AAFA DSCP Update

PRESENTED BY Dennis Dudek

Director of Supplier Operations

CLOTHING & TEXTILES

March 2006

I MEF Protection Initiatives

Why We Are Here …

Why We Need Your Support …

Agenda

• The Year in Review

• Support to the Warfighter

• BSM Update

• Dollars and Sense

• Issues

FY 02 Sales/Services: $ 7.8B FY 03 Sales/Services: $10.4B FY 04 Sales/Services: $11.5B FY 05 Sales/Services: $12.7B FY 06 Projection: $12.3B

• C&T $2.5B• Medical $3.6B• Subsistence $3.9B• Construction & Equip. $2.7B

FY 02 Sales/Services: $21.5B FY 03 Sales/Services: $25B FY 04 Sales/Services: $28B FY 05 Sales/Services: $31.3B FY 06 Projection: $34.3B

• Land/Maritime/Missiles: $ 3.3B• Aviation: $ 3.6B• Troop Support: $12.9B• Energy $11.0B• Distribution: $ 2.5B • Other: $ 1.0B

Scope of Business• #50 Fortune 500 – Above Intel• 5.2 Million NSNs • 1411 Weapon Systems Supported• 48 States / 28 Countries• 26 Distribution Depots

Scope of Business

• #172 Fortune 500 – 2 Above Nike• 2.7 Million NSNs / LSNs • 1200 Weapon Systems Supported• 14 States / 11 Countries• 22 Distribution Depots with DSCP Stock

DLA (20,804 Civilians / 1267 Military) DSCP (2706 Civilians / 71 Military)

The DLA / DSCP Enterprise

FY05$12.7B

DSCP - 4 Supply Chains

Food Service Produce Operational Rations

Recruit Clothing Readiness Organizational Clothing & Individual Equipment

Pharmaceutical Medical/Surgical Readiness Equipment

Facilities Maintenance Equipment Wood Products Safety & Rescue Equipment

CONSTRUCTION & EQUIPMENT CLASS IV / VII

MEDICAL CLASS VIII

CLOTHING & TEXTILE CLASS II

$2.54B$3.86B

$2.71B$3.60B

SUBSISTENCE CLASS I

Sales by FY

00 $5.5B

01 $6.3B

02 $7.8B

03 $10.4B

04 $11.5B

05 $12.7B

SALES:

FY 01 - $1.2BFY 02 - $1.5BFY 03 - $2.1BFY 04 - $2.6BFY 05 - $2.5BFY06 - $944M to date

INVENTORY:

FY 01 - $1.2BFY 02 - $1.1BFY 03 - $1.0BFY 04 - $1.4BFY 05 - $1.4BFY05 - $1.5B

PEOPLE:

Customers – 14,000

Vendors – 220

Employees – 295

MAGNITUDE:3,600,000 orders per year-31,000 different items-$2B spent each year- [ FY06 $1,049,000,000]

FY05 – The C&T Big Picture

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

C&T 17.4% 16.9% 17.0% 12.1% 9.0% 9.0% 9.0%

FY00 FY01 FY02 FY03 FY04 FY05 FY 06

C&TC&TCost Recovery RatesCost Recovery Rates

FY96 - FY06FY96 - FY06

$50

$100

$150

$200

$250

$300

$350

$400$450$500$550$600$650$700$750$800$850$900

Net Demands @ Cost 189. 194. 110. 153. 184. 212. 105. 125. 94.7 122. 176. 292. 146. 61 101 204 105

Net Sales @ Cost 174. 203. 164. 172. 144. 210. 159. 176. 176. 181. 207. 250. 137 113 128 223 133

Backorders @ Cost 846. 837. 783. 764. 805. 807. 752. 701. 620. 560. 529. 571. 582 529 503 484 457

Oct-04

Nov-04

Dec-04

Jan-05

Feb-05

Mar-05

Apr-05

May-05

Jun-05

Jul-05

Aug-05

Sep-05

Oct-05

Nov-05

Dec-05

Jan-06

Feb-06

C&T – FY05/06 Budget C&T – FY05/06 Budget ExecutionExecution

C&T – FY05/06 Budget C&T – FY05/06 Budget ExecutionExecution

Backorders @ Cost (9/30/04)… $831.8M

Month Only

Cumulative Balance

End of FY05Net Demands @ Cost.… $1,962.1M Net Sales @ Cost……… $2,222.1MBackorders @ Cost……… $571.7M

C&T sold off some of their backorders Demands $213M less in first five months of FY06

BackordersDemands/Sales

Supply Chain Management (SCM)Support to the Warfighter

“The only thing harder than getting a new idea into the military mind is to get an old one out.”

Source: B.H. Liddell Hart, Marine Corps Gazette, January 2003

Logistics Challenge OEF / OIF

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

O03

N D J F M A M J J A S O N D J04

F M A M J J78.0%

80.0%

82.0%

84.0%

86.0%

88.0%

90.0%

92.0%

94.0%

96.0%

Demands Supply Availability

Demand is Erratic

Average Monthly DemandItem Prior to OEF FY 04 FY 05

Boots Hot Weather Desert 5,000 82,600 36,674

Coat/Trousers Desert 17,250 160,000 125,335

Boots Intermediate Cold Wet 9,392 24,000 7,648

Hat Camouflage Desert 7,000 90,000 19,253

Clothing & TextilesThe BIG Picture

PGC Net Sales Item1 02780 $92.0M Insert, Small Arms Protective2 02637 $46.4M Parka, ECWCS, Desert3 02934 $43.9M Body Armor, Outer4 21266 $32.5M Modular Sleep System5 01973 $19.7M Helmet, Ground Troop6 02671 $18.8M Trousers, Cold Weather7 02147 $15.4M Boots, Hot Weather8 02665 $14.5M Shirt, Cold Weather9 20187 $ 6.9M Tent, Personnel, Ext Mod

10 02926 $11.9M Boots, Combat

OEF / OIF Top Sales Items

• Currently Working– ‘Chocolate Chip’ Desert Uniform

• Initial Requirement: 280K sets Coats/Trousers• 255K set delivered

– 50 other items• Boots, Helmets, Cold Weather Items,

Tents, Gloves, Duffel Bags, Berets, ECWCSBerets

Delivered 255K ($2.4M)Flash removal – 25K/month

Winter Aviator Gloves

164K order; RFI Item; Delivered 4K ($153K)

Delivered 80K Trousers, 88K Parkas

($21.8M of ECWCS)

Delivered 242K ($16.8M)

Boots, HW & Combat

Totals to date:$175M ordered / $95M filled

Delivered38K ($1.3M)

Poncho Liners

Delivered 47K ($2.2M)Ponchos

" I wanted to thank you for DLA’s assistance in helping advance the ball so substantially. DLA has been a key element in what we’ve been able to accomplish, and the progress in recent months had been particularly noteworthy. Purchasing stocks through DLA channels has consistently provided us with high quality items that are delivered on time and to the desired location. " - LTG David Petraeus, April 22, 2005. . . Email to VADM Lippert, Director, DLA

Support to MNSTC-I

Army Direct Ordering (ADO)Web-Based Logistics

• DSCP solution:

• Use an existing web-based program which currently supports 631,000 Guard/Reservists

Serves 360K Army National Guardsmen

ANG saving $10M / year

•Test Case: 7 Units deployed in Iraq

– Ran from Jun-Oct 2004

– Very Successful – all orders filled complete

• 311 orders worth $36K

• Expansion on-going

– Afghanistan (16K soldiers), Horn of Africa(100 soldiers) & Iraq (90K soldiers);

–872 units ordering, 57,000 Orders shipped

–Overall totals: 395,000 items / $6.0M

• Next Step

– Possible expansion to support OCIE Concept

Boots, Caps, Hats, Cold Weather Coats,BDU Coats / Trousers, Helmet Covers, and more…

1. Deployed Soldier Needs

Item

3. Places OrderVia Army

KnowledgeOn-Line

2. AccessesInternet

4. Order ReceivedStateside at DSCP site(KyLOC)

5. Items Picked;Patches / Insignia

Sewn on

6. Order ShipsVia US

Postal SystemTo Individual

Soldier

CSA authorized a test of Internet ordering capability

WINNER OF 2005

SUPPLY CHAIN

EXCELLENCE

OSD AWARD

(announced Feb 06)

Business Systems Modernization

Update

BSM

Army Recruit Cell

Navy Recruit Cell

USMC Recruit Cell

AF Recruit Cell

USCG Recruit Cell

Army CIF Cell

USMC, Navy, USCG OCIE Cell

Recruit Customer Facing Division

Clothing Sales Stores Cell

National Guard & Reserves Cell

AF IEE Cell

Dress Clothing IPT

Field Clothing IPT

Organizational Clothing IPT

Individual Equipment IPT

Clothing & Textiles Customer Operations DirectorateDirector Paul C. Diamonti, Mil 0-6

Deputy Director Gary Shute

OCIE Customer Facing Division

Other Customer Facing Division

Other C&T Customers Cell

Operating Forces Support Team

Other & FMS Support Team

Installation Support Team

Item Planning Division

Customer Support DivisionSee DSCP Customer

Operations Directorate

Clothing & TextilesCustomer Operations

Gloves/Wet Weather ISTKevin Peoples

Dress Uniforms ISTSuzanne Kershaw

Outerwear ISTBob Spadaro

Dress Shirts/HeadweaCherly Reynoldsr

Footwear ISTTom Hutchinson

Battledress ISTSusanne McHale

Accessories ISTHarry Veneri

Chemical ISTMarie Brywka Chemical IST

Marie Brywka

Organizational Clothing Division

Donna Pointkouski

ECWCS ISTFlorence Robinson

Individual Equipment Division

Terri ScheetzSafety IST

Dave Johns

Individual Equipment ISTMark Twardziak

Tentage & Shelters ISTLouAnn Graham

Heraldics ISTTom Zassick

Product Services Branch

Product Services Branch

Non-NSN IST

Coverall/Special Purpose ISTCindy Small

Dress Clothing DivisionBill McClellahan

Field Clothing DivisionBob Panichelle

Supplier Support Div

SMSGClothing & Textiles Supplier Operations DirectorateDirector Dennis Dudek

Deputy Director Sally DiDonato

Clothing & TextilesSupplier Operations

Product Services BranchProduct Services Branch

Release 1.1 – Battledress Uniform Went live: 1 December 03

Release 2.1.1 Flags & Insignia Went live: 1 Jan 05

Release 2.1.2 Chemical Suits Went live: 1 Apr 05

Release 2.1.3 Tents Went live: 1 Jul 05

Release 2.1.4 Accessories Went Live: Nov 05

Release 2.1.5 Org Clothing Went Live Mar 06

Business System ModernizationBSM

What’s Left?

Jun 06 – Dress ClothingAug 06 - Footwear

Dollars, and Sense…

Recruit Clothing PlanKey Drivers $M

Projected

Totals

BattleDress $494.7

Footwear $141.6

PT/PFU/Accessories $73.7

Cloth $6.8

Dress Outerwear $29.7

Dress Uniform $34.9

Total $781.4

Individual Equipment and Clothing PlanKey Drivers $M

Projected Totals

Safety $44.4

Individual Equipment $291.9

Tentage $142.5

Helmets $51.8

ECWCS $27.4

Gloves $33.7

Special Purpose $68.5

Chemical $386.7

Wet Weather $18.4

Total $1065.3

ACU Award Breakout

NISH

UNICOR$39.7M

Large Business

Small Business

MandatorySources

$15.9M

NIB

$92.7M

$37.1M

$140.0M

$88.8M

Large Business = 5 FirmsSmall Business = 11 Firms NISH = 1 Workshop NIB = 7 Workshops UNICOR = 5 Plants

HubZone

WmnOwned

SBD

OtherSmall

43.6%

Total BaseYear

$321.5M

7.5%

9.1%

27.6%

28.8%

4.9%

11.6%12.3%

4.4%6.6%

Joint Meetings of Industry and DSCP

Contract Length – Will maintain long-term contracts – will stress advanced notice and timely placement of orders

Solicitation Improvements – Will track buy times in FY06 and address specific industry concerns from a supply chain perspective (new mgmt position)

Min / Max – Will use correct base figure to calculate and will be more flexible depending on sub-industry particulars – not a ‘one shoe fits all’ approach – will also be able to adjust production lead-times based on material

Information Sharing – Will provide current vendors with a 12 month window at the beginning of the fiscal year (Oct) and a 6 month window at mid year (Apr) - based on demand figures – Advance notice the key, even for bad news

Technology Issues – Will continue to inform on latest changes – RFID, VIM-ASAP, BSM, etc.

ADDRESSING THE FIVE MAJOR AREAS:

The Forecast• Comprehensive review of items

– Every 6 months (start and mid-point of fiscal year)– Reviews past data / customer input– Establishes future projected demand– Prepares projected contract delivery schedules– Passed on to vendor community

• Reviewed on a monthly basis– Compares actuals vs. projected

• Demand / Delivery / Stock Levels / Sales– Makes adjustments based on the numbers

• Projected deliveries are just that – projections– Our ‘Best Guess’ based on all of the data– As much customer input as we can obtain

• Depends on:– Demand occurring as projected– Inventory hitting goals– Customer item changes (e.g., Army Combat Boot or ECWCS)

• Projected Delivery Schedules:– OCT: Beginning of our fiscal year (12 month look)– APR: Mid Fiscal Year (6 month look)

• Notices going out soon – with all necessary caveats

• DSCP is a Large User of JWOD Program– NIB and NISH production facilities– Always with the intent to broaden base of a product line– Demonstrated by use of the Pie Chart (next slide)

• Dollars may go up and down, % should remain relatively constant• One Exception was the JSLIST program

– Now undergoing review

– The Committee holds ultimate responsibility for Regulation Compliance

• Procedures now being analyzed• DSCP has asked for a re-check of certifications

– BOTTOM LINE: • DSCP will continue to use JWOD• Tighter controls will be needed

JWOD Program

Share of Business

Small Business

Large Business

NIB

NISH

MandatorySources

UNICOR

$1130.3M

$213.3M

$665.4M

$464.0M

$128.4M

$73.0M

Final FY05

Chem SuitsAccount for

$264M

• DSCP is bound by the Berry Amendment– Had always been very stringent

• As decided in Oct 05, the component needed to be of a general textile nature to be included

– Allowed some relief for some items contributing to making end item

– New Requirement (as backed by the AAFA)• Jan 06 – Section 833 of Authorization Act

– Revised Berry to all materials and components– Much more definitive in what is covered

• Feb 06 – Implementing guidance received– Vendors must confirm Berry compliance prior to orders

• Will immediately affect many recently acceptable product lines– Examples: Steel Toes for Shoes/Boots; Gloves; Sneakers

– Will need to pursue Relief– All of these will now require a DNAD exception

» Basically a waiver request signed by an Under Secretary of Defense– Will require synopsis for “Sources Sought’ to prove need– May require investigation of positive responses– Will require the Services to provide written statement of need– ‘Assume’ this will not be a short timeline process

– DSCP is pursing a 180 day window of exemption to allow sufficient time to evaluate the situation

Berry Amendment

• Army Utility Uniform– The ACU is still being rolled-out– Demand much less than anticipated

• Army Dress Uniform– Changes still being developed– Timeline

• Air Force Utility Uniform– The ABU is being readied for initial roll-out– Timeline

• Navy Task Force Uniform– Developing the Roll Out Schedule– Timeline

Major Uniform Changes

• Unite Now– DLA was contacted to respond to allegations of ‘sweatshops’

prior to a scheduled news conference (Declined)• Always with a threat of involving Congress

– We do investigate any specific allegations (never verified)– Informational

• TENTNET– A new development for the tentage product line– Joint effort of Govt / Industry / Academia

• VIM-ASAP– Need to continue to use – improves payment– BSM rqmts on ship dates may be forthcoming

Other Issues

Focus on getting the Warfighter what they need, when they need it, wherever they need it

BOTTOM LINE

• DSCP Will Strive To Make Improvements As Noted– However, we are bound by regulatory

limitations

• Need the Help / Understanding of Industry

• Working Together to Improve the System