Apr 17, 2004was going to be the second speaker, and in reality, if you’ve paid attention to Mark’s comments, I think you’re going to see that what I have to say the Defense Department is doing is really reinforced by the kind of strategic outlook that he laid for us.
First, very important from our perspective, RFID isn’t a panacea. It isn’t a system. It doesn’t do anything for you except help you. It’s an enabler. And we consider it just one of the suite of technologies that we use to do business better. The government and the military use the entire suite. Everything from bar codes to contact memory buttons. If you’re not familiar with them, it's about the size of a dime to a half dollar and they carry a little bit of data. We use them for configuration management on some of our electronics equipment. There are over 300 of them on the President’s helicopter. (Download presentation.)
We know what software is loaded on those chips and that’s an important piece of equipment for us. The other part is how do we move this information around no matter what technology we’re using and we consider some of our satellite technology moving data around as part of our AIT suite Optical memory cards—interesting old technology—is a credit card sized thing that does what a CD does today, and we’re migrating over to re-writable CD ROMs because every computer in the world has one, but we were doing this ten years ago when re-writable CD was kind of a rare thing.
The AIT office advised on the military ID card. This is a DOD ID card used by all civilians and military personnel. I’ve got more stories on each one of these things, but when the office first started, we were working with the Second Armor Cavalry coming out of Bosnia, and we have these cards with all of the information we needed to manifest people aboard aircraft. Normally, it took about 45 seconds per person to manifest them. And you can see 300 soldiers lining up in the classic hurry up and wait mode. We fought with a few units, saying let us try this, let us show you how this technology is going to work. We had planeloads where we gave him the cards and we were manifesting people in five seconds. Well, flights were leaving early, which is unheard of. Before our folks had left the theatre, every other unit that was going home was coming to us and saying, Could you do this for us? It was a great application with technology. Now, every DOD employee carries one of these cards. RFID we have a huge investment in actives. It’s paid off for us, and we’re pushing hard, embracing passive technology.
Mark set this up—we’re going after automatic identification technology [AIT] to facilitate source data collection. We want to get data right. We know bad data is a bad thing and we want to get it right. We want to improve it and those of you who are as old as I am remember when you started working there was a secretary who had carbon papers and she was a very, very good typist and now we all have computers, we don’t teach anyone to type. We got rid of all those typists, and we expect data to be good. It just doesn’t make sense.
But we think if the data accuracy is going to help us reduce logistics processing time and it’s going to enhance asset visibility. Well, our leadership right now has embraced the RFID technology, but our office has been working with MIT Auto ID Center since back in 2000. So this is not a new thing for us on the passive side, but last July we got a telephone call and said you know I want to refocus the office. I want you to take a lot of your resources and I want you to go after RFID. We really need to get there early and so the focus of my office was realigned. And when you get guidance like that you are trying to figure out what are these people really looking for, what do they expect us to do, what’s the expected outcome, and I always like this one because there are so many things out there that you can do, that you better wait and you better watch and you better study before you decide what you are going to do, because if you don’t know where you’re going it doesn’t make any difference what you do, you can't be successful.
I want to take just a little bit of time to show you how the Defense Department is taking a look at what we want to do in the area of logistics. This is typical defense department slide. I’ve got a couple of them in here, and I’ll explain a few things because maybe most of you don’t know that PBL is performance-based logistics. We actually are going so far as to say, I’m not going to make a decision on how many aircraft I’d buy, fighter aircraft. [Instead, we say,] I want to be able to have x number of aircraft available to fly x number of hours for so many days in a row. Then I want to be able to have aircraft available to fly so many hours for the next so many days in a row. Now you, the supplier of airplanes and the supplier of logistics, tell me what it takes to make that happen.
I don’t want to calculate how many parts I have to buy, because you’re probably going to tell me to buy parts. I’m going to buy a whole lot of them and six months later they’re going to be the wrong ones. I want to put that risk back on the other side and say give me an aircraft that performs. That’s the ultimate in performance-based logistics but we’re looking at some other things to a regular maintenance shop of a program office as far as that drives the cost of weapon systems now.
We’re embracing a lot of commercial commodities and a lot of commercial concepts. Customer pays is a good one. We used to have layers and layers of inventory. We had wholesale inventory. We had a retail inventory. We had bench stock and we had huge money invested and everyone invested a smart military logisticians. You didn’t want someone to fail so you built as much as you could in order to make sure there would be no failure. We have more stock than we ever needed. By streamlining that we’d like to have one owner and we would like to have the customer pay for it when he uses it.
That sounds a lot like lot of the retail arrangements today. For a greater part of that, the owner will probably be the place where I work. It’s the Defense Logistics Agency and then there will be some, where we drive that ownership back into the commercial sector. We’ll figure out how the pricing works best, where we can get the best advantage, and we want those term relationships with the suppliers. If they’re good, they’re going to have experience of this. We want to take advantage of their expertise and work together in a partnership.
We also started taking a look from a more strategic perspective. I’ve got another slide of that, where we have a distribution process owner. We used to have someone in charge of transportation, someone in charge of a portion of supply, each of the services is in charge of a little of their of specialty supply and it was all over the place. So we’ve taken a more strategic view.
DDOC is the Deployment Distribution Operations Center. What we found out—even going into theatre into Iraq—is each of the services has their own stovepipe. Actually, we work together very, very well, but it could be better and so we set up a command to coordinate in theater that has some authority to reach back and make decisions.
Those of you into distribution remember in the mid1990s when FedEx and overnight shipping became the big thing. We decided we were going to be really, really good in the military and we took our huge distribution centers and we cleared the warehouse floor every night, which means we didn’t consolidate. A lot of it was small parcels and most of it went overnight. So we took the huge warehouse with skilled distribution labor force managers, and we took all of that work load, we threw the stuff out of the doors and we created mayhem at the customers, and I’ll show you the slide later where we had a little bit of mayhem in theater in Kuwait.
We’ve cleaned that up. Now we’re building pure pallets. We call it pure pallets because consolidation is a bad word. We also used to study in-transit times a lot, and we managed things in transportation with transportation terminology, transportation data. Nobody cares about transportation. Someone is taking something with a stock number that has value for what it is off a shelf and needs to get it to someone to consume.
So we said, let’s look at asset visibility not in-transit visibility, and this is the part that I think is really, really important. All of those processes, all the things we do to manage our supply chain are the important parts of our business. What’s at the bottom are the enablers. Enterprise integration is our architecture for our large systems and the fact that that’s all that that does is facilitate the things we really want to get done.
We're looking at condition-based maintenance. Everyone’s probably familiar with that. If you drive a Chevy Cavalier, Jeffrey Lube is convinced you should need to change your oil every 3,000 miles but if you drive a Lexus or you drive a Mercedes or BMW, you probably have a little something in you dashboard that says the oil was now out of specification, you need to change the oil and so instead of throwing away good oil because your odometer said 3,000 miles you’re replacing the oil because it’s now out of specification. That’s where we want to go with most of our hardware.
Understand what it is, understand its condition and then fix it. But RFID is an enabler at the bottom of the chart. It’s a powerful enabler but it’s not the business processes. So how do we change, how do we change our outlook on things in managing the supply chain? How do we improve our supply chain? How do we find the things that we need to do in order to apply technology and improve our processes?
We used to manage customer wait time, now everyone has heard the terms; we’re going more towards perfect order fulfillment. We used to just work on speed. Now, we’re trying to look at how do we satisfy the war fighters' requirements and it’s interesting. The example I gave earlier was one where you change performance by changing what you measure. We used to measure how much old freight was on the dock in the distribution centers and as soon as FedEx decided they would take all our freight, someone said let’s get it all off the shipping dock because that’s what works for us. We are now perfect, we have one-day shipment, everyone is happy and in reality that’s how we hurt ourselves.
So we started a balance scorecard approach. Many of you are probably familiar with balance scorecard. We said, Who’s the customer and what are we really trying to do? As a logistician, this is in some ways a military brief, but it’s a business process that works anywhere. Our forces need to be ready. The machines have to be able to work, and people have to be trained. What are the logistics issues there? We need to support our forces. We can send these guys half way around the world, but while they are in transit, it’s just a bunch of freight and just a bunch of people. When they get together at the other end, and they can operate as a unit, we now have a force.
Then we have sustainment. Can we keep the weapon systems up and operating? Can we keep the troops fed? Can we reset? Reset is when it’s over and everything is going home. When I put all my things through maintenance and get everything squared away, am I a better force that when I went out the first time? We want to make sure that we do things like interject hardware upgrades at that point. So what do we do in logistics to support that? I talked about it earlier. Perfect order fulfillment. We need to be very, very agile because we can plan what we’re going to do but lots of times we get surprised. Can we keep cycle time down? The lower we can keep cycle time the more agile we can be.
Resource planning. This is the part where we get to the balance scorecard. There are lots of good ideas but you need to make your investments wisely. Where are we going to invest? And where can we provide the biggest improvement, the biggest bank for the buck with our logistics money? One of the things that’s really hard is innovation and learning. The technology is exploding. RFID is just an example, just one example of things that we could go do that would make things better. Where do we make our investments and can we keep people exercising and implementing at a consistent rate with the same vision? That’s real hard. It takes a lot of education; it takes meeting with hundreds and hundreds and hundreds of people to let them know that what they’re doing is important, and there are some enablers that can help them and we listen to them too because those are the people that tell us about the new things that we hadn’t heard about.
There's a slide that I normally give before this one. When I go talk to DOD audiences, and I didn’t want to bring it out here because it’s a really scary slide, especially when you’re talking to people who aren’t used to working with military. We have a very professional and a very good logistics operation and we demonstrated that again and as soon as one operation is underway and as soon as its over, we do reviews and try and learn lessons. So we had a whole list of lessons learned, and I looked at that slide and said you know what, if you didn’t know all the good things we did, you’d say that we were really, really in trouble.
But what we found out was there were lots of really interesting things. The fighting force is so fast and so good that the logistics chain is getting hard. In Napoleon’s Day, it was how many months do you have to get there. We were, in matter of hours, traveling 40 miles. That may have taken a week I Napoleon’s times. We have to move really, really fast with our logistics operations. We have great systems and great data entry, but if the guy in charge of the warehouse that’s in the back of truck never stops long enough to crank up the power and turn on his computer, we’re never going to find out what’s been coming out of the back of that truck.
Those are some issues that we really need to get our arms around. We’re very, very fast, very, very agile and we have to figure out how to change our processes to keep up with that. We did a good job, but it was much more labor-intensive than it ever needed to be. So one of the big conclusions we reach was, let’s do asset visibility not in-transit visibility. Data systems were an issue at some points. Especially as you get out closer to the war fighter, the ability to communicate back and forth is lessened. But one of the big conclusions was RFID was really pretty good. These are active tags we’re talking about now. RFID was really pretty good and let’s go farther. This is just progressing because it’s kind of a neat DOD picture. This is Kuwait and that’s our warehouse, and no matter how much they swept they never got down to the floor. Why do we need RFID now?
You know this is an interesting Kuwait story. I’ll go into this for just a second but we talked about standardization and worldwide implementation. About 1999, I was in Kuwait, and we were looking at putting some networks and we were using 915 UHF, and in Kuwait, you can’t do that. We talked a little bit Kuwaitis, and it was really fun to find out that that’s the frequency they used on the control valves in the oilfields. They didn’t want a bunch of soldiers running around with 915 gear firing them off and who knows what would happen at the oil wells.
So there is good reason for standardization and worldwide standards and that’s important to all of us. But why RFID now? Because in order to support that supply chain I talked about on all those issues we have with maintenance and acquisition and readiness, we need to improve or processes now. We know there are ways to improve. The DOD got involved because—here I’m talking primarily passive—we want to make sure that the standards that are out there, the standards that are developed and the hardware that’s developed will meet our needs.
We’re concerned that if an industry gets a hold of this and drives all the standards that maybe it won’t meet our needs. And we don’t want to do that. We want to use the same hardware that you do. We want to use the same tags that the commercial industry does because we think that that’s an advantage to everyone. We can drive costs down not only of tags themselves but also of all of the equipment, the antennas, the readers—all of the equipment associated with using RFID and the business processes. There's going to be somewhere between that really intelligent piece of hardware and your ERP or your management system is going to be some sort of middleware, it might be huge, it might be small, according to what kind of hardware and what kind of system you have.
But the fact of the matter is we need to analyze that and we didn’t want industry to get out there and be somewhere that didn’t support the Defense Department because we thought it was important that if there is research done for the commercial sector, we want to use that research for the Defense Department too. Our distribution processes are very, very similar, if not exactly the same as commercial distribution.
We know where our inventory is. How accurate it is it? As a logistician, I want to manage things by serial number because I want to know when they were produced, who produced it, how is it performing and what do I need to do to make it work better? What do I need to do if I have an item that is produced by three different companies?
So we came out with a policy. In July, my office was a refocused on RFID. In October, we came out with a policy that said we’re going to use these active tags everywhere. We had already done that for operations in the Middle East and we did it in Afghanistan and RFID solved a huge food problem that we had. At that point, I got a call form one of the generals over there. They had 77 containers of food on the way in and they had no idea what was inside those containers. They couldn’t make the connections. And they were moving very quickly in theater.
So we put our active tags with detailed information on the containers, and after that, it was available on the network what was in each container and some units got to eat breakfast, lunch and dinner as opposed to breakfast, breakfast, breakfast. Everyone had food. But some guys were eating breakfast, breakfast, breakfast, lunch, breakfast, breakfast and other ones were eating dinner, dinner, dinner, dinner, dinner. Again you’re moving real fast. You’re trying to figure out what’s going on. At one point they were trying to figure out what was in the containers to get through customs, and we didn’t have it and we ended up with spoiled food. It’s better to be breakfast, breakfast, breakfast than spoiled food.
