Wednesday, April 5, 2023
Conversation with VADM Michelle Skubic, Director, Defense Logistics Agency (DLA)

As the nation’s combat logistics support agency, the Defense Logistics Agency manages the end-to-end global defense supply chain – from raw materials to end user disposition. “Our mission is to ‘deliver readiness and lethality to the warfighter always and support our nation through quality, proactive global logistics,” explains Vice Admiral Michelle Skubic, director of DLA. To accomplish this mission, this agency has a staff of about 25,000 employees divided into multiple supply chains that contract for material and services across the military classes of supply. VADM Skubic joined me on The Business of Government Hour to discuss DLA’s mission and how it works to support the U.S. Department of Defense and beyond. The following is a edited excerpted of our discussion.

On DLA’s Mission. We support our nation’s armed forces, 11 combatant commands, 40 federal agencies, as well as partners and allies.  The vision as an agency is to be innovative, adaptable, agile, and accountable – focused on the Warfighter Always. We are vast and complex agency that spans the globe with “cradle to grave” support to our customers.  As such, DLA is vital to the DoD and our nation. In sum, we are the nation’s combat logistics support agency, and we cover a lot of territory both figuratively and literally. Organizationally, we are headquartered at Fort Belvoir, VA, and our crown jewels are our six Major Subordinate Commands.

  • DLA Aviation, in Richmond, VA, is the aviation demand and supply manager, providing the Army, Air Force, Marine Corps, Navy, and Space Force with full-spectrum logistics support. Aviation also manages maps, environmental products, and industrial plant equipment.
  • DLA Land and Maritime, in Columbus, OH, manages the supply chain for ground-based and maritime weapons systems repair parts.
  • DLA Troop Support in Philadelphia manages supply chains for food, textiles, construction material, medical supplies, and pharmaceuticals.
  • DLA Energy, at Fort Belvoir, manages all things fuel, including aerospace energy and installation energy services. They are also very involved in the administration’s push for alternative fuel and renewable energy.
  • DLA Distribution, in New Cumberland, PA, manages a global network of distribution centers, and provides planning for transportation, logistics and contingency operations.
  • DLA Disposition Services, in Battle Creek, MI, disposes of excess property by reutilization, sales, transfer and demilitarization.

We meet our global mission with a FY22 budget obligation of $48 billion, over 25,000 total employees of which 24,000 are civilian employees. Interestingly, around 46% civilians are military veterans. I truly believe that the heart of the DLA workforce beats on behalf of the warfighter. We are relentlessly determined to deliver results, whether supporting a fight or response to a crisis. 

As director of the DLA, I set the tone and vision for the organization, both internally and externally. My internal goal is establishing a culture of hard work, respect, and integrity, as well as taking care of those working to achieve DLA’s mission. Externally, the director maintains relationships with our customers, suppliers, and other key stakeholders.

On Leveraging Partnerships and Cultivating Collaboration. DLA continually finds new ways to leverage our strategic partnerships and cultivate collaboration across the DoD to improve operations, achieve program outcomes, and execute missions at the speed and scale necessary to solve problems.

We stood up a new Executive Directorate – DLA Plans – in FY22 to enable improved attention to this mission set. The new SES directorate enables improved and coordinated attention to Plans, Futures, and Strategy. The agency leverages wargames, exercises, studies, experiments, and deliberate analysis activities for the purpose of enabling planning, managing organization change, and the development of actionable strategy. We’ve also positioned DLA liaison officers at over 30 key strategic partner locations. We also do Partnership Days as well as a new Strategic Deterrence Day to bring us together with CYBERCOM, NORTHCOM, SPACECOM, and STRATCOM discussing logistics support to their strategic priorities. DLA has Performance Based Agreements (PBA) with the Services that focus on Service and DLA priorities, exchanges logistics requirements, and aligns Service and DLA resources to achieve logistics support.  These PBA’s cover all customer/supplier relations, including performance metrics, all classes of supply, Joint Enterprise collaboration opportunities, financial transparency, and Weapon System Prioritization. These documents negotiated the range of support necessary to meet operational readiness and cost objectives and optimizes the effectiveness of DLA’s worldwide logistics support at best value.

There is also the Agency Synchronization Operations Center (ASOC), which fuses mission readiness and business operations to better operationalize and integrate the agency’s support to warfighters and federal partners. ASOC has linkages to all of DLA’s major subordinate commands, and our liaison officers with the Services, Combatant Commands, and Whole of Government. Our analytics tools like the readiness dashboard allows us to drill down into the weapon systems the Services tell us are their most critical platforms. In looking at these platforms, we can see what’s not operational due to a lack of parts from DLA, and ideally find where we can make the most impact in addressing the Services’ issues.

Leveraging our relationships across the industrial base is also critical. We target sustainment solutions with the OEM and the Services that reduce costs and improve readiness while also combating obsolescence and diminishing manufacturing sources for aging platforms. DLA always supports the needs of its customers by focusing on modernizing our acquisition processes and capabilities. Line of Effort 4 in our strategic plan, focuses on our ability to harness and analyze business performance data to make informed, risk-based decisions and develop actionable solutions to improve customer outcomes. This LOE includes a greater understanding and analysis of our DLA supplier base and the issues impacting industry, enhancing our market intelligence and supply chain illumination capabilities to identify risk and designing acquisition processes to incorporate coverage for surge.

On Pursuing a “Whole of Government” (WoG) Approach. In addition to the military Services, we support 40 Federal Interagency partners, 50 States, 300 local and municipal governments, and 124 international partners. DLA has a strong history of supporting DoD and WoG through crises. Our relationship with FEMA dates to Hurricane Katrina and has evolved ever since. After Superstorm Sandy, this relationship was formalized through Interagency Agreement that define roles/responsibilities and gives FEMA pre-scripted mission assignments for DLA. Menu of what they need from food, fuel, tents, generators, and other needed items.

This mission evolved during COVID-19 pandemic and positioned DLA to be ready when the nation needed us at the onset of the pandemic.  DLA established interagency agreements with the U.S. Department of Health and Human Services (HHS) to assist with efforts including replenishing strategic national stockpile, working with testing and diagnostics working group, and procurement of additional over-the-counter COVID test kits. Additional initiatives also included the White House Test Kit initiative, all while continuing support to FEMA.  These partners benefit from our buying power. In addition, this further increases our buying power, passing savings back to the Services.

DLA’s Strategic Plan ensures Warfighter support remains our top priority. We perform a business case analysis on any potential new partners to ensure taking them on doesn’t negatively impact military readiness or costs.

On Managing Material and Operating Costs. Our contracting officers work very hard to negotiate prices, savings that we can pass along to our customers. Inflation and supply chain disruptions have been challenging these last few years. We rely heavily on long-term contracting arrangements to achieve lower overall pricing, as well as fixed pricing over years, allowing for better predictability and planning. The entire agency acknowledges the importance of constraining operating costs to keep prices down for our customer base and the taxpayer.  Within the past year, we conducted an extensive analysis of our service contracts with industry, reimbursable orders with other DoD and federal entities, and within our civilian labor force. We validated every requirement which supported our strategic plan and made some adjustments to those that did not.

We are modernizing our distribution network operations to enhance efficiency and effectiveness. DLA is also undertaking a digital business transformation across the enterprise to modernize our capabilities. Both initiatives are critical to ensure DLA remains postured as a combat support logistics agency to support warfighter readiness.  Modernization will increase operating costs in the near term but will produce efficiencies in the long term.

The department is focused also on improving how we cost-effectively meet the sustainment requirements of our Military customers. The overarching factors that influence DoD’s supply chains are much different than those that affect commercial, or for-profit, logistics providers. DLA holds regular Demand Planning Summits and formally collaborates with all the Services to improve our forecast accuracy to properly size our on-hand inventory. Our challenge is that most items we stock in inventory have erratic and variable demand. The variable nature of consumption of these items makes it very difficult to predict if we’ll receive an order and, if we do, what quantity will be required.  DoD is engaging all components to adopt “alternatives-to-forecasting” methodologies for non-forecastable items. DLA is a departmental leader in the implementation of alternatives to forecasting methodologies and has moved over $2B of DLA’s annual demand value to non-forecasting methods over the past 10 years.

On Critical Risks Facing the Global Supply Chain.  DLA is developing tools and processes to identify and respond to supply chain risks. Industry reporting of risks and vulnerabilities is critical to identification and mutually beneficial response development. The agency manages 5-10 million items. Prioritization, data accessibility and sharing, and a common language are essential for success. The assistant secretary of Defense for Sustainment manages the department’s supply chain risk management (SCRM) efforts. DLA is supporting this effort to effectively communicate and coordinate DOD responses to identified risks and vulnerabilities.  DoD lacks a coordinated, holistic framework to effectively manage SCRM. Risks are individually managed with ad hoc coordination and information sharing. Cross-functional coordination efforts are also inhibited through a lack of common SCRM terminology and definitions. Taxonomy elements include counterfeit components, diminishing material supply and manufacturing sources (DMSMS), supply chain disruptions, cyber vulnerabilities, foreign sourced components, foreign investments, financial distress, and sourcing of critical technologies from adversaries. Continuing development will include environmental, metrics, training, and other considerations.

On Logistics Data as Strategic Asset. We also recognize that we can use data for advantage on the battlefield, to improve DOD management and to drive informed decisions at all levels. We are focused on making DLA’s data: visible, accessible, understandable, linked, trustworthy, interoperable and secure (VAULTIS).  We consider DLA’s logistics data a strategic asset. It enables leaders to make decisions that improve readiness and ensure America’s success in contingency operations. Treating data as a strategic asset improves operations, ensures auditability, enhances interfaces with our industry trading partners, decreases risk and establishes a competitive advantage through quality data. This approach helps us capitalize on analytics and artificial intelligence.

At DLA, we treat data as a weapon system. We manage, secure, and use data for operational effect.  We use market intelligence to tie into supplier data to better inform our procurement processes. For example, ensuring we’re considering the latest market lead times into our acquisition timelines.

On Keeping Up with Technology. One of the most significant challenges is keeping up with technology to remain relevant to our warfighters. Technology is critical to the success of our military’s ability to fight and win future wars. I’d like to highlight a few things we are doing to get out ahead of this challenge. 

Our Digital-Business Transformation (D-BX) effort is critical capability focused on modernizing the way the agency does business. We are looking to upgrade legacy systems to avoid failure & processing delays. The implementation of the Warehouse Management System (WMS) strengthens internal controls, improves financial practices, streamlines processes, increases audit readiness, and improves reporting capabilities between DLA and customers. We continue to work on streamlining business processes and eliminating system customization, decreasing cybersecurity vulnerabilities, reducing aggregated costs, simplifying future system upgrades, and enabling rapid innovation and technology adoption. DLA’s R&D programs explore and develop innovative solutions to modernize and enable a more ready and lethal Joint Force - supported by better performing and affordable logistics business practices. We work with our partners in government, academia, industry, and small business to help us find solutions to challenges across a variety of technical areas. We hold an event called Industry Collider Day every year to enhance these partnerships, to promote innovation, and to encourage industry – especially small businesses.

Artificial Intelligence is rapidly transforming all aspects of supply chains from customer management to warehouse operations. Our goal is to be ready to make data-driven business decisions. DLA’s AI capability will play a large part in that vision. Machine learning can be used to detect issues in the supply chain before they disrupt the business. Using machine learning models, we are experimenting with predictive analytics for demand forecasting. These machine learning models are adept at identifying hidden patterns in historical demand data. However, this doesn’t necessarily mean we can predict the future. Over reliance on AI and other predictive models can negatively impact a supply chain. We need to be smart with our application of these powerful tools. AI can’t replace experts, quality data and good communication between DLA and our partners. Having a robust supply chain forecasting system means the business is equipped with resources and intelligence to respond to emerging issues and threats. We are hoping machine learning can increase our forecasting capability in the future.