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EXECUTIVE STY The Defense Logistics Agency (DLA) initiated a Logistics Systems Modernization Program (LSMP) as a multi-year, phased approach for transforming itself into an integrated logistics management agency through the application of modern information technologies. The LSMP is in the concept development stage under the Department of Defense's (DOD) formal Major Automated Information System Review Council (MAISRC) process. The MAISRC approved the mission need for this program in November 1986. The president's Management Report for Fiscal Year 1989 lists the LSMP as a "presidential priority system.'' These major system efforts are notable for their size, cost, technology leadership, or impact on government operations. In order to assure that its goals are sound and its plans executable, the DLA arranged with the National Research Council's (NRC) Board on Telecommunications and Computer Applications to conduct an independent and objective review of the modernization strategy and management approaches being employed for the LSMP. The resultant NRC Committee on Review of Logistics Modernization undertook a two-year study that was conducted in two one-year phases. A midterm report summarizing the findings and recommendations after the first phase of the review, entitled, "Planning for Defense Logistics Modernization " was released in July 1988 (National Research made in our midterm resort _ ~~ ~ ~;1 1DQQ) _ _ , __.___, _,,. The major recommendations were for: Strong central management Clear, concise LSMP objectives Top-down and bottom-up design Phased approach to implementation External policy guidance from the Office of the Secretary of Defense (OSD) In this final report we identify and highlight the major issues affecting the LSMP and offer suggestions that may help the DLA address the most pressing problems that jeopardize the progress it seeks to make. 1

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2 MAJOR FINDINGS AND RECOMMENDATIONS In our midterm report we said that the LSMP could be the DLA's blueprint for excellence by providing the driving force for deploying and executing its modernization plans. We continue to believe in that possibility. However, even though we found commendable accomplishments in determining requirements, the overall slow rate of progress warrants attention. The DLA has not aggressively pursued the LSMP. Therefore, due to uncertain commitment, we elected to focus this final report on the program as a worthwhile. but yet unseized. opportunity for logistics excellence. We continue to support and agree with the DLA's decision to modernize to the extent proposed by the LSMP. Modernization is sorely needed and long overdue. The agency's systems tend to be paper-intensive, manual, fragmented, and outdated. Its automation systems, for the most part, are based on obsolete technology of the 1960s and 1970s. They do not share information or provide information to support decision-making. As a result, information is often duplicated, out-of-date, in unusable form, or nonexistent. The DLA is greatly dependent on automation to perform its-mission and the trend is toward increasing use of information technology. Appendix A identifies the major information systems in use at the DLA and the operations they serve. As with any large program, risks accompany opportunity. Throughout this report we offer comment, suggestions, and advice that will, in our judgment, help the agency manage those risks. Below we state five recommendations we consider to be crucial to successfully establishing and executing the program, and summarize the rationale supporting them. Adopt Information Resources Management Because the information relevant to each aspect of the operations of the Defense Logistics Agency has significant bearing upon the information relevant to every other aspect, the agency needs to expand its view of information systems beyond traditional automatic data processing and telecommunications functions by considering information as a resource and creating the organizational structures that will manage this resource. In our review of the DLA, we found this distinction between automatic data processing (ADP) and Information Resources Management (IRM) lacking. Therefore, we strongly urge the agency to expand the purview of its Office of Telecommunications and Information Systems (OTIS) beyond its purely ADP and telecommunications (ADP/T) acquisition, development, management, and maintenance functions. The

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3 DLA needs an IRM organization that focuses on the agency's information requirements and understands the needs of its users as well as the technological tools that can be applied. The OTIS can and should - develop into the DLA's IRM organization, and the agency should; recognize that this implies more than just ADP/T responsibility. It requires a blending of applications knowledge and technology choices from an information perspective. Adopting IRM will require considerable organizational sophistication and evolutionary change at the DLA. An Umbrella Plan Is Needed Because the mayor benefits of modernization arise out of improvements in process, the agency's modernization should be guided by a unified concept rather than a collection of individual and uncoordinated fix-it projects, performed on an "as needed" basis, that retain the old processes. In the past, the DLA upgraded its systems on an ''as needed" basis and in a piecemeal fashion. In other cases, beneficial upgrades were not made because of budgetary constraints or the absence of urgency. As a result, over time the agency's systems have become fragmented and outdated. We urge the agency to avoid returning to this mode of operation by maintaining its emphasis on modernization as a long-term plan that can and will be executed in doable steps. We are not opposed to grand designs per se. However, we do recognize the risks associated with grand implementations and warn against across-the-board modernization. In so doing, we hope to see the agency evolve toward moving more information and less materiel. We have observed a conspicuous lack of technology content in the planning of the LSMP. This may have been the result of an overreaction by the agency to the MAISRC 1 disapproval in which the proposed concept was found to be too hardware-oriented. In any case, technology elements took a back seat when the DLA undertook a major effort~to analyze and model its business. We supported the business analysis effort in our midterm report, and we still believe in the value of such a process as long as its results are put to use. The LSMP began as a technology-based program, and it remains one. We urge the agency to see that the technology elements of the program are properly included in its plans by setting forth the technical architecture and agency-wide standards that will translate business planning into useful implementation. - Move Forward to Approval Milestone 1 In order to avoid jeopardizing the program and reemphasize commitment to it, the agency needs to move forward with the Major Automated Information Systems Review Council for the

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4 Logistics Systems Modernization Program (LSMP) by scheduling and holding to a date for review and approval of Milestone 1, concept development for the first project under the LSMP unbrella plan. The MAISRC approved Milestone O for the LSMP in November 1986 but withheld approval of Milestone 1 at that time. The DLA initially expected to return to the MAISRC in March 1988 but slipped that and several subsequently scheduled review dates. As of our most recent briefing in February 1989, the DLA does not yet have a firm date set for MAISRC 1 review. We believe that the agency should move forward with the MAISRC process and also get the program onto the DOD's formal Program Objective Management (POM) process for multi-year acquisitions. In presenting projects for MAISRC approval, the DLA should not try to present plans and details it cannot know at this stage. We suggest that the DLA maintain an umbrella plan and seek approval of subprograms to accomplish specific pieces of its conceptual functional requirements in an evolutionary manner. The subprograms, subject to MAISRC review, will furnish the detailed information necessary to accomplish a major technology implementation. In this way, the MAISRC will still have cognizance of the details of the program implementations and confidence that the approved projects are part of an umbrella plan even though specific details for such future planned implementations are not yet known. We urge the DLA to maintain its focus on the umbrella plan, estimate the costs for each subprogram and present the subprograms for MAISRC approval of Milestone 1. Concurrently, it must generate the basis for funds needed to support both the early development work and the time-phased implementation of the discrete elements of the program. This level of budgeting and planning is necessary to assure that the MAISRC can give this program serious consideration based on its merits as well as the likely~consequences of failure to act on it. The present level of LSMP funding for the next few years will do little more than allow for continued study and planning -- a strategy that will consume precious time, yield minimal results, and might even jeopardize the DLA's business and information planning investment. Focus on Integrated Materiel Management Because it is the largest part of the agency's mission and because its systems are most in need of modernization, we recommend that the materiel management and supply functions have priority. The DLA should concentrate its modernization investment where it is most needed and where it will produce the greatest benefits. The materiel management functions are currently supported by the Standard Automated Materiel Management System (SAMMS). This system supports the inventory management functions at the agency's supply centers. SAMMS functions include distribution, requirements, supply control, financial

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5 management, accounting and billing, procurement and production, and technical cataloging. A modernized SAMMS that uses large-scale optimization and item visibility would reduce procurement, inventory, and transportation costs while increasing availability of supplied items. SAMMS modernization, ~therefore, is one of the first major subprograms that should come forward under the LSMP umbrella plan. In this regard, the agency must make sure that its projects are achievable in the "real world." SAMMS, like other applications, can and should be developed and operated on an agency-wide standard data base and technical facility design. We suggest, therefore, that data base design and technical facility acquisition be conducted concurrently with application development. We strongly recommend that the DLA design, develop, and acquire a common technical facility for use throughout the agency and a data base architecture that will support its internal and external information needs. The data base design, and the agency's transition to it, is by far the most significant undertaking because it relates directly to how the agency plans to conduct business in the future. Establish Accountability for Systems Modernization In order to ensure successful modernization, it will be appropriate and desirable to consolidate authority over the central design activities and those programs that have received approval of mission need from the Major Automated Information Systems Review Council, and to establish reporting channels for them to that authority. A principal concern of ours has been the perceived lack of clarity and focus for such management basics as the identification of responsibility, authority and accountability for the various actions, phases and steps associated with systems modernization. The scale and complexity of the LSMP requires strong management and organizational cooperation. We have consistently believed that the LSMP requires the full attention of a management group whose primary responsibility is the successful achievement of modern, interoperable information systems. Furthermore, in order to accomplish such internal integration, this management group must have the responsibility and authority to enforce the accomplishment of program objectives throughout the DLA. In addition, the interest and attention of top management to the key initiatives of the program must permeate the entire organization. Responsibility, authority and accountability for program managers and their organizational alignment should be decided and put into effect quickly to avoid loss of momentum. At a minimum, the organizational elements responsible for modernization should have sign-off responsibility on system upgrades, developments, and enhancements where these involve choice of languages, data base management systems, and protocols that will assure inter-operability. With such precise accountability established for program results, users

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6 and planners should confine their efforts to concepts, capabilities, directions, and requirements. Functional managers and users must participate and have a vote in the design deployment, testing, and development process. Functional managers must maintain the appropriate staff capability to define requirements, track progress, participate in test demonstrations, and critique the flaws in the process. The application of independent and objective test demonstrations are critical to this process. A "test bed" environment could be useful for users to conduct "what if" experiments. PROGRESS In our midterm report, we said that because of the dynamic nature of the LSMP, our assessment of progress would very likely be outdated by the time that report would be published. In this report we would like to say the same, but unfortunately we cannot. We must report that there has been little progress in putting the LSMP in place within the DLA in the year since our last report. Furthermore, except for the bottom-up effort of a few organizational elements that were dedicated to the LSMP, we found that the DLA has made very little progress toward overall modernization planning and implementation in the two years of our study. This viewpoint must be tempered, however, by observing that during this period, several units within the DLA have initiated projects that will implement upgraded; newly designed systems to modernize existing functions. The new director of the agency exhibited his dedication to modernization goals by getting all top managers together shortly after his appointment to critique progress and make recommendations. If organizational changes are made to centralize responsibility for information management and design, the agency will have created an improved internal environment for moving forward with a modernized longer-term view of information systems and technology. External Policy External policy guidance is still needed from the Office of the Secretary of Defense (OSD) in areas that the DLA can not resolve on its own. Chapter 3 of our midterm report, the Defense Logistics Environment, dealt with this issue in detail. At this time, the major issues are still materiel visibility, excess inventories, and stocking policies across all the military services and the DLA. Visibility of assets is needed by the inventory managers for keeping track of designated inventories at specified levels. Admittedly, these are ~ difficult and complex issues, but, to the best of our knowledge, they have not yet been addressed by the OSD. -

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7 Decision Support In our midterm report we found that the DLA did not have the capability to easily locate, access, format, or display information that its decision makers routinely needed, or that its management needed to make timely, substantiated, and objective assessments of agency performance. We recommended that the DLA move to enhance its . information systems by incorporating decision support requirements in its plans for the LSMP. We also recommended that a pilot project be initiated to develop a prototype Decision Support System (DSS) for use by the director and his staff. We found.that the former director's . frustration at not having adequate DSS tools was echoed throughout the DLA staff. Yet in spite of the directive.issued by him, early in.his tour with the DLA, to develop a DSS and in spite of the agency-wide recognition of the imperative need for a DSS, not one individual nor staff element assumed responsibility for the project. Therefore, DLA is no closer today than it was two years ago to developing the process and system required for responsive, interactive, decision support. OPTIMIZATION OF MATERIEL MANAGEMENT The DLA's Standard Automated Materiel Management System (SAMMS) was designed and implemented mainly in the early 1970s. It makes very little attempt to achieve the integrated optimization of procurement and distribution decisions that is.currently envisioned by the DLA. The current model has many limitations (refer to Chapter 4~. Research at universities during the last three decades has made major advances in developing models and optimization techniques for large-scale inventory systems. Some of this research.has been applied in recent years to achieve integrated optimization of materiel management at several large firms that simultaneously reduced investment in inventories and improved customer service. We believe that it is now possible and timely to develop and implement a much more efficient materiel management system than DLA now has in which large-scale optimization is used to effectively integrate supply decisions. Experience in industry suggests that such a system is likely to increase system availability and permit significant . reduction in inventories and procurement costs, particularly if. visibility of military service inventories is provided to the DLA. The DLA does not appear to have significant in-house expertise in large-scale optimization and senior management should clearly understand the role that methods of mathematical optimization might play in helping the DLA optimize it use of resources. We believe that the DLA should acquire some in-house capability in large-scale optimization, both personnel and software, and recommend the use of consultants and other advisory services. Furthermore, we suggest that the DLA review the level and location of its operation research resources to ensure that the benefits of this discipline are fully exploited in managing and planning operations.

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8 DATA BASE ISSUES We believe that the data base identification and implementation problems are so key to the LSMP, and are so demanding, that the DLA should focus on undertaking this element of the project as quickly as possible. The LSMP must center upon identification of the major data bases that will make up the foundation of the DLA's functions, and the technology that will be used to implement them. Among the issues that have to be addressed are the makeup of the data bases; the extent of coverage of data bases; the technology to be employed to implement them; the establishment of data management centers; the'implementation of a transition plan; and standardization of such things as data base management systems, data definitions, data dictionaries, and query languages. A sound transition plan and the establishment of data management centers will be crucial to ensuring the feasibility of the LSMP itself. The DLA 'needs to identify its major data bases, establish its data management centers, and select the technology and standards that are to be imposed. As part of the implementation process, decisions must be made as to whether old data bases can or should be modernized or whether new ones must be built. STANDARDS The use of standards promotes interoperability among the various data bases and systems within an organization that need to exchange and share information. There are two kinds of standards that DLA needs to include in its modernization plans. The formal standards are those established by 'the various standards organizations that exist on national and international levels. There are also informal standards that are selected and levied across project activities to ensure conformance and uniformity. Formal and informal information technology standards should be applied to networks, software, operating systems, computer languages, and data bases. The use of standards is also intended to help in dealing with the following developmental challenges: . . . Comnlex and diverse ~uh.~v~t~m.~ : The LSMP is intended to eventually replace a variety of aging, incompatible, automated and manual systems. Long life cycle: The LSMP is expected to continue beyond the year 2000. This may even be extended further because of the vagaries in the approval process and funding limitations. Technological change: Rapid and significant changes in information technologies will continue during the implementation of the LSMP. Change may be manifested in ways such as: Networking involving a diverse aggregation of hardware and software from a variety of manufacturers and countries.

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9 Merging of all types of communications, computer, telephone facsimile, and video technologies. Mobility of applications from one computer to another and to newer models that enter the market. Improvements in the software development process. Increasing use of automation as reflected in new policies such as Computer-Aided Acquisition and Logistics Support (CALS). Although we urge the use of standards, we also point out that they should be used carefully and selectively. Standards can be misapplied because they are obsolete, are too limiting, impose immature technology, or are extended beyond their original purpose. Therefore each requirement needs to be carefully analyzed in order to achieve a delicate balance between anarchy and inflexible mandates. REFERENCE National Research Council. 1988. Planning for Defense Logistics Modernization. Washington, D.C.: National Academy Press.

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