Base Realignment and Closure 2005

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Base Realignment and Closure 2005 Commodity
Management Privatization Ms. Mary Horvath
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(No Transcript)
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OSD Transformational Guidance

• Establish a consolidated multi-service supply,
  storage and distribution system that enhances the
  strategic deployment and sustainment of
  expeditionary joint forces worldwide. Focus the
  analysis on creating joint activities in heavy
  (US) DOD concentration areas
• Privatize the wholesale storage and distribution
  processes from DOD activities that perform these
  functions
• Migrate oversight and management of all service
  DLRs to a single DOD agency / activity
• Establish a single Inventory Control Point (ICP)
  within each service or consolidate into joint
  ICPs
• Each Military Department and Joint Cross Service
  Group will look at the effects of either reducing
  their functions 20, 30, and 40 from the
  current baseline, or reducing excess capacity by
  an additional 5 beyond the analyzed excess
  capacity, whichever is greater. The objective of
  this analysis is to uncover ways in which
  additional gains could be achieved, rather than
  reasons why they could not.

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Outcomes
3 Candidate Recommendations
50 Scenarios
56 Proposals
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SS JCSG Recommendations
51 total scenarios yielded 3 Recommendations

• Supply, Storage and Distribution
• Reconfiguration
• DLR Procurement Management
• Commodity Management Privatization

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Materiel Readiness Advisory Group (MRCAG)

• Small Group, O-7 level, Expert
• Consider Larger parameters of implications
• Vet paths of each recommendation element
• Facilitate exposure of new constructs into
• parent Components
• Provide Project Office with institutional
  reactions
• for consideration
• Initial issue resolution point
• Meeting frequency (monthly, bi-monthly,
  quarterly?)
• Direct support to DLA Deputy Director

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Materiel Readiness Initiatives Project Office
(MRPO)

• Project Office created to integrate efforts
  translate larger picture to execution of SS
  recommendation elements
• Staffed with Component personnel
• Interact with Components build visible
  partnerships
• Provide exposure to evolving mechanisms
• Lead implementation
• Project Office dissolves once implementation
  complete

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Privatization Recommendation175 (0043R)
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BRAC Language
Transformational Intent Privatize the wholesale
storage and distribution processes from DOD
activities that perform these functions Decision R
elocate tire supply contracting function from
Detroit Arsenal and Hill AFB to DSC Columbus ICP.
Relocate supply contracting function for
packaged POL from NSA Mechanicsburg to DSC
Richmond ICP. Disestablish all other supply
functions and all storage and distribution
functions for tires, packaged POL and compressed
gasses.
Target of opportunity reduce excess capacity
saves money!
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What Does This Recommendation Do?
- Privatizes supply functions performed at
TACOM, Mechanicsburg, Hill ALC and DSC
Richmond - Privatizes storage and distribution
functions performed at other distribution
depots - Assigns responsibility for tire
contracts to Columbus ICP - Assigns
responsibilities for packaged POL and compressed
gases to Richmond ICP - Starts 2006 -
Finishes 2008 - Payback Immediate
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What Does This Recommendation Do?
- NPV (Savings) 735.8M - 1 Time Cost
6.4M - MILCON 0.0 - Positions Eliminated
133 - Positions Realigned 0 - Covered
Storage Space Eliminated 2.2M sq ft
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Commodity Management Privatization
ICP-Hill AFB
DD-Puget Sound
ICP-Detroit Arsenal
ICP-DSC Columbus
DD-Hill
DD-Tobyhanna
DD-Susquehanna
ICP-NSA Mechanicsburg
DD-Richmond
ICP-DSC Richmond
DD-San Joaquin
DD-Norfolk
DD-Cherry Point
DD-Barstow
DD-Warner Robins
DD-San Diego
DD-Albany
DD-Jacksonville
DD-Oklahoma City
DD-Anniston
DD-Corpus Christi
DD-Pearl Harbor
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How Will We Do It?

• Careful Planning and Teaming
• Aggressive Disposal Attrition Privatization
  of Materiel
• Maximizing Remaining Storage and Distribution
  Processes

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Milestones

• POAM
  FY2006 2007 2008 2009 2010
  2011
• BRAC Recommendations Becomes
• Law
• Execution of Contracts
• Transfer Management of Tires to DLA
• Execution of Materiel Attrition Plan
• Execution of Manpower Reduction
• Transfer Navy Tire PBL to Columbus

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Way Ahead

• Establish DoD Implementation Team
• Identify requirements forecasts, inventory
  levels, and contract data required
• Develop strategy and transition plans for
  Military Services contracts
• Develop strategy for interim customer support
• Coordinate with DRMS on disposals

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Defense Supply Center Richmond

• Privatization
• Industry Day
• Sallee Justis, Deputy Director, Supplier
  Operations

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Agenda

• Notional Strategy
• General Scope
• Timeframe

Moving Ahead
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Notional Strategy

• Regional Contracts based on Commodities CONUS
• Use two iterations of industry days to engage
  supplier base and gain insight
• Involve Small Businesses by having second
  industry day to focus on mentor/protégé and
  teaming

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Scope

• 3 Federal Supply Classes
• 6830 Compressed Gases (Bulk and/or Cylinders)
• 8120 Cylinders
• 9150 Petroleums, Oils, and Lubricants
• Services
• Demand Planning (Forecasting), Procurement,
  Storage, Distribution (including Disposal),
  Station Returns, and Demilitarization
• Estimated Annual DLA Sales 70 million

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Scope

• Technical/QA Requirements Stay The Same
• Packaging, Marking, Labeling, Testing, CoC
• Re-refined Oil/Bio-based (FAR 23)
• Reporting (FAR 34)
• Security Requirements
• Background Checks

Not All Items Are Commercial-Off-The-Shelf!
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Scope

• Storage/Delivery/Transportation Requirements
• Cylinder Refurbishment Contractor
  Responsibility
• War Reserve, Surge
• Depot Work Orders install valves, correct
  mistakes, fix paint
• Customer Returns Uncertain if DLA or Contractor
  will be responsible for PQDRs

DLA Depots Will No Longer Be Used
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Source Selection

• Best Value Award
• Pricing
• Management Plan will include a transition plan
• Past Performance

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Post Award Government Support

• Contract Administration
• 8 people at Defense Supply Center Richmond
• Personnel mix being determined

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Draft Timeline

• Development of Requirement through February
  2006
• (includes interaction with industry)
• Release Draft Solicitation March 2006
• Anticipated Final Solicitation Issue Date May
  31, 2006
• Proposals Due July 15, 2006
• Award Date December 31, 2006

Contracting process to begin full-scale 3
January
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Backup Slide
120,386 Customers
55,113 Customers
79,685 Customers
Susquehanna
54,833 Customers
San Joaquin
Warner Robins
Oklahoma City
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Additional Information

• Website
• http//www.dscr.dla.mil/UserWeb/FAGA/index.html
• Under Specialized Support, Click on
  Privatization Efforts
• P.O.C.s
• MAJ Broughton, Johnny.Broughton_at_dla.mil, phone
  804-279-5520
• Cindy Lantz, Cindy.Lantz_at_dla.mil, phone
  804-279-5789

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Chemical Management Services a supply-chain
approach to chemical management
Tom Votta, Deputy Director Chemical Strategies
Partnership 617-822-2005 tom_at_chemicalstrategies.or
g www.chemicalstrategies.org
Privatization Industry Day Defense Logistics
Agency Defense Supply Center, Richmond
VA December 14, 2005
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Objectives and Agenda

• Objectives
• Share understanding of CMS, trends,
  opportunities
• Obtain industry feedback in regard to packaged
  oils and lubricants and gases (bulk and
  compressed cylinders)
• Agenda
• What is Chemical Management Services (CMS)?
• Industry trends
• Major items for feedback

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Purchasing Spectrum
Regional Contract
TCO Chem Mgmt Services (CMS)
National Contract (NC)
Individual Purchases
NC Vendor Managed Inventory (VMI)

• Rationalize supply base
• Negotiate price savings

• Vendor owns and manages inventory
• Vendor manages purchasing admin

• Customer-retention-level process efficiency
  improvement
• Still More is More

• Incentives to continuously reduce volume
• Gatekeeping/ MSDS Mgmt
• EHS reporting/ compliance
• Cost analyses/ procurement support

• User Convenience

• User Convenience

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Chemical Management Services (CMS) is a
market-based approach to reducing chemical use
and costs

• A strategic, long-term relationship in which a
  customer contracts with a service provider to
  supply and manage the customer's chemicals and
  related services
• The provider's compensation is tied primarily to
  quantity and quality of services delivered, not
  chemical volume
• Goes beyond invoicing and delivering product
  CMS optimizes processes and continuously reduces
  chemical lifecycle costs, risk, and environmental
  impact
• These chemical services are often performed more
  effectively and at a lower cost than companies
  can do by themselves

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CMSmanaging the entire chemical lifecycle
The Chemical Lifecycle
upstream
downstream

Chemical management can cost up to 7 for every
1 of chemical purchased.
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CMS can encompass a range of activities
Information management

• Best price purchasing
• Manage Tier 2 suppliers
• Gateway for chemical clearances
• Research on product substitutes

• QA/QC testing

• Inventory mgmt
• Container mgmt
• Minimum on-site storage
• Reduce unused product

• JIT systems
• Point-of-use delivery

• Monitoring and controlling
• Use reduction initiatives
• Substitute or eliminate chemicals
• Product and process engineering

• Waste collection
• Manage transport-ation and disposal activities
• Recycling, secondary markets

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Under the CMS model, formerly conflicting
incentives are now aligned
Traditional relationship Conflicting incentives
CMS model Aligned incentives
Service provider
Supplier
Buyer
Buyer
Material (cost, volume)
Lifecycle costs (material, labor, waste
management)
wants to increase
wants to decrease
wants to decrease
wants to decrease
Changing the supply chain model results in
potential costs savings and environmental gains
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What is the Chemical Strategies Partnership?

• The Chemical Strategies Partnership (CSP) is a
  non- profit project funded by foundations,
  government, and private companies
• CSP is helping to promote the economic and
  environmental benefits of chemical management
  services (CMS)

CSP Mission To reduce chemical use, waste, and
cost through transformation of the chemical
supply chain
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Chemical Strategies Partnership (CSP)

• CSP Pilot companies
• Raytheon Company
• SLAC-Stanford/DOE lab
• Nortel
• Seagate Technology
• Analog Devices
• Dartmouth College
• UC Merced
• Hyundai Motor Company
• Metal-working cos.

• Funders
• Foundations
• Government
• CMS Forum companies

CSP

• CMS Forum
• Tier I CMS Providers
• Tier II suppliers
• Customer Cos
• Other stakeholders

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CMS is a growing trend in the US
Source CMS Industry Report 2004, Chemical
Strategies Partnership
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Scope of services utilized by customer facilities
Services used, percentage of respondents
Purchasing
Inventory
Data Management
Value Added
Application
EHS
Customer
Disposal
Provider
Other
Source CMS Industry Report 2004, Chemical
Strategies Partnership
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Industry structure and changing dynamics

• Approximately 75 of the CMS providers
  interviewed are
• product-based providers
• The remaining 25 are service-based providers
• Changes in the marketplace
• In the 2000 survey, most providers served only
  one or two sectors
• In the 2004 survey, more than half of the
  providers surveyed serve
• four or more industries
• The dramatic growth in the number of sectors now
  using CMS may be attributed to
• more service expertise is being developed
  among the provider base
• a more highly educated customer base
• increased awareness of CMS

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Program Overview

• Materials included
• Compressed Gases (bulk and/or cylinder) FSC
  6830
• Cylinders FSC 8120
• Packaged Oils and Lubricants FSC 9150
• Scope of Services
• Demand forecasting, procurement, inventory
  management, storage, distribution, take-back of
  cylinders and or POL (including disposal)
• Items continued to be procured i/a/w ESA
  mandated item descriptions (e.g., mil-specs,
  drawings, etc.)
• Exact requirements still being defined

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Program Design I

• Key Contracting Issues
• Combine one or more commodities or keep
  separate?
• Multiple regional prime vendor (PV) contracts
  or a national contract with regional tier 2
  vendors
• Constraints of existing contracts DLA to
  review all existing contracts that may impact
  proposed program

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Program Design II

• Key concerns with supply base
• OSD DVD requirements are 1-3 days (high
  priority and routine) can industry meet or
  beat?
• Program transition and roll-out
• How long to implement nation-wide
• Inventory transition issues
• Options for price volatility over a long term
  PV contract
• Can the supply base adequately
• Manage unforeseen demands and ensure military
  readiness?
• Serve overseas customers?

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QA
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Additional Case Studies and Information on CMS
can be found atwww.chemicalstrategies.orgOr
Contact Tom Votta617-825-2005tom_at_chemicalstrat
egies.org