distribution) Joint Integrating 

Concept states that TRANSCOM, as Distribution Process Owner, has responsibility to coordinate and synchronize 

the Joint Deployment and Distribution Enterprise.

26GAO-12-138.
Page 20 GAO-12-883R Defense Logistics

As we previously reported, for TRANSCOM to more effectively coordinate and synchronize the 

enterprise to meet joint force commander requirements, it would benefit from having an 

awareness of distribution requirements and processes in the fourth leg, from the point of need to 

the point of employment. Accordingly, we are encouraged that the department has 

acknowledged the need for some level of oversight across all four legs of the materiel 

distribution system. 

- - - - - 

We are sending a copy of this report to appropriate congressional committees and the Secretary 

of Defense. The report will also be available at no charge on our website at http://www.gao.gov. 

If you or your staff have any questions about this report, please contact me at (202) 512-5431 or 

russellc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs 

may be found on the last page of this report. GAO staff who made major contributions to this 

report are listed in enclosure III. 

Cary B. Russell 

Acting Director, Defense Capabilities

 and Management

Enclosures – 3 
Enclosure I

Page 21 GAO-12-883R Defense Logistics

Scope and Methodology

To assess the extent to which the Department of Defense (DOD) has developed and 

implemented Distribution Process Owner Strategic Opportunities (DSO) consistent with resultsoriented management practices, we reviewed planning documents and other information for the 

four implemented DSO efforts—process improvement, strategic surface optimization, strategic 

air optimization, and supply alignment. We assessed to what extent these documents 

incorporated the six characteristics of results-oriented management practices as identified in 

previous GAO reports. Three GAO analysts evaluated and individually assessed each 

characteristic for each improvement effort as “addressed,” “partially addressed,” or “not 

addressed.” These categories were defined as follows:

• Addressed: All parts of the characteristic are generally addressed. 

• Partially addressed: One or more parts of the characteristic, but not all parts of the 

characteristic, are generally addressed. 

• Not addressed: No part of the characteristic is addressed. 

Upon completion of the individual evaluations, the analysts discussed their assessments, 

identified any differences, and reached a consensus in areas where their individual 

assessments differed. Once consensus was achieved, assessments for each improvement 

effort were rolled up into one comprehensive assessment for each characteristic. For example, 

if the assessments for all four improvement efforts were “addressed” for the mission statement 

characteristic, then the assessment table (see table 2) would reflect this with the assessment 

“addressed” for the mission statement characteristic. Preliminary observations for the strategic 

network optimization improvement effort are illustrative examples of planning efforts provided 

through interviews with Defense Logistics Agency (DLA) officials and strategic network 

optimization planning briefing slides. We did not conduct a formal assessment of the strategic 

network optimization improvement effort because this effort is still in the planning stages. 

Implementation of the strategic network optimization improvement effort is scheduled for 

October 2013.

To assess the extent to which DSO has made improvements to DOD’s materiel distribution 

system and has addressed issues identified in our past work, we obtained and analyzed data 

and reports from U.S. Transportation Command (TRANSCOM) and DLA on cost avoidance and 

shipment delivery times since DSO implementation began in fiscal year 2009, and interviewed 

TRANSCOM, DLA, and military service officials to obtain additional information on DSO 

improvements. We analyzed TRANSCOM’s monthly DSO cost-avoidance reports that 

document cost avoidances resulting from the strategic surface and air optimization efforts; 

TRANSCOM briefings and other documents on improvements to shipment delivery times for a 

limited number of shipping lanes resulting from the process improvement effort; and DLA’s 

monthly reports that document cost avoidances and shipment delivery-time improvements 

resulting from the supply alignment effort. We assessed the reliability of the cost avoidance and 

shipment delivery-time data by reviewing related data documentation, analyzing the 

methodology used to determine DSO improvements, and interviewing and obtaining written 

comments from knowledgeable TRANSCOM and DLA officials. We found that TRANSCOM and 

DLA calculate cost avoidance and shipment delivery times by using data from multiple sources. 

These sources are often operated by DOD organizations outside of TRANSCOM and DLA 

control, and those organizations are responsible for maintaining quality control over the data. 

Officials stated that the data sources fulfill their need to calculate cost avoidance and shipment 

delivery-time improvements, and that any identified data discrepancies are addressed in 
Enclosure I

Page 22 GAO-12-883R Defense Logistics

consultation with distribution stakeholders. Thus, we determined that the data were sufficiently 

reliable for our purposes to assess the extent to which DSO has made improvements to DOD 

materiel distribution. Finally, we obtained and reviewed DSO planning and implementation 

documents and interviewed Office of the Secretary of Defense, Joint Staff, TRANSCOM, DLA, 

and military service officials to determine the scope of DSO improvement efforts across DOD’s 

materiel distribution system.

In conducting our work, we contacted and obtained information from the following organizations: 

• Office of the Deputy Assistant Secretary of Defense for Supply Chain Integration 

• Joint Staff, Logistics

• TRANSCOM, Strategy, Policy, Programs, and Logistics

• DLA, Logistics Operations

• Office of the Deputy Chief of Staff of the Army, Logistics 

• Office of the Chief of Naval Operations, Logistics 

• Office of the Deputy Chief of Staff of the Air Force, Logistics, Installations, and Mission 

Support

• Office of the Deputy Commandant of the Marine Corps, Installations and Logistics 

We conducted this performance audit from November 2011 to August 2012 in accordance with 

generally accepted government auditing standards. Those standards require that we plan and 

perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that the evidence obtained 

provides a reasonable basis for our findings and conclusions based on our audit objectives.
Enclosure II 

Page 23 GAO-12-883R Defense Logistics

Strategic Network Optimization

The strategic network optimization effort is designed to improve logistics efficiencies in the 

Department of Defense distribution network and reduce transportation costs by storing materiel 

at strategically located Defense Logistics Agency (DLA) supply centers. The current plan for this 

effort is to designate five major source nodes across the continental United States, which will 

distribute materiel to 12 regional storage and distribution centers. These nodes and centers will 

be located at existing installations (see fig. 3). In addition, nine source nodes have been 

identified outside the continental United States that DLA expects will allow it to more-efficiently 

move materiel forward and backward across the global distribution network (see fig. 4).

Figure 3: Planned Locations of Strategic Network Optimization Sites in the Continental United States
Enclosure II 

Page 24 GAO-12-883R Defense Logistics

Figure 4: Planned Locations of Strategic Network Optimization Sites outside the Continental United States
Enclosure III

Page 25 GAO-12-883R Defense Logistics

GAO Contact and Staff Acknowledgments

GAO Contact

Cary B. Russell, (202) 512-5431 or russellc@gao.gov

Staff Acknowledgments

In addition to the contact named above, key contributors to this report were Thomas Gosling, 

Assistant Director; Susan Ditto; Jim Melton; Geoffrey Peck; Amie Steele; Michael Willems; and 

Richard Winsor.

(351653)
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