Affirmation is a wonderful thing: Performance Based Logistics at DLA

A tranquil and rainy Sunday morning is an ideal opportunity the to read and digest DoD policy.  Policy is a wonderful thing – the playbook that directs what the government actually does – and today’s theme is logistics policy at the Defense Logistics Agency (DLA).  In particular, the focus is a search for Performance Based Logistics directives at DLA. 

According to the Defense Acquisition University, with PBL “outcomes are acquired through performance based arrangements that deliver Warfighter requirements and incentivize product support providers to reduce costs through innovation. These arrangements are contracts with industry or inter-governmental agreements.”

Policy at the Defense Logistics Agency flows from the top down, beginning at the White House.  The President provides the vector, the Secretary of Defense issues direction across the Department of Defense, and the direction ultimately cascades down to the operational level. 

There are five Focus Areas laid out by DLA leadership to describe DLA’s “plans, priorities and expectations related to Industry Engagement from the DLA enterprise perspective.”  Peeling back within the five Industry Engagement Focus areas, there is a detailed description of “Supplier Communication and Interaction.”

“Following Secretary Mattis’ guidance, DLA acquisition professionals and leaders are encouraged and expected to engage with and work collaboratively with industry in a fair and open manner. DLA will continue to initiate, ensure and be responsive to supplier interactions at all levels of business.”

And then there is a citation pointing to a detailed diagram that invokes Performance Based Logistics as a critical piece of the Supplier Engagement Strategy, “see Supplier Engagement Spectrum below.”

PBL lives on at DLA.

Memo to Washington: Do the math, then do your job

The federal government funds the nation’s transportation surface infrastructure in large part through federal gas taxes. Conceptually, that makes sense. If you drive a car, or a truck, you use the roads, so the 18.4 cents per gallon tax funds roads and bridges.

Except it doesn’t anymore, and projections show it getting worse. The gas tax is a fixed rate, not a percentage, and it hasn’t been revised since 1993. Because of inflation the purchasing power of the 18.4 cents per gallon has declined, meaning that the effective tax rate has declined to around 11 cents.

We can quibble over the math, look at the underlying variations in the cost of gasoline itself, but let’s just accept that the purchasing power of a dollar in 1993 has declined by about 40%, there isn’t enough government money to maintain the infrastructure.

And technology shifts will further erode the revenue base. The federal government understands this, and the GAO has been firing warning flares since 2009.

The tax base will likely continue to erode as demand for gasoline decreases with the introduction and adoption of more fuel-efficient and alternative fuel vehicles. To maintain spending levels of about $45-50 billion a year for highway and transit programs and to cover revenue shortfalls, Congress transferred a total of about $141 billion in general revenues to the Highway Trust Fund on eight occasions from 2008 through 2015. This funding approach has effectively ended the long-standing principle of "users pay" in highway finance, breaking the link between the taxes paid and the benefits received by highway users. 
Source: GAO.gov

We need infrastructure. In business, there is not a thing we bring into our warehouse or send out to our customers that doesn’t need transportation infrastructure. Washington needs to wake up and do its job.

Even my mother understands it

Watch what happens in any Emergency Room.  Patients arrive.  Medical professionals examine, categorize, and route to treatment.  That routing may be to a bed in that facility, perhaps an operating table, or a transfer to a more appropriate facility.

That same description would work for any cross-dock operation in the world.  Go to any cross-dock facility, or even a break bulk location, and you will see the same process flow.  Goods arrive.  They are identified, categorized, and routed.  That routing may be to points of use, a queue, or matched to another facility.  Top notch distribution centers move through this process at the speed of light.

This weekend, my mother and I experienced the full spectrum of logistics in health care.  We rode an ambulance to one facility, spent a couple of hours in an examination process, then routed to another facility 10 miles down the road, where we went through the examination, categorization process  all over again.

Let’s say it didn’t feel like we were running through the medical analogue to a Wal-Mart DC.

Good logistics practice applies where ever there is flow.  What’s moving can be a physical item, or a logical concept, or even person.  Everything fits in a flow, and best-in-class logistics principles are universal.

Maybe somebody should ask the insurance companies, who seem to have distorted good logistics principles when it comes to patients in hospitals. Or maybe we should ask the government folks who write the regulations.  But, given what we saw,  I think I understand why medical costs are spiraling out of control.

As we were idling in one of the stops along the way, my mother looked at me and said, “What is so hard about this?” 

All I could do was smile, and then go hunt down somebody to expedite.