S. Hrg. 110–391

FROM WAREHOUSE TO WARFIGHTER: AN UPDATE

ON SUPPLY CHAIN MANAGEMENT AT DOD

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 TENTH CONGRESS

FIRST SESSION

JULY 10, 2007

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

Printed for the use of the Committee on Homeland Security 

and Governmental Affairs

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FROM WAREHOUSE TO WARFIGHTER: AN UPDATE ON SUPPLY CHAIN MANAGEMENT AT DOD

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37–356 PDF 2008

S. Hrg. 110–391

FROM WAREHOUSE TO WARFIGHTER: AN UPDATE

ON SUPPLY CHAIN MANAGEMENT AT DOD

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 TENTH CONGRESS

FIRST SESSION

JULY 10, 2007

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 

JOSEPH I. LIEBERMAN, Connecticut, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK L. PRYOR, Arkansas 

MARY L. LANDRIEU, Louisiana 

BARACK OBAMA, Illinois 

CLAIRE McCASKILL, Missouri 

JON TESTER, Montana 

SUSAN M. COLLINS, Maine 

TED STEVENS, Alaska 

GEORGE V. VOINOVICH, Ohio 

NORM COLEMAN, Minnesota 

TOM COBURN, Oklahoma 

PETE V. DOMENICI, New Mexico 

JOHN WARNER, Virginia 

JOHN E. SUNUNU, New Hampshire

MICHAEL L. ALEXANDER, Staff Director 

BRANDON L. MILHORN, Minority Staff Director and Chief Counsel 

TRINA DRIESSNACK TYRER, Chief Clerk 

OVERSIGHT OF GOVERNMENT MANAGEMENT, THE FEDERAL 

WORKFORCE, AND THE DISTRICT OF COLUMBIA SUBCOMMITTEE 

DANIEL K. AKAKA, Hawaii, Chairman 

CARL LEVIN, Michigan 

THOMAS R. CARPER, Delaware 

MARK L. PRYOR, Arkansas 

MARY L. LANDRIEU, Louisiana 

GEORGE V. VOINOVICH, Ohio 

TED STEVENS, Alaska 

TOM COBURN, Oklahoma 

JOHN WARNER, Virginia

RICHARD J. KESSLER, Staff Director 

EVAN CASH, Professional Staff Member 

JENNIFER A. HEMINGWAY, Minority Staff Director 

DAVID COLE, Minority Professional Staff Member 

EMILY MARTHALER, Chief Clerk 

(III)

C O N T E N T S 

Opening statements: Page 

Senator Akaka .................................................................................................. 1

Senator Voinovich ............................................................................................. 3

WITNESSES 

TUESDAY, JULY 10, 2007

Hon. Jackson P. Bell, Deputy Under Secretary of Defense, Logistics and 

Material Readiness, U.S Department of Defense .............................................. 5

General Norton A. Schwartz, Commander, U.S. Transportation Command ...... 7

Lieutenant General Robert T. Dail, Director, Defense Logistics Agency ............ 9

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

ALPHABETICAL LIST OF WITNESSES

Bell, Hon. Jackson P.: 

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

Joint prepared statement with Lieutenant General Dail and General 

Schwartz ........................................................................................................ 27

Dail, Lieutenant General Robert T.: 

Testimony .......................................................................................................... 9

Joint prepared statement with Mr. Bell and General Schwartz .................. 27

Schwartz, General Norton A: 

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

Joint prepared statement with Mr. Bell and Lieutenant General Dail ....... 27

Solis, William M.: 

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

Prepared statement .......................................................................................... 49

APPENDIX 

Background .............................................................................................................. 77

GAO Report entitled ‘‘DOD’s High-Risk Areas, Progress Made Implementing 

Supply Chain Management Recommendations, but Full Extent of Improvement Unknown,’’ January 2007, GAO–07–234 .................................................. 83

GAO Report entitled ‘‘Defense Logistics, Efforts to Improve Distribution and 

Supply Support for Joint Military Operations Could Benefit from a Coordinated Management Aopproach,’’ June 2007, GAO–07–807 .............................. 245

Copy of the ‘‘Business Case Analysis for Radio Department of Defense Passive 

Radio Frequency Identification,’’ submitted by General Schwartz .................. 307

(1)

FROM WAREHOUSE TO WARFIGHTER: 

AN UPDATE ON SUPPLY CHAIN 

MANAGEMENT AT DOD 

TUESDAY, JULY 10, 2007

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 2:36 p.m., in Room 

SD–342, Dirksen Senate Office Building, Hon. Daniel K. Akaka, 

Chairman of the Subcommittee, presiding. 

Present: Senators Akaka and Voinovich. 

OPENING STATEMENT OF SENATOR AKAKA 

Senator AKAKA. Good to see all of you here. Good afternoon. This 

hearing of the Oversight of Government Management Subcommittee is called to order. I would like to welcome all of our witnesses. Today’s hearing will look at progress made—and after reading some of the history, I must say that is true that progress has 

been made—in implementing the Department of Defense’s 2005 

plan for improving supply chain management. Supply chain management has been on the Government Accountability Office’s HighRisk List since 1990, and that is far too long. My good friend Senator Voinovich and I are dedicated to seeing this issue removed 

from the list. 

Since 2005, he and I have chaired several hearings on supply 

chain management. 

After our last hearing in July 2006, Senator Voinovich and I 

asked GAO for an analysis of DOD’s Joint Theater Logistics Initiative, which is one aspect of the plan for improvement. GAO has 

completed their analysis, and their report is being made public 

today at this hearing. Mr. Solis, I look forward to hearing more 

about your team’s findings today. 

Supply chain management is critical to our security. It affects 

the safety of men and women in uniform who are currently engaged in two simultaneous conflicts in Iraq and Afghanistan. Even 

after these conflicts end, effective supply chain management will 

remain vital. We need to look to the future when we must stock 

and store supplies for the next contingency, be it missions abroad 

or assisting others right here at home. 

2

To begin, let me congratulate the Defense Department for what 

it has done well in supply chain management. I am very impressed 

by the progress made by the Defense Logistics Agency in implementing the Joint Regional Inventory Materiel Management initiative (JRIMM), which has now been operational in my home State 

of Hawaii on Oahu, and it has been operating since August of last 

year. I hope that we will continue to see the benefits of jointly 

managing supplies regionally as JRIMM is expanded in the Pacific 

Command and into other regions. 

I also want to recognize the progress made by the Transportation 

Command in implementing several forward-looking initiatives as it 

grows into its role as the ‘‘distribution process owner.’’

However, having said all of this, there are several areas we are 

especially concerned about. 

First, poor container management continues to be a serious problem. At this moment, DOD cannot account for more than 50,000 

containers in the Central Command theater. They are lost. They 

have disappeared. Many of these containers do not even belong to 

the military. DOD also has thousands of containers that it has simply failed to return to their commercial owners who, in turn, charge 

the government late fees for not getting them back. This has forced 

the Defense Department to buy them out. It has spent $203 million 

to buy out over 25,000 containers. Now it has thousands of containers that are its responsibility—if it can ever find them. This is 

exactly the kind of waste that helped put this issue on the HighRisk List. 

Asset visibility cannot be fully achieved without adequate technology applied to the supply chain. Radio Frequency Identification 

Initiative (RFID), in theory will track every pallet and every container from the warehouse to the warfighter. This capability has 

been in use in the private sector for years now and has greatly improved inventory levels and visibility. While implementation of 

RFID continues to move forward at DOD, there is still a long way 

to go. 

We also need to work to ensure that information systems involved with logistics can communicate with each other. Personnel 

in the field are being forced to find tedious, manual work-arounds 

to exchange information between different computer systems. Computers working in joint operations cannot always automatically exchange needed data. 

The Defense Department needs to formulate a unified, comprehensive strategy to address future logistics capabilities. It has 

been promised since we started these hearings that the Department was working toward that goal. I am particularly concerned 

that the ‘‘To Be’’ roadmap, which was supposed to provide this 

strategy, is still not complete, even though it was supposed to be 

released last February. Without a long-term strategy, all of the 

links in the supply chain—the Defense Logistics Agency, the Transportation Command, and the combatant commands—are likely to 

end up with their own approaches which may not be consistent. 

As Chairman of the Armed Services Readiness Subcommittee, I 

know that the failure to modernize business processes contributes 

greatly to all of DOD’s high-risk areas. These areas also have to 

be removed from GAO’s High-Risk List. I look forward to conVerDate 0ct 09 2002 12:06 Jun 03, 2008 Jkt 037356 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 P:\DOCS\37356.TXT SAFFAIRS PsN: PAT
3

1The GAO Report entitled ‘‘DOD’s High-Risk Areas, Progress Made Implementing Supply 

Chain Management Recommendations, but Full Extent of Improvement Unknown,’’ January 

2007, appears in the Appendix on page 83. 

tinuing to work with Senator Voinovich, as well as the Office of 

Management and Budget and the Department of Defense, to work 

toward this goal. 

With that, it is my pleasure to have several witnesses here today 

from DOD that can give us a broader look at the work being done 

to improve logistics at the Department. I want to commend you all 

for your commitment to creating not just a joint force but one that 

is integrated in its efforts as well. 

I also want to welcome back Mr. Solis, who has come before this 

Subcommittee again to give us GAO’s perspective on this important 

issue. And I look forward to hearing from each of you today. 

I am so delighted to have Senator Voinovich here, and I ask him 

for his statement. 

OPENING STATEMENT OF SENATOR VOINOVICH 

Senator VOINOVICH. Thank you, Senator Akaka. Let me begin by 

thanking you for holding the Subcommittee’s third hearing on the 

Department of Defense’s supply chain management. This Subcommittee is very fortunate to have Senator Akaka’s leadership. 

Not only with his experience on this full Committee but his experience on the Armed Services Committee, you are able to bring both 

perspectives to this issue. 

Supply chain management, as many of you know, has been on 

the GAO high-risk list since 1990, 17 years is far too long. My continued 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 resources in the 

supply chain amounting to more than $162 billion, the Department 

must be a good steward of taxpayer dollars. As I have noted in the 

past, former Secretary of Defense Don Rumsfeld once estimated 

that the Department wastes 5 percent of its budget—more than 

$20 billion a year at current budget levels—on redundant or outdated business practices. Based on my experience as a former 

mayor and governor, I believe it is more like 10 percent rather 

than 5 percent. 

Second, and arguably more important given Operation Iraqi 

Freedom, inefficient, ineffective, and redundant steps within the 

supply chain can have a direct and negative impact on the 

warfighter. We must assure that the current supply chain system 

at the Department has the ability to deliver the right items, at the 

right time, to the right place to our soldiers in the battlefield. 

Since our last hearing in July 2006, we have seen noticeable 

progress, as I said, in this high-risk area. I have been pleased with 

the Department’s continued commitment to improving supply chain 

management. 

At the Subcommittees’s request, the GAO has released two reports critiquing the Department’s supply chain management. The 

first report, released in January of this year, takes a hard look at 

the supply chain management improvement plan and overall logistics planning within the Department.1 In this report, GAO found 

4

1The GAO report entitled ‘‘Defense Logistics, Efforts to Improve Distribution and Supply Support for Joint Military Operations Could Benefit from a Coordinated Management Approach,’’ 

June 2007, appears in the Appendix on page 245. 

that the plan continues to lack outcome-focused performance 

metrics as well as overall cost metrics for each of the 10 initiatives 

in the plan. 

Since the Subcommittee began working on this issue over 2 years 

ago, we have continued to press upon the Department the need to 

develop long-term performance and cost metrics. I am disappointed 

that after several requests, including personally asking Deputy 

Secretary England, the Department has not put forth these important measures. These metrics are essential for this Subcommittee 

to provide effective oversight of this issue and will be vital in the 

next Administration. I think the Department has a very good plan 

underway. I am hoping that the next Administration will embrace 

it. But I want to know what metrics can the Subcommittee use to 

determine whether or not the Dpartment is indeed following the 

plan that was put in place. 

Mr. Bell, I am interested in your opinion on the Department’s 

ability to measure the success of the supply chain management 

plan absent these performance objectives. 

The second GAO report,1 which is being released in connection 

with today’s hearing, focuses on Joint Theater Logistics, an initiative in the supply chain management improvement plan that centers on getting the right supplies into a combat theater in a timely 

manner. Mr. Solis, I look forward to your remarks on the findings 

within this report and, more importantly, from our DOD witnesses 

on how the Department intends to implement the recommendations. 

Key support components of Joint Theater Logistics include the 

Defense Logistics Agency and U.S. Transportation Command. General Schwartz, my staff recently visited USTRANSCOM, and they 

were pleased with the information provided and the processes established under your leadership. It seems to me that successful implementation of the Joint Deployment Distribution Operations Centers and the current transformation of the information technology 

architecture to support supply chain management will go a long 

way toward improving supply chain management. Success will depend in part, however, upon the services’ willingness to accept 

these initiatives. 

General Schwartz, given your responsibility as the distribution 

process owner, with responsibility for overseeing Department-wide 

distribution of assets, I question whether or not you have the necessary authority to carry out the mission that has been given to 

you. I look forward to hearing from you and General Dail on how 

you will work together to ensure that assets are made available to 

our men and women in uniform without delay. 

Given the complex nature of supply chain management and the 

need for business transformation within the Department, it is imperative that the Department, I believe, have a Chief Management 

Officer, and I have been batting that ball back and forth with Mr. 

England for a long time. I am pleased to see that language was included in the Fiscal Year 2008 Defense Authorization bill, which is 

currently being debated on the Senate floor. This language is a step 

5

1The joint prepared statement of Mr. Bell, General Schwartz, and Lieutenant General Dail 

appears in the Appendix on page 27. 

in the right direction to ensure continuous top-level attention to 

management issues at the Department. And the reason why Senator Akaka and I are so strong on this is that from our experience—and I know, Senator Akaka, from my experience as mayor—

transformation is not done in 2 or 3 years. In many instances, 

transformation may take 5 to 6 years if you are going to institutionalize it and put it in concrete. And I keep saying to the people, 

Ken Krieg and company that have worked on this so far, I would 

like to have some guarantee that all this work that I did is not 

going to go down the tubes when the next Administration comes 

into office. And it would be comforting to me to know there is somebody there that is smart, knows the system, and is going to stay 

on top of it to make sure that your hard work bears fruition for 

the Department of Defense. 

I just want you to know that I am very grateful for your presence 

here today, and I am grateful for the conscientious effort that you 

have made to take this on, something that has been around too 

long. Thank you, Senator. 

Senator AKAKA. Thank you, Senator Voinovich. 

It is my pleasure now to welcome Jack Bell, Deputy Under Secretary for Logistics, Department of Defense; General Norton 

Schwartz, Commander, U.S. Transportation Command; Lieutenant 

General Robert Dail, Director, Defense Logistics Agency; and Bill 

Solis, Director, Defense Capabilities Management, Government Accountability Office. 

It is the custom of this Subcommittee to swear in all witnesses, 

so will you please stand and raise your right hand? Do you solemnly swear that the testimony you are about to give to this Subcommittee is the truth, the whole truth, and nothing but the truth, 

so help you, God? 

Mr. BELL. I do. 

General SCHWARTZ. I do. 

General DAIL. I do. 

Mr. SOLIS. I do. 

Senator AKAKA. Thank you. Let the record note that the witnesses responded in the affirmative. 

Although statements are limited to 7 minutes, I want all of our 

witnesses to know that their entire statements will be included in 

the record. I understand that all witnesses from the Department of 

Defense will be submitting a joint statement for the record, but 

each would like to also make brief remarks. 

So, Mr. Bell, will you please proceed with your statement? 

STATEMENT OF HON. JACKSON P. BELL,1 DEPUTY UNDER SECRETARY OF DEFENSE, LOGISTICS AND MATERIEL READINESS, U.S. DEPARTMENT OF DEFENSE 

Mr. BELL. Thank you, Chairman Akaka and Senator Voinovich. 

Thank you for this opportunity to appear before you today. I am 

honored to have appearing with me General Norton Schwartz, as 

you have indicated, Commander of the U.S. Transportation Command and the Department’s Distribution Process Owner; and LieuVerDate 0ct 09 2002 12:06 Jun 03, 2008 Jkt 037356 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 P:\DOCS\37356.TXT SAFFAIRS PsN: PAT
6

tenant General Bob Dail, the Director of the Defense Logistics 

Agency. I also welcome this opportunity to appear with Bill Solis 

of the Government Accountability Office. 

As in recent years, we come before you today to report to you the 

progress the Department of Defense is making to reduce risk and 

to institutionalize the improvements that we are making in our 

supply chain management processes. In the interest of time, I will 

summarize my written testimony and highlight our efforts to support our deployed warfighters and the progress that we have made 

since the last hearing in July 2006. 

Before we address those areas, I want to compliment your staffs, 

the staffs of the Office of Management and Budget, and the staffs 

of the Government Accountability Office for their support of our efforts. 

As we have indicated, DOD logistics is a very large and complex 

business involving over a million uniformed, civilian, and contract 

employees. This effort did account for $160 billion in spending in 

fiscal year 2006, shaped significantly by our Global War on Terror 

operations. Our military forces are deployed to some of the most 

difficult environments and some of the most remote parts of the 

world, significantly accelerating the equipment maintenance and 

RESET requirements. Our supply chains operate across international boundaries where we have little or no military presence. 

In Iraq and Afghanistan, our supply chain operates over enemychallenged ground lines of communication, adding significantly 

both to the cost of our equipment and the personnel needed to provide security. 

Nonetheless, in January through May of this year we moved almost 80,000 troops and over 280,000 short tons of materiel fully 

supporting the requirements in Iraq and Afghanistan. And we are 

today processing approximately 6,000 requisitions each day for our 

Army and Marine Corps troops there. 

In supply chain operations, a primary output metric of performance is customer wait time—how long it takes from the time a customer orders an item until it is received. Last year, we reported 

that we had achieved a 33-percent reduction in customer wait time 

from fiscal year 2004 through April 2006, from an average of 24 

days to 16 days. Since then, we have achieved another 6-percent 

decrease in wait time, despite the surge of our deployed forces and 

despite continuing difficulties with our ground lines of communications. Where possible, key commodities and components are now 

stocked forward and delivered as soon as they are requested. 

While supporting the warfighting effort, we continue to make improvements in our supply chain operations, and I would like today 

to highlight three areas of focus. 

First, we are continuing to institutionalize the supply chain operations improvement plan efforts. These include initiatives to integrate transportation operations across DOD, to achieve global asset 

visibility both for our inventories and for our in-transit shipments, 

and to consolidate inventory management and supply and storage 

activities. General Schwartz and General Dail will report on some 

of these key initiatives. 

Second, we are integrating life cycle management principles into 

our acquisition and sustainment programs. This effort focuses on 

7

1The joint prepared statement of Mr. Bell, General Schwartz, and Lieutenant General Dail 

appears in the Appendix on page 27. 

improving equipment reliability and reducing the long-term, costeffective support for a system as part of an integral process during 

the acquisition approval steps. 

Finally, we are developing the concept of joint logistics portfolio 

governance. The intent of portfolio governance is to coordinate development of related logistics capabilities across the Department, to 

improve interoperability, to minimize capability redundancies and 

gaps, and to maximize cost-effectiveness. The logistics portfolio 

management test should be completed later this year. 

The results of our life cycle management initiative, the logistics 

portfolio test, and our supply chain management improvement efforts all will be incorporated in the Department’s logistics strategic 

plan, called the ‘‘Logistics Roadmap.’’ The development of this Logistics Roadmap should be completed by the summer of 2008. 

Based on the significant progress that DOD has made in supply 

chain management, in December 2006, the Under Secretary of Defense for AT&L requested that GAO remove supply chain management from its high-risk list. GAO declined, stating that DOD has 

not yet met key requirements for removal from the high-risk designation. Based on our progress to date, DOD believes we have met 

and are meeting these requirements. Key output metrics and data 

system support are being put in place, and performance improvements are already showing in these metrics. 

The institutionalization of key initiatives is testament that we 

have the will, we have the commitment, and capacity to address 

these challenges on an ongoing basis, transcending leadership 

changes. We will continue to work with the GAO to earn their support in removing supply chain management from their high-risk 

list. 

In closing, DOD appreciates the opportunity to explain our 

progress in improving supply chain management. Following the 

testimony of my colleagues, I will be happy to answer any questions. Thank you. 

Senator AKAKA. Thank you very much, Mr. Bell. General 

Schwartz, your testimony. 

GENERAL NORTON A. SCHWARTZ,1 COMMANDER, U.S. 

TRANSPORTATION COMMAND, U.S. DEPARTMENT OF DEFENSE 

General SCHWARTZ. Mr. Chairman, Senator Voinovich, it is a 

privilege to be with you today representing the more than 152,000 

people that are a part of the U.S. Transportation Command family. 

Our core mission is to provide outstanding support to the 

warfighter and the Nation by rapidly delivering combat power and 

sustainment to the joint force commander. We also redeploy our 

forces home and provide the utmost care in moving our wounded 

troops to more advanced medical facilities here, in Europe in the 

case of the current missions, or in the United States. 

In our role as the distribution process owner, USTRANSCOM 

serves as the quarterback of the joint deployment and distribution 

enterprise. We lead a collaborative effort within the Defense Logistics Community to develop and pursue system-wide distribution 

8

process improvements to increase the precision, the reliability, and 

the efficiency of the DOD supply chain that you referred to earlier. 

When fully developed, this enterprise will aid us in fulfilling our 

fundamental obligations and keeping our promises to our 

warfighters in the Nation today and tomorrow. 

Mr. Chairman, one of the enterprise initiatives I would like to 

bring to your attention is the Defense Transportation Coordination 

Initiative (DTCI). DTCI is an effort to increase the effectiveness 

and efficiency of DOD freight movements in the continental United 

States—the lower 48, if you will. USTRANSCOM, in partnership 

with General Dail and the Defense Logistics Agency and the military services, is currently selecting a transportation services coordinator to manage these DOD freight movements. This coordinator 

will have visibility of CONUS freight movements enabling load consolidation, use of more efficient intermodal means of transportation, and importantly, more intelligent scheduling. These improvements will increase the precision and reliability of freight 

movements leading to increased customer confidence, cost savings, 

and not unimportant, increased and more effective workforce management. 

Use of a single coordinator will also help us gather the metrics 

that you and we seek collectively to drive continual process improvements in our distribution system. With the planned contract 

award next month, we are now only weeks away from implementation and look forward with great anticipation to the very positive 

changes I believe that DTCI will have on DOT transportation, writ 

large. 

Just as DTCI will improve commercial transportation, our Joint 

Deployment and Distribution Operations Center concept is improving integration of this from the strategic to the tactical level. 

Creation of the so-called JDDOC was the first major distribution 

process owner initiative and addressed the longstanding need to 

improve integration of strategic, that is, national partner activity 

here in the United States and that which is occurring in theater 

under the supervision of the combatant commander. JDDOC has 

since matured into a critical node for improved end-to-end distribution. 

Let me give you an example. Let me compare two moves of the 

10th Mountain Division to the Central Command AOR, one in 2005 

and one in 2006. 

The 2005 move was planned entirely by air—that is, the movement of their helicopter assets—and it ran into a number of problems, including weather delays, customs lead time, commercial to 

organic transload requirements, materiel visibility, and limited jet 

fuel in some locations. Thinking that there must be a better way, 

the DDOC, the Central Command, the European Command, many 

players, the services, worked together to develop an air and sea solution, that is, something called in the industry ‘‘intermodal solution.’’ That included a transload operation at Rota Air Base in 

Spain. And by using this multi-mode approach, we were not only 

faster, sir, we actually delivered 4 days sooner than the 2005 scenario, and it cost the taxpayers $2 million less to execute. 

I would argue that this kind of thing is an example of precise, 

reliable, and efficient delivery to the warfighter. And in retrospect, 

9

1The joint prepared statement of Mr. Bell, General Schwartz, and Lieutenant General Dail 

appears in the Appendix on page 27. 

this multi-modal solution may seem self-evident, but solutions do 

not always present themselves linking the supported combatant 

commanders to the distribution national partners without having 

one entity as the quarterback of the process. The result of these efforts is that each geographic commander now has one of these operations centers, and the concept is being codified in doctrine, policy, 

and training. 

The DDOC continues to mature, and later this year we will publish the third edition of the template, which will incorporate, sir, 

performance metrics and guidance for the geographic combatant 

commanders on how we collectively can execute this mission. 

Finally, sir, in 2006, Under Secretary of Defense Krieg designated our command as the functional proponent for radio frequency identification and related automatic information technology 

in the Department. Under this designation, we will prepare and 

execute an implementation strategy and draft the corporate approach for active and passive RFID, satellite tracking, use of bar 

codes, and other asset visibility technologies. 

We have recently published the concept of operations for this to 

improve the overall performance for the warfighter, and our goal 

is to publish the implementation plan this fall, which will address 

both asset visibility and your considerations in terms of improving 

the supply chain. 

Mr. Chairman and Senator Voinovich, I am grateful for the opportunity to testify today, and I would be happy to discuss these 

very important issues that you have tracked for so many years. 

Thank you, sir. 

Senator AKAKA. Thank you very much, General Schwartz. General Dail, your testimony. 

LIEUTENANT GENERAL ROBERT T. DAIL,1 DIRECTOR, 

DEFENSE LOGISTICS AGENCY, U.S. DEPARTMENT OF DEFENSE 

General DAIL. Good afternoon, Chairman Akaka, Senator 

Voinovich, and distinguished Members of the Subcommittee. I am 

Lieutenant General Robert Dail, Director of the Defense Logistics 

Agency. It is my privilege to appear today and represent the more 

than 21,000 men and women of the agency who, for more than 40 

years, have provided responsive global logistics support to America’s Armed Forces in peace and in war. We are a combat enabler, 

a supporting organization, dedicated to improving warfighter support to the combatant commands and supporting the ongoing combat operations in Iraq and Afghanistan. 

I am here today to talk about how we accomplish our mission 

through close collaboration with the military services, the combatant commands, the distribution process owner and with General 

Schwartz, to my right, at U.S. Transportation Command. We are 

a link between our warfighters and the great American industrial 

base. 

DLA is an integral part of the military logistics system. The 

Army, Navy, Air Force, Marine Corps, and Coast Guard rely on 

DLA supply centers to source and provide food, fuel, medical supVerDate 0ct 09 2002 12:06 Jun 03, 2008 Jkt 037356 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 P:\DOCS\37356.TXT SAFFAIRS PsN: PAT
10

plies, clothing, construction and barrier material, and we also provide more than 90 percent of aviation, land, and maritime weapons 

systems spare parts. We receive, store, and issue DLA and military 

service assets at our distribution centers located across the continental United States, Hawaii, and in key en route infrastructure 

locations overseas. Our Defense Reutilization and Marketing Service is a key partner in the reuse or disposal of property no longer 

required by the individual military services. 

In recent years, DLA and the U.S. Transportation Command, the 

Department’s strategic mobility provider and life provider, and as 

its distribution process owner, have forged a very strong partnership that seamlessly connects warfighters’ requirements with the 

American industrial base. This partnership, part of the 

USTRANSCOM’s DPO charter, helps synchronize key DOD supply 

chains, ensuring that material arrives in theater, on time, to the 

warfighters who need it. 

The past 2 years have been very busy for the Defense Logistics 

Agency, U.S. Transportation Command, and the military services 

as we have worked to transform and employ new methods and capabilities to manage DOD’s supply chains. 

I have listed and discussed the various joint supply chain initiatives in my formal written statement to the Subcommittee: The 

Joint Deployment and Distribution Operations Centers (JDDOCs) 

that General Schwartz mentioned; the Joint Regional Inventory 

and Materiel Management Initiative that, Mr. Chairman, you mentioned in your opening statement. These are initiatives that we 

have undertaken with the various combatant commands. 

The Radiofrequency Identification Technology initiatives and the 

Integrated Data Environment, Global Transportation Network Convergence Initiative that we have undertaken with the U.S. Transportation Command, and the Integrated Logistics Partnerships 

that we have begun just recently in 2006 to partner with the military services that promise great savings and economy while increasing output tremendously. Each of these initiatives has improved readiness and response times. They have provided 

warfighters the agility that they require to be successful wherever 

they operate around the world. 

Finally, Mr. Chairman, the Defense Logistics Agency remains 

committed to ensuring that America’s fighting forces are the best 

equipped and supplied of any force in the world. We pledge to use 

America’s resources wisely while continuing to support high levels 

of readiness in the military services. Our Nation and our freedom 

depend upon it. 

I thank you, Mr. Chairman, and Senator Voinovich, for your 

leadership, in making sure our Armed Forces continue to be strong. 

This concludes my statement, and I look very much forward to 

answering your questions. 

Senator AKAKA. Thank you very much, Lieutenant General Dail. 

Now we will hear from Bill Solis. 

11

1The prepared statement of Mr. Solis appears in the Appendix on page 49. 

STATEMENT OF WILLIAM M. SOLIS,1 DIRECTOR, DEFENSE 

CAPABILITIES MANAGEMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

Mr. SOLIS. Chairman Akaka, Senator Voinovich, thank you for 

the opportunity to provide an update on the progress made by the 

Department of Defense for resolving longstanding problems with 

supply chain management. The challenges to successfully improving the management of DOD’s vast and complex supply chain network are formidable, and your active involvement has been and 

will continue to be vital to keeping attention focused on this important aspect of DOD’s business and logistics support operations. 

My comments will focus on four issues: First, DOD’s overall 

progress in implementing its supply chain management improvement plan; second, its progress in implementing joint theater logistics, one of the 10 initiatives in DOD’s plan; third, I will discuss 

other recent work we have completed on aspects of supply chain 

management; and fourth, and finally, I will address broader, 

though related, issues of defense business transformation, logistics 

governance, and strategic planning within DOD. 

Regarding DOD’s supply chain management plan, DOD has 

shown progress in developing and implementing its improvement 

initiatives, which are intended to address three main focus areas: 

Requirements forecasting, asset visibility, and material distribution. As previously mentioned, DOD has established Joint Deployment Distribution Operations Centers in each geographic combatant command, following the reported success of the first such operation in Kuwait. DOD has also reported initial success with a storage and distribution initiative known as Joint Regional Inventory 

and Material Management. In March 2007, the DLA was tasked to 

be the lead proponent for the continued worldwide implementation 

of this initiative. Furthermore, in the Defense Transportation Coordination Initiative, DOD has taken numerous actions to incorporate the lessons learned from a prior prototype program and, 

moreover, has taken positive steps to adopt best practices employed 

by other public and private organizations. 

Despite these examples of progress made, since the last hearing 

before this Subcommittee in July 2006, we have not seen significant changes in how DOD proposes to measure the impact of these 

initiatives in its plan. As before, the plan contains four overarching 

performance measures, but these are not well-linked with the individual improvement initiatives or the three focus areas, limiting 

DOD’s ability to fully demonstrate the results achieved through its 

plan. Furthermore, some of these initiatives are in their early 

stages, with full implementation several years away. 

Regarding joint theater logistics, we found in our recent work 

that DOD has not taken a coordinated and comprehensive management approach to guide and oversee this initiative. Rather, development and implementation of joint theater logistics has been fragmented among various DOD components largely because of a lack 

of specific goals and strategies, accountability for achieving results, 

and outcome-oriented performance measures. 

12

Further, DOD faces challenges that hinder specific joint theater 

logistics efforts to improve distribution and supply support to the 

warfighter. For example, initiatives to improve the coordination of 

surface transportation assets, mainly trucks, in a theater of operations face challenges such as potential duplication of responsibilities, the unavailability of information technology tools, and unclear 

lines of command and control. 

Despite the benefits attributed to the Joint Deployment Distribution Operations Center in Kuwait, effective management of supply 

distribution across the theater has been hindered by ongoing problems in achieving asset visibility. Senior military commanders in 

Kuwait attributed these problems to a lack of interoperability 

among information technology systems that make it difficult to obtain accurate and timely information on assets in the theater. 

We also found continuing problems with container management 

that hinder asset visibility and impede DOD’s ability to effectively 

manage logistics operations and costs. Some challenges that DOD 

faces with container management include the application of radio 

frequency identification tags on containers in the supply chain, 

compliance with container management processes, and the return 

of commercial containers to maritime carriers. 

Our other recent work has identified continued systemic weaknesses in aspects of DOD’s supply chain. In February, we reported 

that problems continue in managing Army’s prepositioned stocks. 

Despite recent efforts to improve requirement setting, the Army 

has not yet determined the reliable requirements for secondary 

items and operational project stocks. 

In March, we reported that the military services are experiencing 

difficulties in estimating the length of time between the initiation 

of a procurement action and the receipt of spare parts into the supply system for equipment and weapons systems. 

In April, we reported continuing problems in Air Force’s inventory management practices, hindering its ability to efficiently and 

effectively maintain its spare parts inventory for military equipment. 

Specifically, from fiscal year 2002 through 2005, an average of 52 

percent, or about $1.3 billion, of the Air Force’s secondary on-order 

inventory was not needed to support on-order requirements. Further, about 65 percent, or about $18.7 billion, of on-hand inventory 

was not needed to support required inventory levels. We calculated 

that it also costs the Air Force from $15 million to $30 million a 

year to store its unneeded items. 

Finally, I would now like to turn to broader issues affecting supply chain management. Transforming and improving defense business operations are integral to resolving supply chain management 

operations. Because of the complexity and long-term nature of the 

business transformation, we have stated that DOD needs a Chief 

Management Officer with significant authority, experience, and a 

term that would provide sustained leadership and the time to integrate DOD’s overall business transformation efforts. Based on our 

work, pending legislation, and other recent studies, it is clear that 

a broad-based consensus has emerged that the status quo is no 

longer acceptable. 

13

As our work on joint theater logistics indicated, DOD may also 

need to re-examine fundamental aspects of logistics governance and 

strategy. The diffused organization of DOD’s logistics operations, 

including separate funding and management of resources and systems, complicates DOD’s ability to adopt a coordinated and comprehensive approach to joint theater logistics. In this respect, joint 

theater logistics may serve as a microcosm of some of the challenges DOD faces in resolving supply chain management problems. 

In the governance area, DOD has been testing, as mentioned, a 

new approach to managing joint capabilities as a portfolio, but key 

decisions are still to be made on how to implement this approach. 

In addition, DOD plans to develop an overarching logistics strategy, but has delayed the completion of that strategy until sometime 

next year. 

In closing, DOD officials believe that the commitment they have 

demonstrated to resolving supply chain problems, including the development of the plan and making progress in implementing initiatives, justifies removing this area from our high-risk list. In preparing the January 2007 biennial update to the high-risk list, we 

decided that notwithstanding the positive steps taken by DOD to 

address problems, supply chain management should remain on our 

high-risk list until DOD can successfully demonstrate improvements in requirements forecasting, asset visibility, and materiel 

distribution. The work we have completed since January 2007 reaffirms our decision to retain supply chain management as a highrisk area. 

We look forward to continuing our work with the Department to 

provide an accurate appraisal of the progress toward the goal of 

successfully resolving problems that have hindered effective and efficient supply chain management. 

Mr. Chairman, Senator Voinovich, this concludes my prepared 

remarks. I will be happy to answer any questions. 

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

General Schwartz, according to GAO, the Department has bought 

out over 25,000 containers that were accumulating detainment 

fees. This cost taxpayers about $203 million, and now the containers belong to the Department of Defense. In addition to this, 

we have lost over 54,000 containers. 

What do you plan to do with all of these containers? Do you, for 

example, plan to sell any of these to recoup some of those costs? 

General SCHWARTZ. Mr. Chairman, let me address that by first 

articulating how we got to where we are at. You are quite right 

that this is an area that has been difficult to manage. 

Let me take you back to October 2001 and try to describe the picture of missions beginning to occur in Afghanistan. It is a landlocked country. It is not a country with a lot of developed transportation infrastructure. There isn’t a single oil refinery anywhere in 

the country, for example. And so we were very much in an expeditionary mode in that time frame, beginning combat operations. And 

so containers were used for many different things there. They were 

used for storage. They were used for places for people to sleep. 

They were used for force protection purposes. You can imagine the 

various uses. And so unquestionably there was a large number of 

detained containers that belonged to carriers that were put to use 

14

in ways that commanders on the ground felt was necessary in 

order to accomplish their missions. 

Now, with that as background, we beam forward several years. 

The current numbers that I have for containers in the Central 

Command AOR is there are about 110,000 government-owned containers, about an additional 30,000 which are leased, and then 

there are about 4,400 which are under detention, i.e., carrier owned 

but in our possession, about 3 percent. That is at least a third of 

where we once were. 

So how did we make the improvements over time from a completely expeditionary mode to something more in the sustainment 

mode and to where we are now driving the numbers down further? 

Two major things. In the early days, sir, we did not have a dedicated element to manage containers in the theater, nor did we have 

software that would do this. We do now. We have a dedicated container management element in Central Command that works, both 

the management, the training of people in logistic elements in the 

various commands in Afghanistan and in Iraq, and likewise maintains the database. So what we have done is dedicate resources to 

managing both the assets and the problem. 

To conclude, sir, your question about what do we do with those 

assets we own, as you are aware, the government maintains a certain number of assets, whether it be airplanes or ships or containers or pallets for loading airplanes in reserve for those moments when we might be called upon to surge. So we will maintain 

in reserve status a number of containers so that we don’t run into 

the scenario we had in Afghanistan again, that instead of sending 

carrier containers into an austere area, we will send governmentowned containers. 

Second, the excess amount of containers, what we will try to do, 

frankly, is find folks who we can lease them to for use, and we can 

get them back if that is necessary. So there is a business piece to 

this in terms of making them available to industry for use, and 

then there is a part to it for having a reserve so that we don’t 

again fall into the situation where we don’t have enough containers, that we have to use commercial ones to do our mission. 

Thank you, sir. 

Senator AKAKA. Thank you, General Schwartz. I am wondering 

though, did these containers make it to their destinations? What 

were in those cointainers, and were they empty when we lost 

them? 

General SCHWARTZ. Sir, I am sure it is some of all of the above. 

It is important to understand that, again—and you have traveled 

to both Afghanistan and Iraq. I know both of you have. You will 

see containers being used for a number of functions. For sure there 

are no more carrier containers that are out there being used for 

storage and so on. But I think it is key to understand that we got 

on top of this once we recognized how severe the problem was, and 

I believe that we are on the glidepath here not only to correcting 

the problem in the short term, but having a longer-term posture 

which is correct for the Armed Forces. 

Finally, sir, I think it is important to recognize that much of the 

container detention was not dry goods. These were refrigerated 

containers. And, again, if you think back to the Afghanistan sceVerDate 0ct 09 2002 12:06 Jun 03, 2008 Jkt 037356 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 P:\DOCS\37356.TXT SAFFAIRS PsN: PAT
15

nario, there was not permanent cold storage in Afghanistan. And 

so one of the things that occurred was use of refrigerated containers to store foodstuffs for our troops that we now are building 

some temporary sort of permanent cold storage to compensate. But 

that occurred several years after the initiation of combat operations. 

Senator AKAKA. Thank you. We will have another round. Senator 

Voinovich, your questions. 

Senator VOINOVICH. Mr. Solis and Mr. Bell, I am concerned that 

the substantial progress that we have seen in the supply chain 

management will be lost with the change in leadership due to a 

new Administration. We are running out of time. In your opinion, 

does the supply chain management improvement plan that you 

have worked very hard on, have the necessary metrics in place to 

institutionalize the progress made and ensure that no time is lost 

with the change in leadership? 

Mr. BELL. Thank you, Senator Voinovich. We are concerned 

about several levels of institutionalizing the progress that we have 

made, and we are focusing on those areas. For example, for the distribution process owner authorities, we have worked very diligently 

to get approval of the internal direction, the directive, and the instructions that are necessary to institutionalize that function to 

transcend administrations. That process has been completed. The 

coordination is done. We expect those to be signed up within the 

next 2 weeks. They are both up in the Under Secretary’s office and 

the Deputy Secretary’s office for signature. 

Similarly, we are working on institutionalizing the introduction 

of metrics for measuring supply chain performance. One of the 

functions of the joint logistics portfolio governance test has been to 

test the use of metrics across the entire supply chain from the vendors actually all the way through the theater logistics commands 

and theater support logistics to the end user, and customer wait 

time and time-definite delivery and perfect order fulfillment are 

key output metrics that we believe as a result of the governance 

test we can institutionalize. 

The next component, though, to institutionalize them is we have 

to have certain enabling capabilities such as global asset visibility, 

which we are working on with our RFID, both sensor-based and 

satellite-based. We have to develop those capabilities to have realtime visibility in where our assets are so that we can measure how 

we are performing in terms of customer wait time or perfect order 

fulfillment. 

We think there are some challenges involved in that process, but 

we are making significant progress, we believe, so that it will not 

only transcend the change in political administrations, but will also 

transcend the normal rotation of military leadership in some of the 

key joint functions. 

Senator VOINOVICH. Mr. Solis. 

Mr. SOLIS. I would offer that as it pertains to the plan, there are 

still——

Senator VOINOVICH. Mr. Solis, Deputy Secretary England has 

asked for Supply Chain Management to be removed from the GAO 

high-risk list. Was a lack of metrics a reason for not removing a 

supply chain? 

16

Mr. SOLIS. Well, I think that is part of it. I think there are other 

reasons, as I mentioned in my oral statement. But pertaining to 

that, I think six of the ten initiatives do not have any outcome 

measures that are associated with it. Also, I think nine of the ten 

initiatives still do not have any cost metrics. And so it becomes difficult for us or anybody else to measure how they are doing on the 

particular initiatives. 

Let me be clear. Each one of these organizations here has their 

own internal metrics, but the linkage of their metrics, as it relates 

to the plan, as it relates to the initiatives in the plan, and how it 

relates to the four overall metrics in the plan is not clear. And that 

is why we talk about the lack of metrics. It becomes difficult to 

measure the progress, as it pertains to these particular initiatives. 

Senator VOINOVICH. You just heard from Mr. Bell. What is your 

comment about what he just indicated? And has there been any 

communication in the last several weeks or months dealing with 

what he just talked about in terms of metrics? 

Mr. SOLIS. Well, I know we have committed to get together and 

talk as we have in the past. We will continue to have these discussions, probably even shortly after this hearing. 

Senator VOINOVICH. Well, one of the things that I was pleased 

about and I know Senator Akaka was pleased about is that we requested that the Department of Defense, the Government Accountability Office, and the Office of Budget and Management come together and develop kind of a consensus on what the plan should 

be. And from what I understand, that has come along quite nicely. 

But what you are saying is that in some of these areas, you just 

have not had a meeting of the minds. 

Mr. SOLIS. Well, DOD has a plan, but again, some of the initiatives are still a ways off and, in fairness, some of them are just beginning. Also, in our view, they are still lacking the outcome measures that we would like to see so that we can better see where they 

are in terms of the progress. 

Senator VOINOVICH. I would like to have you prepare a list—

some of that is in your testimony, but prepare a list, get it over to 

Mr. Bell, have him respond to it, and see if we cannot stay on top 

of this so that maybe 6 months from now, when you come back, you 

can all say that you have worked something out and that you agree 

on it. 

Is RFID working out as well as you believed it would? What kind 

of help did you get from the private sector? 

General SCHWARTZ. Senator, if I may at least lead, RFID has a 

number of applications. It has applications in terms of in-transit 

visibility, containers that are moving and so on. It also has applications in terms of inventory management, and General Dail can address that in greater detail. But an important notion here is that 

while—I have been to Bentonville, Arkansas, we will soon visit 

Best Buy, and there are very fine companies out there employing 

various aspects of RFID, whether it be passive or active or otherwise. 

The one thing to appreciate, there are some differences about our 

business models, if you will. In the end, Wal–Mart stores don’t 

move—ours do. And so there are some differences here that one 

has to accommodate. Nonetheless, they are a powerful example to 

17

us, and we are pursuing putting the right kind of RFID on the 

right purpose. For example, active tags cost at the moment $65 apiece. They are 

expensive. They hold lots of data. You can put one on a container, 

and it can tell you every single box that is in the container. 

Passive tags, on the other hand, are maybe 65 cents apiece, and 

at that kind of economics, you can maybe put a passive tag on 

every box. And General Dail can use that in his warehouse if he 

chooses to. 

The key point here is that there are different kinds, and it is important to apply the right kind of technology to the right problem. 

And I think in the case of Wal–Mart, if you have been reading the 

literature, they implemented a passive ID strategy, and they have 

been adjusting this a little bit. They discovered that it was not producing the outcome that they desired. 

So there is still some experimentation going on, sir, and very importantly, we are committed to this. Our plan for executing this on 

behalf of the Department will be certainly available for your perusal in the September time frame, and it will include both the intransit segment and the inventory management segment. 

Senator VOINOVICH. Could I ask just one more question, Senator 

Akaka, to follow up on that? 

Senator AKAKA. We will have a second round. Thank you, Senator Voinovich. 

Mr. Bell, your testimony says that the Logistics Roadmap plan 

will now be complete next summer. 

Mr. BELL. Yes, sir. 

Senator AKAKA. This is more than a year after what we were told 

last year. You say that it will be released after finishing up the logistics capability portfolio management tests. Why does a document 

that will contain ‘‘planned and desired capabilities’’ have to rely on 

this current test? 

Mr. BELL. One of the reasons is that the concept of portfolio governance is a different concept of how we work towards support of 

the joint warfighting effort in dealing with the current authorities 

that we have within the Department of Defense in which there are 

significant Title X authorities that are vested with the services, 

and the question is how do we integrate those most effectively. 

The governance concept looks at taking a cross-department view 

of the development of capabilities. We think it is critical in terms 

of the Logistics Roadmap that we adopt that cross-department view 

of governance in developing our capabilities going forward, and 

that is the reason we made the decision to defer completion of the 

roadmap until we could see the extent to which we could apply this 

governance concept in getting to a joint approach to the whole Department’s capabilities. 

Senator AKAKA. Since it has been delayed for over a year because 

of testing of one new capability, what is to stop it from being delayed again? Can you commit to this Subcommittee that you intend 

to have the roadmap by next summer? 

Mr. BELL. We certainly do intend to do that. We think this delay, 

while it seems to be unusually long for a single-capability view, is 

actually a critical step forward in developing a joint approach to 

governance as the DPO concept has been, as the defense logistics 

18

executive concept has been. Otherwise, we obviously would not 

have deferred completion of the roadmap until we had finished this 

test. 

Many elements of the so-called Logistics Roadmap are well developed. Many of the metrics in terms of output metrics of supply 

chain performance we believe are falling into place. We can develop 

the capabilities to measure performance against those metrics. 

While we have some disagreement with GAO regarding metrics associated with specific improvement initiatives within the overall 

improvement plan, I believe GAO would acknowledge that, in 

terms of supply chain overall performance metrics, we are focused 

in the right direction. 

So many of the elements of the Logistics Roadmap are well in 

place, and we think with the addition of this concept of joint governance across departmental lines, it will be a significant improvement in our capabilities. 

Senator AKAKA. I understand that TRANSCOM is working on an 

internal plan called Theater Enterprise Deployment and Distribution (TED2). Is the TED2 document related to the Logistics Roadmap currently under development at DOD, General Schwartz? 

General SCHWARTZ. Chairman, it is indirectly related, but it is an 

independent initiative, and it is an example of what I would call 

portfolio management with a small P and a small M, not the capital P, capital M that the Secretary was addressing. 

What we are doing is recognizing that in the theater there are 

multiple systems. Senator Voinovich mentioned that some cannot 

talk to one another; they don’t interact easily in terms of data 

transfer and so on. This particular initiative is producing results in 

terms of narrowing down the numbers of systems and making sure 

that, in fact, they are interoperable. 

A case in point: We currently have two port management systems. One is called the Worldwide Port System. It is an Army-developed product. And then there is a system called the Global Air 

Transportation Execution System (GATES), which is an Air Force 

product. 

Now, where we all came from, services develop their own systems, and at one time there was not the emphasis on assuring 

interoperability and so on. And what we are doing is converging 

these two to a single port system so that if Marines arrive or Army 

arrives or Air Force arrives, we will be operating essentially the 

same piece of software. That is the kind of portfolio management 

I am doing as the distribution process owner, and it applies, at 

least indirectly, to this notion that you referred to earlier. 

Mr. BELL. If I may, in fact, those kinds of portfolio views across 

the Department in terms of developing interoperable capabilities is 

exactly what the overall portfolio governance test is about. 

Senator AKAKA. I have a final question, but before I ask it, let 

me ask Senator Voinovich whether you have any further questions. 

Senator VOINOVICH. Yes, I do. 

Senator AKAKA. Will you proceed? 

Senator VOINOVICH. Thank you. Mr. Bell, your tenure will end 

with this Administration. Is that right? 

Mr. BELL. Yes, sir. 

19

Senator VOINOVICH. General Schwartz, how many years do you 

have left in your current job? 

General SCHWARTZ. Sir, at least until the summer of 2008 I think 

is what the Secretary has indicated. 

Senator VOINOVICH. General Dail. 

General DAIL. Sir, I am intending to stay in this position for an 

indefinite period until my period of service is over. I would certainly think spring of 2009. 

Senator VOINOVICH. General Schwartz, you have been in your position for how many years? 

General SCHWARTZ. Almost 2 years, sir. 

General DAIL. Sir, I was his deputy for 2 years and then moved 

to DLA just this past year. I have been in my job about 10 months. 

Senator VOINOVICH. One of the things that really disturbs me is 

the change of responsibilities is much too quick in the military. I 

remember Wright-Patterson Air Force Base where people would 

come in 3 years and then out they go. This does not really lend 

itself to transformation. 

Do you have civilians that are underneath you that are going to 

be around for a while? I would like to know how long you are going 

to be in each of your positions and who are the people that report 

to you and how long are they going to be around. 

When you put together your plan to reform or transform, do you 

have a list of things based on the potential to save money? Did you 

approach them with the idea of saving money, or did you look first 

to see what the low-hanging fruit was and then thought, well, we 

can knock these off easy and we will get on with the other ones 

after we have done the easy stuff? 

General SCHWARTZ. I have to answer yes to both. 

General DAIL. It is a combination. 

General SCHWARTZ. It really is. We are, Senator Voinovich, taking a concerted business case approach to this, and that is why use 

of satellite technology, for example, has application in a place like 

Pakistan, where we are moving cargoes from Karachi into Afghanistan over a ground line of communication without any military 

footprint whatsoever. And so that is a place where a satellite tracking capability perhaps has an application. But it is expensive, and 

so you are not going to do that on a line of communication over 

which you exercise exclusive control. 

So the bottom line is our approach to this, as I indicated earlier, 

is to apply the right technology to the right problem, and it has to 

have a business case. 

Senator VOINOVICH. When you started this project, if I asked you 

do you have a number that you thought you might save as a result 

of putting this new system in place, and then to be able—so you 

can compare? You said $65 for one gizmo and 65 cents for what you 

called passive. 

General SCHWARTZ. Right. 

Senator VOINOVICH. Have you got those numbers on a piece of 

paper so you can compare them? 

20

1 Copy of the ‘‘Business Case Analysis for Radio Department of Defense Passive Radio Frequency Identification,’’ submitted for the record by General Schwartz appears in the Appendix 

on page 307. 

General SCHWARTZ. I can provide that for you for the record, sir.1

I think it is accurate to say that our initial motivation on this was 

to provide in-transit visibility. An example, on December 21, 2006, 

sir, if you would buy your wife a gift off the Internet for Christmas, 

you get a tracking number, and you put that into one of the 

websites for the major transportation carriers, and you can see that 

box coming to you. As long as you can see that gift coming to you, 

on December 23 you are probably not going to buy your wife a 

back-up gift just in case the first one you ordered does not make 

it because you do not want that to occur. 

Believe it or not, supply sergeants operate exactly the same way, 

and so the initial purpose of this was to provide that visibility of 

that product moving through the supply chain, so that we changed 

behavior at the receiving end. 

So part of this was behavioral, was transformation organizationally, and so on. There is a business case for RFID, and I will be 

happy to provide that to you for the record, sir. 

General DAIL. Sir, if I can just add one comment, the Chairman 

mentioned earlier about the Joint Regional Inventory Materiel 

Management Initiative we have in Pearl Harbor that will support 

all four of these service components on the Island of Oahu. When 

we entered into the next phase, which we will again this coming 

fiscal year, our intent is to take radiofrequency identification technology and, with the help of General Schwartz and his command, 

instrument up the island. And then I will purchase some additional 

stock and position it at Pearl Harbor. 

We think, as we have discussed with the services, that the return, because of the confidence level that it will have with visibility 

of stock on the island and coming from the United States en masse 

in horizon lines coming into the State, that we will be able to get 

that replenishment on the surface transportation and not have to 

use air transportation and military aircraft. And that will save the 

services $2 to $3 million a year, and we think that is a business 

case that for the first time we have been able to apply to an actual 

initiative that we have been able to do together at USTRANSCOM 

and the Defense Logistics Agency. 

So I think sometimes we do take low-hanging fruit, but sometimes I think we have been able to apply a business case to an initiative and a new way of doing business on the island of Oahu. 

Senator VOINOVICH. Finally, if I asked you what equipment you 

now have in Iraq—humvees and Strikers and so on and so forth—

could you tell me what you have there? 

Mr. BELL. I think we could provide that report to you, sir, from 

the services. 

Senator VOINOVICH. Do you have any idea what percentage of the 

equipment that we have in the total Defense Department is there—

15 percent, 20 percent, or 50, 75, 80 percent? Does anybody know 

that? 

Mr. BELL. Rather than guessing, I would rather take that as a 

question for the record if we could. 

Senator VOINOVICH. I would like that very much. Thank you. 

21

Senator AKAKA. Thank you, Senator Voinovich. Let me get into 

a third round, and this is for the three of our DOD witnesses. 

When we eventually begin redeploying forces in Iraq and Afghanistan, this moment will present a significant logistical challenge 

since we have been there for several years now and moved many 

assets there. 

What planning, if any, have you done to ensure that we have the 

logistics capability to leave the theater and return our assets back 

to the United States? Mr. Bell. 

Mr. BELL. Yes, sir. It is obviously fair to say that we have extensive planning activities currently underway throughout DOD addressing that question so that when the time comes and the decision is made to begin to draw down forces that we will have put 

in place the capabilities logistically to do that in the right order 

with the right amount of equipment coming down in the right sequence. 

That effort has been underway for some time and is being discussed at all levels, both in CENTCOM in Iraq as well as at the 

Pentagon. 

Senator AKAKA. General Schwartz. 

General SCHWARTZ. Sir, I would concur with that. I would say 

that our objective—and this is really Central Command’s objective—is to execute a retrograde, the redeployment, whatever that 

turns out to be, with the same precision that we would execute a 

deployment. 

To take you back a few years, during the roll-up for Desert 

Shield/Desert Storm, materiel returned to the United States without good visibility, went to the wrong port, materiel was lost. We 

will not repeat that exercise. And one of the things we are doing, 

Mr. Chairman, in cooperation with the Army Materiel Command—

General Ben Griffin is a case in point. The Congress appropriated 

roughly $15 billion to the Army to execute RESET of equipment. 

My promise to Ben Griffin was he would not lose a vacancy on a 

RESET line because I did not get the piece of equipment back to 

him on time. And so we, as a result of working the RESET program, have sharpened our focus and our procedures, are making 

sure that stuff that is heading westbound arrives at the right port, 

has the right transportation plan back to the forts and so on. 

I am not Pollyannish about the challenge this will be. This will 

be a major undertaking. But I am confident that we have the procedures in place and the commercial and organic military capacity 

to make it happen. 

Senator AKAKA. General Dail. 

General DAIL. Sir, I would echo the comment that General 

Schwartz made about our entire focus would be on ensuring that 

we support Central Command’s, Admiral Fallon’s plans to execute 

whatever operations that he would undertake. Defense Logistics 

Agency is a largely contractual operation, so we have already 

begun planning about what kinds of capabilities we would need to 

increase to support a redeployment of some sort in the future. In 

our case, Defense Reutilization and Marketing Service, which deals 

with the reuse, disposal, proper handling of hazardous materials, 

those kinds of movements and retrograde operations back to the 

continental United States or some other locale that may have a 

22

vendor that may want to procure some retrograde material or 

scrap, to the point where we may want to increase some of our 

other contractual capabilities in Kuwait and some other areas to 

support a precise redeployment of capability. We are linked at this 

point in time with the proper folks in U.S. Central Command, U.S. 

Transportation Command. 

Senator AKAKA. Mr. Solis, GAO did not make any recommendations relating to container management, yet I see it as one of the 

more interesting parts of your report. Do you think that container 

management is just a symptom of overall management issues? 

Mr. SOLIS. Well, from my perspective, I think it has been a 

longer-term problem, and I would even go back beyond 2001. When 

I think back to the first Gulf War, you heard a term referred to 

as ‘‘Iron Mountains,’’ and those were referring to not only just the 

equipment, but all the containers that were piling up. So this is, 

again, one of the reasons why we felt it was something that needed 

to be addressed in the longer term. 

As we looked at this, we first reported on the problems back in 

2003 about the containers and the lack of visibility. As our current 

work has shown, there is still a problem. However, there are efforts 

by the Department and TRANSCOM to try to get a handle on it. 

I think what we are going to do is probably track that as it moves 

to see how this pans out over the next several months or year to 

see if they get a hold of this. 

Senator AKAKA. Do you think the container problem has been 

solved? 

Mr. SOLIS. I think it remains to be seen. In fact, one of the 

enablers to track this, of course, is the RFID tagging system. And 

as we mentioned in our JTL report, there are still inconsistent applications, such as whether the tags are on there and whether the 

information on the tags is accurate. And so I think there are still 

issues related to whether they are going to be able to track those 

containers given the processes that are currently in place. 

As General Schwartz mentioned, Afghanistan is another issue, 

and it could be problematic just in terms of the geographics itself. 

So, again, I think it remains to be seen over the next several 

months or so to see how the handle will be—how they will get a 

handle on this in terms of dealing with the issue. 

Senator AKAKA. Finally, let me ask Mr. Bell—and I am tagging 

this onto a question that Senator Voinovich asked, too. I would like 

to end with a question about sustainability of the Department’s efforts in supply chain management. In less than 18 months, there 

will be a new Administration running the Department of Defense. 

What steps are you taking now to ensure that progress made so far 

does not end when the civilian leadership turns over at the Pentagon? 

Mr. BELL. Thank you, Chairman Akaka. Several important steps 

we have underway. As a team here, we are focusing in our overall 

supply chain management efforts to institutionalize all of the key 

elements of the improvement program, and you have heard different elements of that described today. 

On a personal basis, within my shop, I have identified and designated a Principal Deputy, Assistant Deputy Under Secretary of 

Defense, who is well known to you, Alan Estevez, who has reported 

23

to you frequently, who will have the responsibility for managing 

the transition on the carry-through on all of the items that we have 

in implementation. And Mr. Estevez, as you know, has been intimately involved in the whole supply chain improvement program 

during this period. 

We are also working with the other commands to make sure that 

the elements that we need to have in place get sufficiently documented so that when there is a transition occurring in Administrations, our plan is to have a transition handover book available for 

the new Administration that identified all the new initiatives and 

all of the key points of contact within the Department of Defense 

that are working on these initiatives. 

Senator AKAKA. Thank you very much. Senator Voinovich. 

Senator VOINOVICH. General Schwartz, to improve end-to-end 

supply distribution, the Secretary has designated your command as 

the Department’s Distribution Process Owner. However, GAO has 

noted instances of overlapping roles and responsibilities in the Department that the Department clearly define the responsibilities 

and authorities of the DPO in relation to other players in the distribution process as an issue of chain of command. 

This past April, the Defense Business Board recommended that 

DOD take steps to clearly identify decisionmaking authority for 

supply chain integration and to clearly define responsibilities and 

authorities for all players in the supply and distribution process. 

To what extent do the DPO responsibilities and authorities need 

further clarification? Do you have the necessary authority to break 

through the stovepipes in DOD’s supply chain and logistics system 

in order to improve the efficiency of the overall system? In other 

words, once you get it done, are you in a position where you could 

make it happen? Do you have the authority? 

General SCHWARTZ. I do. As a practice, sir, I do not assert dominion. You can accomplish certain things by brute force, but it seems 

to me that the approach that we have followed is, again, to try to 

make the case for those things we think are needed, and sometimes 

there is a bit of friction, and I will admit that openly. But I must 

tell you that we have not failed to do something that we were committed to do. We have overcome all resistance. For example, recently the Joint Requirements Oversight Council approved our expeditionary port-opening capability. There was some resistance 

from the services on that initiative. We overcame that because we 

were persistent. 

I think it is important that, as Secretary Bell mentioned, we 

have our charter document, which is over 10 years old that has not 

been updated, that soon will be signed out by the Under Secretary 

and the Deputy. The DPO instruction is soon to be approved, and 

I would say more importantly, frankly, that responsibility now resides in the Unified Command Plan. And, Senator Voinovich, the 

Unified Command Plan has the President’s ink on it, and everybody gets that. 

So I think this is in part a matter of authorities that are documented. I think they very soon will be in an end-to-end fashion. 

And it is also a matter for us to be persuasive, that this is the way 

to proceed. And I must tell you—and General Dail can confirm 

this—that the services recognize the pressures they are going to 

24

face in a declining—in a post-Operation Iraqi Freedom environment. And so they are looking for ways to be prudential and more 

efficient. 

What our obligation is is to make a case that is compelling and 

they will follow our lead. That is what we have seen thus far. In 

those cases where we have to compel cooperation, the Deputy Secretary has been more than receptive of accomplishing that task on 

our behalf. 

General DAIL. Senator, I would like to add that, in addition to 

the authorities that he spoke to, I think it is something that you 

mentioned earlier about a succession strategy and making sure 

that you have people that continue to stay on long enough to understand what the intent and what the vision is for the DOD supply chain. I served for General Schwartz at U.S. Transportation 

Command, and my movement to the directorship at DLA—the relationship that we enjoy professionally has made it a lot easier to 

build these capabilities and these initiatives together. And I think 

that when we provide a business case, something that is of value 

to the military services, they have come forward and willingly have 

asked to participate in these improvements and in these initiatives. 

Senator VOINOVICH. So you use the power of the obvious benefit. 

General DAIL. Yes, sir. 

Senator VOINOVICH. But if that does not work, you can use other 

methods. 

General DAIL. Absolutely, sir. 

Senator VOINOVICH. Yes. What was the receptivity to the Business Board’s recommendations? And if they were well received, how 

long do you think it will take you to respond to them? 

General SCHWARTZ. Sir, in fact, I, General Dail, and the Secretary met with the Business Board 3 weeks ago, and as I understand it, they are going to brief the Deputy Secretary on the result 

of that interaction tomorrow afternoon at lunch. And we have an 

obligation, the three of us do, within a matter of weeks to get back 

to the Secretary after tomorrow’s session with our take on that session. 

I think the bottom line is there was fundamentally violent agreement. There is a view that the board has had over time that there 

should be sort of a King of Logistics, if you will, either a Joint Logistics Command or other such solutions. I personally do not favor 

that. But beyond that one area of disagreement on how much purview one individual should have in uniform, I think there is agreement with their fundamental argument that we need to document 

the authorities, we need to make sure that this process improvement mechanism and the supply chain oversight mechanism is well 

institutionalized. And that is what we will tell the Secretary. 

Senator VOINOVICH. And you will get back to the Board, in other 

words, the Board will come back to them and say here is what we 

have done as a result of that, and so you will get some feedback 

from them so they know how you are responding to it. 

General SCHWARTZ. Yes, sir. 

Senator VOINOVICH. I would just like to finish on this note. I 

think that you mentioned that the pressure is going to be on the 

Defense Department, and I think that is a very good observation. 

I think one of the things that the American people have not recogVerDate 0ct 09 2002 12:06 Jun 03, 2008 Jkt 037356 PO 00000 Frm 00030 Fmt 6633 Sfmt 6633 P:\DOCS\37356.TXT SAFFAIRS PsN: PAT
25

nized is because of the war in Iraq and Afghanistan, the tripling 

of the amount of money that we spend for the 22 agencies and the 

Homeland Security, that an enormous amount of money has gone 

out, and that the nondefense discretionary budget has been 

squeezed pretty hard. And there is going to be a lot of pressure to 

get back to putting more money in that area because of the fact 

that some are concerned about the fact at this stage of the game 

that maybe we are eating our seed corn and not doing some things 

that we ought to be doing in terms of our competitiveness. 

So I think that the more you can get that message out, the better, and it would be wonderful if, as a result of your work that you 

or maybe your successor can come in here and say, hey, we really 

got on this thing, and we are saving this money, and it is really 

working. 

There are a lot of folks out there that really are kind of losing 

faith in our management. I think one of the reasons why we had 

such a tough time on the immigration bill is that people just did 

not believe that we were securing the border. Then after we had 

the fiasco with the passports, they said again we cannot seem to 

get things done. And I think we need to restore people’s faith, I 

think, in the management of this government, and I made that 

very clear to Clay Johnson, who is in charge of Management over 

at OMB. 

So good luck, and thank you very much for your effort. I think 

it is one of the most worthwhile things maybe you will have something to do with. 

General SCHWARTZ. Sir, all I can tell you, in our small bubble, 

we are committed to restoring people’s faith in our integrity and in 

our capacity to manage this. 

Senator AKAKA. Thank you very much, Senator Voinovich. 

I want to thank our witnesses for appearing today. Removing 

supply chain management from GAO’s high-risk list is an important task, as you all well know. Inadequate management puts not 

only our tax dollars at risk but, more importantly, the safety of our 

warfighters serving overseas. 

I find some of the examples cited by GAO very concerning. Issues 

like container management are only a symptom of a larger challenge that the Department faces. I look forward to continuing to 

work with the Department of Defense in the future on this issue. 

I know that Senator Voinovich and I are dedicated to getting supply chain management off the high-risk list. 

The hearing record will remain open for 1 week for additional 

statements or questions other Members may have pertaining to 

this hearing. 

And with that, let me say thank you again, and the hearing is 

adjourned. 

[Whereupon, at 4:12 p.m., the Subcommittee was adjourned.] 

(27)

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