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The 51st Annual NDTA Transportation and Logistics Forum and Exposition Wrap-Up
On the cover: Ron Drucker, Immediate Past Chairman, NDTA, presenting NDTA's three most important awards at the Chairman's Awards Dinner at the NDTA Forum and Exposition: National Defense Leadership Award to General Robert L. Rutherford, USAF, Former Commander-in-Chief, US Transportation Command; Commander, Air Mobility Command; National Transportation Award to Jeffrey C. Crowe, Chairman, President & CEO, Landstar System, Inc ; and Distinguished Service Award to Philip M. Quast, USN, Commander, Military Sealift Command.
EDITORIAL REVIEW BOARD AND EDITORIAL MISSION
Ms. Lana R. Batts, Exec. Dir., Interstate Truckload Carriers Con{.
Dr. Jerry R. Foster, Associate Professor, College of Business, University of Colorado
COL Norbert D. Grabowski, USA (Ret.), Exec. Ass't., NDTA
Maj Gen John E. Griffith, USAF (Ret.), Transportation Logistics Consultant
Richard H. Hinchcliff, Consultant
Brig Gen Malcolm P. Hooker, USAF (Ret.), Member, Board of Directors, NDTA
Dr. Joseph G. Mattingly Jr., College of Business & Management, Univ. of Maryland
Whitefield W. Mayes, Chief Engineer, Transportation Engineering Agency, MIMC
Prof. Gary S. Misch, Valdosta State College Valdosta, Georgia
Dr. Richard F. Poist Jr., Professor, Transportation and Logistics, Iowa State University
MG Harold I. Small, USA (Ret.), Consultant
Donald E. Tepper, Principal, Tepper and Associates, Public Relations Research Services
COL Joseph Torsani, USA (Ret.), Consolidated Safety Services Inc.
Dr. David Vellenga, Dean, Haworth College of Business, Western Michigan University
Dr. L. Leslie Waters, Professor of Transportation, Emeritus, Indiana University School of Business
Dr. Clinton H. Whitehurst Jr., Senior Fellow, Strom Thurmond Institute of Government and Public Affairs, Clemson University
Editorial Objectives
The editorial objectives of the Defense Transportation Journal are to advance knowledge and science in defense transportation, the partnership between the commercial transportation industry and the government transporter. DTJ stimulates thought and effort in the areas of defense transportation and logistics by providing readers with:
• New and helpful information about defense transportation issues;
• New theories or techniques;
• Information on research programs;
• Creative views and syntheses of new concepts;
• Articles in subject areas that have significant current impact onthought and practice in defense transportation;
• Reports on NDTA Chapters_
Editorial Policy
The Defense Transportation Journal is designed as a forum for current research, opinion, and identification of trends in defense transportation. The opinions expressed are those of the authors and not necessarily of the Editors, the Editorial Review Board, ortheNDTA.
Editorial Content
For all correspondence including manuscripts and books for review, write:
Joseph G. Mattingly Jr., Editor Defense Transportation Journal
Asst. Dean, Emeritus Van Munching Hall University of Maryland College Park, MD 20742 (301) 405-7163 -V Mail (301) 405-0164 - Fax (703) 256-3172 - Home jmatting@bmgt.umd.edu. - email
Joseph G. Mattingly
NDTA Literary Awards
Are We Listening?
Every year for many years, one common theme has occurred at the annual Forum. An important thing that occurs is that both government and industry personnel are interested in using new technologies to provide information and improvements iil"the nation's transportation system. A common desire to improve the efficiency in the future information and transportation system permeates the discussions. Participants discuss the enormous problems of meeting the transportation requirements to meet national security needs.
The government participants always state that a healthy civilian industry is needed to meet mobilization and deployment requirements. Again, they surfaced the possibility of a shortfall in transportation capability even if industry cooperates. The question about whether we could depend on friendly assets in future conflicts is floated.
On the other hand, civilian industry and labor executives state, " .if you do not use us in peacetime, we may not be able to respond to meet national security needs. If you want rail service to your bases, pilots for CRAF, maritime labor for ship crews, etc., you should help provide for the infrastructure and economic assistance to provide military capability in our transportation equipment."
Since we all seem to agree on what is needed, e.g. a strong and healthy civilian industry to support limited government funded assets, what is needed to provide the assets? Do we need new laws? Do we need new reward systems? Do current government procurement laws .and regulations provide the environment for true partnerships enjoyed by industry? Are budget crises preventing full cooperation? Anyone willing to offer a solution that will satisfy all or some of the critics may have their ideas aired in this Journal. Articles on the above subjects will be welcomed.
As a start, in this writer's opinion, the government needs to "buy American" during peacetime to insure the availability of a healthy civilian industry to meet national security needs. DTJ
Ideas expressed on this page are solely the ideas of the editor and do not necessarily reflect the position of the NDTA or any other officer or member ofNDTA.
Congratulations to those persons receiving the NDTA's Foundation Memorial Medal for Literary Merit for the top article and cash honorariums for the top three articles written for the Journal in FY96. For 1996, the Memorial Medal honors BG Paul C. Hurley, USA (Ret.), a stalwart supporter of NDTA.
First Place-NDTA's Foundation Memorial Medal for Literary Merit ($500 honorarium): "The U.S. Flag Merchant Marine's Containership Fleet: The Key to U.S. Strategic Sealift" by Albert A. Melvin.
Second Place ($300 honorarium): "President Bush Was Right: Send The Troops Home-The Equipment Can Follow" by Walter R. Schumm and Farrell J. Webb.
Third Place ($200 honorarium): "Airlift to the Balkans: Something New, Something Old" by Lt. Col. Chris Krisinger, USAF.
Total cash honoraria awarded in 1995-96: $1000.
Letter to the Editor
I et me first state that I support the idea that maritime cabotage Lshould be maintained, as you stated in your editorial in the August 1996 issue of DTJ. The support comes with some reservations, however.
You have cited the deregulation of the other modes in domestic transportation as being able examples of what can, and should, be done to preserve our domestic maritime transportation infrastructure. This comparison will always fall short of the reality of the situation.
Today, cargo can be shipped using a truck made by Volvo to the airport where it is loaded aboard an Airbus for a domestic move. The workers doing the loading may be travelling to work on a subway car built in Canada or Italy. All other modes of transportation in the US use the character of the firm (domestically owned) and the nature of the workforce (US workers only) to determine whether a firm is entitled to operate in domestic commerce, not where the equipment was manufactured. The maritime cabotage laws differ significantly in that the equipment manufacturing location, the workforce, and the character of the firm are used to determine whether a company can operate in the trade.
Some in the maritime industry keep arguing that opening the market to foreign competition would kill the industry; yet Boeing is able to sell vast numbers of its aircraft in both the international and domestic markets despite stiff competition. Perhaps it is time to fully equate the maritime industry to the other modes of transportationcompetition is not always a bad idea. The same level of protection extended to the other modes should form the basis for cabotage. Allowing more open competition may revive the transportation aspect of the industry and better bolster the ability of the industry to assist the US in a contingency.
Internet: http://web2.volpe.dot.gov .ndta/ E-Mail: ndta@pop.erols.com
Kevin P. Bums Alexandria, Virginia
In deference to your death-defying schedule, we'll get right to the point. Here and around the world, nobody can offer you as many guaranteed* on-time delivery options as UPS. Whether that means getting your most urgent package across the country in hours, or across an ocean by breakfast. Or if it means getting inventory out of your warehouse today, even if your customer can' t take delivery until the day after tomorrow. You might say we can offer a timely response to every critical deadline. Assuming that these days, there is any other kind. Look for us on the Internet at http://www.ups.com or call us at
1-202-675-4223. MOVING at the SPEED of BUSINESS'."
'
LTG Edward Honor, USA (Ret.) President
Our 51st Forum and Exposition, by the reports I have received,will go into NDTA history as an extremely successful Forum. I attribute this success to the Keynote Speakers, Moderators and Panelists; Corporate Sponsors; Exhibitors and all of our members who came to contribute towards building a foundation for the 21st century. This issue of DTJ is dedicated to recording the proceedings of this Forum for historical purposes and to share the program with our thousands of members who could not attend. As you know, the prime purpose of our Forum is to educate and exchange information between om government and industry participants. I believe it is safe to say that this was achieved through the professional programs and exhibits.
Our A-35 participation this year was excellent. I was extremely pleased with their enthusiasm and superb discussions which took place during meetings. I encourage supervisors to permit young transporters to attend our Forum, as it is truly educational and I believe it would improve their knowledge of government and the transportation industry. I wish to thank all who were able to attend and participate.
To complement our professional programs, over the past six years some of our corporate members have sponsored events to raise funds for the NDTA Scholarship Foundation. This year, scholarship events were held at Church Street Station, Universal Studios and Disney, EPCOT and Pleasure Island. I wish to again publicly thank all of the sponsors who made these events possible. They are identified on page 41 of this DTJ. The SatoTravel Start-Up Breakfast added a new dimension this year with a superb, top drawer, motivational speaker . Our cards and letters indicate that this approach was truly well received.
The always sold out Golf Tournament, hosted by Northwest Airlines, provided a sporting opportunity for
136 golfers While some played golf, those who did not like to rise early on Sunday morning participated in an excellent poolside breakfast hosted by American Airlines andNDTA.
At the Chairman's Awards Dinner, the USAir Jazz Orchestra, directed by Roger Pemberton, was at its best. Jerry Goodrich and Kathy Kessler-Price offered several musical selections which brought standing ovations from the audience. Gary Berghoff-better know as "Radar" from the television show M*A*S*H-was superb in his delivery of a moving tribute to McLean Stevenson.
During our Membership Assembly, draft resolutions were made available to all in attendance As you know, the NDTA resolutions guide the work of the Association for years to come. Your input to this process is welcome-however, I need your comments/proposals by January 6, 1997.
I am saddened to advise that Welby Frantz, who served as President and Chairman of our Association from 196771, died in September. His contributions to NDTA will be remembered for years to come. Welby and his wife attended our 50th Anniversary Forum in St. Louis in 1994.
During our 51st Forum and Exposition we kicked off a drive to establish a scholarship sponsored by Life Members, to be presented to a college student majoring in Transportation and Logistics at an accredited college or university The first donation to this scholarship was made at the Forum. All Life Members will soon receive a letter advising on how to make a tax-exempt donation to the NDTA Foundation. I hope we can count on your support for this important endeavor.
It is not too soon to start thinking about our 52nd Forum and Exposition to be held from 27 September to 1 October 1997 in Oakland, California. We will soon start our planning for the professional programs, so you are welcome to submit proposals for a theme and the supporting program. Mark your calendars now-our San Francisco Bay Area Chapter will be your host.
In closing, I wish to thank our many volunteers who worked long hours to cater to the needs of all conferees. They were all absolutely the best! DTJ
In peacetime or when conflict occurs, CSX's transportation companies stand ready to provide seamless global multi-modal transportation, with intransit visibility, to the U.S. defense effort. Our integrated system of rail, container-shipping, barge, intermodal, truck and logistics management serves
customers in more than 80 countries worldwide. Whenever we're needed and whatever we carry, we deliver total quality transportation.
We're proud to be partners with the Department of Defense in supporting the nation's defense strategy.
Ken Gaulden
By Major General Wllllam J. Begert, USAF Director for Operations and Logistics (J3/J4) United States Transportation Command
Ithink It's fair to say that if each of us was given a blank sheet of paper and asked to design a Defense Transportation System (DTS) for our nation, none of us (hopefully) would come up with our present, fragmented structure as a proposed design. That's why, as part of the USTRANSCOM Strategic Plan, we are aggressively shaping our future through implementation of the Joint Mobility Control Group (JMCG).
Let me briefly describe for you the rationale behind the]MCG concept and explain why it is so important to us. My purpose is twofold: first , to inform you of our initiatives and, second, to solicit your cooperative support for our endeavor.
Over the years from the end of World War II through Operation Desert Storm, our transportation management structure evolved into vertically constructed organizations operating within policies and procedures designed to optimize singular modes of transportation
The Air Force focused on air transportation, the Army was the ground movement expert and the Navy ruled the seas . No single agency viewed the total transportation system to ensure efficient employment across all modes
While our DTS is the most capable in the world today, it needs improvement. Recognizing that need, the Secretary of Defense designated in 1992 the Commander-in-Chief, USTRANSCOM, as the DoD single manager for transportation, other than Serviceunique or theater-assigned assets. SECDEF did this to formalize USTRANSCOM's authority to develop an integrated global transportation system.
Our goal is to establish a fully integrated, efficient, effective and customer-focused DTS with continuous quality improvement To many of you that may sound like something out of a Deming manual or a Dilbert comic strip
What it really means is that we want to take a structure that is fragmented and stovepiped, and rearrange things to make them work better. That's where the JMCG comes in. It is a command and control structure that integrates common-user traffic management to include both organic (military) and commercial lift. It will be the focal point for optimizing DTS operations through centralized planning and control and decentralized execution.
The JMCG will be comprised of eight essential elements: USTRANSCOM's Mobility Control Center (MCC); command center elements of the three Transportation Component Commands (TCC)-Air Mobility Command, Military Traffic Management Command, and Military Sealift Command; Joint Traffic
Management Office, which will be discussed briefly later; Joint Intelligence Center - USTRANSCOM; Global Patient Movement Requirements Center; and Joint Operational Support Airlift Center.
Transportation requirements currently received at each TCC will, in the near future, flow into the MCC. In order for USTRANSCOM to stand up to the charter of single manager for DoD transportation, maximize readiness and responsiveness, and reduce costs, the MCC must exercise command and control of TCC operations and maintain visibility over all DTS movement requirements (current and projected) and assets.
The MCC will be the single focal point for customers at the CINC and major-shipper level. The TCCs will continue to provide and operate mobility forces, and plan, schedule, task and execute missions and movements. They will be the primary points of contact for DTS agents.
For example, the recently-activated JTMO at MTMC is comprised of functional intermodal expertise and serves as USTRANSCOM's single focal point for execution of surface intermodal movements. It will receive validated requirements from the MCC and apply its expertise to determine the most efficient surface mode of transportation. This unique opportunity to consolidate experts into process-oriented teams provides customers the most flexible , cost-effective response to their requirements, and is one of the important parts of the JMCG.
The stool that the JMCG will stand on is the Global Transportation Network (GTN). GTN is an automated information system that provides integrated in-transit visibility and command and control capability. The system will provide a real-time view of all DTS assets and requirements, and provide continuous updates to the information needed during planning and execution of DTS operations. Without the projected capabilities of the GTN system and the rules by which it will operate, the JMCG structure has no hope of achieving its desired objective.
Our customers have become frustrated with movement delays and increased costs. Diminished customer confidence in our delivery systems has understandably resulted in them inventing workarounds in order to bypass our sometimes ineffective DTS.
We want the DTS to be the provider of choice for the entire federal government, and a new day is dawning as we move towards that goal. However, a strategy of small, incremental changes won't work. We need a top to bottom reengineering.
As the JMCG concept evolves, all DTS organizational structures will be reviewed for consolidation or elimination to reduce layering and overhead costs. We at USTRANSCOM have the foresight and desire to finish what we have begun and make our vision for the future of the DTS a reality. DTJ
The LANDSTAR System: Multiple Transportation Companies In One.
Landstar System. The new name for nine of the largest and most established transportation companies in the U.S. - Landstar Ranger, Gemini, Inway, Ligon, Poole, Express America, ITCO, TLC and Logistics. Working together now to make shipping more convenient and effective for you. With Landstar, one phone call to a government marketing representative gives you access to a nationwide network of people and equipment, in over 1000 locations across America, dedicated to getting your loads wherever you want them to go on-time!
Our companies will coordinate your shipments, provide you with up-to-the-miriute status reports, including satellite tracking for ammunition and explosive shipments and even customtailored logistics services to match your special requirements.
Nationwide coverage plus local, personalized service - that's the Landstar System.
Call our 24 hour-a-day Government Offices in Springfield, VA at 800-443-6808, or our Western Region office in Point Richmond, CA at 800-4434348, to find out more about Landstar, the only intermodal system you'll ever need. Let Landstar deliver for you
The 51st Annual NDTA Transportation and Logistics Forum and Exposition
Co-KEYNOTE SPEECH
Frederick W. Smith Chairman and CEO, Federal Express Corporation
It is an honor to speak today to such a distinguished audience on issues which are of vital importance to the NDT A and, therefore, our nation's defense. I would like to focus on three areas: (1) The factors behind growth in express transportation and the way in which it is changing the face of logistics; (2) The developing global transportation market and what it means to the future of world commerce; and (3) Commercial support of military programs, such as CRAF.
First, I would like to provide you with background on FedEx to give you an idea of where we are coming from on these issues FedEx corporation was founded in 1973 with the largest venture start-up in U S. business history ($80 million). In 1983, we were the first U.S. corporation to grow to $1 billion in sales without an acquisition and in 1990, we were also pleased to be the first service company to win the Malcolm Baldrige National Quality Award. At that time, we called it our "License to Practice."
Today, FedEx has 124,000 employees-approximately 15,000 outside the U.S., including 3,000 in Canada; more than $10 billion in annual sales-approximately 25% in international sales; the largest allcargo airline in the world; over 500 aircraft. We are the leading international express company with worldwide ISO 9001 certification, and the first company to receive simultaneous certification, through the electronic process. Our express package business has grown with the continued strength of the express market. Using FY93 as a baseline, our daily express volume has increased from $1.7 million on packages to $2.5 million in FY96. Our revenues have grown by almost $ 1.0 billion per year since FY93. Our fiscal 1996 revenues were $10.25 billion. Despite intense competitive pressure, FedEx
has maintained an overwhelming lead in the express market, defined as one to two day delivery. In the U.S. export market, FedEx also has a commanding market share lead, more than 10 points ahead of our closest competitor. 1
Factors driving express needs continue because of the growth of (1) High value-added/technology-based commerce (e.g electronics, computers , medical, pharmaceutical, aircraft/auto parts, avionics, optics, branded and high fashion goods, etc.); (2) Increasing globalization/ international economic integration due to advanced transport and; (3) Telecom systems and production and distribution increasingly moving to
In 1990, 18% of product was shipped for just-in-time manufacturing. By the year 2000, that number is expected to reach 390/o.
Fred Smith
fast cycle methodologies ... to reduce costs, decrease time to market, and improve quality. As a result of these changes, the costs of logistics, including both carrying costs of inventory and transportation costs, are coming down. Manufacturing is moving rapidly toward a new system of distribution. Warehousing is decreasing. 2 Distribution centers are being consolidated. Express transportation is replacing older methods of stockpiling inventories, which reduces carrying costs and obsolescence. In 1990, 18% of product was shipped for justin-time manufacturing. By the year
2000, that number is expected to reach 39%.3 Efficient customer/supplier integration of information and enhanced communications will increasingly become the determinants of competitive success in the express transport/logistics markets. Businesses are reducing inventories and relying increasingly on express transportation to replace inventories in the supply chain.4
Air cargo is already the future. Since the 1950s, we have witnessed the gradual but steady growth in air cargo as the preferred method of moving a growing number of goods, from textiles to perishables to electronics. These trends will only continue as the value per pound of manufactured goods increase. To exploit this opportunity, FedEx has developed a three-part strategy we call V-3: (1) Vision; (2) Value and; (3) Virtual. Let's start with the Vision System. FedEx has deployed the most extensive network of wide-bodied freighters in the express market, connecting the world's principal trading centers with daily scheduled service. We can provide 24-48 hour service to over 90% of the world's GNP for packages and freight of virtually any size and weight. Our superior electronic networks allow us to speed up the customs clearance process, putting dutiable goods into the hands of our customers faster and more reliably. The Value network will enhance our competitiveness in the U.S. market. Our Value network maximizes our extensive trucking network to complement our global aviation network. We are also increasingly using distance-determined pricing with
We can provide 24-48 hour service to over 90% of the world's GNP for packages and freight of virtually any size and weight.
Fred Smith specific accounts when it fits their shipping needs. This allows us to offer a broader range of services at a competitive price level.
FedEx began creating the Virtual Company in the early 1980s when we launched bar-code scanning. We have led the industry in technology. Today we provide many ways for customers to interact with us; PowerShip hardware systems; FedEx ship software; internetship on the FedEx home page; and FedEx government home page (FedEx has set up a separate home page for government customers on a separate web site, http://www. fedex.com//usgovt).
Let me give you an example of how FedEx puts all this together to reduce cycle time, lower costs and add value for its customers. In 1990, National Semiconductor undertook a review of the distribution process for the computer chips it produces. They learned that to reach the customers, the chips traveled 20,000 different routes, on 12 different airlines and were stored at 10 different warehouses around the world. What's more, 95% of the chips ordered were taking 45 days to deliver to customers and 5% of the product took as long as 90 days to deliver. With thousands of chips sitting in costly stockpiles at plants, warehouses and distributors, National realized they had two options: (1) They could try to make their company into a FedEx, or (2) They could hire FedEx. I'm pleased to say they chose the latter. Within two years of streamlining their distribution process, they began to see results. Sales increased by $584 million and distribution costs fell from 2.6% of revenues to 1.9%. Soon, they were able to move chips from factory to customer in four days or less.'
FedEx has also enabled DoD to achieve savings through an agreement with the Defense Logistics Agency (DLA). DLA is able to position mission-critical components in one
consolidated location. Therefore, DoD lowers inventory levels. Also, FedEx enables DoD to place orders for mission-critical parts up until 12 midnight for next day delivery. FedEx technology enables DLA to track parts through the system. Time-critical inventory centrally located, is easier to manage. Government-owned facility is operated by FedEx 24 hours per day, 365 days per year.
Despite the outstanding progress we've made, there's much more that can be done if government and private industry work together to address them: (A) Global Freight Movement, (B) Infrastructure and (C) Aviation/Bilateral Agreements. Some of the issues confronting our industry are: (1) The need for more rapid customs clearance. FedEx has invested millions in technology to implement electronic customs clearance approaches. We have deployed these systems in this country and in other countries in which we now operate. It is critical that U.S. customs recognize the need for rapid, efficient Customs Clearance Systems; (2) The interface between different modes of transportation is also vital. This is true for
FedEx enables DoD to place orders for mission-critical parts up until 12 midnight for next day delivery.
Fred Smith
air, ground and rail; and (3) As legislators at local, state and federal levels approach regulatory reform, they must balance the needs of the public and private sectors. Infrastructure issues of particular importance are: (1) Further development of the National Highway System-We commend the efforts of the Clinton administration and Congress in signing the National Highway System Designation Act of 1995; (2) Traffic Congestion in Major Hubs-One of the issues we face on a daily basis, is the challenge of getting our freight from airports into the heart of major cities around the country. The current system is far too fragile for dependable daily express service; and (3) Anti-Icing CapabilitiesWe encourage additional research on ways to fight two of our greatest weather hazards: snow and ice. This
winter's blizzards, for example, cost FedEx $30 million, largely because roadways were impassable.
On a larger scale, FedEx faces other obstacles to the shipment of goods through its extensive global network. I'm speaking, of course, of aviation bilateral agreements such as the one with Japan. Because of the enormous investment we've made to create a seamless information and telecommunications network, we have a significant stake in the outcome of these issues. Given the realities of global commerce that I described earlier, I believe anyone involved in distribution or logistics today is affected by these bilateral agreements.
To protect U.S. interests in this current economic conflict, the U.S. government must equate: Asia-U.S. opportunities for Japanese carriers with Asia-Japan opportunities for U.S. carriers; Japanese carriers have access to the huge U.S.-Asian market, totaling more than 5 billion ton miles annually in 1995. This is U.S. trade! These markets represent the largest growth markets in the world, clearly the engines of growth in the 21st Century. By contrast, FedEx has access to a much more restricted market Japanese trade, between Japan and other Asian points. In order to protect vital U.S. interests, the U.S. government must: formally equate 5th and 6th freedom market opportunities; respond in kind to real or implied threats by the Japanese government to restrict access to the Japan-Asia market in defiance of the terms of the 1952 bilateral; make it clear that should the Japanese abrogate the 1952 Bilateral treaty, the response will be a curtailment of 6th freedom market access for Japanese carriers and deny Japanese carriers access to the lucrative AsianU.S. market should Japan act on its threats. We have conveyed our recommendations to the Clinton administration, to the U.S. negotiating side, and to members of Congress. We trust that as the negotiations proceed this position will be seriously considered, for the sake of all who have a stake in the outcome, both the United States and Japan.
I would now like to address ways that we in private industry can support the government, and specifically, military programs; we at FedEx have found several ways to support the government and the military. In addition to the logistics service we provide the DLA, FedEx has established partnerships in other areas: (1) General
Services Administration (GSA), (2) ALOC and MEDEX and (3) Civil Reserve Air Fleet (CRAP). The GSA Contract effective August 16, 1996 for one-year term with option for four more years, for the first time, this makes FedEx exclusive carrier to federal agencies and the entire DoD for 1 and 2 day expresses delivery services under 150 lbs. Through initiatives like ALOC and MEDEX, FedEx has helped the DoD move critically needed cargo to support our military efforts overseas. We're proud to participate in these programs because of their tremendous benefits: shorten transit times from weeks to days, reduced inventory levels and lower costs. The U.S. government estimates that in the first year alone, MEDEX will achieve savings of over $27 million. FedEx has been a strong proponent of CRAP over the years and contributed significantly to the only activation in the 45-year history of CRAP. During
Operations Desert Shield/Desert Storm, we provided seven FedEx DC10 and MD-11 aircraft and crews to this operation. Of the 2,700 missions operated by cargo carriers supporting CRAP, FedEx flew more than 570 or 21 % of those missions. Of the 161,000 tons of materials shipped by CRAP carriers, FedEx delivered more than 51,000 tons or 32% of all tonnage shipped by cargo carriers. By contrast, our primary competitor in the U.S. express market accounted for about 4% of cargo CRAP missions and 7% of tonnage shipped by CRAP. In addition, FedEx continued to operate channel trips for the AMC from the U.S. and Asia with our DC-10 aircraft. Our current commitment to CRAP is strong. 100% of our international aircraft fleet is committed, included DC10- lOs, DC-10-30s, MD-11s and crews. Given the current tensions in the Persian Gulf, we believe our commitment is vitally important.
Co-KEYNOTE SPEECH
Honorable Dr. John J. Hamre
Under Secretary of Defense, Comptroller
Good morning and thank you very much; I'm indeed very honored to be here. I must say I thought it was quite a daring act for this organization to invite a comptroller for your kickoff. Most of us comptrollers moonlight as anesthesiologists and to have us come for an opening session, I thought that was gutsy indeed; especially to a transportation community. I would like to talk to you about the changes that this community is going to endure over the next several years. It's hard for me to imagine another community in the Defense Department that is going to endure more wrenching change than the transportation community over the next four to five years and I'd like to talk with you about that. To place my comments in context, let me use a mental image of three concentric circles. The outer circle will be the broader budget and the defense budget inside of that, then the next circle would be defense priorities and then finally the transportation community. I think a lot of my comments will make more sense if I put it in this context.
Congress is going to wrap up today, we will get a continuing resolution that will provide funding for FY97 thankfully this year before the year starts, and Congress will leave quickly. We've had two very exciting years with the changes in Washington. I've enjoyed it thoroughly, but I must tell you they've been very difficult changes, it's been a Titanic time, you know we rarely have far reaching debates in Washington. Despite the hot rhetoric, and the large scale of the rhetoric, it tends to be over minutia, but not these last two years. They've been broad scaled and truly exciting. Having said that, we've really not reached a conclusion in our country as to our priorities and goals as a society. I think there will be absolute majority in America, probably in this room, of people who would like to have a tax cut; who would like to make sure that social security and Medicare are not cut; who want to make sure we have a strong defense and really don't want to have much
We believe the partnership between FedEx and the U.S. military can be further strengthened. For example, the level of shipping FedEx provides for the military during peacetime, falls well below the level of assets FedEx has committed to CRAP. We believe that level of peacetime shipping should be more equitable with our commitment of assets to CRAP. I hope that I've explained how FedEx can make such a commitment from the military beneficial for our government and for Federal Express. Thank you. DTJ
Footnotes
1. The Colography Group, FedEx Market Share
2. U.S. Department of Commerce, Logistics Costs As A Percentage of U.S. GDP
3. CASS Logistics, Inc. and The Ohio State University, Percent of Product Shipped for Just-In- Time Manufacturing
4. CASS Logistics, Inc., Ratio of Business Inventories to U.S. Gross Domestic Product
other change in government services; and they'd like a balanced budget. I'm sure there's a majority for that. They don't all fit. We have had both sides, by this I mean both sides of Pennsylvania Avenue and both sides of Capitol Hill have advertised that they have solutions to make all of this fit, but in all candor it is an unengineered solution.
Let me describe to you what happened this spring when President Clinton submitted his budget for defense. We proposed a total cut of $16 billion out of the defense program over a period of five years. During that same five year period, the President's budget called for a cut of non-defense spending of $300 billion. Almost all of which occurs in the last two years of the five year
plan. The Congressional Budget Resolution would modestly increase the defense budget during this period and cut the domestic side even deeper. That was our plan back in April and of course we've ended up this year in three frantic days negotiating a compromise that is, frankly, increasing spending for everyone. I don't know that this is a realistic platform to presume that we'll have a balanced budget by the year 2002. Now the significance of this , and again I don't want anyone to take my comments to say that I don't strongly support having a balanced budget, no department in the federal government has suffered more from deficits than has the Department of Defense. Every year for the last 11 years we have endured budget cuts. Largely because we as a society have not found a way to reconcile our spending goals and our revenue base.
No department has suffered more than has the Department of Defense from the deficits. But having said that, I personally doubt that this country is prepared to see defense spending stay at the current levels at the same time we're going to cut domestic spending $300 billion over the next five years, a 40% reduction. So I say that to make one point, and only one point, and that is the budget we're currently confronting , that we currently have, is likely the high water mark for the Department of Defense. I must say I struggle with it every day, not more than General Walt Kross struggles with it every day, but I struggle with it every day to try find ways to bridge the gap between our genuine true defense requirements and the resources that our society broadly is prepared to devote to them.
Now let me go to the next circle in , and that's to talk about our priorities inside the Defense Department and I will discuss them in the familiar terms that all of you who either wear the uniform today or have worn the uniform will recognize. Let's first talk about force structure. I think this year we are corning to the end of the draw down. I believe most people feel that this is the irreducible bottom, especially when you see how far flung and how far stretched our forces are. None of us would have thought this would be the way it worked out in the post cold war period. None of us would have thought that we would have 30,000 troops deployed to Bosnia
and 3,000 troops deployed over a weekends notice to Kuwait, that we would have tensions in the Formosa Straights, remember that? Most of us remember thinking about Formosa Straights as a crisis from our text books in the S0's not in 1996. None of us would have thought the post cold war period would have worked out like this, and it's not really conceivable that we can operate and that our country's security could be protected with a smaller force than we have today. So the force structure becomes pretty much set, given our national interests and our international requirements.
The next item that we tend to talk about is readiness and I think it has enjoyed an unusual priority at least from this administration, and rightly I believe. Never before has the department endured a substantial sustained draw down without having broken forces as a product, every previous time we've had that. I would argue that the priority given to readiness has been the key factor that's helped us
You have to invest 10 and 15 and 20 years consistently to get the kind of talent that we routinely have in the Department of Defense now, but you can lose it overnight if you don't invest in people-and frankly, we have cheated.
John Hamre
world could have done, except, well maybe FedEx and UPS. It's an enormous priority for this Secretary and I think for everyone in the department to maintain that level of readiness.
Dr. Perry brought to the table a new dimension to readiness this year which has enjoyed a high priority and rightly should, and that's quality of life. I think it came about as a realization, that it takes an awful lot longer to build a qualified battalion Command Sergeant Major than it does to build a tank. You have to invest 10 and 15 and 20 years consistently to get the kind of talent that we routinely have in the Department of Defense now; but you can lose it overnight if you don't invest in people-and frankly, we have cheated. Those of you who are familiar with military housing know we've been cheating for some time. Those of you who are familiar with household goods movement know we've been cheating for a long time the quality of life. So Dr. Perry has made a commitment that quality of life enjoys a very high priority, number three really on this list.
We're now down to number four and that's modernization and here frankly, it's a sad story. We have been placing priority on the first three basically by living off of our reserves that we built up during the cold war and it's really gone on too long. When you look at this, this is the first year when we will submit a budget that has no money in it for fighter aircraft for the Air Force. This year we submitted a budget that had four airplanes, I mean most third world countries do better then that. Now we got a $10 billion increase from Congress this year and we got out of it four more airplanes for the Air Force. We are not investing adequately to maintain the force structure that we currently have and will have in the next century. There are a few bright spots, but only a few.
avoid that this time. That's not to say we don't have stresses and strains and we surely do, those of you currently in command billets know that, you know how stressful this environment is. None the less, when I look out and think of the number of people here who were involved in seeing that we got 3,000 troops deployed on short notice to Kuwait, it's a remarkable achievement. No other organization in the world could have done this, let me say no other organization in the
So we lookat the departments priorities and we look at our fixed limited resources and we say where are we going to modernize in the future; and frankly it's only going to come from one place and that's from within, inside of the department and it's going to come from changing our business practices to become much more efficient. Giving reality to the rhetoric that we've all espoused during the last several years it is going to be difficult.
I think that the world is divided
into two kinds of people when confronted by the need for big change. And if I could use the mental image of a mill, there are grinding millstones and there are grinding plates. There are stones that move and produce change and there are stones that sit still and resist change. Unfortunately we've got a lot of both in the department, we have a lot of both in our industry and the real challenge is for all of us to find ways to become the moving stone, not the fixed stone in these next three or four years. I look at the kinds of challenges that Walt Kross is facing and I say thank goodness we have a man of his caliber in this job right now. During the month of September he was confronted by two crises, he was confronted by a crisis of helping to deploy American military personnel to Kuwait to blunt and deter Saddam Hussein yet again in another adventure and at the same time had to battle in Congress a cut of $100 million for people who felt he wasn't being sufficiently aggressive in downsizing. It's an unusual management challenge to confront that on the one hand and an operational requirement that's compelling and unavoidable and essential to our national interest and at the same time deal with cuts that people want to impose because they don't understand what's going on and feel we ought to be doing more than we are. This is the kind of world we're increasingly facing and I look at the sorts of tensions and strains that we are confronting in the transportation community.
During this past year, our friends, and I mean all of these in a very friendly way, so forgive me if this comes across critical for I don't mean it to sound this way, but our friends in Air Force Exchange Service (AAFES) decided they couldn't afford to go inside the military transportation system and got legislation put in so they could bolt out and get their transportation services in the private sector to avoid the overhead costs of the military transportation system. Our friends in the Defense Commissary Agency (DECA) and they're good friends, I worked closely with them, sought to do exactly the same thing, to break out of the military transportation system, to go elsewhere to find some other way to get their services. I sat in ·a session where senior representatives from
each of the military departments looked in the eyes of TRANSCOM and flat out said we don't trust your rates, [your Defense Business Operating Fund (DBOF) rates,] we don't want to pay them, we think they're too high, we're not sure you need to do all of that. Let me just say we're on the front end of a revo1ution and I'm not sure how it's going to go. As our customers are becoming increasingly aggressive in saying they want lower costs; I wish they were saying they want lower costs, but they really want lower prices. I wish they would help us find lower costs rather than just fixate on lower prices. But none-theless it's a revolution that's afoot and managing that is going to be difficult over the next several years.
And then I think there's another wild-card that's entering this year and that's the increasingly hot call for privatization. And as I say that, it probably sounds as though I am against privatization, but I am not. There are lots of people who are
There's no reason for the Department of Defense to be providing travel services-we ought to be doing travel management, but not travel services.
John Hamre
making lots of promises about the great savings of privatization that I'm not sure are true. We are going to have to be very careful not to walk in and assume they are true and create a problem for our budgets in the future because we want them to be true. We have to be very careful. So confronting all of this-what are we to do? Let me speak just for a moment, because clearly, the only solution in this is from fairly fundamental re-engineering. Let me use here as an example, what we have been doing during the last couple of years in travel. I unfortunately was the only person at the table when they said who wants to head up this travel re-engineering business and got stuck with it. I shouldn't say it that way, it's been a fascinating
experience. I've learned a great deal about this community. We are well on our way to a fundamentally new travel system. We had to make fundamental changes. The travel system that we had was truly a defensive one. Wasn't it? Those of you who have been living with it, knew there was going to be some fellow out there who was going to sleep in his car and try to submit an invoice for the Hotel Pontiac. And because you were worried about that, we created this blizzard of forms and requiremen ts for people to submit. Not because you were ever going to catch him, but because you had a process that you could blame rather than an individual when GAO found him. Right? You all know what I'm talking about.
The solution to this is a fundamentally new solution which is to go back, and review who's going to catch that fellow? It isn't going to be one of our 3,000 clerks some place looking through sheaves of paper, it's going to be a supervisor. You know every supervisor knows who they can trust and who they have to check. So you have to start a new system, a system built on that and at the same time build a system that's going to use the private sector where it's absolutely best. There's no reason for the Department of Defense to be providing travel services-we ought to be doing travel management, but not travel services. And so the new system that we're designing will emphasize travel management in the Department of Defense and travel services in the private sector. And I believe we will have a draft RFP that will go out this Fall or even as late as January. My team is sitting here, so hopefully you will talk to them. So let me say for those of you in the travel business, don't miss the first competition.
We need to bring that same sort of energy to household goods transportation. This is an area that is in desperate need of re-engineering and I must say this last year has been disappointing. I spent the entire year in Congress fighting a rear guard action by a lobby that really did not want to change. Forgive me for being so blunt about it, I apologize, and I would argue that it was a misplaced fear on the part of the leaders of that community. Because this is a community that's being held back and bogged down and bloodied by bad actors in
that community. Where, far and away, most of the transporters are really fine people doing a good job and rendermg a good service for the price. But there are a lot of bad actors systemically created by a system that's flawed and I applaud what MTMC has _ done during the last year to try to bnng about a re-engineering. !he best we could do was a pilot pro1ect, confronted with this opposition. But I tell you this is an area that needs fundamental change and change is coming and hopefully we'll all be part of that moving millstone, not that fixed grinding plate.
, Another area that's changing and I 1:1 sure you all sense this, you certamly heard it this morning from ~red Smith, is that the transportation rndustry_ and the logistics industry boundaries are becoming very fuzzy and it's difficult to separate these two. This is hard for a military department to deal with, since they are used to fairly definable boundaries. As is alwa~s t?e case, things work fairly ~e!l ms1de a military community ms1de an organization and they can frequently fail catastrophically when you bridge across communities. Who is now going to be responsible in this new world of Total Asset Visibility? ~re th~se now going to be transportatio~ ?11le~s or are these going to be logistics billets in the future? It then becomes a big deal because over the years we've grown this remarkable organization. This is a very talented organization because we've had robust communities inside that did a :ery good job at protecting their interest, and that's not meant to be in a negative sense, but we're now looking at very different things. If we really b~lieve in fundamental re-engineenng there will need to be a lot of realignments. Fortunately, we have people of your talent and your dedication to help us and I mean that very sincerely. For you to come to a conference, I realize part of it is the attractions of Orlando, but for you to come to_ a conference like this, speaks of that mternal glow of professionalism that is really the bedrock of the s~ccess of the American military. The times we face are going to be difficult the choices we face are going to b~ m_onumental, the process of change will be wrenching and thank goodness we have all of you to be able to help us do it. Because without it without this sort of talent and dedica~ tion, insight and courage, it wouldn ' t get done. Thank you very much. DTJ
Keynote Speeches Dialogue Session
Jeff Crowe, Fred Smith and Dr. Hamre
Crowe
I can say personally I enjoyed both of your remarks enormously and as I listened, Dr. Hamre, to your remarks and words of enduring, substantive and gut wrenching change, I am in total agreement with the difficulty you face. And as I was thinking of our audience and about various commanders and the various doers that are out there and trying to sort their way through, well what does that mean for me today, and what does that mean for ~e and my career. So the first question would be I believe probably about that process. Fred, we've faced those issues in the private sector as major corporations of this c_ountry and international corporations have tried to get their hands a_round that, so it's a two-part quest10n to start this discussion. One, how do you think the private sector can help the command structure and decision makers to move their way through that? And then I ' ll have a follow-up in a minute.
Smith
Well I guess the most important issue from my perspective of what the corporate world is dealing with and I think what Dr. Hamre alluded to in his remarks is how do you deal with boundaries7 It's sort of funny because I think this thing has come full circle. If you ask if Julius Caesar who lived 2,000 years ago could come into this room and you put up the organization chart for the U.S. Air Force or the U.S. Marine Corps or what have you, he would understand it. And the reason he would understand it is because he in~ented it. The first organizational issues that humankind had to d~al with was how do you organize for warfare? And how do you put calvary and infantry and javelin throwers and archers and what have you together and be successful in doing that? Of course, the next problem the
Romans had is how do you then control a geographical dispersed org~nization? You've got the Pacific command over in Great Britain and you've got the European command in Syria I mean you see the parallels there? ~ut today, we have our organization chart just like Caesar had his and the Air Force has theirs and DoD has its and everyone of these organizational specialties are there for a very good reason. You want the best fighter pilots, the best tankers, the best logisticians the best infantry men, the best c~ 17 squadrons, whatever the case may be, everybody is in a specialty. And the question then becomes how do you cut across those organizational frontals in order to optimize the process. The military would say the mission and I think that the movement t~ process management and systems that better manage process are the leading edge in the corp~rate world today . What we have done at FedEx is, historically, we've been driven by two fundamental gauges on our panel. One is the customer satisfaction index which is a qualitative measurement of customer satisfaction and the oth_er is our service quality indices which are mathematical measures on a daily basis of 12 different measurements that create customer dissatisfaction. So the issue has always been how do you drive c~stomer satisfaction up and service quality indicators down. The problem is we needed a third dial an~ so ~?at we've developed is we ve divided our company into five core processes and each one of those processes, one of which for i_nstance is picking up transportmg and tracking the product. They have a process leader who is also a senior officer of one of t~ese vertical funnels, might be an operations or pick-up and delivery people and then we have
The first organizational issues that humankind had to deal with was how do you organize for warfare?
Fred Smith
Coming to grips with the way we do budgeting in the DoD is probably one of the biggest things we need to do. Frankly, it will be a linchpin of whether we're able to open up some of the real avenues of re-engineering or not.
John Hamre
put measurements that cut 3 across these organization boundaries and we monitor them on a daily basis so now as we fly our system so to speak we've got three dials up there. We've got the customer satisfaction index which is the qualitative measurement, the service quality indicators which are mathematical measures and process quality indicators which are the individual components that go into the system that cut across these organizational boundaries. That's what I think DoD will have to do as well. You've done that to some degree with the unified commands That's really an effort to try to manage a process or a mission rather than to manage a function, I think that would be the biggest issue.
Crowe
Good. Dr. Hamre a follow-up to that, as you begin stepping into this new world and I think your comments were right on, I think we have to step out of the world of theory and into the world of reality where some bruising will certainly take place. Your first attempts that you were speaking of, what do you see as the next steps that would be the logical direction to go?
Hamre I think that there are a whole series of things that will probably be on the forefront as it relates to transportation and integrating of transportation and logistics pieces. But more broadly and organizationally I think finding ways that we can and are willing to invest in
somebody else's improvement is going to be, I think, the key organizational challenge. Let me use an example of something that I learned when I visited Fred Smith and his people about a year ago. You mentioned Fred that you have a 100,000 powerships systems out with customers . That was an astounding thing because it ' s the first time that I know of, I'm probably wrong, but the first time that I knew where a corporation said I'm willing to invest my capital to improve some other organizations way of doing business because it helped you at the same time. People don't realize that not only do they give you a bar code label to put on the package but I think I learned when I was with you that 60% of all of your customers invoice themselves. That's a revolutionary thought. Now let's take that into the Department of Defense. We have all of the worst attributes of a bureaucracy because of the way we do budgets. And everybody is fighting so hard for their share of the budget every year that they rarely are willing to invest in somebody else's improvement even if it's going to help them And as a matter of fact, we have just the reverse phenomena. If you find that somebody else is going to get a benefit out of this thing, I won't do it and then I'll tell the comptroller I can't afford it and therefore he'll give me more money. Right? We've seen that thousands of times, I really feel I'm the biggest impediment. Seriously, I the comptroller, the biggest impediment to real systemic change in the DoD because of the way we do budgets. We punish people wanting to help somebody else, because generally we say if you are going to do that you don't need as much money in your account so I'll take it away from you in advance Coming to grips with the way we do budgeting in the DoD, is probably one of the biggest things we need to do. Frankly it will be a lynch pin of whether we're able to open up some of the real avenues of re-engineering or not. So as an example it is worth it to me in the finance world, because we have a devil of a time to present paying government transportation bills late, just a devil of a time, lots of errors. It's worth it for me in the finance world to invest in system upgrades in the transportation
world so they can give me a better product that makes it easier for me to pay. It's that sort of thinking that I think we're going to have to engineer and it doesn't come natural in our organization. The areas that I think are ripe for changes as I said, are household goods transportation, vehicle transportation and then finally I think guaranteed freight . I think those are the things that are most likely on the forefront of change.
Crowe
Dr. Hamre, if I could stay with that thought as I go back to Fred for a moment, again we face some of these issues as we've looked out to major corporations that you've worked with as you change the way or modify the way that they do business. With your past career and spending some years in the military, how do you feel, how far up the food chain can we move outsourcing as General Kross and so many of the commanders that are here have to look at fewer assets with fewer people. How far up do you think we can move in terms of trying to make decisions of support?
Smith
Well I think you can move quite far up the food chain provided that DoD and the uniform services maintain control of the situation. I think it was Dr. Hamre, we were talking at breakfast, I mean economic control is far greater than any other control so I don't think there's any limit to that assuming that you have information systems that allow you to control the output so that you get what you want. The problem is, the reason people are concerned about outsourcing is that they're concerned about; (A) not being able to create a desired output or (B) they want to build an empire of some sort. Well the empire building is over, the realities of the world as you describe them Dr. Hamre, are such in DoD that you can't do it and I just would like to make sure everybody else understands that those same pressures are being felt in the corporate world . I don't think that there's ever been a time when customers had more complete price and service information. So it's almost impossible today to maintain a premium price for anything very long. Your competitors are going to find out about it because we've got great media and great information systems that let you know that and then with rare exceptions
they're going to match you. So there has to be a system of constant innovation and I think in DoD if you think that you're the only ones seeing these pressures on your budgets it's not correct, it's true with everyone. So we too are looking at outsourcing and what our core competencies are. So the empire building is going to go the way of the dinosaur and going to be replaced again with some sort of a horizontal management system that cuts across vertical funnels and I think the issue is the outsourcing can go as high as needs to be outside the core competencies. Now I don't think anybody's going to outsource the 101st Airborne or something like that, but you might outsource a lot of other things. And I think it's the ability to define what the output is and to control that output through economic leverage. Other than that I don't think that there's any limit to it really.
Crowe
Dr. Hamre, I was again struck as you were talking about budget constraints and where budget issues are; Fred certainly highlighted that's what everyone is facing. Fewer assets, fewer people and really what we need is improved asset utilization and allow people to do what their specific job is. So I guess where I am leading with this is how can we build this environment in the uniformed services and within the DoD? Because until you overcome the culture issues you can't make these decisions that will produce the sweeping changes required.
Hamre
Let me just share with you one of the things that was one of the hardest problems we had when we were doing the travel re-engineering. And that is in the past when we were growing an organization, if you wanted a qualified Colonel to run a finance operation, a big finance operation, by and large you have given them career opportunities from Lieutenant on up. As a 1st Lieutenant, he ran the travel office, or the travel section processing vouchers and they were working their way up in the chain. So we have tended to support this broad pyramid of duties by having financial services inside the federal government. So there was something for Lieutenants and Captains and Majors to do by giving them service opportunities. Now what does that mean when you contract out? How
do you grow 1st Lieutenants and Captains and Majors in the future if you are basically going to contract out the service side of the business? That's probably the hardest thing for us to wrestle with and I'd venture to say that's one of the big impediments in the transportation world is that we've got a lot of people, you want a good Colonel who can command, who can handle a contingency to do the deployment of people through Savannah, to deploy the 3rd ID but as a 1st Lieutenant they were doing some sort of a service
How do we build trust as we move up the food chain in this transportation system?
Jeff Crowe
operation in working their way up in the chain of command. Now all of a sudden if you're going to contract that out how do you grow people? I think that's going to be the biggest issue, how do you grow people to have management skills if you don't have career opportunities. The ground rules of our personnel system is fairly inflexible. You can't be a Colonel unless you have X number of people and have performed certain duties on the way. I'm sure you've confronted the same thing Fred that you've got people that • want to bring an Army or an empire with them if they're a senior vice president because that's what senior vice presidents get. In the future we may have organizations that are much thinner and flatter but they still deserve the same respect and authority because they're really managing now not simply providing a host of non value-added services and I think that's going to be the serious challenge we face in the department.
Crowe
I think that is right on the mark. If you accept this permanency of change, then I believe it permits us to look at alternatives on how to develop a career pattern. Perhaps more training with industry would be appropriate. I agree that this is a difficult issue because of the environment in which you must work.
Fred, do you have anything to add from a corporate perspective?
Smith
It's exactly as Dr. Hamre said. I mean in the corporate world, it's even worse because you can't get to be a Colonel if you've got a lot of people that work for you. I mean you can't just anoint yourself a Colonel. You have to earn that eagle. In the corporate world you get enough folk working for you almost always the compensation committee, compensation stratus says okay, well you got these seven direct reports ergo you're now a grade 34. So people are very smart, they want seven direct reports it doesn't make much difference what value-added they're bringing to the organization. So what you have got to do is look for a way for somebody to be a Colonel and not bring all the baggage with them. If you can't solve that, you can't solve the problem. It's fundamentally that simple.
Crowe
But to that, Fred, the corporate world's not always right, as you've been discussing that you don't need to have seven people reporting to you if that's not the right answer; I guess the other, and I don't know that any of us can answer this, but it gets back to this trust factor, customer trust. I was struck by the comments that I suspect everybody will give their packages freely to FedEx and believe they are going to be there and trust that occurs. How do we build trust as we move up the food chain in this transportation system? People in the audience are going to have to trust someone else, ergo FedEx and others to do that vital and essential movement of material, people and information, otherwise I don't think we can be as effective. I would hope that meetings like this, and the exchange that we have had will serve to bring the private sector and the DoD sector together more frequently around these very vital subjects, they are issues vital to our national interest. So Dr. Hamre, Fred, I really want to thank you for taking time from your busy schedules to be with us this morning. You've made a huge contribution to getting this started so I have a token of our appreciation for you being here. I know you both have to leave, we wish you safe journey and again thanks for being here. DTJ
Panel 1: The Foundation
Su m mar y
Mr. Lucas, the panel moderator, opened the session by stating that this panel is designed to share a number of industry trends, initiatives and innovations that will enable us to build a foundation for the 21st century. The panelists, distinguished leaders from government and industry, will provide some brief opening remarks to set the stage and to discuss a number of key programs their organizations are developing or working on to meet the demands of the 21st century. After introducing all the panelists to the audience, Mr. Lucas asked LTG Smith to start the opening statements
LTG Hubert Smith
1Jep11tr C m111 111 111tler -i11 -C l1icf U.ffRANS C OM
LTG Smith opened his remarks by reporting on the progress the U.S. Transportation Command (TRANSCOM) has made on several important strategic mobility issues and programs. While many improvements have been made in defense transportation operations, the current system must continue to evolve rapidly to ensure we can meet all future contingencies. We need to work closer and more efficiently with our commercial partners and adopt commercial practices and processes to the degree permitted by the risks associated with military operations. These needs weighed heavily in TRANSCOM's vision for the future. As TRANSCOM published its strategic plan (referred to as Defense Transportation 2015) its vision statement was developed and it reads as follows "provide timely, customer focused, global mobility in peace and war through efficient, effective and integrated transportation from origin to
Front (I ro r) : VADH Philip M. Quast, USN , Commander , Military Sealift Command; Ms. Mary Lou McHugh, Assistant Deputy Under Secretary of Defense Transportation Policy; L TG Hugh Smith, USA, Deputy Commander-i n- Chief, US Transportation Command ; Mr. Kenneth Gaulden, Vice President, Government Marketing, Sea-Land Service,
Rear (I to r ) : Mr. Jack J. Dillon , Vice President, Manassas Operations, Lockheed
James R. Hertwig, President, Landsta r Logistics ; Mr William Lucas , Deputy to the Commande r, Military T r affic Management Command (Panel Moderator)
destination." TRANSCOM customers are demanding the same things that commercial customers are demanding today and are expressing the same concerns, such as: the high cost of shipping cargo because of the overhead, quality of service, timeliness of delivery, too much paper work. Organizational streamlining using state-of-the-art technology, including command and control such as the Global Transportation Network (GTN) and making our transportation system compatible with that of commercial industry are all initiatives TRANSCOM has undertaken to realize its vision
Since 1993, when we first began our re-engineering and streamlining, TRANSCOM has sought to improve defense transportation efficiency while reducing costs associated with our operating practices. We've used three key strategies. The first is productivity savings, which is designed to force closer scrutiny of operating expenses through fiscal channels; for example, an improved utilization rate for our air services , a reduction in the number of transportation automation systems, and by negotiating container shipping agreements. We've had some success. From fiscal year 93 through fiscal year 99 we will have saved over $500 million. The second strategy is process re-engineering, focused on improving the Defense Transportation System (DTS) wide policies and procedures, to gain operating efficiencies and streamline organizational structures As a first step we created this year a Joint Traffic Management Office OTMO) for centralizing traffic management of intermodal cargo. We anticipate a cumulative DBOF (Defense Business Operating Fund) transportation account savings exceeding $70 million as a result of this single initiative. The
third strategy is reducing overhead. We've consolidated, co-located, reduced and divested within our compon e nt commands, to eliminate the fat, duplication of effort and better align missions within the components. We will have achieved a 37% reduction in manpower within TRANSCOM by FY 99 using FY 93 as our baseline.
These strategies have not only resulted in tremendous savings but also improved our ability to serve our customers. The primary customers of the DTS are the warfighting commanders in chiefs. Sometimes in our push to get more like industry we tend to forget that point. As the current issues and future challenges are discussed throughout this Forum, please keep in mind that the first and foremost concern of TRANSCOM is to support the war fighting commanders.
General Smith proceeded to identify additional programs and initiatives he considered of interest to the audience. In strategic lift, the focus must be on surging, or force projection and high speed, precision sustainment Leaner, faster , and smarter logistics systems will be necessary. The effective use of available military and commercial ships and aircraft will be TRANSCOM's major challenge when deploying and sustaining our forces. To meet this challenge we partnered with the Maritime Administration (MARAD) and the sealift industry to develop a new program, the Voluntary Intermodal Sealift Agreement (VISA) to ensure adequate commercial sealift forces and continued partnership with the maritime industry. Similarly, continuing and enhancing our partnership with Civil Reserve Air Fleet (CRAP) carriers will be key to the airlift support we need to support expeditious movement of our forces world wide. TRANSCOM is
Inc.
Martin Tactical Defense Systems ; Mr. John T. Gray, Vice President and General Manager, Indu stria l Products and Busines s Group, Union Pacific Railroad ; Mr.
constantly looking for ways to improve planning and execution processes, both with the other commanders and with their commercial carrier partners Examples include an exercise called TURBO Intermodal Surge, which in 1996 exercised intermodal movements of combat equipment from Marine Corps Reserve and Army units using West Coast ports for loading ammunition. Our TURBO-CADS exercises provided opportunities to test and improve containerized ammunition movements between the U.S. and overseas theaters. A new annual war game associated with VISA, allows us to test the VISA processes for joint planning with industry when providing commercial sealift to meet the DoD contingency scenarios. Expanded intermodal transportation, including containerization, will continue. Adoption of many commercial sector logistics delivery methods will be essential to ensuring best value and best results TRANSCOM's Joint Mobility Control Group is a new program which will provide single requirements focal points for the Command and integrated command and control centers and activities between our headquarters and components. They'll be organized with state of the art communications, command and control equipment. They are designed to integrate traffic management through a network of defense transportation system agents that encompasses all the users in the field through a wide range of modelling and simulation tools to achieve intransit and total asset visibility. Intransit Visibility (ITV) and Total Asset Visibility (TAV) are extremely important to the war fighters and to the resource managers. We must be able to provide the war fighting CINCs with TAV from the time a shipment leaves the installation, the vendor or depot, until it is delivered to the forward-most theater destination, to include the point where it may be consumed, such as the firing battery. The CINC at TRANSCOM has designated 1997 the year of Infrastructure. In addition to implementing needed improvemen ts and repairs to installations, depots, ports· and airfields through our Mobility Enhancement Plan provided by Congress, we need to ensure that we maintain an adequate overseas basing structure to support force projection. Drawdowns have left some bases overseas in a caretakers status. They are needed for surge or contingency purposes and they must be adequately maintained for that purpose. This will require big investments and much work needs to be done in this area. TRANSCOM is
also working with the Defense Advanced Research Project Agency (DARPA) and the Defense Logistics Agency (DLA) to develop an Advanced Logistics Program. Approximately $140 million is ear: marked for this program over the next five years. The challenge here is to identify the next generation of logistics methodologies and capabilities to advance information technology in order to project and sustain overwhelming combat power world wide Another program is the Center for Commercial Development of Transportation. We're currently using this Center to research high speed sealift and other advanced technologies that may become available to support DoD mobility needs. TRANSCOM can only accomplish its primary mission of supporting the war fighting CINCS with the cooperation and assistance of the commercial industry. NDTA has played a vital role in the on-going partnership between TRANSCOM and the private industry,
In strategic lift, the focus must be on surging, or force projection and high speed, precision sustainment.
LTG Hubert Smith
providing the opportunities to discuss important issues and resolve potential conflicts. We rely heavily upon the established NDTA committees to provide open lines of communication between the Department of Defense (DoD) and commercial operators, and to assist us in the refinement of our strategic vision and mission. We now have the Transportation Advisory Board, a new body which is charged with looking into the future to predict the global marketplace trends and help us identify how these might impact the DTS. We also have a GTN Senior Executive Users Group to help us evaluate our military ITV and TAV strategy and architecture. The key is working together to leverage technology to eliminate any duplication of effort. To meet the challenges ahead we need a balanced program which will ensure readiness, continually improve our processes and modernize our organic mobility assets to ensure a DTS ready to meet the operational needs of the 21st Century.
James Hertwig l'rcside11I, L1111t/5/ar l.,~«htio
Mr. Hertwig stated that, as we move closer to the next millennium, consideration must be given to the impact that mergers and acquisitions will have on DoD's ability to meet global challenges. Today you can read and hear about acquisitions in the paper on a daily basis . Internationally there are global alliances occurring that bring independent companies together to pool their assets and services. Evidence of this has been seen in the trucking industry, wherein a few years ago over 1500 carriers filed tenders with MTMC; today there are less than 500. The surviving companies are restructuring, re-organizing and re-engineering to chase the market place, to reduce their costs while providing quality transportation services. As the market dictates, organizations are quickly changing to reflect how they can better execute.
Many companies today are providing a full spectrum of logistics services. This includes multi-modal transportation and warehousing that's supported by the most advanced technology. This is a must as we approach many of our customers and assess their requirements 85% of the DoD cargo moves by commercial assets This encourages us to pay close attention to the military's direction. Additionally, the fact that DoD is moving to third party logistics with the enhanced vendor delivery program has created unique partnerships.
Last year, Ms. McHugh stated "DoD is looking at intermodal support, viewing our requirements from origin to destination and looking at an intermodal delivery approach rather than a modal approach." Many people criticize the government for always moving too slow, but just ten months after her comments the Military Traffic Management Command (MTMC) christened the JTMO, offering one stop shopping for DoD customers. As DoD changes, so must we in the commercial transportation business. In conclusion, as companies change to redefine their market niche, DoD will have to continue to assess whether industry's capacity commitment to support wartime surge is being diluted to achieve peacetime cost goals. Last year, 15 companies carried munitions. To increase competitiveness and efficiency, they have merged and reduced their excess capacity. This could be a problem in the next Desert Storm. I'm sure you will continue to
.. . as companies change to redefine their market niche, DoD will have to continue to assess whether industry's capacity commitment to support wartime surge is being diluted to achieve peacetime cost goals.
James Hertwig
monitor the impact that mergers and acquisitions will ultimately have on DoD. Finally, as DoD moves to increase the number of third party logistics companies and develops more guaranteed traffic, those companies that are participating will have to be fully capable of providing the necessary capacity to support a contingency
Mary Lou McHugh ,i , \i\t,1111 Vcp11ty U11dcr Scaet11ry of lJefcme-Tmmpmtatio11 Policy
Ms. McHugh began her remarks by providing an update on DoD's defense transportation re-engineering efforts. The first thing we did was develop our vision for the 21st Century. The two principal areas that we're focusing on are in the acquisition arena and on the financial management arena. You heard that 85% of the DoD cargo is moved on commercial assets, therefore, the business that many of us are in is buying transportation. Because of the large sums of money and resources involved, the focus is on those areas in DoD's reengineering effort. Our acquisition processes have developed in DoD on a modal basis and under the cultures of three separate services. Through TRANSCOM we have the opportunity to streamline and bring some consistency to those acquisition processes. That's the focus of this acquisition policy. TRANSCOM did a lot of work in developing the policy, which is now being coordinated with the military services and should be published in early 1997. The policy will require that, when buying transportation for the DoD it is a best value acquisition and that we're not focused on just getting the lowest
cost, but on getting the value that is required by the services and by service members. We are also looking for enhanced contingency support, a concept that's been well recognized and implemented in the airlift area. The message here is that if you get our business in peacetime we are going to require you to support us during a contingency, to have the processes laid out, to know what the contracting process is going to be, and what the rate structure is going to be so that when we need this service most we are not sitting down to figure out what the mechanics are. The third area is best commercial practices. With the help of the industry we think that we can advance both your processes as well as our own, not just in the movement of goods, but in the documentation and the payment processes, because that's where a significant portion of our resources are being spent today. The final area is to focus on ITV and Electronic Data Interchange (EDI). We will require, as part of these contracts, that if you're moving our stuff, we must know where it is. You must have the ability to provide that information to GTN. The use of EDI will be required so that as much of the paper as possible can be eliminated. Another focus area is the financial management arena and there are some real challenges here, because we're crossing disciplines. There are transporters who understand the transportation process and the financial community who understands the payment processes but the two must be linked, to understand the relationships of those processes and how they interface. As John Hamre said yesterday: "We need to try some imaginative thinking." We've focused in two areas here, first, to identify separately what our readiness costs are and what our costs are to provide transportation. We believe the readiness costs ought to be paid out of our separately budgeted accounts so that we can understand and better manage those costs and so that our costs for providing transportation to our customers are clearly understood. We've had some erroneous and dangerous conclusions drawn, all the way from the Hill to folks in DoD, by comparing apples and oranges. It is extremely important that costs being paid through the DBOF by our customers actually reflect the cost of providing that transportation. We have succeeded, through TRANSCOM's efforts, in identifying $28 million that will be taken out of the DBOF and will be funded through direct appropriations because they are readiness costs as
opposed to costs that should be paid by a customer for a transportation service. The Army is also looking at an additional $70 million in costs in MTMC port operations to determine whether or not those should remain in the DBOF. Secondarily, we're looking at billing and payment processes, to streamline them. We really need to challenge the processes that we have in place today and we will do this jointly with the financial community. I would welcome ideas from the civilian commercial transportation companies. Bring us your ideas. This is an opportunity to influence our actions in this area.
We will also take a look at third party logistics this year, an issue which has been mentioned a number of times here today. We have asked the Logistics Management Institute (LMI) to assist us in taking a look at what the impact of third party logistics will be on the DTS. We want to understand where and how they're being used and their impact on the DTS, to determine if their use will affect our contingency programs. We have carriers today who are committed to CRAF or in the future to VISA. We want to ensure that the DoD is getting credit for the traffic with those carriers and that provisions of third party logistics contracts require the use of carriers which are participating in our mobilization programs. Our intent is not to stand in the way of this, but to ensure that the use of those third party logistics contracts also supports our mobilization
The message here is that if you get our business in peacetime we are going to require you to support us during a contingency, to have the processes laid out, to know what the contracting process is going to be so that when we need this service .most we are not sitting down to figure out ·what the mechanics are.
Mary Lou McHugh
goals through the CRAP and the VISA program. I would like to conclude this quick update on what DoD is doing, by reciting a quote from a T-Shirt which I saw the other day, and which sums up what we are doing: "If you're not operating on the edge you're taking up too much space."
Ken Gaulden Vice President, Gov't Marketing Sea-land Service, Inc.
Mr. Gaulden stated his opening remarks would focus on commercial customer trends and how they relate to trends mentioned by Ms. McHugh and other DoD customers, such as TRANSCOM and the transporters in the DoD system. Without a doubt, globalization of everything from Bulgarian and French wines to blue jeans, Sony TVs, and Chinese T-Shirts will keep expanding. Customers will expand their abilities to source goods from India, finish them in China, and package them in the Philippines, for shipment to the U.S., Europe and other world destinations. The changing patterns in trade reflect changing production patterns where the developing countries with low cost labor and rising technology are producing or assembling more and more of the world's goods. Clearly one of the biggest influences on world trade will come from emerging markets-China, South America, India and the former Soviet Union. The idea of global coverage and global networks, including emerging markets, is something customers really want to see and are asking for. Shippers are looking to simplify their supply chain management, to limit the number of transportation vendors they want to work with, but they demand that those that they choose be top notch and global in nature. They need to respond to market pressures and they want help from us to beat their competitors. They know time is not only money but often their survival and every step of their operation, from the acquisition of raw materials to the on-time delivery of finished goods, shippers are demanding that we become an integral part of their focus on quality and reliability. Our customers are looking for tailored services; one stop access to entire logistics chains. Consolidation services, intermodal shipments, tailored information in the area of EDI and now the Internet, warehousing, brokerage, customs help, labeling, bar coding and distribution systems design, customers are looking for transportation providers
who can bundle selected assortments of each of these services and manage them seamlessly from pick-up to delivery. Value is key and to deliver value a carrier has to be low cost not only in its operation but throughout its culture. Very soon, virtually every variable in the shipping industry will be captured and tracked continually and automatically. On one tiny microchip we'll be able to account for every ship and every shipment in the world. We will be able to tell you where it is within 10 meters, what it is carrying, where it is going, when it will get there. We see a world where computers of rubber producers in
Our customers are looking for tailored services, one stop access to entire logistics chains.
Ken Gaulden
Malaysia are connected to tire producers like Michelin and Goodyear and both are connected to computers of their carriers. Computers of tire producers for that matter are connected to computers of car producers and all of them are connected to computers of their transportation providers. Again, the currency is time. Competitive advantage in our business, in your business and the businesses of all our customers will be made in cutting time out of the cycle. Compression of time is a function of information, but information is nothing and knowledge is everything. That means we have to manage the information intelligently in order to realize advantage and this is no short order. At my company, Sea-Land, we are preparing for this new and complex world by common sense acquisition of technology, through cooperation, alliances and partnerships, both with other carriers and with customers. We are pushing the throttles full forward to lead the development of supply, production and distribution systems, not merely to follow them. Commercial customers in our business represent 90 plus percent of Sea Land's world and global business. These trends however mirror the customer trends that we're seeing in the DoD, particularly in peacetime for customers like the Defense Commissary Agency (DeCA) and the Army Air Force Exchange Service (AAFES). The strategic
customers represented by TRANSCOM obtain access to the system in time of war without the need to purchase and maintain a large infrastructure in time of peace and VISA is the passport to the system. The foundation clearly for SeaLand is the enterprise coupled with the willingness to meet the challenge of the future with our customers.
John Gray
Vice President and General Manager of the lnd11st1ial Business Gro1111, UPSP Railroad
Mr. Gray opened his remarks by stating that it is an exciting time to be talking about the rail industry. It is exciting because in the last 16 months we have probably seen, particularly in the Western United States, emergence of structural change that is more significant than probably anything that's happened in the last century in the industry. We have seen the consolidation of both Burlington Northern Railroad and Santa Fe, Union Pacific and Southern Pacific into two mega carriers, very large railroads, each doing about $9 billion. We have seen the structural change which we think will allow the industry to become a major player, capable of entering the 21st Century. This structural change is also going to allow the funding of the capacity improvements that are necessary to support both the DoD business and that of our commercial customers throughout the West. To illustrate what this means to our customers, both Government and commercial, I would like to show you some of the effects in the West. First, these two mergers have created two very large carriers that go almost everywhere. Each carrier blankets the entire West from the Mississippi River to the West coast. Each carrier serves a large number of origindestination pairs in common, each of them serves a large number of origindestination pairs that they did not have access to prior to the merger without going through the interchange process. Anyone who has lived through the interchange process with shipments, realizes it is perhaps the most frustrating part of trying to transport something by rail. These mergers are giving us the opportunity to eliminate many of those things that provided very little added value to the customer, but added lots of costs to the carriers. These mergers are giving us an opportunity to do this in a way which can give us a more efficient cost structure for ourselves and give us
the opportunity to compete for more business more effectively. In the intermodal arena these mergers have created two carriers which each carry about $2 billion annually in intermodal business. To get from origin to destination with one carrier is almost the entire basis of the business. You don't interchange intermodal business efficiently. The mergers have given us opportunities that never existed before. They have allowed us to consolidate transcontinental business in both the southern quarters and the central quarter out of Oakland, in efficient, large facilities at the midland transfer stations We are now able to create the economies of scale which drive the rail industry. The industry has finally consolidated itself into companies with traffic bases large enough to take full advantage of the technology that has existed for many years and that which has emerged in the last ten years. Most importantly it has given us the ability to generate the cash necessary to fund the capacity improvements that are required to support our customers into the 21st Century. In this area, Union Pacific and
The [rail] industry has finally consolidated itself into companies with traffic bases large enough to take full advantage of the technology that has existed for many years and that which has emerged in the last ten years.
John Gray
Southern Pacific will be spending about $2 billion annually over the next few years to support capital improvements, upgrade lines that require additional capacity in the way of second tracks and much of it will go into terminals. The important thing that we have to remember is that it is possible to upgrade capacity in one area such as the main lines and have extremely fast trains operating between the terminals and then get bogged down in the terminals. The terminals are the nemesis of every transportation company.
However, we now have the ability to consolidate and eliminate portions of terminals which are inefficient and create the kind of terminals that are necessary to support our commercial and government customers. We are excited about what we think the industry is going to be able to do over the next few years; we are excited about the trends and we are excited about the ability to reach out to new customers as well as providing better service to those that we are alread y working with. We look forward to doing this work with you folks over the next few years and we look forward to some very exciting times in our industry
Admiral Quast stated that there are exciting times also in the sealift business. He announced that today, on the 1st of October, a new phase of VISA is starting which has been a major breakthrough over the past year. It is an effort to work in partnership with industry to provide sealift where we need it to supplement our surge which is basically the Ready Res erve Force (RRF), specifically to help us with sustainment lift which is where we see VISA playing a primary role . The theme of your panel, "The Foundation" fits very much what the Military Sealift Command (MSC) has been trying to do for the past couple of years; w e have been trying to posture ours e lves for the upcoming 21st Century. In that regard we've looked at ships, the Large, Medium Speed Roll-On Roll-Off (LMSR) Program specifically, shipyards and the industrial base which certainly need a lot of attention , and people In the last six months we've accepted two of the nineteen planned LMSRs that are going to be cornerstone of our strategic sealift capability. Those two ships, one from the East coast (Newport News) and one from the West coast (NASSCO), both of them conversion ships, are currently operating off the East coast and preparing for their first deployment. We have three other conversion ships being worked on by those two shipyards The remainder of the 19 ships will be built from the keel up in NASSCO out in San Diego and Avondale Shipyard in New Orleans. You will probably hear more than you care to about VISA, but more importantly as a part of our effort to continue on with VISA is th e development of a strategy that we intend to take to the 105th
Congress. Part of this strategy are the National Defense features. We currently have a Request for Procurement (RFP) on the street, directed by the Congress. It has $50 million associated with it to stimulate conversion of ships that are already in existence or those that are being built so that we could incorporate some defense features into those ships and utilize them for mobilization needs, if required. As part of our strategy, we intend to expand on that program and hopefully incorporate some shipbuilding into it. This strategy is ongoing, we intend to brief the CINC-TRANSCOM shortly, and we are also working this with the Department of the Navy and with industry. In terms of cooperation with the commercial industry, last week we were very much a participant in "Customers Day" at Scott Air Force Base, a TRANSCOM initiative to bring all our customers together to hear from them directly and to try to work towards satisfying their requirements. Last week, as well, we were in Norfolk as part of a CEO meeting sponsored by the Navy to get with our major stake holders in the shipbuilding and the ship repair business. There's been a lot going on over the last year, it's been very active and most importantly we are now seeing for the first time some very vivid fruits of our labor. The Maritime Security Program (MSP) bill was passed by the Senate last week and hopefully will be signed by the President in the next week or so, which is another indication that our part of the transportation business is coming alive and is an indication that we are living in exciting times.
Jack Dillon
\'I' Mmw \sas Opeml ion~ to, klleetl Martin Tad k al Defcmc Sy\tm1s
Mr. Dillon announced that he would use his opening statement to provide the audience with an update on the Global Transportation Network (GTN) Program. The GTN Program has three major objectives. First it will provide the DoD with ITV of personnel, equipment, cargo, patients and oth e r resources moving within the DTS Second, it will be the command and control system for USTRANSCOM resources that sustain DoD forces during peace time and war. Finally, the GTN will support exercises and what-if situations, through simulations and modelling, using real and historic data. It will become the tool that will allow business practices and reengineering changes more easily
VADM Philip Quast, USN
ilitary Seafift Commmul
Before this panel session, we distributed a reprint of an article on G1N written by Maj Gen Begert, USAF, the J-3/4 USTRANSCOM, which explains all aspects of G1N very well. I suggest you read and distribute it within your own organizations. For a demonstration of GTN you may stop by the USTRANSCOM exhibit area. G1N is scheduled for its initial operating capability in February of '97 which is a slip from this November, but the full operating capability remains on schedule for 1999. The first GTN delivery is critical because it establishes the framework on which all future deliveries will be built and it is primarily oriented toward ITV or logistics pipeline visibility. Logistics pipeline visibility is the "where-is-my-stuff-visibility." In order to provide this visibility, G1N must integrate the details of what the customer ordered with the details of what is moving the order and associate that information in context to place and time. This is a huge integration effort and today no one system exists that can provide this visibility. Since the last NDTA Forum in Dallas we have accomplished a great deal on the GTN Program We have a highly complex infrastructure in place that makes G1N available at all times. We successfully initiated a massive database capturing input from a dozen or more systems. We have over 130 reference tables that support look-up of the codes used by these various systems We have an extremely powerful front-end that allows the customer to form any question in any combination of variables. We can save reoccurring questions and associate them with user defined output. We implemented an extraordinary data quality matrix that will go a long way towards supporting an understanding of where the data quality problems are and represent those problems in a graphical way. We have a robust error processing capability that allows designated users of GTN to correct the error while getting the problems solved at the source. This capability makes the data more accurate. If you want to ask a question about cargo moving in the DTS, you can qualify your question by over 200 variables and 150 conditions. These variables can be combined with each other and then associated with status, phase, condition, mode, location and time. Our output capability is user definable We provide defaults, but you can build your own, save them and associate them with the questions and finally you can see your data represented on a map or business graphic. If you like you can export the output to "excel" and manipulate the
data with the full power of that spreadsheet tool.
We are now debugging and the time to do so has exceeded our expectations. Everything works, but we have such a powerful query tool it intimidates the average user. We need to allow the users to tailor the front-end so that they only have the qualifiers or conditions in which they are interested. We define the most complex object in each network first. This has resulted in uncovering several major unforeseen shortcomings with the design In the long term it will serve us well but it has contributed to a delay in fielding the system operationally. We have defined over 100 objects. Once we nail down the master, we should be in good position to move out smartly. We are getting answers back but the answers are not easily interpretable. We do not allow enough default options. We need to pre-define outputs that are connected to the conditions selected. We are finding one default output per option is insufficient. We need to ensure that the user feels comfortable with the data and make the system easy to use. Along the way we have introduced enhancements to the system. We have demonstrated that we can integrate input from commercial carriers to provide visibility over the
We have a highly complex infrastructure in place that makes GTN available at all times.
Jack Dillon
commercial movement to and from military installations. This will illuminate the ITV black hole in the commercial sector. This also provides an opportunity for GTN to provide the carrier with data in return. G1N could provide an electronic image of the government bill of lading to the carrier, eliminating having to hand jam the data in that commercial system. We have prototyped a query tool to allow users to log into GTN via the worldwide web. It is very easy to see that the average user needs may be met with a robust web implementation. This not only applies to ITV types of things but also offers opportunity to submit user requirements via the web. We are pursuing this option aggressively. This change in thinking is one example of how our flexible architecture is already paying
off. In conjunction with G1N, we have proposed logical extensions to the system. We propose that G1N maintain a master reference file for the DTS; that GTN provide electronic data interchange translations services for the DoD; that GTN provide the ability to update the defense finance and accounting service so that upon acknowledgement of receipt of cargo they would pay the carrier immediately; that users access GTN to update the whereabouts of the freight in their control. A freight forwarder for example could have an account on the G1N, log into the web page and update the information. Similarly small businesses could log into their accounts and provide movement information about the freight they are sending to a customer. G1N could generate the electronic message needed to notify other systems or users. We can see that deployed elements of USTRANSCOM components can log into the web and submit their situation reports.
Quite appropriately we should recognize the immediate benefits of G1N. We are going to deliver late, but what we deliver will far exceed the initial requirements. You will be able to slice and dice data in ways only dreamed of previously. Almost immediately you will be able to see infrastructure holes, because of the robust and adhoc query tools. This means change is about to occur. For example, information will be readily available to the supply Sergeant who asks "where is my stuff"; to the Major in the USTRANSCOM Mobility Command Center who needs briefing charts ready for a presentation when he walks in at 6:00 AM in the morning; to the General who'll ask "what's going on in the world", and to the Defense Secretaries who need to see where the system breaks down. Critical information from the same user interfaces at the appropriate level of detail from data captured by the troops doing their job every day. Finally a partnership with the commercial sector in the area of information sharing is about to unfold. Something unprecedented to the DoD transportation and G1N is going to be the catalyst.
Panel 1
Questions &Answers
{"'\:Dr.Hamre, in his keynote speech, '-<feferred to household goods reengineering. Where are we in that
process?
McHugh: The Secretary of Defense established a quality initiative in personal property movement and storage about a year ago and we have two pilot programs that are about to be underway within the DoD. The first is MTMC's program to change the way we procure household goods service today, with a focus on quality and best value. Their pilot program will be based on a federal acquisition regulation type contract as opposed to the process that is used today. It will get rid of the "me too" process and what we call "paper companies" that have been the source of a lot of our problems, and the lack of quality in today's process. MTMC expects to release a solicitation before the end of the year, hopefully in October or November. A pilot program would cover three states and would be in operation for probably a year. The other program, to be tested by the Army, would utilize relocation services that are used by many commercial firms to provide movement of household goods for their travellers when they're relocating. Under that concept, DoD would pretty much be out of the business, within the DoD, of procuring those household goods services. They are two very different concepts. We are trying to achieve major change in the way that we have been doing business in this area for the last couple of decades. We are committed to getting quality into that process, to reduce some of the administrative processes and cumbersome paperwork, to get more direct contact between the carrier and the customer and hopefully get to direct settlement of claims between the carrier and the customer. Our intent is to have TRANSCOM evaluate both of those programs, evaluate the results and compare them with processes we have in place today. We may come out of it with a hybrid or a phased implementation of these programs. Our intent is to learn from both of those programs and to develop practices that we can then implement across the board in the department.
0 =There have also been discussions ~ bout re-engineering of DoD travel procedures and policies for several years now. Apparently, a lot of work has been done in that arena. Where are we as regards the issue of an RFP, award and execution?
McHugh: The short answer is we expect to release a solicitation in the early part of 1997 It is later than hoped for, but we are trying to influence not only the transportation and travel services but also to integrate the financial
and administrative processes. There have been tremendous changes required in order to be able to do that; change within DoD, other government agencies and working with the IRS, for example, on records retention. We have learned a lot in the process We will have dramatically simplified the process to authorize, approve and ultimately pay for travel. I think also that the industry has been changing pretty dramatically in the capabilities it can provide and the way it can integrate the provision of travel services with the payment and authorization processes. There will be a draft distributed to industry for a final round of comments before we go out with the solicitation. The industry has been of great help to us in developing this solicitation.
O =There was some discussion about '-<,! ntermodalism. As the single manager for transportation I would ask TRANSCOM to comment on how essential it is to have a seamless system and how do we get there?
Smith: In a perfect world we would strive for a seamless DTS but we do not live in a perfect world, so we work with what we have. The term Single Transportation Manager implies being in charge of transportation resources. But what we move is usually controlled by some other commander or agency. However, with the command, control, communications and computer systems coming on-line, I believe that, before the turn of the century we can create the appearance of a seamless DTS. This will require much cooperation and commitment to a lot of money, needed to keep migrating the systems we need for command control communications and computer support on track. The complexity of the system will probably never allow a truly seamless type of environment. To illustrate, let's set a case for supporting a Commander (CINC) in Southwest Asia. We have a CINC Central Command who has requirements to provide troops or forces and sustainment His force provider is the Commander in Chief Atlantic Command in the Continental U.S. His sustainment provider in this case is DLA They are required to provide material which the single transportation manager, the CINCTRANS, will move. We're going through the European Command where the Commander in Chief EUCOM is responsible for enroute support and base support. In any one of those areas, there's a potential for change, which can create a ripple effect all the way back to the sender of the forces or sustainment. This is why we
will probably never achieve a truly seamless system.
0 =With increased emphasis on '-<,! ntermodalism and the vast quantities of containers that the railroads are handling, how are the railroads currently positioned to handle the government's requirements for increased intermodalism?
Gray: The industry has put a lot of effort into making intermodal business as effective as possible for all of our customers over the last few years. An essential element in making the intermodal system effective for any customer is how you control it, how you control the use of those units or containers which move in the intermodal system. As an example, one ship means about 1,000 containers, more or less. We must control the truck that moves that container from the ship to the rail yard. The train that you load that container on carries about 250-300 containers. Each railcar holds from 1-10 containers. Before that train gets to destination it has to be controlled, along with 150200 other trains moving at the same time. When the train gets to its destination, it is unloaded, and the container is stored somewhere and becomes one container again. The container is moved to a destination by a truck, again requiring control. The system is not seamless, but the appearance becomes seamless simply because of the control systems The mergers are giving us the money and the resources to concentrate the business so that the control becomes more practical. They make it possible to invest in the equipment and systems necessary to effect that control. We think that the industry is well positioned in terms of the traditional intermodal definition of the transportation industry. But there is another dimension of intermodalism which is not quite as effectively managed as containers, and that is break bulk cargo. This cargo is as intermodal as the container, but much more difficult to manage and to control. It includes everything from heavy equipment to small packages. The industry is working on a variety of programs to help manage that, but it is not yet as effective as the container management systems. We have the resources to move forward on as many fronts as necessary, but there are specific programs that will probably need some work in the years ahead to make them appear more seamless to our customers. The Transportation Research Board, over the past year, has worked with intermodalism a little bit and developed a definition of intermodalism that
includes the broader aspects of the term, to include multi-modalism and to get a customer from origin to destination on a single bill. That is the definition that we would like to try to operate from under this new Joint Traffic Management Office concept within the DoD.
("\ : There was some discussion about "-{PLA's proposed use of third party providers. With this trend towards using third party logistics, either to augment or replace DoD organic logistical systems, should OSD issue some sort of a po_licy statement, setting some minimum requirements for the use of these companies?
McHugh: The intent is not to stymie or preclude the use of third party logistics companies but we are concerned that as we are using them, we understand what the impact is on the DTS. We are concerned about the impact on our mobilization programs such as CRAP and VISA, specifically, the provisions of these programs. Those provisions are not currently in any of our third party logistics contracts. It may be that we want third party companies to have the option to be able to use those contracts that we've negotiated. We also want to be sure that third party companies have the capability to provide ITV to the GTN for anything that's moving in those systems. We need to be sure that, in contingencies, they are able to interface with our contingency planning systems. Those are the kinds of issues we need to look at and I would expect that there will be a policy memo emanating from this.
("\ : How far should DoD go with this ~ oncept of out-sourdng and third party providers, particularly in terms of overseas operations?
Smith: The real problem appears to be the risks associated with outsourcing. To what level can you offset force structure reduction with outsourcing and still maintain the power projection base needed in surge type environments. In contingencies such as Haiti, we had commercially operated port services down there through a contract type of arrangement. We had general logistic services being provided in Bosnia during Joint Endeavor, arranged by European Command and U.S. Army Europe; so there's certainly a place for outsourcing. We need to examine the risks associated with contractual operations where the environment can turn bad and we then have to have the uniformed capability to cover loss of commercial capability. We also want to make sure that we don't let our force
size dwindle to the point that it puts us at risk. We need to maintain a surge capability within the military, even though this may look like excess capacity to some. We need to have sufficient military resources to go into a theater of operations on short notice, opening ports, moving material to ports, moving the airplanes across to build the air bridge and unloading ships overseas. There is potential for more fixed base type operations, but it is something we'll continue to look at to determine how far we go with this concept.
("\ : Using GTN as a spring board, '-<,.what will the logistics community be able to do for the war fighter that they couldn't do before?
Dillon: First of all, GTN is a giant step toward integrating supply and transportation and therefore the ability to see requirements early in the requisition and the sourcing process before they actually move. It will improve the ability to provide lift and maybe the efficiency of lift. Secondly, as the war fighter has the ability to get a continual update on the status of his requisitions, he will not feel the historical need to double and triple order items. Lastly, this improved visibility should allow the war fighter to spend less of his decreasing defense budget on spares because he'll have confidence in the transportation system and know where things are.
("\ : Why does the government want '-(! o participate in the VISA program?
Quast: I think it's a recognition of the many changes that have occurred in the sealift industry; it not only recognizes but also accommodates the change. Certainly the numbers of ships available in the U.S. flag fleet has fallen dramatically. Capacity by and large has maintained itself but it is a whole different system out there, liner systems, containers, and with that we have lost a lot of our flexibility. So from a military point of view we wanted an assured commitment of lift capacity when needed. From the industry's point of view we were sensitive to diminishing the disruption that they saw during Desert Storm. I think there was an honest effort from all parties to try to come together and to work towards a common goal, assuring that we had lift when we needed to the degree that we wanted.
("\ : Does the government not already '-{!l ave the right to come and claim ships? Can't they requisition them?
Gaulden: They sure do and every carrier that has a ship is well aware that
the government can come take that vessel. The problem with that I think is two fold. From the government's side what you get is a ship, without infrastructure or management. Under VISA you have a large group that can offer you capacity and total infrastructure; you get what you need quicker, earlier, faster then you would get otherwise. From a carrier's perspective, not knowing the mobilization requirements puts us at risk in terms of disrupting our commercial services. We need to reduce that risk wherever possible.
Smith: VISA also brings with it the joint planning capability with the industry. VISA brings capacity, rather than ships. There is nobody better prepared to tell us how to use their capacity than the owners of that capacity. They also bring to play their intermodal resources and the ports in which they operate. They have got their overseas structure they can exercise if we allow them to help us plan, to work with them.
("\ : What are some of the key fea'-(! ures of the Maritime Security Program, which has been mentioned earlier?
Quast: This program, the MSP, provides funds for 43 US flag vessels, relatively new container ships, to be used for force sustainment in a contingency. MSP pays out $2.1 M a year per vessel on the condition that it be made available when needed. This decreases our dependency on foreign flag vessels. It certainly gives us a feeling of comfort that we have these ships available. It also secures a number of positions for our Merchant Mariners. The Bill is of benefit certainly to the liners, shippers, and to the labor union whose people man these ships.
Moderator: Given the passage of MSP, and DoD's willingness to participate in VISA, will we see a stop to the reflagging of US vessels to foreign flags?
Gaulden: I wish the answer to that was yes. I don't think any one program, MSP, VISA, or other programs we may still consider, would take away all the financial pressures on carriers.
("\ : As regards Intransit Visibility '-{(ITV) and Total Asset Visibility (TAV), how does Industry evaluate their ability to track and report on cargo real-time?
Gray: The rail industry has a number of major efforts going on among the various carriers to develop or expand existing systems that are used to track and manage cargo. Our initial focus is on the ability to track and manage the containers, the trailers and the railcars
both in intermodal service and in traditional carload service The industry has spent several hundred million dollars on developing the tracking and control systems for this. We have noticed that simple tracking systems of themselves rarely work very well; for a tracking system to be effective they have to be part of the company's management structure and culture. It has to be integrated within the way that the company manages its business as well as the way in which the customer tracks their shipment. Unless you have the two together you get a disconnect; the data is rarely accurate and meaningful. So our focus in the last ten years has been on developing systems such as Union Pacific's Transportation Control System. This system provides information for our customers and is an integral part of the way we manage our business on a day to day basis. It is used to measure the way we manage our business on a day to day basis. When that happens the tracking and control systems work very well. There is also a second set of issues which affects our government customers and our commercial customers, and that is the issue of the vehicles that we are moving. When moving a whole carload of coal or com it is fairly easy to identify the contents of the railcar. There's very little chance that you're going to lose the linkage between the two. But when you're moving something much mor e complex , such as vehicles, the linkage becomes a little bit more tenuous because you have a number of items which could be identified with the specific railcar. Perhaps as many as 20-25 vehicles will be associated with a particular railcar. The ability to link the railcar with its contents is something we are now trying to do better. Also, the government bill of lading is somewhat different from the normal commercial bill of lading I believe CSX Transportation is working on some linkages that will allow the carriers to link the government bill of lading more effectively with our existing EDI systems. About 80% of Union Pacific's bill of ladings come via e lectronic data at this point. We're shooting for a much higher number eventually and one of the keys to closing that gap is to insert the government bills of lading into the electronic systems that we now have. CSX believes that they ' ll have a system.
Hertwig: In the trucking industry, many of the logistic companies have been asked by the carriers to provide solutions for this issue, to research and develop the technology. Many of our customers have come to us to provide a
solution for them in the area of technology. We are in tracking, whether it be by purchase order or by part or even to the extent of authorizing the payment of a vendor on a purchase order. I think many of the logistics companies have developed that technology and are working with many of the carriers today to provide ITV for the customer.
Gaulden: In the sealift industry, the carriers today provide booking and event notification through EDI. This requirement is in several of your contracts today. I think in AFEES, DeCA, UCR and BVR (Uniformed Commercial Rates and Best Value Rates, under VISA) all have these provisions. In addition several carriers belong to MTMC ' s Automated Carrier Interface Program. The goal here is ultimately a paperless program.
McHugh: One of the things that we're looking for also is not only to be able to tell where the stuff is at any given point in time, but to the extent that it's not where it needs to be able to anticipate corrective actions and to have that information available to us through the system so that you can identify what's next closest in the system or what the best corrective action is to get the material that isn't where it needs to be where it is that you want to have it. GTN is going to give us that.
Smith: TRANSCOM is working very closely with several of the larger commercial carriers now to become familiar with their command and control systems to figure out how we can interfac e more completely the data they provid e routinely to their customers and to the GTN. We are confident that we have the nodes identified within the GTN where we need the input. What we're looking at now is the interface. It is something we have got to really complete within GTN and Joint Total Asset Visibility 0TAV); everything we need to make that a perfect world .
Lucas: DoD has got to get deeper into electronic commerce . MTMC is going to automate the GT (Guaranteed Traffic) program; basically any future solicitations so that they may be transmitted via means like the world wide web.
McHugh: DoD is continuing to approach this issue pretty much on a functional or commodity basis. We are working electronic data interchange in the freight arena, in the sealift and airlift arena and th e problems we have to deal with are very tough. What I would like to see us try to do is to develop more consistent standards and business processes that would enable us to lay out what our process is going to be for
documentation and for payment . We need to see if we can reduce the number of standards and the number of processes that we have got to implement; that's our challenge. We need to take a more revolutionary approach to how we do that, questioning what the processes are and what the documentation is . That's not easy to do because it crosses several disciplines.
A : Will we see more significant '-<f hanges in the industry, will there be more mergers ahead?
Hertwig: There will be more mergers. The carrier industr y will sustain nearly one billion dollars in losses collectively in the next year, according to some people. This will result in consolidations, mergers and acquisitions. There will also be more vessel sharing programs.
Gaulden: There will be more alliances and mergers. The industry is volatile, and mergers bring an added degree of stability to the system, reduce cost and improve service to the customer.
Gray: In the railroad industry, there will not be much more consolidation in the West simply because there's no one else to consolidate with. There are rumors of possible consolidations in the East, but they are only rumors now. There are a number of smaller carriers that may consolidate or acquire additional lines that the major railroads are spinning off for cost reasons This type of activity is going to continue rather than major mergers. However, there are still three major carriers in the East and two large Canadian carriers and a number of smaller class one railroads, and no one knows what is going to happen there.
The Panelists responded to written questions submitted during the break by the audience:
Gaulden: Sea-Land's position on the use of radio frequency tags or tagging in g eneral. Tags are wonderful things. Everybody wants to use them , everybody can see a potential benefit in the future. If you're going to start tracking and tracing everything, ultimately you end up with a tag. The problem today is that the cost-benefit ratio in the tag area just hasn ' t been there. As costs come down I think you'll see things changing. The biggest demand for tagging comes from the DoD. They see a tremendous benefit from it. In the commercial industry, there just hasn't been that kind of demand from our customer; they look at tracking from another perspective. If you put a tag on
some 700,000 containers moving in and out of the United States just for the benefit of a few customers, it becomes cost prohibitive. We have experimented with tags, inside the terminals with readers, on chassis; we have tagged equipment that's domiciled in one location but we haven't done extensive tagging to large pieces of intermodal equipment that flow in and out of our systems. That will not happen until the cost of the tag gets quite a bit lower then it is today
McHugh: Please comment on DoD reaction to the recent legal action initiated by Sato Inc. to block contributions to the Servic e Morale, Welfare and Recreation Funds. Sato took the government to court, essentially taking exception to our combination of official and unofficial travel requirements in a single contract. The court initially ruled in the government ' s favor, but when Sato appealed, the appeals court ruled that the payment of those fees to our Morale and Welfare Funds, the Miscellaneous Receipts Statute applied. Essentially, that means that those funds could no longer go into the morale and welfare activities and would have to go into the general treasury. We are very concerned about that because those fees are really based on the personal funds of members who are traveling on unofficial travel. The appeals court has remanded the case to the District Court to determine what the future action should be and we're trying to work very closely with Sato to see if we can come to some compromise on that. It was not Sato's intent to preclude the payment of those concession fees into our Morale and Welfare funds, but unfortunately that appears to be the result of it. So we're trying to work with them to see if we can come to some agreement on a ruling that would be issued by the court . We have to resolve this by about the middle of November because the outcome will affect current and future contracts. We hope that we can grandfather current contracts so that those fees could continue to be paid to our morale and welfare accounts, with the exception, of the single instance that was the object of the court case. For the future, we hope to reach a compromise where we would continue to issue a single solicitation for official and unofficial travel services, but they would be separately evaluated
Hertwig: During Prime Minister Thatcher 's government, the British Defense Ministry starting using third party logistics. A~er the honeymoon period was over with the contractor, prices began to rise. When
the Defense Ministry's price threshold was met, the Defense Ministry looked back to the military to provide the services only to find out that the infrastructure was gone. Is anybody looking at this? Some logistics projects have not demonstrated the savings that maybe the client expected The projects that I've been involved with, numerous ones at Landstar, usually have a quarterly review which not only reviews the service, but also looks at cost improvement. In addition, many of the projects are set-up on gain sharing; a baseline is established that will meet the customer's expectations and beyond that, the savings that are realized are split between the client and the logistics company. This gets both the logistics company and the client working together to continue to drive costs down.
Smith: What is the Transportation Advisory Board working with TRANSCOM?
This is a group of CEO's and Senior Vice Presidents from major commercial transportation companies, selected by NDTA, to advise the TRANSCOM leadership on changes taking place in their business sectors. That Board will meet about every six months. We gain very valuable insights from the Board on future directions of their industry, changes that they see coming, which helps us plan better for the future.
Quast: Will the LMSRs, when delivered, replace ships for pre-positioning? The answer is yes. Currently the Army's prepositioning ships are borrowed from the RRF; the RORO ships right now Diego Garcia. As the LMSRs come into the fleet, they will replace those ships, which will then be returned to the RRF fleet. Of the 19 LMSRs planned, eight will be used for PREPO, the rest will be in Ready Reserve. To what extent the LMSR's will affect the current use of the eight Fast Sealift Ships (FSS) is still to be determined. The FSS ships are currently in a very high state of readiness and I believe we're going to right now maintain that level of readiness. We will review that once all 19 LMSR's are available. We are continually pulling the FSS's and activating them and we are finding that they exceed their minimum readiness time, usually by one or more days. We have a good program there.
Dillon: When will the new GIN really be available? First of all, GTN is an evolutionary development contract using commercial off the shelf technology, so it is never going to stay static. As part of our process of evaluation, we have a step called the confidence test, followed by the system acceptance test. And then they go through the complete IOT&E
and roe (Initial Operations Test and Evaluation and Initial Operating Capability) The confidence test was held last week; there is no formal report out yet, but word is that it went well. On 11 to 22 October we will have the system acceptance test (SAT). Then the Government can start their IOT&E assessment. The schedule in place says, assuming the confidence test looks good, the SAT looks okay, there would be an roe in February. From all indications it looks like this schedule is on target. There will be continued improvement of the product as we go along.
McHugh: In view of some DoD agencies, such as AAFES and DLA, trying to circumvent the DTS, does OSD plan to provide clear cut, unambiguous direction to the services regarding the mandatory use of the DTS? The short answer is yes. We are drafting such a policy now. It's complicated somewhat by the fact that we have a statute that authorizes AFEES and DeCA to operate to some extent, largely in the sealift arena, outside the DTS. We have to accommodate that as well. The policy we are crafting indicates that the DTS is required to be used and exceptions will have to consider not only lower costs but how readiness capability is affected. The other issue is to cause customers to want to use the system. That's where the real strength is and that's what we've all got to work together on.
Hertwig: In view of the significant reduction in the number of motor carriers and of the mergers that have created mega railroad companies, is there on the horizon the creation of mega multi-modal corporations, single corporations of motor, rail and sea carrying capacity? The answer is possibly. On the panel today we have a company that has a large railroad but also operates a trucking company and also a company that is a railroad that operates a sea going business segment. There are many motor carriers that operate trucks and also have airplanes. I believe that you will continue to see companies going to new product lines where it makes sense.
Smith: Probably the biggest problem facing the war fighter during Desert Shield/Desert Storm was assets slowed to a stop and o~en lost due to congestion at major CONUS theater ports. What are we doing to ensure that this doesn't happen again in a new shooting war of that size? In Desert SWeld/Desert Storm we had a tremendous amount of congestion in the sustainment arena. A lot of material arrived in the Desert that did not bear identification on the container and we ended up with a lot of things we didn't
know we had. The Army has the lead, by direction of OSD, to work on Joint Total Asset Visibility CTTAV). Last week we began firming up the architecture for JTAV. That's a capability that will enable us to see everything that is out in the supply system, everything that is in the transportation system and provide the customer the opportunity to go into GTN and look at what's in-transit. That will preclude people from doing a lot of what occurred in the Desert, that is ordering the same thing over and over because they could not determine status of their requisition. Also, we hope that next time around we won't have a lot of people back in CONUS pushing stuff to the Desert that they think the CINC needs. If supplies are pushed in under the new system there will be visibility because the cargo has to be entered into one of the systems that feeds JTAV.
Another thing that we're working very hard on is to make sure that the supported CINCs acknowledge and identify a requirement for sustainment well before Day 30. Also, with the new, lean logistics the services have adopted, we don't maintain mountains of excess materials just in case we need it . We also are developing the capability with JTAF to identify not only the container that's on the ship but also what's in the container down to the stock number. The Logistic Integration Agency in Washington, working with AMC and Army DSLOG, is developing the architecture for JTAF.
Gray: What is the status of the commercial rail fleet and its ability to support government needs? The rail fleet today is about a million and a half cars of which about half are owned by private companies rather than the railroads them-
selves, including the U.S. government. There are some specialized units in that fleet for handling heavy equipment. The industry is interested in investing in equipment where it makes sense for their business. But equipment to support short term requirements that can not be used in a commercial environment will have to be procured by the Government. We would, however, enjoy working with the government on programs to effectively utilize the government fleets at times when they are not needed, to ensure that the fleet is maintained to current standards and is useable in its current condition. DTJ
Summarized by COL Norbert Grabowski, USA (Ret.). Full audio tape transcripts are available from NDTA.
Panel 2: Future Directions
Front (I ro r) : Dr. Marshall Bailey, Assoc. Exec Dir , Policy , Systems and Engineering, Defense Logistics Agency ; Mr. Roger W. Curry , President & CEO, CF Motorfreight, Inc .; Mr. David Swierenga. Chief Economist, Air Transport Association of America; Mr. Bennie "Mac" Warren, President, Consolidated Traffic Management Services (Panel Moderator)
Rear (I to r): Mr. Phil M. Grill , Vice President, Government Relations , Matson Navigation Co ; Mr. John Graykowski, Deputy Maritime Administrator for Inland Waterways and Great Lakes; Ms. Theresa Giordanengo, Forum Co-Chair; Mr. Michael J. Premo , President , SatoTravel ; The Honorable Michael P. Huerta. Associate Deputy Secretary and Director, Office of lntermodalism, Department of Transportation.
Yesterday's panel discussed the foundation of NDTA's government industry partnership. This morning we'll focus on initiatives and trends that will have an impact on NDTA and take us through the next decade.
Mr. Roger Curry, President & CEO CF MotorFreight, the Panel II Moderator, introduced his panel by noting that government and industry have had a long history of working together. Today we're all facing budget and staffing reductions, so it's more important than ever that we strengthen that relationship. This panel, called Future Directions, is designed to provide a government and industry visualization of the new environment we will encounter in the 21st century. Subjects to be covered include legislation and public policy, re-authorization of federal programs such as !STEA, airport
improvement programs, private and public investment in infrastructure, the Maritime Security Program, and the Jones Act. From an economic perspective we will hear about global restructuring, strategic partnerships, third party logistics and leveraging information technology.
Today I'm going to talk not in theory, but in terms of initiatives that we think are on the cutting edge. So I hope that in some of the questions you can give us even better ideas so that we can really get out in front. I'd like to start by giving you an idea of what DLA is all about. DLA is a large scale operation.
We have material management and distribution which is approximately $5 billion in sales, and then with the fuel added on, you get another $2 billion. The number of transactions is significant from a transportation standpoint because we have 31 million transactions annually There's another side to DLA which you folks in the transportation industry call the "first destination." We manage contracts throughout the DoD that total about $900 billion in active contracts. We graduate ever year about $300 billion in active contracts There's ari awful lot of contract administration activity on the sidelines. There are things like the old national stockpile for raw materials for mobilization purposes. The Defense Logistic Service Center is our federal cataloging system. The Utilization and Marketing Service-the ash and trash-is the rear end of our
Dr Marshall Bailey
A ,soc Exec. Dir !'11/icy N Sys. fa1:,;.
J)efeuse Logis/i(S Agency
business, if you will. And there are several hundred sites throughout the world where transportation plays a game. So DLA is a fairly comprehensible organization, getting involved in all_ logisti~s functions; but I want to bnef D~A s future in terms of logistics, not Just transportation. My examples are from the transportation community, ~ut I want to talk about it in terms of mtegrated logistics becaus~ that's wh~re we're all going. And we re not lookmg at individual functions anymore, we're trying to tie these functions together. The Council Logistics Management (CLM) has about 5,000 members and commissioned a $3 million study of what world-class logistics was all about. They surveyed about 3,000 ~ifferent logistics companies and bolled that down to only 100 companies that they thought were truly world-class. They analyzed those few companies in-depth and came up with four key competencies: positioning, integration, agility and measurement. These make sense; but often we don't always tie everything together in a way that really exerci_ses true supply chain management-whICh is integration. In industry you folks call that the perfect order concept. You make a deal, you keep a deal. And measuring how good our transportation is, is part of that. How fast does it meet customer expectations? I want to talk about these four competencies and explain where DLA is going. DLA must join the ranks of the world-class logistics companies. We weren't in the survey so I don't know exactly where we would stand, but it looks like most government agencies in logistics have a way to go to truly be world-class. We ought to talk about things we're doing to become world-class. I'm going to talk positioning first. In positioning I'd like to address privatization; that is, how ~e are going to engage the commercial marketplace more fully. Then in inte?ration we're going to talk about the pnme vendor initiative which many of you have heard about. It takes different forms in different industries. Then we'll talk about agility; and in that context premium service. That's just one example, but it's the transportation ~xample of meeting customer expectat10ns. In measurement we'll talk about enhanced vendor delivery which some of you have been participating in, and show how that fits.
Privatization of DLA is not the lock, stock, turn-key farming out of our agency. Privatization to us is linking the customers to the marketplace. It's our way of actually engaging industry in
Privatization to us is linking the customers to the marketplace. It's our way of actually engaging industry in large measure and on large scale.
Dr. Marshall Bailey
large measure and on large scale. That is, stop doing a lot of the individual transactions and enable the customer to rely totally on any industry base. But setting up that apparatus and that infrastructure is what we plan to do. We need to shrink, we need to get smaller, but that doesn't mean we have to stop giving service across the broad range of defense requirements. That doesn't mean that we have to stop being the covenant keeper of things like readiness and sustain~~ility which are so important to our m11Itary mission. Our way of privatizing is to become a broker linking large scale relationships with our customers. That's our positioning strategy. If we want to be world-class we have to do so brilliantly. Let's talk about the old way and the new way of doing business. Most of you remember DLA when it had five depots, and then later it had 30 depots and all those depots had lots of materials which we bought, put in stock and issued out of stock. That was our way of doing business. Some time ago, we shipped it to the next level and we started to do direct vendor delivery. But here again, it was one transaction at a time. Whenever somebody wanted something, instead of getting it from stock we'd try to buy itand you know what that does to lead time. You folks in the Services doing lean logistics, velocity management, precision logistics, etc. require quick turn-ar~und and consistent timely supply; D1rect Vendor Supply (DVD) doesn't hack it. So we went to Prime Vendor. There we connect a large scale corporate enterprise ~n an existing environment where the distribution system is set-up and already operating. We don't want "made to order" just for the government to connect to the customer, set-up a computer system between the customer and that company. We've done this in fo?d, we've done this in medical supphes, we're doing this now with Warner Robins in terms of their piece parts that they use to overhaul airplanes, things like nuts and bolts. We have a large scale
plan that's truly an integrated way of doing business.
Now let's move to another aspect of world-class logistics. Can we integrate? Here's how we're going to integrate. We're skipping the old process where the requisition goes through the Inventory Control Point (ICP) and instead, we are letting the requisition go directly from customer to contractor. This is our main thrust. You'll hear Prime Vendor and see Prime Vendor in many different forms. The definition is not that exact and we don't want it to be. It has to fit the marketplace. If we can connect the customer to the marketplace conveniently, make a deal and keep a deal-that's Prime Vendor.
Next we're going to talk a little about agility. In terms of being agile we know that turn-around time is absolutely critical. But is this agile enough for you? DLA's premium s~rvices is our way of positioning stock m one location with ready delivery immediately to the customer. It's tieing in directly to fast, first-class transportation. Stock location is critical to customer support but it doesn't need to be that critical if you can trade off stock and trade off multiple locations for good speedy transportation. That's what our premium service concept does. It's working, it's growing. Thousands of requisitions are coming in on this program and there is still room for lots of improvement. If you look at stock location, look at the shrinkage it causes. In a given warehouse you don't have just one location, you might have 20 or 30 for the same national stock number. So, our solution provides agility and consistent sup~ort in accordance with customer reqmrements. It provides fast tum-around in those things the customer needs fast, especially expensive items.
Now let's look at the last part of world-class logistics-measurement. One of the problems we've always had is the connection between the contractors' commitment that he shipped and the customers' actual receipt. It was very hard to discipline the system. Enhancement in delivery, which is now in several prototype stages, will allow us to engage a large-scale transportation lay-down across first destination _and second destination transportat10n. Especially in first destination from the contractor to the customer. It's a concept that allows us to use transportation to do control and measurement. We take the transportation data that you folks have always had and apply it in terms of logistics and follow-up to cus-
tomer requirements to discipline the industrial base. We make sure that we deal with world-class vendors. We know they're world-class because they're meeting their commitm e nts. And we're going to use transportation data as a form of measurement. It is a very powerful new way to measure how well our logistics system is working.
We want to be truly world-class and to provide the kind of readiness and sustainability that the military people in the U.S. and abroad need . To do that we are using the four different competencies. We've shown you just one initiative from each of those in the transportation area. But there are scores of initiatives in DLA that try to step up to this challenge I wish I could talk about them all. I know Admiral Straw would consider it a great honor to share these with you, and General Babbitt, who is our next director, would feel the same way.
John Graykowski
Oeputy Maritime Acl111i11. for l11/aml ltVataway.\ & Great l,ake .\
I'd first like to convey greetings from my boss, Admiral Herberger, who wanted very much to be here but was unable to join us for two reasons. One, he was in Europe attending a NATO shipping and sealift meeting; and secondly, he's heading up a U S. delegation at the worlds largest shipbuilding exposition in Hamburg , Germany-the first time the U.S. was asked by this organization to be a partner. The reason I raise this is that it relates to the success that MARAD experienced over the last four years which makes this country stronger then it was four years ago
I'd like now to review where we ' ve been, because that, in some part, shows us where we're going I was here two years ago in front of this group and talked a lot about our hopes and dreams for the maritime industry It's wonderful to be able to stand here today with tangible proof of the achievements we've made for the maritime industry and for our national defense. Without question we've put together a maritime policy during the last four years that will carry forward into the 21st century. Let me start with shipbuilding. After nearly a 40-year lapse, we've now signed a construction contract for six vessels; we have two more that are about to be signed and we have created a program that has initiated over $2 billion worth of new shipbuilding construction. Plus we have two large modernization pro-
jects underwa y Over 251 vessels in total are under construction today. All of this has occurred in four years in an industry which was heading downhill. It was gone, it was dead Let other people do it, was often heard. But we all recognized that there has to be a shipbuilding industry in this country. The Navy can't support it by itself in the face of a declining budget . We must maintain the critical skill level to maintain that industrial base Now, it's being done and the proof is out there . I attended this weekend the christening of the first Jones Act vessel; its Product Tanker at Avondale Shipyard. The first one built since the Oil Pollution Act was passed; it complies with all environmental requirements. This particular project alone preserves some 300 jobs in the maritime industry. But it's a new ship,
I
find it absolutely
incredible
can
that you
pass a Bill 88 to 10,
which is clearly bipartisan, and within a week, before the ink is even dry, the October 1st New York Times publishes the following editorial. Quote
"The U.S. fleet is no longer vitally important in a military sense and it is out performed commercially by more efficient foreign flag vessels."
John Graykowski
American flag, American crewed and American built; that's what is significant. Five years ago people would have bet money that this was never going to happen again. Secondly , Maritech is a project that creates an industry-government partnership Maritech is creating new vessel designs and new shipbuilding technologies and processes around the country. The third thing I want to talk about, again with partnership as the essential element, is the VISA Program. This is an idea that
since I started at this agency has, in my view, come from Admiral Herberger; it has been his vision, his drive and absolute determination that this is the way we have to go. And h e 's drawing on 30 some years of experience in the Navy, and his experience as the Deputy CinC of TRANSCOM and this VISA Program which again we have pushed through with sometimes shear force of will The bargain we get out of VISA is beyond imagination. We don't just get ships, which was the old way of thinking about it; what VISA does is allow us to approach all of our sealift needs in a very rationale, methodical, planned fashion. No last-minute, in-the-heat-ofthe-battle type decisions. This leads to more efficiency and a heck of a lot better service all the way around-when we need it. And I think everyone involved in the VISA Program, and that's all of the government agencies, deserve a lot of credit for what they 've achieved here And most importantly, industry is a full blown partner in this. What's produced is an agreement and a framework that all of us not only are comfortable with but fully endorse and know is going to serve us well as we move forward.
Now, finally, a discussion of the Maritime Security Program. Last week, as I think all of us know, the Senate passed legislation, 88 to 10, to create a Maritime Security Program . We're assured it's a 10-year program So this is a proud moment; we're absolutely ecstatic. Unfortunately, it's not over. I find it absolutely incredible that you can pass a Bill 88 to 10, which is clearly bi-partisan, and within a week, before the ink is even dry, the October 1st New York Times publishes the following editorial. Quote "The U.S. fleet is no longer vitally important in a military sense and it is out performed commercially by more effici e nt foreign flag vessels " That is an outright mis-truth, mis-statement. I think their facts are wrong. This myth, and I'll call it a lie now, is perpetrated over and over and over again We have found ourselves at this agency and in this industry fighting this particular statement: "that (ours) is no longer a militarily useful fleet." I stand here with a letter from the Deputy Secretary of Defense saying we support it, we need it I know how the people in the Pentagon feel about it, I know how TRANSCOM feels about it , I know how people in the Navy and Army, and all the services feel about it, the Joint Chiefs of Staff, General Shalikashvili, Colin Powell, feel about
it. You can site every.body back to Moses saying we need sealift, or Noah, I guess, would be a better example. And we still have this kind of stuff being published in newspapers that people read and say, "well the New York Times said it."
On the issue of competition and competitiveness, I will hold up our industry which has put forward more innovations then I have fingers on my two hands and toes on my feet to make our transportation industry, our intermodal transportation industry, more efficient than any other country in the world. We pay a lower percentage of our dollar for transportation than any other country, and these people have the gall to say that we're inefficient and non-competitive. Not only are we competitive, we pay U.S. merchant mariners U.S . wages . Those other companies operate in a tax-free environment, not abiding by half the laws and regulations that we do. And most importantly, look at what crews are paid around the world to operate ships-it is appalling! You wouldn't pay a babysitter those wages much less professional merchant mariners. But the implication of this is that we do away with what we have and substitute these foreign ships and foreign crews. Another quote: "An increasingly skeptical Pentagon, which has its own fleet of supply ships, has yet to state officially that it needs any standby merchant vessels at all." Where in God's name do these people get it? What do they know that all of you and me and Admiral Herberger and General Shalikashvili and the President don't know. It is incomprehensible that this stuff gets published and repeated! I guess the theory is that if you tell something that isn't true often enough, it becomes the truth. Passing the Maritime Security Program last week was a great victory. But clearly the fight isn't over. What this editorial is showing is what we all have to be aware of-that there will be a constant day campaign until next year when the appropriations come up to support the program. Critics will reason that now is our chance to kill it, just eliminate the appropriations for it. All of you who believe in your hearts that we need this, that this adds to the National Defense, that it puts merchant mariners on these ships and the Ready Reserve Fleet vessels and ensures that we have enough people; all of you that have professional ties and connections with whomever at the Pentagon, have to help. You know with
confidence that we're right in what we're doing, but you all have to help us get the message through to the people that are going to be voting on our fate Otherwise our victory of today could be short lived NDTA is a great organization and we couldn't have done it. without all of your help.
Philip M.
Grill
Vice Presidl'11l Gm 't Rclation.s Matson N111'(',:atim1 Company
There has been a great deal said recently about the Jones Act, about what its financial implications are, about its service implications and its economic consequences, so I'm very happy to be here today to put some facts on the table. I'd like to begin with the funda-
"If you're going to carry cargo domestically in this country by water, that transportation must be provided on a vessel that is U.S. owned, U.S. registered and U.S. built." That's the essence of the Jones Act.
Philip Grill
mentals. "If you're going to carry cargo domestically in this country by water, that transportation must be provided on a vessel that is U S owned, U.S. registered and U.S. built." That's the essence of the Jones Act.
Let's take these requirements one at a time. First U.S. ownership. There's a similar ownership requirement for aviation, defense contractors, and public utilities. We don't want Libya operating a nuclear power plant on the Chesapeake Bay. Similarly, it is the economic security rationale that is the reason for the U.S . ownership requirement. You'll notice in the transportation area there's a domestic ownership requirement for aviation and for maritime but not for highway and rail. The reason is, planes and ships are large assets that can be taken out of the country, and that, as a practical matter, cannot be done with trucks and trains. They are here, and geo-
graphically we have control over those assets. That's why we have the domestic ownership requirement for aviation and maritime. The U S. build requirement-I think you have to look at and recognize that it is a part of our larger U.S. shipbuilding policy. There are 47 countries around the world with some form of cabotage. They reserve their domestic waterborne commerce for ships of their own flag, but only six of them have a domestic build requirement. At the same time, however, 63% give direct operating subsidies to their shipyards. Since 1988 the six largest shipbuilding countries of the world have subsidized their yards an average of $8 billion per year. We give our yards nothing in the way of direct subsidy; we give them loan guarantees. So I think we need to keep the U.S build requirement in perspective. And a further point in keeping this U.S. build requirement in perspective is, for Matson, which is a liner operator, our vessel capital cost is less than 5% of our total operating cost. Now remember, these ships are never going to be for free. So yes, you could buy them cheaper in a foreign shipyard, but what's that going to do? That's going to drop that 5% to say 3%, so you might have a 2% drop in your operating costs, which again, is 2% (and these are large numbers we ' re talking about) but it's important to keep the cost of the U.S. build requirement in perspective.
Now here is the real issue-this debate is not about the U.S. ownership requirement or the U.S. build requirement. This debate is about the U.S. registration requirement, because what this says is, if you're going to carry cargo domestically in this country you're going to be in complete compliance with American law. You're going to comply with the Civil Rights Act, the National Labor Relations Act, the Fair Labor Standards Act and the Coast Guard Standards. You're going to pay corporate taxes here, obey environmental requirements and so on-this is the issue. This is the reason why I personally believe we will have to engage in this debate. Ultimately, the opponents of the Jones Act are chasing a pot gold at the end of a rainbow that does not exist. The reason I say that is the opponents are primarily agricultural bulk shippers. They see these cheap foreign flag bulk rates in the international trades and they think they ' re going to bring those ships into our domestic economy. Those ships pay no taxes, they pay no pension to their crew, they
pay no medical benefits to their crew, they employ third-world crews and they pay third-world wag es. In my opinion there is no way that the U.S. Congress, at the end of the day, will ever so unfairly disadvantage American companies here at home operating in our domestic eco nomy, by allowing those companies to come in and bring those third-world labor and tax-exempt status vessels into our domestic economy to compete with American companies who are in full compliance with American law. And let's also remember that while cabotage certainly is not unique to the U.S. (as I mentioned there are 47 countries around the world that have some form of cabotage) neither is it unique to maritim e transportation. You don't see Air France carrying passengers or cargo between New York and Chicago, that is reserved for U.S. airline companies and similarly with truck and rail. You may find a Canadian-owned company in effect, an American subsidiary trucking company located in the U .S. and carrying cargo domestically, but that Canadian-owned American subsidiary is for all intents and purposes an American company. Remember I said there's no U.S. ownership requirement for truck and rail. They're complying with American law, they're paying American taxes , they're competing on an equal basis with the other American-owned trucking companies that are carrying cargo domestically in this country.
We are in complete agreement with Defense Secretary William Perry and several in-depth Pentagon studies emphasizing the importance of the American Merchant Marine to our national security interests. I think we ought to point this out to the New York Times. During Desert Storm , 28,000 tons of military cargo was delivered each day. After travelling an 8,000 mile voyage, 80% of that cargo delivered in American flag ships. And to those that say the American flag doesn ' t matter, I would point out that we did use foreign ships in operation Desert Storm. But we paid an average of $17 4 a ton to deliver that military cargo aboard the foreign flag vessel compared to $122 a ton on the American flag ship. That's a 43 % premium that we paid to the foreign flag vessel for the use of those ships. There were som e foreign countries that charged the U.S. a 50100% premium, twice their normal peace-time commercial rate, to participate in operation Desert Storm And if I may editorialize a bit, I just personally find it unimaginable that the U.S. would ever find itself in a position where it
would have to go on bended knee to foreign governments or to a foreign shipping company controlled by foreign governments, and ask them if they would mind carrying our fighting men and women into war and carrying the equipment and supplies that they need to sustain their operations. If the U.S. flag ships are important , the Jones Act provides a foundation for the U.S flag merchant fleet because it is the Jones Act that maintains this critical mass that's necessary to sustain our maritime infrastructure. One ship can't do it, one company can't do it, one shipyard can ' t do it. It has to be a thriving interdependent industry. I would like to quote one further sentence from that letter signed by 52 admirals: "It is the American shipyards and their skilled artisans, our pool of experienced and American trained seafarers, marine suppliers throughout the country large and small, U.S. based vessel insurers and financiers and federal, state and private maritime training establishments that constitute th e true source of our maritime power." That's what these people are saying-and we're saying the same thing. Why do I say that the Jones Act provides this critical mass? Let's look at the fleet. 78% of U.S. flag tonnage is Jones Act tonnage, 38% of the U.S. tonnage in vessels over 1,000 gross tons, one fourth of our intermodal fle et, those are the container ships and the ROROs and 82% of the tankers. These are the Jones Act vessels. Who's going to man these ships? There are 80,000 American merchant seamen and 87 % of them are employed in Jones Act trades. In December 1995 the U.S. sent two supply ships into the Balkans to supply our allied forces and 70% of the crewmen aboard those two ships had served on a Jones Act vessel within the previous five years, that is after the Persian Gulf. And 48 % of the crewmen, almost half, had their last job on a Jones Act vessel. The Jones Act opponents love to tell you that the United Kingdom has lifted their long standing cabotage restrictions. But what they don't tell yo u is that last summer there was a British Parliamentary Inquiry and it concluded that the British merchant fleet has now shrunk to such a point that the United Kingdom, the British commercial fleet, can no longer sustain a UK overseas military operation. When Great Britain agreed to provide additional peacekeeping forces in Bosnia, they had to use an American ship manned by American seamen to transport the UK's 24th Air Mobile Brigade to the Balkans . I can't imagine the U.S. finding itself in that kind of a position. Certainly not con-
sciously adopting a policy that would put us in that position. Again with the shipbuilding, 70% of projected U.S. shipbuilding opportunity is going to be in Jones Act trades. Remember, we give -0ur shipyards loan guarantees while many other countries of the world are directly subsidizing their yards. This is the subject of an entire seminar in its elf . Finally, let's remember that we're talking about the domestic commerce of this country, one billion tons of cargo worth $220 billion per year that is carried by Jones Act vessels. It is absolutely essential that the U.S. have control over our own domestic transportation system and over this waterborne commerce. I don't think that there would be anyone in this room that would doubt that statement, but to anyone who would, think back when the Soviet Union broke up a few yea rs ago Th ere were those terrible food Jines, people standing in line all day to buy a loaf of bread, not because there was a shortage of food but because the transportation system was incapable of delivering the food to where it was needed . And finally I will conclude on a statement of Colin Powell: "Since I became Chairman of the Joint Chiefs of Staff, I've come to appreciate first-hand why our Merchant Marine has long been called the nation's fourth arm of defense." This statement has proven itself time and time again and it is even more important now, and becoming more important as the military downsizes and as we place more emphasis on military mobility.
When we were all growing up the mention of the 21st century conjured up images of space colonies and th e Jetsons. Today it 's difficult to imagine a future that is a whole lot different then what we see in front of us everyday. In transportation, the 20th century has been a time of building new transportation systems that have ti ed America together as-well as linking our nation with the rest of th e world. The 21st century will be more about managing transportation capacity. We will be focusing on ensuring that all parts of the transportation system are operating as efficiently as possible to maximize our carrying capacity overall. It 's in this context that we will be considering the re-authorization of the feder-
Michael P. Huerta
al transportation programs. I will focus the bulk of my remarks on the reauthorization of the Intermodal Surface Transporta-tion Efficiency Act or ISTEA. As most of you know, ISTEA expires in October 1997. ISTEA was visionary legislation that set the stage for a new era in transportation. Overall it has delivered much of what was ?romised. ISTEA provided a strategic mvestment framework. The best example of that is the National Highway System that focused federal support on top national priorities. ISTEA also supported research, development and deployment of emerging technologies such as the Intelligent Transporta-tion System, designed to get more capacity out of existing transportation infrastructure. Safety was a high priority in !STEA but unfortunately there have been efforts to curtail some of the very programs that have led to a safer transportation system. And, of course, !STEA emphasized intermodalism and efficiency, essential aspects of transportatio? t~at _are key to maintaining economic vitahty and quality of life as ':ell as our national security objectives. ISTEA was significant in that it delegated decision making for specific transportation investments to state and local officials. At the same time Congress gave the states and local officials funding flexibility so that they woul_d have the ability to fund important mtermodal projects. There's broad support for the structure that ISTEA put in place. State and local governments appreciate the flexibility to make their own transportation decisions rather than relying on dictates from Washington. Industry has found the emphasis on intermodal transportation to be more in-line with business realities. And anyone who cares ~bout transportation has especially liked the higher funding levels that it has delivered. The message has been clear-while ISTEA may not be perfect it's a great start and should be fin~ tuned, but it should not be overhauled altogether. Nevertheless, while ISTEA has had many successes there have been some problems. And it's in these areas that we need to focus in the next round. One thing that we have heard is that the re-authorization of !STEA needs to place a greater emphasis on the movement of freight in addition to the movement of people. While ISTEA ~id ?ive freight issues some standing, it did not do some things that are essential for meeting the needs of good freight transportation. For example, it did not explicitly authorize rail
The re-authorization of ISTEA needs to continue our commitment to develop and deploy technologies that benefit Americans in their daily lives.
Michael Huerta
fr_eight access projects, necessitating a bit of creativity disguising the project to get federal funding. We've also heard that many states and metropolitan planning organization s are more ~esponsive to passenger transportation issues then to freight needs. So we ne~d t? strengthen the ability of freight mterests , the private sector and the users of the freight transportation system to advocate for their interests. These are problems with ISTEA, but not fatal flaws. The best way to approach re-authorization is to keep the successful elements, and build on the ISTEA foundation. -
Here are the principle~ that we'd like to see included in the ·re-authorization. First, the next authorization ~ust promote intermodal transportatwn. Each mode must compliment and connect to the others. We're looking at ways to promote major projects that have benefits beyond state and local jurisdictions and that include multiple modes of transportation and multiple players. For example, the ~lameda Corridor will drfimatically improve cargo flows between the ports of Los Angeles and Long Beach, and the rest of the country. Federal funds are being used in partnership with private, local and state government funds to develop a corridor that will greatly expedite access through Southern California. We also need to look at ways to expand eligibility so that we can fund some of the projects that have been difficult if not impossible to do under ISTEA. ISTEA created flexible programs that increased state and local ?fficials' ability to targ~t funds to pro1ects that made sense for their communities. And we need to continue to expand on this flexibility so that all types of transportation projects can be chosen based on their transportation merit.
Un~er ISTEA we also began to pro~ote mnovative financing mechamsms for transportation projects. The
response actually exceeded our wildest expectations. Barely a year later, we ?ad approved more than 74 new proiects. The new pilot program for state mfrastructure banks, which was authorize~ by t~e National Highway System Designation Act, builds on this progress. Early this year DoT announced that ten states had been selected to pilot the State Infrastructure Bank concept. The DoT Appropriations Bill provides additional au th ority to expand the Infrastructure Bank Program. ISTEA's successor needs to continue these efforts to create new ways of meeting America's transportation needs.
Advanced technology is vital to imp~oving safety, system capacity, efficiency and travel times. Under ISTEA we've expanded investments in :esearch and development through m~reased funding and through new pnvate sector partnerships. And with a deployment oriented strategy we have focused on closing the gap between state-of-the-art and state-of-the-practice. We've made it a high priority to get technology into the system instead of focusing exclusively on the pure research aspects that might be interesting but really do not change lives for the users of the transportation system. The re-authorization of ISTEA needs to continue our commitment to develop and deploy technologies that benefit Americans in their daily lives. However we need help in doing that. As one example, Congress reduced fu nd ing for intelligent transportation systems by one third for FY 1997. As was mentioned earlier, these investments have a huge potential to enhance the capacity of the system ?verall and to improve mobility. ISTEA is a great piece of legislation. We believe that its central elements should be preserved and strengthened in the successor. The forces shaping the debate over the role of government in our society will no doubt influence the re-authorization debate. Should there even be a federal transportation program?, is a question that has been asked, and I think will continue to be asked in the coming year. Should we step back from our historic commitment to certain modes of transportation and just delegate the whole responsibility to state and local government? What has worked under ISTEA and what has not? What are the appropriate levels of resources to be provided by government and how do w~ work in closer partnership with the pnvate sector? We believe that ISTEA
was an important step and when the administration presents its proposal next year, it's going to build on the progress that we've made so far. Next year ' s re-authorization is going to be a major statement on what the future transportation program at the federal level looks like. We'll need to work closely in partnership with all of you in the defense transportation industry to ensure that it is responsive to your needs as we look to the 21st century. Whether we're building foundations or we're building bridges, we all need to make sure that whatever it is that we're building for the future of transportation is strong and lasting
Passenger travel in its most basic form is not going to change in the 21st century. We're still going to take airplanes, we're still going to rent cars, we're still going to sleep in hotels. What is going to change in the next several years is how we acquire and how we purchase those services. I'm going to discuss some of the major economic drivers that are going to make change happen in the acquisition of travel services over the next few years .
The airline industry is still the major economic driver behind travel. Forty percent of travel budgets are spent on airline tickets. It's a healthier industry then we've had in some time- the industry made a $2.3 billion profit in 1995. However it is still recovering from over $13 billion in loses from 1990-1994. Most of that profitability is required to improve the balance sheets of the industry and to acquire aircraft to meet the stage three noise targets at the end of the century. Fortunately the outlook, I believe, is fairly strong. Most new aircraft acquisitions are going into fleet upgrades rather than fleet growth. You can continue to expect to see fairly full airplanes and fairly high fares at least as long as the economy remains reasonably strong
The hotel industry is also much healthier. The buzz word through that industry in early 90's was "stay alive until 95." There was a tremendous amount of over-building ; hotel profitability sank, people weren't able to sell hotels, and there has been a dearth of construction for the past fiv e years. As the economy improves, capacity has been constrained and hotels are much fuller. Acquisitions and mergers are on the increase-Red Lion was just acquired by DoubleTree as an example.
In summary, hotels are going to be fairly full and $100 plus room rates will be more common then in the past.
Our car rental industry is also healthier. The car rental industry is an extremely difficult business to make money in. One of the senior executives at one of the major car companies told me he'd been in the business for 20 years and that 18 of those years were terrible, financially, and that the other two were disasters; so it's a very challenging industry. But even they are seeing improved profitability; again driven
We're going to see travel as essentially an icon on the DoD workstations. You're going to be able to do point and click types
of orders,
routings for approval process-
es, automated transfers to accounting systems and electronic reimbursement both to travellers and to credit card companies and other vendors directly.
largely by capacity constraints Many of the major car rental companies are owned by the manufacturers, Ford, Chrysler, GM and those companies are cutting their allocations of new manufacturing to the rental car business. They're selling those cars to you and me, and limiting the business that's going into the car sid e We also are likely to see continued consolidation in the industry. Roughly 80-85% of the car rentals in America will be handled by no more than three companies within the next two to three years.
The travel agency industry has been under an economic attack for the past 12-18 months; from 1978 when airline deregulation occurred, travel agents became the surrogates for the airlines in battling for market share. The average business travel fare has gone from about
$320 round trip in 1993 to over $700 in 1996. Consequently, the monies that were going into the travel agency industry were based not only on higher airfares but higher commissions and people got very used to that kind of income stream. In many respects I think the airline industry has decided it's time to review the commission structure in the distribution sector. We are likely to see a continued profit pressure on companies that are involved in distribution as they now want to deal more directly with you and corporations, and attract you to them through things like their schedules, their fares, their frequent flyer programs, etc. This is relatively a new thing that's happened in the last 18 months , but it is having, and will continue to have, impact on the agency business for the next several years.
In summary, from an overall industry perspective, capacity is being added slowly. Many of the airlines, car companies and hotels were burned by too much capacity in the 1990s. That was certainly a major reason why the airlines lost billions of dollars. As a result of that cautious capacity growth, you can expect full airplanes, full hotels, more sold-out car rental conditions and lower discount levels, particularly during peak travel seasons. As a result, we ' re going to see technology go to the forefront in the next couple of years. What does that mean for all of us in the government travel sector? It means that change is going to come. Again, not such much in how we travel, but how we acquire those services. There will continue to be an attack on distribution costs. Certainly there's also a real drive to see change happen in the defense travel sector. Dr. Hamre alluded to that in his keynote speech. There's a lot of innovation occurring with an effort to simplify, streamline and reduce costs. On the supply side, there are things like electronic tickets One company is marketing ATM machines for airline tickets where you would be able to get cash advances, plus get your airline ticket and perhaps other types of tickets. Smart car technology is going to expand, and within the DoD there's been a lot of innovation as well. We've seen simplification of the Joint Federal Travel Regulations, interesting new billeting systems and, as Dr. Hamre also indicated, a change in philosophy that I think will assist greatly in driving that change. DoD is re-engineering the TDY process. No one really knows what the potential savings are. We've heard anywhere from $150 million to $300 million.
Michael J. Premo
l'rc.\itlc11 t SatoTtawl
Michael Premo
There are economic incentives for airlines. As they put electronic tickets out they expect to save significant accounting costs, and even travel agencies expect to save money through using book-it-yourself types of systems Direct ticketing could save between $3 to $8 versus talking to an agent on the phone. I think that full re-engineering based on discussions we've had, is likely to go much, much further We're going to see travel as essentially an icon on the DoD workstations. You're going to be able to do point and click types of orders, e-mail routings for approval processes, automated transfers to accounting systems and electronic reimbursement both to travellers and to credit card companies and other vendors directly. I see some major challenges for all of us in the commercial travel office industry. How to hook into this type of new technology and ensure that service remains personalized and seamless is not going to be a simple matter. We are used to a largely telephone-based service industry or a walk-up service industry in the defense sector. We certainly hope to leverage experience and to take all the knowledge we've learned about doing business in the defense department and apply it. in positive ways to the reengineering process. Frankly, we don't feel we've got the complete picture and enough expertise to deliver the full solution. We think that partnerships in this sector, uncommon in the past, are very likely. Technology companies are very interested in this process; the idea of putting an icon onto every DoD workstation for some function is potentialy very attractive to them. But they don't have the travel experience and they typically underestimate the complexity of the DoD travel world. They say "yeah we do finance, we do banking, we do insurance, we do medical processing, how complicated can travel be? It must be easy." Another major challenge is going to be implementing an iconbased or technology-based solution in DoD's very diverse technical platform environment. The obstacles to this change, I think, are really not technical. They tend to be political and focused on the desires of the vast constituency of stakeholders in DoD travel today, both on the Defense side and on the industry side. There's a concern as to whether the economic incentive to do this on the industry side is going to be great ·enough to attract people to this sector. And from the CTO side, having the resources available to move
forward considering the reduced commissions.
So what does the future hold? I think very clearly it's going to hold a travel icon on your PC. It's going to have on-line access for you for entitlemen ts, flight schedules, and fares. There will be an automated approval process and payment reimbursement process. Inno-vations like the broader use of electronic tickets and ATM types of distribution channels will multiply. And as always, certainly for the foreseeable future-"book early for your best rates and availability."
David A. Swierenga Chief Fconomht
Let me start by discussing where the industry might go in the next ten years or so Right now U.S air carriers board close to 600 million passengers per year. And that's expected to grow by sometime early in the next century-2007 close to 900 million passengers. That's going to be a fairly steady growth but since the industry is very cyclical, what you really need to focus on is not the path but the end point . We expect that the industry will grow at about 4% per year over the next decade or so. That represents a real slow down . li you look back, following World War II we were growing very rapidly, 20% or so per year. In the 80's we grew between 5 and 6%. Our current predicted 4% growth is still a very high rate relative to the overall economy which is expected to grow at about 3%. So we •are still somewhat of a growth industry, but not nearly as much as in the past-we're an industry that is beginning to mature.
Domestic travel dominates our business . And, in fact, domestic travel in the U.S. represents about half of the world's aviation business. Given our 4% growth in passenger demand, what does that do to our fleet? Our business is dominated by the narrow body, within that category, the two-engine narrow body is growing the fastest followed by the two-engine wide body. If we have 6,500 jet aircraft by the year 2007, those aircraft will, in fact, be dominated by the two-engine aircraft in the fleet.
Freighters constitute about 17% of today's fleet and it's a little hard for me to anticipate exactly what the size of the freighter fleet is going to be by the year 2007. The reason for that is that passenger aircraft can easily be
converted to freighter use . Probably those two-engine airplanes will also be the backbone of the freighter fleet. Our freighter fleet's growing at about 3% per year.
Operationally speaking we have today about 7 million departures and 7 million arrivals. That's going to grow to 18 million operations in the year 2007. And that has some implications for infrastructure. Obviously, acquiring these aircraft is going to be the responsibility of the U.S. airlines. But providing the infrastructure is going to be the joint effort of the U.S government and the airline industry. Now let's look at congestion in our system today as measured by delays per departure. Every flight in 1995 had 7.3 minutes of ATC delay included in that flight. Now 7.3 minutes doesn't sound like a lot but when you spread that out over 7 million operations that's a lot of money. Better th en $3 billion that car-
... domestic travel in the U.S. represents about half of the world's aviation business.
David Swierenga
riers are spending today on an ATC system that's not quite as efficient as we would like it to be. There has been some pretty dramatic improvement in the last five years. As the industry moves into the next century, we must put in place the kind of ATC system that is going to deliver efficient air transportation. Another way to look at that is to look at the airports, the third leg of that three legged stool (airlines, air traffic control system, airports). The 12 airports with the worst ATC problems in the U.S., are in fact, the hubs of our transportation network. Every one is a major airport in the U.S. If we could solve the congestion problem at these major airports we would solve the congestion problem of the entire system. That's easy to say but hard to do. How do you add capacity, for example?
One of the problems that we're going to be coming to grips with as we move into the next century, is that our airport infrastructure must grow in a way that's going to meet our needs and in a way that will be environmentally sensitive yet convenient for pas-
sengers and shippers. Another issue that we'll be coming to grips with in the next decade are the security issues that have recently been the focus of a Presidential Commission. First, explosive detection equipment. You've heard a lot about the CTX 5000, the latest and greatest machine that looks at your bags and tells whether or not you've stuck a bomb in there. And as a matter of fact we have a couple of these machines in place, we put one in Atlanta for the Olympics there. The processing rate for that machine was on average 125 bags an hour. Now you think about a 747 with close to 400 passengers aboard and the number of bags that those passengers would have and then think about the delays. ATC delays may have been the problem of the '80s and early '90s, but passenger and cargo processing will be the problems to solve in the future. We carry about 900 million bags a year. We simply cannot process every single one through some kind of X-ray device. Another issue that we are asked to do by this Presidential commission is to match every bag with a passenger. We put no bag on an airplane unless we know who the passenger is that goes with that bag, i.e., no unaccompanied bags. I think we are going to have to come up with a passenger screening system-"profiling" it's called. But that has some implications for the rights of passengers. But it is going to have to be the basis for the security system in the next decade. The system will be designed to identify the good guys first. The people who come to us from a known source such as a travel agency. We'll have a profile on them and set their bags aside, so we don't have to process them through our screening system. That first step gets us down to a more manageable number of people and bags to process. Other things we'll be doing include criminal history checks, and fingerprint checks on employees, plus continued use of bomb sniffing dogs. Unfortunately you can only use the dog for about 45 minutes and then it has to rest. The commission actually had about 20 recommendations I'm just mentioning their key ones.
Also, I was asked to comment about the continuing globalization of the airlines. In 1978 the U.S. airline industry was deregulated which was one of the best things to happen to our industry. At that time we were pushovers for our international competitors. They had nearly free reign in our market. Today the U.S. air carriers
are the strongest, best, and most competitive airlines in the world. We're not afraid to compete with foreign carriers operating in the U.S. No, we don't think that's a good idea-we're not afraid of it. Foreign carriers are now really terrified of additional competition from the strong U.S. industry that we have today. One indication of globalization is airline marketing alliances and agreements. If you look at those alliances there are over 300 different alliances that exist involving 171 airlines. This is the direction that the U.S. Air Transport System is heading to work cooperatively. We're not going to gain the kind of access that we would like to have, for instance, to the European community. U.S. air carriers would love to be able to set-up operations in Europe, but that's not likely to happen except through agreements.
Another indicator of how the industry is going to grow over the next several years is how many airplanes are on order and auction today by ATA members. In 1990 we had about 2,700 aircraft on order and auction and today that number is just a little over 1,100 airplanes. What we had in the early 1990's was a system of tremendous over-capacity. In the late '80s we were taking about 250 new airplanes into the system every year. When we went into recession in '90 and '91 we had a tremendous problem of over capacity. And if you look at just the
Because of some of the major changes in the military and government as a result of downsizing or right sizing, the need to utilize third parties is growing.
Bennie Warren
next several years, you can see that the orders and auctions that we have in place today spike up as we get to the end of this century. That is a representation of our commitment to replace the noisy stage two aircraft in our fleet with the quieter stage three. So this is really not a scenario for growth but a scenario for replacement.
What's all this going to cost? If you look at just the airplanes that are going to be delivered through the year 2000, assuming that all of the options are exercised, the total price tag is about $45 billion for 700 aircraft; $9.7 billion per year on average for this industry. I suggest to you that that is only just barely doable. In the 1990s we lost an enormous amount of money and that has created a balance sheet that is really a wreck. Last year we earned $2.4 billion, this year it looks like we're going to earn around $3.5 billion, 1997 I'm hoping that that's going to continue at about $3.5 billion. Those numbers sound great but when you look at how little money we are keeping on every dollar of revenue, it's only about 3.5 cents. The average company in the U.S. keeps about a nickel and a half. So on $3.5 billion in profits, how do we sustain a $9.5 billion investment program? Well we have $4-5 billion in depreciation charges, that's cash that we have access to; add to that our profitability and you're looking at something like $7-8 billion dollars in cash flow that would be required to sustain an investment program of $9.7 billion. Obviously we're going to have to go to our bankers to make up the shortfall. The problem is the bankers are going to tell us to re-build our balance sheets. Today, we have about 65% of our capital coming from debt. That is 50% greater then the average company in the U.S. In other words, the U.S. air carriers are highly leveraged and susceptible to downturns in the economy because we have to pay these interest costs year in and year out. That's why our bankers view these as very risky loans and why as we go forward in this decade, we will have to rebuild the balance sheets in order to acquire the money that we need for the fleet growth that's going to sustain the kind of passenger growth that we expect will materialize.
M. Warren
The purpose of my presentation is to attempt to show you the need for a third party logistics environment in the government agencies. Stepping back just a moment, third party logistics as it exists in the U.S. today could not exist prior to the Motor Carrier Act
Bennie
of 1980. The regulations that we were required to abide by just didn't allow us to do the things that we can do today. Major industry changes have provided an explosion of growth in our industry over the past few years. The definition of third party is changing as we speak. A group of us got together a couple of years ago and formed a group called ALMAAmerican Logistics Management Association in an attempt to define the word logistics and also set some ethics and standards for those that participate in that industry. And also to provide listings of those companies for users so that they could inquire as to what services were provided. Third party groups basically fall into two categories: asset-based or informationbased. The asset-based are companies with rolling stock or warehousing and the information based are those companies that provide systems and technology only. Our company falls in the later. I feel that about 90% of what we do is manage information. If you're going to succeed and to manage material it is extremely important to manage the information from the demand planning to the final delivery to the retail unit. We need to do it right and quick and cost effectively. Without the right technology, that's bordering on impossible. Third party logistics revenues are hard to track. In 1995 estimates indicate that about $650 billion were spent as a total with only about $20 billion of that going to information-based third party logistics companies. It's estimated shortly after the turn of the century that these information based third parties will be billing about $300 billion-so that's substantial growth. In that time span and with that kind of growth and the opportunity that exists, there will be a lot of companies coming into the third party industry. As in any other industry that can be good and bad. You'll have a lot of great companies coming in but you'll have some that are not so good. Because of some of the major changes in the military and government as a result of downsizing or right sizing, the need to utilize third parties is growing. Volume shippers such as DLA, the Commissary and the Exchange Systems will benefit most. There's considerable opportunity to reduce their inventories and transportation costs by improving the logistics response time. In-transit visibility is almost non-existent in the vendor delivered products today. And that's probably the most useful tool that the
third party companies have at their fingertips. To ensure the time and service, and to make the inventory reduction possible, you need to know where the product is and what stage of transition it's in. That's necessary to make sure that when somebody needs the product it's there. As budgets shrink, so will operations and sustainment costs. Third party logistics managers can provide an offset to work force reductions because of base realignments and closures actions. The third party manager also can provide services during surges and contingencies and national disasters. This eliminates the need for DoD to maintain large military infrastructures that can only be fully utilized during periods of increased operational tempo. Of course, in anything there are benefits and risks and I'll try to mention a least one of each. The most important benefit is overall cost reduction by controlling inventories and transportation costs and having the product when a customer needs it. The risk is selecting the wrong third party and getting your organization off in the wrong direction and selecting the third party that doesn't have the experience or the technology or the ability to use it. Experience should be first on your list of requirements, second only to technology when interviewing a third party. I had the chance to listen to Walter Risten of Citicorp speak one time and his last comments were that information about money is almost as important as the money itself. I'll leave you with this statement: "lots of money is being unnecessarily spent due to the lack of or ineffective logistic management systems." DTJ
Panel2
Questions &Answers
QDoes the use of contracts to procu re premium service and enhance vendor delivery signal that DLA is moving away from the use of tenders, particularly guaranteed traffic?
Bailey: We are looking to move toward more comprehensive transportation service packages because that allows us to download some of our own infrastructure and reduce our cost and use the industry base. But I'd anticipate for the immediate term 75%
or more will go through the normal guaranteed tendor system.
,\ : Who will pay for MSP? DoT or '--l..DoD; and, if DoD, wouldn't it be reasonable for DoD to manage MSP and or restructure the program to ensure DoD is getting the highest priority military useful ships that it needs?
Graykowski: Who will pay for the MSP-the account is 054 which is related to DoD, but it's not a specific DoD account like 050. I think my agency, the Maritime Administration, is the best equipped to manage this program because the essence of it is not gray hulled ships. The essence of the MSP Program and it's essential component, the VISA Program, is the partnership concept with industry. Maritime Administration is a civilian agency, and we are the only voice in the government that is designed to promote a strong merchant marine. What we've created with MSP and VISA fits right smack dab in the DoT because we're buying a system, we're not just buying ships with the MSP Program. We're going to have to work in very closely with the DoD to be able to satisfy its needs.
Q. Many sectors of U.S. industry compete successfully in the world market place despite the disadvantages of paying U.S. wages, taxes, etc. Examples are computers, automobiles, commercial aircra~. Why can't the U.S. maritime industry ("and protected Jones Act lines in particular") compete?
Grill: You have to recognize with respect to the imports coming into this country, there are a whole host of controls that the U.S. has on our export and import market. For example, Section 301 petitions, quotas, tariffs, direct subsidies, political intervention, international treaties, and bi-lateral arrangements. All of these things control at least to some degree our international trade. If you come into the domestic economy, you've got to comply with American law and that is not what's being proposed here. If that were what the opponents of the Jones Act were proposing then all we'd be talking about is the U.S. ownership requirement and the U.S. build requirement. This debate is about bringing these foreign third world crews into our own domestic economy. We have sweat shops in California where people are sewing buttons on shirts under deplorable conditions, and we send in the INS and criticize Kathy Lee Gifford-that gets every-
body in an uproar. I would then ask, what is the differenc e between bringing these foreign flag ships and these third world crews to compete in our own domestic economy? That is not done in any other form of American business. It is totally unpr ecedented to just give these people a blank check.
QThere's been a lot of discussion in Washington about the possibility of taking the Highway and Aviation Trust Funds off-budget. What does that mean? What is the probability of that happening and what would being off-budget mean to transportation infrastructure investment for the future?
Huerta: Off-budget means that you take revenues that accrue to the trust funds and exempt them from budget caps. Meaning that rather than balances being used, some would argue to show a smaller federal deficit, you just spend down the money as long as it's there Remember that a very substantial portion of the federal transportation program is not funded from the trust funds, rather it is funded from the general funds (e.g. substantial portions of FAA operations, U.S. Coast Guard operations, the Federal Transit Program, and other regulatory activities that everyone regards as extremely important). A couple of years ago the department suggested that we would like to see a larger portion of the department's operations funded off of trust funds or user fees. And what we heard from the industry is well we really didn ' t mean that, we meant that we still want to keep our general funds support. We just want you to continue to spend down the trust fund balances on a larger level resulting in more funds overall for transportation. I think that that sentiment is basically the sentiment that you're seeing in the Congress. Mr Wolfe of Virginia who's the chair of the Transportation Appropriations Committee offered a challenge to the industry when he spoke to the state transportation officials a year ago. He basically said, yes, we will take them off-budget when we can talk about a totally trustfunded transportation investment. I think it's important that the industry develop some consensus on whether that is an approach that it would like to pursue. As it relates to the likelihood of it happening; the problem we have in spending down the trust fund balances is that the same folks that want it are the same folks that also would like to see a balanced budget. Transportation spending falls in that
one sixth of the federal budget that's called domestic discretionary. First, we must address the larger structural budgetary difficulties that we have as a government ranging from a wide variety of issues associated with entitlements, associated with defense spending and a whole host of other issues.
Has any consideration been ven during travel re-engineering a owing government/military personnel to keep frequent flyer mileage? If not, why not?
Premo: Government tends to look on that benefit the way some corporations do, which is to say that's a factor that goes into the higher cost of a ticket for us and that by encouraging frequent flyer usage we undermine the solidity of th e City Pair contract air fare program. Which is really the most successful, to my knowledge, travel purchasing program in the world Again, the average commercial air fare today is in excess of $ 700. And the average government air fare is about $360 When I talk to commercial clients about the deals that the government gets on air fares they salivate The one way government air fare between Chicago and Washington National this year is $49 before tax and I can assure you that commercial counterparts spend sometimes ten times that much on that fare. So I think in an effort to protect the validity of that program and the solid nature of it, and ensure that government travellers are going to fly the contract air carriers, it makes pretty good business sense to keep a lid on the frequent flyer program.
lines would view that as paying twice for that asset. On the other hand, I don ' t think we would be opposed at all to additional private funding for new facilities at an airport; for instance, a parking garage or a terminal building that could be funded from private funds. So we're not totally opposed to the idea of privatization but we have some misgivings about some of the things that have been proposed by local governments as a way to solve some of their local deficit problems.
Q. Does third party logistics serve as a means to cut the workforce in an organization?
Warner: That's probably the most common question asked in the commercial side as well as the government side. In both the commercial and government environment, force structure has been reduced drastically already, yet missions have remained basically the same or even increased. So the use of third parties can be a provider for re-allocation of those resources.
Mr. Roger Curry Closing Remarks
QWhy don't the airlines build their own terminals like the rail and maritime industries?
Swierenga: If you look around the world there are few examples of airports that are privately financed, although we do have the example now in Great Britain of BAA operating major airports there. Airports are funded today largely through landing fees and rental charges paid by the airports for terminal space and the AIP Program which is money that comes out of the Aviation Trust Fund which is a tax on passengers and shippers. So, the system today is largely funded by the airlines and its customers. What I think worries us about privatizing the airport system is that most local airport authorities view that as an opportunity to collect a big payment from the airlines in the process of transferring a title from a port authority to some private enterprise. And the air-
I think that we've seen an eclectic pan e l here this morning, a div e rse group talking about subjects of interest to all of us and I think an indication of the fact that we're confronting a significant amount of change be we independent or government people, commercial or government people, recognizing that in both cases we ' re going to have to work as partners because we're going to be resourceconstrained as we look into the future . I think if we work in the manner and in the spirit of cooperation that has been promoted by this conference, we are going to do very well in the changing times and we're going to be well prepared for the next millennium
Summarized by COL Denny Edwards, USA (Ret.)
Full audio transcripts of Forum speeches and Panel presentations are available by contacting NDTA HQ, 50 South Pickett St., Suite 220, Alexandria, Virginia, 22304. Telephone: (703) 751-5011, Fax: (703) 823-8761, E-Mail: ndta@mail.pop.com.
THE NDTA FORUM PHOTO ALBUM SPONSORED BY USAir
U S Ai r i s a proud s upport e r of NDTA a nd i ts a nnu a l Forums.
Ther ef or e, it giv es us great pl eas u re t o s ponsor this special pho t o sec t i o n c o ve ring the events a nd ac ti v it ies of the 5 1st NDTA
Tr a n s por tat ion a nd Logistics
Fo r um and Exposition.
NDTA wishes to recognize and extend its sincere appreciation to the following companies for their contribution to the 51st Annual Forum.
A-35 Activities
American Airlines
Lockheed Martin Corporation
National Air Cargo
Trans World Airlines
Chairman's Awards Dinner
Air Transport Association of America
Boeing Defense and Space Group
Emery Worldwide, a CF Company
Lockheed Martin Corporation
Mercer Transportation
USAir
Coffee Breaks
McDonnell Douglas
C-17 Program
Port of Oakland
Continental Breakfast-Sunday
American Airlines
NDTA
Exhibits Revisited Buffet Luncheon
Port of Beaumont
Exhibitor's Continental Breakfast
Mayflower Transit
United Van Lines
NDTA
Forum & Exposition Entertainment
USAir
Forum Newspaper
SatoTravel
Golf Tournament
Northwest Airlines
Military Unit Awards
T.F. Boyle Transportation, Inc.
Name Badges
Pilot Air Freight
NDTA Scholarship Event:
MChurch Street StationM
USAir
NDTA
NDTA Scholarship Event:
"EPCOT '96 and Pleasure Island at Walt Disney World Resort"
Carlson Wagonlit Travel
Delta Air Lines
Diablo Transportation
FedEx
Holiday Inn Worldwide
TRISM Inc. Companies:
Tri-State Motor Transit
Trism Specialized Carriers
NDTA Scholarship Event:
"New York Street Backlot Party"
UnivBtSal Studios
Dollar Rent A Car
United Airlines
United Parcel Service
NDTA
President's Reception
Crowley Maritime Corp.
Enterprise Rent-A-Car
USAir
Printing and Publications
American Airlines
Consolidated Safety Services
SatoTravel
Trans World Airlines
United Parcel Service
USAir
Recognition Breakfast
United Airlines
NDTA
Registration Tote Bags
Landstar System
Souvenir Portfolio
ABF Freight System
American Trans Air
International
Longshoremen's Assn.
Sea-Land Service, Inc.
Stanley Associates, Inc .
Start-Up Breakfast
SatoTravel
Transportation
Dollar Rent A Car
Emery Worldwide, a CF Company
USAir
Video Production
Dollar Rent A Car
JSS Productions
USAir
Front row (L to R) : Tony Ryan, New York Chapter (for George Jan icello); Marlene Pomeroy, San Francisco Bay Area Chapter; CPT John Fasching, USA, Atlanta Chapter, CPT Ellen Moore, USAF, Washington, DC. Chapter, JU11e Campbell, Dallas/Ft. Worth Chapter, CPT Henry Pittman, USA, Jacksonville Chapter; CWO Robin Brown, USMC, Okinawa Chapter, Roy Kirk, San Antonio Chapter, Keith Troutman, Adanta Chapter.
Rear row (L to R): Linda Kelly, New York Chapter, COL Christopher Lamb, USAF, New York Chapter, Ray Addicott, San Francisco Bay Area Chapw (for Dr Hary Lyons); Norman Dresden, Baltimore Chapter, Cynthia Holliday, New York Chapter; Jerry Ponton, Houston Chapter; Henry Sanchez, New York Chapter; Maj Teddy Ros~ USAF, Hodja (Turkey) Chapter.
Lyons received the NDTA Educator of the Year Award; Fasching and Moore received the Junior Executive Leadership Award; Dresden and Kirk received the NDTA President's Speaal Recognition Award ; Brown, Pittman and Ross received the NDTA President's Special Achievement Award; all othm received the NDTA Dishnguished Service Award
front row (L to R): Charles Kohl, United Van Line~ Charles Pietroforte, American Airlines; Karen Nicola-Preston, Dollar Rent a Car; Dennis Clifford, Northwest Airlines; Tom Anderson, Delta Air Lines; Charles Edmiston, Landstar System , Inc.
Rear row (L to R): Richard Ellis, Burlington Northern-Santa Fe Railroad; Daryl Mobsy, Eimry Worldwide, a CF Company; Michael Premo, SatoTravel; Curt Reilly, Official Airline Guides; John Richardson, United Airlines; Craig Thompson, Carlson Wagonlit.
Not shown: Terry Dolce, FedEx; Syl Hollman, United Parcel Service; Jerry Goodrich, USAir.
Front row (L to R): Thomas E. DaVIS, European Distribution Area (Anny and Air Force Exchange Service); PO Leopoldo Corpuz, USN, Navy Overseas Air Terminal, Yokota Air Base, Japan (Navy); GySgt Jeffrey L Clawson, USMC, Marine Corps Air Staoon, El Toro, California (Marine Corps); SF( Victor G. Harper, USA, Defense Fuel Office, Japan (Defense Logistics Agency).
Rear row (L to R): Bruce Mason, Surface Freight Terminal Hanager, Tyndall Air Force Base, Flonda (Air Force); MG Roger G Thompson. USA Commander, Military Traffic Management Command (presenter of awards); James Christ US Coast Guard Supply Center, Baltimore (Coast Guard); Susan M. Owens , 1313 Medium Port Command, Seattle, Washington (Anny).
GEN Walter Kros s, Commander-inChief, United States Transportation Command and Commander, Air Mobility Command, Presents the NDTA Military Transportation and Logistics Unit Awards
Army• Active
CPT Ross WendeR, !!SA, for the 96th TransportaUon Company, 180tb Transportation Battalion, Fort Hood, Texas, With HG William Fanmn, USA, Assistant Deputy Chief of Staff • Logistics, Headquarters, Department of the Army
Army • Reserve
SGH Gary A. Thornton, USA, for the 1192nd Transportanon Term111al Brigade, New Orleans, Leuisiana, with HG William Farmen, USA, Amstant Deputy Chief of Staff • Logistics, Headquarters, Department of die Army
Navy • Active
CDR Greg Freeburn, USN, for the Norfolk Air Termmal, Navy Supply Systl!ms Command, N-Orfolk, 'flfginta, with RAOf1 Donald E. Hickman, llSN, Direct«, SIIJl9ly Propns 1111d Polity Dms1on, Office of me Chttf ef Naval Operations.
Navy· lleservt
CDR George Westwood, USN, for the Fleet Logistics Support Squadron 53 (VR-58) Naval Alf Stat10n, Jadcsonvill!, Florida, with IIADH Donald E. HKkman, USN, Director, Supply Programs and Polity Di-1111on, Oftet of the Chit! of Mavai Operations.
Air Force • Active
L!Col Fayne A. 11cDowell, USAF, for tbe 99th Transportarion Squadron, HQ AWLGT, Nellis Air Force Base, Nevada, with BrigGen (SeQ Hary Saunders, USAF, Director of Transportat1011, HQ, Urnted States Arr Force.
Air force • Reserve
Hai Herbert E. Brown, IIW, fur the 70th Aerial Port Sqtr.idron, HQ, AFRES/DOH, Homestead Air Force Base, Florida. with Bng(ien (Se!) l1ary Saunders, 11W, Director of Transportatllln, HQ, Umled • Air Fom.
Marine Corps
• Active
LtCol lusstl H. BtU, WSIIC, fer the Hat111e Aerial ~r Trwport Squadron 252, NCAS Chffly Point, Nortb Carolina, with Bng(ien Paul H. Lee, Jr" wt(, Assistant Deputy Cb1ef of Staff, ln1tallat1ons and l.egtslla (Director, Logistics Plans, Policy and Strtte11c Hobitity)
Headquarters, l1ar111t Corps.
Marine Corps • llflerve
l.&Col Terry C. Tlicillasffl, ISl1C, for the l1arine Aerial IWueler S4jUadrun 452, l1ne Air Group 49, Deta<hment 8, Stewart Anny National Guard Base, New Tork, with BrigGen Paul H. ~. Jr, USMC, Auistant Deputy Chtef of Slaff, IIIS!lllations and logistics (Directer, logistics Plans, Pelley and Strategic Hob1~ty) Headquarters, Marine Corpt
Guard
CDR Ben Thomason, USCG, for US Coast Guan! Air SttliOII iorw¥ien. USCG Grum Antilles Section, San Juan, Puerto Rico, with IIADH (Se!) James D. Hull, Cb1ef al Stall, Seventh Coast Guard Diltria, Miami.
Caast
Transportation Operations Manager
Employment Referrals
US Army veteran, Jumpmaster, hazardous cargo certified and energetic team player with a Top Secret security clearance w/SCI experienced in the following: resource management; transportation and maintenance planning; project operations and support/management of multi-vehicle fleet operations; planning and executing of air and land shipment; problem solving and employee relations; air movement operations; no notice deployments and support of 24 hour a day operations. #96-116
Transportation/Logistics Management
Extensive management and transportation background. 16 years of improving operations, streamlining procedures and cutting costs.
Saved funds and improved customer service in the following areas: aircraft operations, passenger service, freight movement and contract compliance and negotiation. Also, managed vehicle fleet leasing maintenance and dispatching, household goods storage and movement and passenger travel. Wealth of experience in management of personnel and the handling of multi-million dollar accounts and equipment. Results oriented, proven track record or improving operational performance and effectiveness and implementing cost saving programs. Top Secret security clearance; trained as a Total Quality Management facilitator and instructor; BS in Transportation, MS in Airport Management; possess strong computer and communication skills. Willing to relocate. #96-117
Logistics Analyst
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More than twenty years in logistics. Work history includes line and staff positions specializing in transportation operations, distribution systems, and supply management. Possess broad knowledge of automated logistics systems. Developed Total Asset Visibility initiatives with knowledge of advanced technology. Direct experience with all transportation modes including the commercial carrier industry. As a material manager, used budget authority to assign cost goals regulating procurements, sales, retention or disposal of supplies and equipment. Demonstrated results in corporate downsizing; team building; problem solving; obtaining resources; and developing innovative corporate strategies for the 21st century. Seeking logistics analyst position with third party logistics company. Possess Top Secret security clearance. #96-118
Transportation Management
Recent college graduate, BS-Logistics and Transportation, BS-International Business Management, seeks employment with solid international logistics/transportation company. Prior work experience as office manager, book keeper, purchasing agent. Highly computer literate, with strong analytical and conceptual abilities; financial management and accounting experience. Pre-college work experience includes private industry and government jobs. Fluent in Spanish, working knowledge of French and Italian. #96-119
Transportation/Logistics Management
Progressive promotions to top leadership positions in leadership and logistics management. Directed daily operations of worldwide, multifaceted, fast paced air transportation operations producing 10,000 missions annually. Twenty plus years experience in personnel management, contingency planning and execution, program development, analysis, and management, project management, scheduling and training. Success driven and results oriented. Outstanding problem solver; analytical, innovative, and tenacious. Exceptional team builder; gets continued on page 60
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Government
N e w s
MTMC
MG Mario F. Montero, Jr., took command of MTMC from MG Roger G. Thompson, Jr., in a ceremony in October at Fort Myer, Virginia Montero, transferring from 8th Army in Korea, became the 14th general officer to head the major transportation command.
He has commanded the 29th Transportation Battalion; Division Support Command, 25th Infantry Division (Light); 1st Corps Support Command , XVIII Airborne Corps; and he has served as the Director, Transportation, Energy, and Troop Support, Office of the Deputy Chief of Staff for Logistics. He holds a bachelor's degree and two master's degrees and is a graduate of the Naval War College.
In other MTMC news:
COL Kirk D Miyake (USA) took command of Military Traffic Management Command, Europe (MTMC Europe) on September 3 during a change of command ceremony at HQ MTMC Europe in Capelle aan den I]ssel, The Netherlands. COL Miyake has served in a variety of command and staff positions including Commander, MTMC 1313th Medium Port Command in Seattle, Washington.
Miyake was born in Eleele, Hawaii, and earned a BA in Political Science at Idaho State University. He holds MA degrees in Human Resources Management from Pepperdine University and National Security and Strategic Studies from the US Naval War College. COL Miyake and his wife, Carol, have three sons.
Guest of honor at this change of command was BG Gilbert S. Harper, Commander of MTMC Eastern Area in Bayonne, N ew Jersey Th e departing commander, COL Jan H. Harpole, and his wife Florence,will move to
Dutch Civilians Complete Course
"" g ' At the end of May 1996, thirteen Dutch
J Ministry of Defense civilians (pictured ~ o/ at right) voluntarily attended a week long Peace Operations Course at the Dutch Army Center for Peace Operations in Ossendrecht, The Netherlands. The Dutch civilians work for MTMC Europe in Rotterdam. Seven civilians work with HQ MTMC Europe while the rest work with the 1318th Medium Port Command, or Benelux Terminal, also located in Rotterdam.
The course goal is to prepare civilian personnel for possible deployment to military threat areas such as the former Yugoslavia. Teambuilding was an important part of the program.
Between December 1995 and January 1996, twelve MTMC civilians were militarized and deployed to Split, Croatia, to support the British forces with moving their materiel into Bosnia on US ships. The twelve MTMC civilians were trained in Ossendrecht last summer.
Germany where Harpole will become the Liaison Officer for the Commander in Chief of the US Army Europe at the US Embassy in Bonn.
USTRANSCOM
•
ls ;J @ Several soldiers from the \ i Headquarters and Headquarters Battery ~-1nots S~ of the Unit Movement Branch were rec-
Tognized during an awards ceremony on Biggs Army Airfield for their support given during the 3d Armored Cavalry Regiment move to Fort Carson , Colorado. BG Michael T. Gaw, 143rd TRANSCOM commander, was on hand to present the awards. Rick Roy, chief of the Unit Movement Branch, received a Certificate of Appreciation. Sgt. 1st Class Stanley Gates, operations officer; Sgt. Christopher Weiss, air section NCOIC; and Spc Roger Violet and Spc. Paul Guerrero, both air section, received the Army Commendation Medal. Cpl. Jopand Crosely, and Pfc. Jamie Brown, both in the rail section, received the Army Achievement Medal. Pfc. Guerrero was also promoted to Spc4. during the ceremony. Several award recipients are members of the El Paso NDTA Chapter.
Maritime Administration
(J The Maritime Administration (MARAD) released its annual publica'lrrs <:ft tion, A Report to Congress on the Status of the Public Ports of the United States 1994-1995. US ports are a critical element in our national transportation system and important contributors to our national econom y and security. They handle over 95 percent of the nation's foreign comm erce and nearly a billion tons of domestic commerce. Copies of the report are now available from MARAD's Office of Port & Domestic Shipping, Room 7201, 400 Seventh St, SW, Washington, DC 20590; (202) 366-4357
MTMC Europe supports port and transit activities of US and, when necessary, NATO, equipment in the many seaports located in their area of responsibility. Dutch MTMC Europe civilians have been deployed previously in Bahrain, Egypt, Jordan, Kenya, Kuwait, Oman, Qatar, and Saudi Arabia.
t.:.
(i)
Military Sealift Command
Harbor tugs (pictured at right and lower right) are a familiar sight to Navy ships enterin g and departing US portsso much so that Navy sailors often take them for granted. The small commercial tugs assist dozens of gray-hulled war ships daily, at all hours and in all types of weather.
The Navy's harbor tug services are provided by contracting with commercial tug boat operators. The command responsible for setting up the contracts in the US Navy's Military Sealift Comm a nd. MSC began harbor tug services contracting in 1991. Currently, ab o ut onethird of the Navy's domestic harbor tug services are handled b y MSC , and the remainder are scheduled to fall under MSC control by the year 2000 .
Military Sealift Command, Pacific
Oakland-based MSC, Pacific (MSCPAC), the civilian arm of the US Navy which operates a variety of ships with civil servic e merchant crews , has three sh i ps in the Persian Gulf ar ea to support US actions again st Iraq. USNS Tippecanoe (T-AO 199), an MSCPAC fleet oiler, is providing ship a nd aviation fu els to naval combatant vessels in the Per sian Gulf USNS Niagara Falls (T-AFS 3) is a stores ship which transports food , spare p arts, mail and other supplies to Navy ships at sea. USNS Catawba (T-ATF 168), a fleet ocean-going tug, is used for towing and salvage operati ons.
MSC-contracted Edison (houest Offshore Inc . C-T ractor tugs maneuver one of the Navy's newest Trident II nuclear submarines, USS Wyoming, into place at Naval Submarine Base Kings Bay, Georgia.
While the sailors stand at attention, MSC-contracted Edison Chouest Offshore, Inc. (-Tractor tugs bring aircraft carrier USS John F . Kennedy into port at Naval Station Mayport, Florida
Mail or fax this form to NDTA to request exhibit, advertising and sponsorship information for the MTMC I Symposium in Louisville, KY (March 25, 26, 1997); the Navy Symposium in Norfolk (May 28 - 29, 1997) or NDTA's 52st Annual Transportation and Logistics Forum and Exposition in Oakland, CA (Sept. 27 - I Oct. 1, 1997). I
.YES, send me the following information:
Denny Edwards
Director of Marketing
National Defense Transportation Association 50 South Pickett St., Suite 220 Alexandria, VA 22304-7296
FAX: (703) 823-8761 QUESTIONS? (703) 751-5011
McDonnell Douglas salutes the men and women of Charleston Air Force Base who fly the C-17
Us l A ~r
USAir, in a major expression of its evolving position among domestic and international airlines, announced recently that early next year it will become US Airways and that its newly painted aircraft will carry a stylized version of the nation's symbol as a proud marker of quality and innovation.
=The new corporate identity
theme will be carried throughout the airline, from redesigned airport terminals
U·S Al R WAYS to ticket jackets, from a new frequent traveler program to new aircraft interiors and a new onboard magazine.
"US Airways will be the airline of choice, providing the highest levels of service for passengers, whether they want to go 400 miles or 4,000 miles. That is our commitment, and we are expressing it today in our name, our colors and, above all, in the symbol we will carry," said USAir Chairman and CEO Stephen M. Wolf.
QUALCOMM announced that Cass Logistics' Rate Management System '" (RMS) and Rate Publishing Plus "' (RP+) software modules have been integrated into its OmniTracs • family of software products, QTOPS ™ Existing OmniTRACS customers are already using these products as part of the QTOPS system to automate truck pricing and rating functions.
MCDDNNELL DDUG'('~
McDonnell Douglas recently began fabrication on new C-17 engine nacelle and thrust reversers at Northrop Grumman facilities in Dallas, Texas. The manufacturing is for detail parts for new, lower-cost components for the US Air Force/McDonnell Douglas C-17 Globemaster III Airlifter.
Mayflower Transit has launched a site on the World Wide Web. The Mayflower Web site covers all product areas, offering site visitors an easy and effective way to learn more about Mayflower ' s services. You can view the site at www .mayflower.com.
CarJsonWagonlit ~ ·
Lr,cal Presence. Gkbal Pm\'tr
PRC
PRC, a subsidiary of Litton Industries Inc., announced that the General Services Administration has awarded the company a contract to provide technical support to the Federal Aviation Administration and other federal agencies in developing and implementing systems that augment the Global Positioning System. "This is a strategic win for PRC because it gives us a strong foothold within the FAA," said Len Pomata, president of PRC.
Sf-r{T\-, I~SatoTravel
Megan Nelson , a 8UJ ll ave
SatoTravel travel counselor at Grand Forks AFB, underscores the importance of SatoTravel's people to its success. "The real benefit of working for a travel company that's tops in the field is working with some of the most knowledgeable people in the field," she says. "With all these people on board, there's not much SatoTravel as a whole can't accomplish to help shape the travel industry in the future. To be a part of that process is very exciting."
Carlson Wagonlit Travel Terry Angelo, a recognized authority on government and business travel, has joined Carlson Wagonlit Travel's Government/Military Division as general manager, National Capital Region. Angelo, recently retired from the federal government , will report directly to Erma Spell, vice president, Government/Military Division. Angelo will be responsible for overseeing the operations of nine branch offices serving key government civilian and military accounts in the Washington, DC, metropolitan area, including the Pentagon, Fort Belvoir, the Agency for International Development, the Nuclear Regulatory Commission, and the Department of the Interior headquarters. Previously, Angelo was the Travel and Transportation Manager for the US General Accounting Office. Prior to that position he served for six years as director of the Travel and Transportation Management Division, General Services Administration.
American Bus Association In its continuing preparation for the reauthorization next year of the Intermodal Surface Transportation Efficiency Act (ISTEA), ABA filed comments with the Department of Transportation in response to its Notice of Policy Statement and Principles. The Department's notice set out four "national challenges" in reauthorizing the federal highway program: safety, travel growth, environment,
and demographic challenges. ABA stated that, " ... A renewed emphasis on intercity bus travel can assist in meeting each of these challenges." The statement pointed out that intercity bus travel is by far the most energy-efficient passenger transportation mode, and that it plays a major role in meeting the needs of both elderly and disabled passengers. The ABA has asked that DoT not overlook the bus industry's concerns in formulating national transportation policy.
LANDSTAR
Landstar and NATIONAL 76 Auto/Truckstops, with support from Mothers Against Drunk Driving (MADD), teamed up in 33 states on Thursday, November 21, to spread the message of highway safety and to continue the fight against drinking and driving. Representatives from Landstar, based in Shelton, Connecticut, and one of the country's largest trucking fleets, joined MADD representatives at more than 85 participating NATIONAL 76 Auto/Truckstops across the country to distribute MADD red ribbons, gifts and safety information to professional drivers and other motorists.
In other Landstar news: In August Landstar announced that Nancy Patton joined the Landstar Logistics Wood Dale, Illinois, local business office as Agency Director of Marketing and Logistics.
Union Pacific Railroad The Marketing and Sales Departments of Union Pacific and the former Southern Pacific Railroads have been consolidated under a joint leadership team. The appointment of eight UP executives and three former SP executives to lead the merged companies' contacts with transportation customers marks the first major department consolidation since the September 11 merger. UP President Ron Burns said the establishment of a joint Marketing and Sales team was the first priority of the UP/SP merger.
TTotem Ocean Trailer Express Assistant Terminal Manager, Caroline Higgins, has been promoted to the position of Fairbanks Manager. Responsibilities con® cern management of TOTE's shipping operation involving overland trailer and rail movements between TOTE's cargoship terminal at the Port of Anchorage and its central terminus serving Fairbanks, the North Slope, and the Interior.
Continental Airlines ~ Continental Airlines recently announced that CEO Gordon M. Bethune, 55, has been elected chairman of the board of directors, succeeding David Bonderman. The company also announced that COO Gregory D. Brenneman, 34, has been elected president. Bonderman, whose Air Partners investment group is Continental's largest shareholder, remains chairman of the executive committee and a member of the board of directors.
CONRAIL
Conrail The Connecticut Southern Railroad (CSO), a subsidiary of RailTex, began operations in September as a Conrail Express partner on 78 miles of rail routes through much of central and northern Connecticut. The routes stretch from Conrail's rail yard in West Springfield, Massachusetts, south to Wallingford, east from Hartford to Manchester and East Windsor, and west from Windsor Locks to Suffield.
moroRFRE/CHT
CF Motorfreight has named David F Morrison executive vice president and chief financial officer. Morrison, 43, will be responsible for all financial operations and will report to President and CEO W. Roger Curry. Morrison is leaving his position as vice president and treasurer at Consolidated Freightways, Inc., to assume his new responsibilities at CF Motorfreight, presently a subsidiary of CF, Inc. CF Motorfreight announced plans in August to operate as a separate publicly traded company. The spin-off transaction from CF, Inc., is expected to be completed by the end of the fourth quarter of 1996.
Correction. In the June 1996 issue of DJ], the location of Interstate Van Lines was incorrect. Please note that the company is located in Springfield, Virginia .
NDTA HQ News:
The NDT A Communications and Publications Committee has a new chairperson. Ms. Barbara Jaworski, the Senior Director, Communications and Customer Service for SatoTravel, assumed the post at the Orlando Forum. Also new to the committee is Mr. Rick Fuller, Director of Communications, McDonnell Douglas Military Transport Aircraft; and Captain Alan Dooley, USN, Director of Public Affairs at USTRANSCOM.
Two new Government Liaison Representatives have been named to the NDTA Passenger Services Committee: Mr. Nelson Chandler, Chief, Contract Support Division, MTMC, and Ms. Janice Sandwen, • Director, Travel & Management Staff from the General Services Administration (GSA).
In other personnel news, Ms. Cruz Menchaca, who started with NDTA as a volunteer and part-time staffer, is now with the association full-time as its new Director of Special Programs and Projects. Ms. Menchaca retired as a USAF civilian last year after serving for 35 years.
Welby Frantz
As mentioned on the President's Page, Welby Frantz, former NDTA President and Chairman of the Board, passed away in September. He served NDTA from 1967-1972.
C hap ter N e w s
WASHINGTON, DC, CHAPTER
Early on Saturday, August 24, nine Washington , DC, Chapter members gleaned zucchini for the Arlington Food Assistance Center (AFAC) at a local area farm Gleaning is the harvesting of grain or produce which is left over by the farmers after the initial harvest. Parker Farms of Indian Head, Maryland, invited AFAC volunteers to glean zucchini from their fields for donation to the poor and homeless. Seventeen sacks of zucchini were filled with the help of our NDTA Chapter volunteers John and Nancy Romps (pictured below), Ray Martinez , Diana and Lela Roach (at seven months, Lela was our youngest volunteer!), Tommie and Joe Lahue, Betty and John Slanta, and Joe Torsani.
ALOHA CHAPTER
The Aloha Chapter held its Annual Scholarship Golf Tournament in September at the Leilehua Golf Course, Schofield Barracks, Hawaii. The tournament was followed by an awards presentation program. Thanks to Delta Air Lines, SatoTravel Hickam AFB, Aloha Airlines, Northwest Airlines, and Sealand, Inc., $865 was designated to the chapter's NDTA scholarship fund. LtCol David Barnes, Tournament Chairman, and his fellow committee members did a great job in organizing such an enjoyable and worthwhile event.
ANNISTON CHAPTER (PROVISIONAL)
The Anniston Chapter (P) held its first general meeting on 8 October at the McClellan Club, Fort McClellan, Alabama. Mr. Walt Dzialo, President of the Mid-South Region, and Mr. Ron Lacour, State VicePresident, delivered excellent presentations describing the nature, mission, and benefits of NDTA. Their participation was paramount to the establishment of the core from which our chapter will grow. The meeting attracted representation from the 3rd Transportation Movement Control Agency (USAR), Ayers State Technical College, and the Alabama State Police. Our goal this year is to establish a strong chapter with representation from the broad base of industry and government agencies located in the north Alabama area.
RICHMOND CHAPTER
The Richmond Chapter had as its November guest speaker Mr. Bill Wilkening, FAA Cargo Security Program Manager. Mr . Wilkening spoke on changes occuring in the cargo shipping industry as it relates to commercial air transport, as well as the proper completion of cargo paperwork. The Chapter will hear from Dr. Robert Martinez, Virginia Secretary of Transportation, later this winter.
Ron Conardy of the Washington, DC, Chapter, is shown passing the Olympic Torch in Dale City, Virginia, on June 21. Conardy was selected to carry the torch based on his 21 years of service to the Marine Corps and his volunteerism with kids throughout his career. Conardy recently retired from the Marines and started his own business, Transportation Management Training.
en ar®And atFor
Sc oars
When you rent from Dollar Rent A Car and use the NDTA ID number ND000I, a portion of your rental fee goes to the NDTA Scholarship Fund.
Dollar is honored to help such a good cause. And we're also pleased to offer so many smart reasons to rent from us. That includes special low rates for all NDTA members-government travelers, contractors and retirees alike, for both business and leisure travel.
Dollar features quality Chrysler cars, on-airport convenience, worldwide locations, and a level of service for NDTA travelers that shows you're #1 in our book.
For information on all Dollar Government Programs, call 703-838-1666. Supporting NDTA is one of the most important hats we wear. And with your support, you'll help us put more money in the hat for NDTA scholarships.
Co-chairing NDTA's 51st Forum in Orlando was one of the best experiences I've had. I met so many people and received so many wonderful compliments from all of you-your thoughtfulness was truly appreciated.
Now for those of you that couldn't be with us at the Forum, I'll give you a rundown of the A-35 activities. A flyer was given to all A-35ers at registration to give them an idea of activities to be held for or by the A-35ers. We started with a meeting Saturday morning for those who had arrived early. We got the word out about this meeting and it paid off-we had 25 attendees. NDTA Headquarters staff made sure that we had a nice meeting room, AV equipment, and a wonderful continental breakfast. We used the time to meet and greet one another, and to discuss Forum and Chapter A-35 activities, as well as my role in serving the A-35 group members. We also officially launched our Book Drive for American Merchant Marines/United Seaman's Service which will run until the end of the year.
We discussed our A-35 booth in the Exhibit Hall, which was very well received, and we enlisted plenty of volunteers to staff it. We also recognized a number of A-35ers being honored at this year's Forum, including Capt. Henry Pittman, CWO Robin Brown, Capt. Ellen Moore, Capt. John Fasching, and SSgt. Ken Russell. In addition, we had discussed the award that will be presented by A-35ers at next year's Forum in Oakland, California. The award will go to an NDT A member or organization that has been supportive of A-35 goals ad A-35ers over the course of 1996-97
As I promised in my last column, I brought a copy of the Mentor Program presentation that Capt. Henry Pittman developed for the Jacksonville Chapter. Since Capt. Pittman was there, he helped to round out the discussion by providing insight into the program's results.
Two other major items of discussion were our Wednesday morning A-35 Forum Breakfast (a huge success in Orlando!) and the NDTA Duck Derby. If you missed all of the promos or discussion about the derby, I would be surprised, but I also venture to say that the first annual Duck Derby will be remembered for a long time. I am not kidding when I tell you that I am still
receiving e-mails, faxes, and cards with "duck race" info and "quack-quack" greetings.
The Duck Derby was held (well, was supposed to be held) at the Monday evening Scholarship Event. On Saturday morning, energetic A-35ers went to work selling "duck adoptions" to everyone they saw in the hotel. You were not spared their creative selling efforts unless you had proof of an adoption (a duck sticker on your name badge).
So many people helped with the logistics and details of the Duck Race, with special thanks going to Lynn Nelson of Mercer Transportation. She kept us centered and focused on making the event successful. Thanks also to Craig Thurgood, who provided a great deal of help throughout the setup and running of the Duck Race.
Duck Race Winners:
• John Kilcullen (7-day Caribbean cruise for two provided by Carlson Wagonlit Travel, and round-trip airfare for two to New Orleans provided by Delta Air Lines).
• Jim Windham (free 1997 Forum registration package in Oakland including airfare, hotel, and rental car).
• Len Heinemann (two round-trip tickets anywhere in the US, Canada, Mexico, and Puerto Rico courtesy of Delta Air Lines).
• SSgt. Bob Boswell (two night stay at a Holiday Inn within the continental United States).
In addition to the race itself, a competition was held among the A-35ers selling the duck adoptions. SSgt. Kathy Wiggin of the 85th APS was the winner by selling 400 duck adoptions (worth $1,024!). Lucille Monko of HQMTMCEA came in second, selling 125 ducks for $327. Total sales on duck adoptions came to $3,111all earmarked for the NDTA Scholarship Fund.
Our A-35 Forum Breakfast was attended by 50 people. This was a great turnout! Our special guests placed themselves throughout the room in order to meet as many of the A-35ers as possible while we shared breakfast.
There are so many highlights from this Forum-I wish I had more space to do so! Please continue communicating with me (a35@aol.com). We'll have to start working now to make next year's Forum in Oakland even better for A-35ers. Thanks again!
Theresa Giordanengo Vice-President A-35
Employment Referrals continued from page 50
the right talent on the job Excellent communications skills; verbal, written, and instructional. Great under pressure; able to work multiple "hot" tasks simultaneously and achieve timely success in each. #96-120
Transportation Operations Management
More than 18 years of success and supervisory-level military experience in all aspects of transportation management Expertise in managing multi-national workforce and $2M budget in a dynamic overseas ocean terminal. Extensive experienc e in truck transportation and fleet maintenance management. International traffic management experience handling large-scale movements via air and sea
Unique perspective and intermodal experience gained during oneyear internship in the largest US-flag containership company Current DoD Top Secret clearance #96-121
Logistics Planning/Management
Logistics manager with more than 20 years expedence in the transportation, distribution, maintenance, inventory field, including personnel and financial management Experienced in contract support operations in Central Europe and Africa Strong skills in program planning and execution Strong experience in force structure and logistics support planning for multinational forces. Expert in managing budgets, programs, and people. Computer literate. #96-122
H O n O r R O 11 of Sustaining Members
These firms support the purposes and objectives of NDTA.
AAR Cadillac Manufacturing
ABF Freight System, Inc.
AMO-American Maritime Officers
AT&T Defense Markets
Air Transport Association of America
Alamo Rent A Car
Alaska Car~o Transport, Inc.
American Atrlines
American Auto Carriers
American Bus Association
American Overseas Marine Corp.
American President Companies ltd.
American Shipbuilding Assoc..
American Trans Air
Apollo Travel Services
Associated Air Freight, Inc.
Association of American Railroads
Atlas Van lines lnlemational Automation Research Systems
BDM Federal, Inc.
Battelle
The Boeing Co.
T.F. Boyle Transportation, Inc.
BristoJ Associates
Brown & Root, Inc.
Burlington Air Express
COMSAT Mobile Communications
CONRAIL
CSX Transportation
Carlson Wagonfit Travel
Carnegie Group
Central Delivery Service-Washington
Computer Data Systems, me.
Comf)':'ter Sciences Corp.
Consolidated Freightways
Consolidated Services; Inc.
Consolidated Traffic Management Services, Inc.
Continental Airlines
Coo~rs & Lyl:,rand
Crowley Maritime Corp.
OHL Airways
Dallas & Mavis Specialized Carriers
Delta Air lines, Inc.
Deutsche Bahn AG (German Railroad)
Regional Patrons
Agnew & Associates, Inc.
American Movers Conference
Anteon Corporation
Arven freight Forwarding, Inc.
Ascension Freight Sysiems, Inc.
Avis Rent A Car
Bay Ship Management, Inc.
Buena VISla Palace Resort &Spa
CSI Military Services
Century Technologies, Inc.
Diablo Transportation
District No. l - PCD, MEBA
Dollar Rent A Car
Emery Worldwide
Encompass
Enterprise Rent-A-Car
Evergreen International Airlines, Inc.
Farrell Inc.
Fed~
GE Aircraft Engines
GRC ational, In(.
Holiday Inn Worldwide, Inc.
Hyatt Hotels and Resorts
lnfonnation Technol()gy Solutions
Pilot Air Freight Co .
Port Authority of N1. & NJ.
Port of Beaumont
Port of Oakland
PulseTech Products Corp.
QUALCOMM
Roberts E~ss, Inc.
Ryder Defence
SAK:
S.M.I.S.
SRA r ........
Sa~ laboratories
SatoTrawl
Schneider National, Inc.
Sea-Barge, Inc.
International Lonashci'emen's Sea Containers America, Inc.
Association, AA.-CIO
Sea-land Service, Inc.
International Organizati , Masters, Sealed Air Corp.
Mates and Pilots
Kuehne & NQgel, Inc.
Southern Air Transport, Inc.
Southwest Airlines
Stanley As~ . Inc
labor 1'\Qnagement Maritime Comm. StevedoringSe~ of America
Landstar SY$len{, Inc.
loc'kheed Mar-tin" Aeronautical Systems TRW Systems Integration Group
Loekheed Mt;lrtin Tactical Defense
TIX ~ny S~s
Tactical y.hicle Sr.stems
Ma~ ln$1ilute Totem OciM;tn TraiJer Express, Inc.
tykes Bros. 5-amsbip Co., Inc. Tran~~~
MAR, lnc.
Maersk line Ltd.
Maritime 0Yef!5eCls <;orp.
Matson Navigation Co.
Mayflower Transit
Tran"'t"" '""!'!""'~ lnsJitute
Trans Worid Airlines
Trism Specialized Carriers
Tri-S...le Motor Transit Co.
UPS Worldwide Logistics
McOonneB Douglas Aeros pace USAir
~cer Transportation Co.
NYP -& Associates, Inc.
National Afr <;argo, Inc.
Union Pacific Railroad
UNrS~ Cc?rparation
United Airlines
Un",ted Pa•"""I Servt'ce
National Ajr Carrier Association, Inc. •....
North American Van lines
Northwest Airlines, Inc.
Official Airline Guides
Old Dominion Freight line, Inc.
Overnite Transportation Co.
PRC, Inc.
Choice Hotels International
Controlled Systems, Inc.
Federal Freight Systems, Inc.
Garrett Container Systems
Gelco Government Network
Global Van Lines
Great American lines
Green Valley Transp. Corp.
HFS,lnc.
Hertz Corp
H.O.D., Inc.
Holland Co.
United Technologies Corp.
United Van lineS, Inc.
Value Rent A Car
WORlDSPAN
Waterman Steamship Corp.
(Central Gulf lines)
WorldPort, LA
Innovative logistics Techniques, Inc.
Janerile Services Ltd.
Kalyn/Siebert, Inc.
Management, Consulting &Resecm:h
Mid-Atlantic Safety Products
Military Living Publications
Modem Technologies Corp
National lnterrent
North American CLS, Inc.
Omega World Travel
PHH Relocation
PTCG, Inc.
Radian, Inc.
Ruthem Transport Services
Savi Technology
Sea Box, Inc
Techmale lnlernational
Thrifty Cor Rental
Trailer Bridge, Inc.
TriEnda Corporation
Wang Federal, Inc.
Westin Hotel • Renaissance Center, Detroit
American President Lines, Inc.
Bristol Associates
CONRAIL
CSX Transportation
Emery Worldwide a CF Company
Evergreen International Airlines, Inc.
International Longshoremen's Association AFL-CIO
Landstar System, Inc.
National Air Cargo, Inc.
Sea-Land Service, Inc.
Southern Air Transport, Inc.
United Technologies Corp.
United Van Lines
The above-named corporations are a distinctive group of Sustaining Member Patrons who, through a special annual contribution, have dedicated themselves to supporting an expansion of NOTA programs to benefit our members and defense transportation preparedness.
Bookshelf Ideas
Logistics and Supply Chain Management by Martin Christopher; published by Richard D. Irwin, Inc. Financial Times, Irwin Professional Publishing, Burr Ridge, IL, and N ew York, NY; 1994.
The author, recognizing that customer relationships are the key to long-term profitability, has prepared a text to examine the crucial importance of customer service. He believes that customer service is how an organization may differentiate itself. An important element in customer service is a logistics system that enables the consistent delivery of the service package to the customer. The theme of the book is that logistics strategy and th e way the supply chain is managed are a vital source of competitive advantage.
The book is organized into nine chapters: 1) Logistics and Competitive Strategy; 2) The Customer Service Dimension; 3) Measuring Logistics Costs and Performance; 4) Benchmarking the Supply Chain; 5) Managing the Global Pipeline; 6) Strategic Lead-Time Management; 7) Just-in -Time and Quick Response Logistics; 8) Managing the Supply Chain; and 9) Leading Edge Logistics. The author provides many practical ideas concerning managing the logistics systems and the supply chain.
The book should be of interest to students, educators and practitioners of logistics and supply chain management. I believe it contributes to a better understanding of supply chain management.
Distribution Planning and Control by David Frederick Ross; published by Chapman and Hall, Department BC, 115 Fifth Ave, New York, NY; Materials Management Logistics Series; 1996.
The author focuses on the calculus of managing sales campaigns, inventory replenishment, and income statemen ts. Although the proven techniques of logistics management are essential management "facts" necessary for the effective planning and control of enterprise functions, he considers that managing the enterprise in the face of the politics of change is required. The author has developed this new text on logistics based on a philosophy of change and the impact of changes on the geography of business, enterprise cultures and structures, and how information technology is shaping and reshaping tomorrow's marketplace playing field Three processes are examined as having a major impact on changes in the logistics field. They are the globalization of the marketplace, enterprise reengineering and information technology.
The book is organized into five units and 14 chapters plus a bibliography as follows: Unit 1) Defining the Logistics and Distribution Environment, Chapters 1 (Enterprise Integrative Management) and 2 (The Distribution Management Environment); Unit 2) Top management Planning, Chapters 3 (Business and Strategic Planning), 4 (Forecasting in the Distribution Environment), and 5 (Marketing, Sales, and Logistics Planning); Unit 3) Logistics Operation Planning , Chapters 6 (Managing Distribution Inventories), 7
Dr. Joseph G. Mattingly, Jr.
(Replenishment Inventory Planning), and 8 (Distribution Requirement Planning); Unit 4) Logistics Operations Execution , Chapters 9 (Customer Service and Order Management), 10 (Inventory Acquisition) , 11 (Warehousing), and 12 (Transportation); and Unit 5) Chapters 13 (International Distribution) and 14 (Information Technology in Logistics).
The text encompasses all the management activities used in logistics and supply chain operations. It is detailed enough to provide the reader with a thorough understanding of essential planning and control processes, as well as problem solving techniques that can be applied to every-day operations. This text is of interest for use by practitioners, instructors and students involved in logistics learning and practice.
GAO Transportation Reports prepared by the US General Accounting Office, are of specific interest to readers.
GAO/ AIMD-95-230 Denver International AirportInformation on Selected Financial Issues, September 1995.
GAO/AIMD-96-6 Highway Funding-Distributing Federal Funds, November 1995.
GAO/RCED-96-24 Motor Vehicle Safety-Comprehensive State Programs Offer Best Opportunity for Increasing Use of Safety Belts, January 1996.
GAO-GGD-96-77 Anti-Car Theft Act-Implementation Status of Certain Provisions of the 1992 Act, April 1996.
GAO-RCED-96-131 Transportation InfrastructureCentral Artery/Tunnel Project Fan~s Continued Financial Uncertainties, May 1996
GAO-RCED-96-136 Emergency Relief-Status of the Replacement of the Cypress Viaduct, May 1996.
GAO-RCED-96-147 Los Angeles Red Line-Financing Decisions Could Affect This and Other Los Angeles County Rail Capital Projects, May 1996
GAO-RCED-96-176 Mass Transit-Actions Needed for the BART Airport Extension, May 1996.
GAO-RCED-96-144 Northeast Rail CorridorInformation on Users, Funding Sources, and Expenditures, June 1996
GAO-RCED-96-151 Human Factors-Status of Efforts to Integrate Research on Human Factors in FAA's Activities, June 1996.
GAO-RCED-96-187 AMTRAK's Strategic Business Plan-Progress to Date,July 1996.
GAO-NSIAD-96-159 lntermodal Freight Transportation-Projects and Planning lssues,July 1996
GAO-RCED-96-156 Transportation EnhancementsStatus of the $2.4 Billion Authorized for Nonmotorized Transportation, July 1996.
GAO-RCED-96-159 Aviation Acquisition-A Comprehensive Strategy is Needed for Cultural Change, August 1996.
For copies of GAO Reports or for additional information, contact:
US General Accounting Office, PO Box 6015
Gaithersburg, MD 20760; 202-275-6241
Where's my package?
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eve,y single package
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