DLA is a DOD Combat Support Agency under the supervision, direction, authority, and control of the Under Secretary of Defense for Acquisition, Technology, and Logistics. DLA’s mission is “To provide best value logistics support to America’s Armed Forces, in peace and war…around the clock, around the world.” In carrying out its mission, DLA manages an $80.5 billion inventory comprised of about 4.6 million consumable items including commodities such as energy, food, clothing, and medical supplies. DLA also buys and distributes hardware and electronics items used in the maintenance and repair of equipment and weapons systems. DLA sales and services amounted to over $20 billion in fiscal year 2002. Customers, mainly the military services, determine their requirements for material and supplies and submit requisitions to any of four DLA supply centers. The centers then consolidate the requirements and procure the supplies for their customers. DLA provides its customers with requested supplies in one of two ways. Some items are delivered directly to customers from commercial vendors while other items are stored and distributed through worldwide distribution depots owned and managed by both DLA and the military services. DLA refers to this ordering and delivery process as materiel management or supply-chain management. Figure 1 depicts this process. GPRA requires establishment of a strategic plan for program activities by each agency that includes, among other things, a mission statement covering major functions and operations, outcome-related goals and objectives, and a description of how those goals and objectives are to be achieved. DLA has been guided by formal strategic plans since 1988. The 1988 plan did not identify strategic measures or performance targets for achieving strategic goals and objectives. Subsequent strategic plans incorporated GPRA attributes but still lacked strategic measures. DLA approved the current 6-year 2002-2007 Strategic Plan—on February 19, 2002, updating DLA’s 2000 Strategic Plan. The DLA Strategic Management System formalizes, aligns, and integrates planning and performance measurement processes. The system incorporates four components: a strategic plan with goals and objectives; a balanced scorecard, with strategies and performance measures; a business plan containing initiatives; and a review and analysis process that assesses performance. The balanced scorecard and business plan reflect decisions on the initiatives in which DLA will invest, and these investments and performance target levels form the basis for DLA’s budget request. The strategies, performance measures, and objectives address mitigating critical spare parts shortages. Performance measures provide DLA management a means of assessing progress and making adjustments as necessary to achieve its goals and strategies. The system’s review and analysis process involves examining progress against objectives and targets to make necessary adjustments to plans and objectives to meet customer requirements. In developing and revising the Strategic Management System, DLA’s procedures require it to incorporate higher-level plans such as, the National Military Strategy, the Quadrennial Defense Review, and Defense Planning Guidance. According to a DLA planning official, DLA’s first corporate assessment of the 2002-2007 Strategic Plan is scheduled for 2003. Appendix III graphically displays the DLA Strategic Management System. DLA’s Strategic Management System’s business plan specifically addresses mitigating critical spare parts shortages that adversely affect readiness. The strategic logistics planning process, currently being implemented, is DLA’s framework for logistics transformation, strategic measurement, and performance management. Three of its components—a strategic plan, a balanced scorecard, and a business plan—incorporate GPRA attributes, address spare parts shortages, and act to improve overall logistics systems and business processes, all of which could improve overall supply support to DOD customers. The DLA strategic plan covers a 6-year period that includes the year of publication—2002—and 5 additional years consistent with GPRA guidelines. It focuses on long-term outcomes and contains DLA’s corporate mission, vision, and values statements and the agency’s 4 strategic goals, 13 strategic strategies, and 39 strategic objectives. The goals that address customer service, customer outcomes, or management of DLA resources for customer value address spare parts shortages directly or indirectly through improved service to the military service customers. Table 1 identifies DLA’s four strategic goals and the respective number of strategies, objectives, and initiatives to be measured for achieving the plan’s strategic goals and strategies. Table 2 illustrates the relationships between the Customer Goal (strategic goal 1) and representative strategic strategies, objectives, and action plan initiatives, relative to spare parts and customer service. The balanced scorecard component of DLA’s strategic system identifies and links DLA’s strategic goals and strategies to transform DLA operations, including customer service, over the next 2 to 5 years. It also provides metrics to measure strategic plan progress including “lead” and “lag” indicators. For example, a lead performance indicator for a Goal 1 strategy—“Negotiate and honor performance agreements with customer segments”—measures the percent of customer agreements negotiated. A lag performance indicator for that same strategy measures the percent of negotiated agreements fulfilled. DLA’s balanced scorecard component “cascades” to each of its Defense Supply Centers located in Richmond, Virginia; Columbus, Ohio; and Philadelphia, Pennsylvania. The centers’ balanced scorecards identify the “how and to what extent” their strategies support DLA’s corporate balanced scorecard. The centers’ scorecards are expected to reflect DLA’s overall vision of “Right Item, Right Time, Right Place, Right Price, Every Time…Best Value Solutions for America’s Warfighters” and, in this way, provide a consistent vision to DLA customers, stakeholders, and employees. DLA’s business plan is a 2-year, agency-wide operating plan that (1) tracks DLA’s 97 initiatives in varying stages of implementation and (2) highlights the investments and actions necessary to achieve strategies and business objectives in the near-term. DLA considers 43 of these initiatives as strategic because they are required to achieve DLA’s vision and strategy. Another 45 initiatives DLA considers critical to maintain or improve DLA operations and guarantee both effectiveness and efficiency. Also, DLA considers nine initiatives mandatory because they are directed by higher authority and may also be strategic or critical. The 97 initiatives, at the time of our review, were in varying stages of implementation. DLA’s business plan, issued in May 2002, is the newest component of the Strategic Management System. Its initiatives are described in action plans, which cite who is responsible for the action; the amount of investment required; how the action supports strategic plan goals, strategies, and objectives; and the major events and time frames to achieve the action. Of the 97 DLA initiatives contained in DLA’s Strategic Management System, DLA identified 18 that are aimed specifically at mitigating spare parts shortages and 6 that are aimed at improving DLA’s internal logistics operating systems and processes that may improve logistics support to customers and thus help reduce critical readiness-degrading spare part shortages affecting the military forces. The remaining 73 initiatives relate to DLA’s financial, human capital, and information technology areas that could improve DLA’s ability to better serve its customers but do not specifically relate to acquiring spare parts to fill shortages. Thus, they are not addressed in this report. DLA has a number of initiatives that, if fully implemented, could either directly or indirectly contribute to mitigating critical spare parts shortages and may improve supply support readiness. Twenty-four of the 97 initiatives contained in its Strategic Management System, and 1 separate ongoing DOD-directed initiative, according to DLA, are aimed at achieving these results. Such improvements are likely, in part, because some of the 24 initiatives address recurring causes for the shortages. If fully implemented as planned by the end of 2009, 18 initiatives in DLA’s Strategic Management System could directly help mitigate spare parts shortages and may improve supply support readiness. These initiatives focus heavily on (1) obtaining strategic sourcing, which involves alliances and long-term agreements with suppliers of critical parts; (2) partnerships and agreements with customers; (3) an improved supply availability to customers; (4) a reduction of backorders; and (5) the development of a national inventory system. Several of these initiatives also address some recurring causes of shortages. For example, one initiative is aimed at reducing spare parts shortages by identifying manufacturers that produce parts, such as cast and forged parts and microcircuits, that are no longer produced by the original equipment manufacturers, yet are still critical components of weapon systems. Another initiative will likely mitigate spare parts shortages because it is designed to guarantee DLA sources of low-demand, high-dollar items by forming long-term contracts with their manufacturers. Another initiative is designed to develop agreements between suppliers and DLA to arrange long-term contracts for sole-source items. Some of the initiatives more specifically address recurring causes for critical spare parts shortages. For example, a Defense Supply Center Richmond official identified two predominant causes for a number of critical spare parts shortages—unexpected service demand and sole source manufacturers not producing quantities DLA needed to fill customer orders. The customer relationship management initiative is designed to address unexpected service demands by using collaborative demand planning between DLA and the services to determine how much of a particular part is needed during wartime as opposed to peacetime. According to DOD, this initiative addresses the readiness-based sparing concept by using service level agreements to provide tailored support levels for weapon systems parts. Several supplier relationship initiatives are aimed at addressing problems with sole source manufacturers not producing quantities DLA needs to fill customer orders. Table 3 briefly describes the 18 initiatives DLA Logistics Operations officials identified in the Strategic Management System’s business plan component that are currently aimed at mitigating spare parts shortages. It also provides an estimated completion date for the ongoing initiatives. Appendix IV describes the initiatives in more detail.