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1 EXECUTIVE SUN ~ RY The Defense Logistics Agency (DLA) is responsible to the Secretary of Defense for providing services and supplies used in common by all the military services. The DLA has undertaken a broad program aimed at modernizing its operations. The Logistics Systems Modernization Program (LSMP)'is a loug-term, phased approach for transforming the DLA into a state of the art integrated logistics management agency. -' In order to ensure 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 LIMP. The resultant NRC Committee on Review of Logistics Systems Modernization' has undertaken a two-year study tribe - conducted in two one-year phases. This midterm report summarizes'the " findings and recommendations after the first phase of the'review that ' primarily dealt with planning and management issues. To date, most of our effort has involved reviews and analysis of existing operations, automation systems, organizational structure, and "plans-for-planning." During the latter part of 1987, we noted some important and much needed progress being made in the areas of high-level objectives, program management, business analysis, and scheduling. In the final' phase of our study we plan to-concentrate our review on key' technical and management issues that include standards, architectures, and decision support. MAJOR FINDINGS AND RECOMMENDATIONS To begin with, we support and agree with the DLA's decision to modernize to the extent encompassed by the LSMP. It 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 The agency's systems tend to be paper intensive, manual, fragmented, and outdated.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 'As a result information is often duplicated, out of date, in unusable form, or nonexistent.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 an increasing use of information technology. Appendix E identifies the major information systems in use at the DLA and the operations they serve. - ' ' - 1

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2 This program provides an opportunity to make significant gains in operating efficiencies and productivity while increasing effectiveness. We also support DLA's decision to start this program by examining how the agency should change to improve the efficiency and performance of its mission using contemporary information processing technology and integral telecommunication networks. As with any large program, risks accompany opportunity. Throughout the sections of this report, we offer comments, suggestions, and advice that may help the agency manage those risks. Here we summarize the issues that we consider to be the most important to successful establishment and execution of the program. Strong Central Management The Logistics Systems Modernization Program needs a strong program office with centralized control and a minimum of matrix management. The program management office needs to evolve from a coordinating organization to one that will drive the program. By relegating development-tasks to field activities and various headquarters groups, the DLA is in-danger of repeating the mistakes made by the U.S. Air Force with its Advanced Logistics System. Autonomous activities are usually not responsive to the program office because their priorities often do not coincide. Top management involvement and support is needed. Clear, Concise LSMP Objectives The planning and development of the Logistics Systems Modernization Program should start with a vision of what the program is to accomplish and what it will allow the Defense Logistics Agency to do that it currently is not doing. This should be achieved through a straightforward and brief set of objectives. These objectives need to be communicated throughout the agency. Top-Down and Bottom-Up Design Analysis needs to be performed from both the top-down and the bottom-up. Thus far, the DLA has done a great deal of detailed bottom-up data gathering in its business area analysis (BAA) process. Without top-down involvement, the result may be to mechanize existing policies and procedures without finding new ways of doing business, improving operations, or reducing costs. For example, top-down analysis should help the agency find ways to move less materiel and more information.

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3 Phased Approach The Logistics Systems Modernization Program is-best approached looking at, and designing for, the whole agency and-then decomposing the program into smaller subproJects that can be implemented separately. - This will allow the agency to concentrate its modernization investment where it is needed most in its major mission areas of integrated materiel management and contract administration. Other subprojects could be set up to develop a DLA-wide technical architecture, decision-support system, data base, data elements, or communications infrastructure. This should help reduce development risks and the disruption caused by change without overburdening the agency's limited technical and management resources. External Policy Guidance There are doctrinal and policy issues that warrant policy guidance directives by the Office of the Secretary of Defense. There are a number of doctrinal and policy issues that the DLA cannot be expected to resolve on its own and should look to the Office of the Secretary of Defense (OSD). Chapter 3 of this report treats this subject more thoroughly, but the most pressing issues involve materiel visibility, excess inventories, and stocking policies. Voids in this area have left the logistics community groping for leadership and direction and have affected decisions at both the DLA and the services. GOALS AND OBJECTIVES FOR THE DEFENSE LOGISTICS AGENCY Much of our initial effort was concentrated on understanding the DLA's mission and how it might change in the future. Within this framework, we assessed the requirements to be met by the DLA's future generation logistics systems. As part of our review, we were particularly interested in understanding what high-level goals had been established for the agency that the LSMP could help achieve. Based on briefings and our own assessment, the following are the major goals for the LSMP: o a o a o Improve mobilization (surge) capability. Improve the readiness of peacetime forces. Improve responsiveness to customers. Decrease the cost of operations. Improve the quality of materiel and services. We believe that a set of specific objectives and performance measures for the near- and long-term can and should be developed in support of the agency's broad modernization goals. In developing its objectives, we suggest that the DLA undertake the following actions during the next year.

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4 o Adopt Integrated Materiel Management. - In concert with the services. define surge and new production logistics requirements to support contingency operations, mobilization, and general war plans. Integrate decisions by inventory managers on order quantities with procurement decisions of buyers to systematically exploit scale economies in procurement. - Define the policies and procedures to reduce what appear to be excessive levels of returned material from the services. o Evaluate the advantages of enhanced item visibility (i.e., current information on location, availability and quantity of an item) with the associated costs of acquiring that capability. O Establish standards that will take into account the near-term upgrades of the current systems, OSD-directed standards, and the LSMP objective architecture. 0 Develop plans for deploying the LSMP in logical segments that will accommodate existing systems and allow a smooth transition to future capability. Evaluate system security trade-offs and factor these requirements into technical and budget considerations. o Determine data flow and interoperability requirements including decision support systems for all levels of the DLA's management and exchanges with the OSD and other service logistical management systems. Develop a basic and applied logistics research program including operations research techniques, artificial intelligence, distributed processing, mathematical modeling for decision making, and information handling. This may be best accomplished by establishing a center of excellence at an academic institution so that academic, industrial, and military interests can be brought together. Develop a plan to identify, recruit, train, develop, retain, and maintain a core of technical and management personnel in the information sciences along with the facility and tools to support them. Since our work has coincided with the planning of the LSMP, some of our thoughts and recommendations have already been implemented by the DLA. LOOKING AHEAD In the next year, the LSMP will undergo its most critical development period in which the business area analysis should teed to the establishment of objectives, functional requirements, and an information architecture. While there are key developments required in many functional areas, we believe that the most important involve surge requirements, item visibility, standards, security, decision support, and program management. In the final year of our study, we will review and report on several areas in more detail including standards selection, decision support, technical architectures, and modernization management.