Defense Transportation Journal - December 1999

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Forum Wrap-Up Issue

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Carden Jennings Publishing Co. Ltd. Publishing

No. 6

South Pickett St., Suite 220 Alexandria, VA 22304-7296 (703) 751-5011 Fax (703) 823-8761

Nearly 25 A-35'ers attended our Saturday morning meeting at the Anchorage Forum this year. A universal theme seemed to be that none of us had been able to devote as much time to the organization in 1999 that we had intended to, because of a wide variety of extending circumstances. All agreed that we would do better in 2000. A good deal of our meeting was devoted to problems of communications. We have yet to develop a good network to speed the word among ourselves. To move forward in this area, I would like to ask each of you A-35'ers reading this column to send directly to me the following information: name, chapter name, mailing address, telephone (work and home), fax and e-mail address. I know we have asked for this before, but we need to get our database updated before we can tackle our other projects. My fax is: (202) 675-4255.

And speaking of projects, as you might imagine the A-35 Duck Race in Anchorage was again a big, but funfilled undertaking. The unexpected SNAFU this year was that it wasn't cold enough to have the ski run we had planned on, so at the last minute we "built a river" out of cardboard boxes and plastic sheeting! Surprisingly, it worked beautifully. This year we also had the added attraction of the Great Alaskan Moose Nugget Drop. Yes, what you are thinking is correct! We actually put hundreds of moose droppings (dried and packaged in tiny plastic baggies with numbers attached) into a big basket suspended beneath a small helium balloon. At the appointed time, the nuggets were released onto a bullseye below and the closest to the center was our winner. Congratulations to Lt. Gen.

Gary Mears, USAF, (Ret.) for winning the grand prize -a European vacation. Also, thanks to the countless volunteers that helped with the duck race and the nugget drop - especially Lynn Nelson, Mercer Transportation; Sean Caulfield, UPS; Carol Hart, Clarion Suites; TSgt Brian O'Donnell, USAFR; Capt. Curtis Izard, USAF; SSG Sharon Mullens, USAR; and Craig Thurgood, Salt Lake City NDTA Chapter President. And a very special "thanks for a job well done" to Bill Elander and Jim Henderson of the Anchorage Convention and Visitors Bureau and their crew, and Steve Halvorson of Golden North United Van Lines for building our "river" in front of the Egan Convention Center. Finally, neither of these events would have been possible without the ongoing support of Trans World Airways and Jim Sebek, their Manager of Airline Marketing. Jim has generously provided the Duck Race airline ticket prizes for many years. Thanks, Jim and TWA.

Theresa Giordanengo Vice President A-35

EDITORIAL REVIEW BOARD AND EDITORIAL MISSION

Dr. James M. Daley

Associate Dean and Professor of Marketing, Boler School ofBusiness John Carroll University

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., R.H. Smith School ofBusiness, Univ. of Maryland

Whitefield W. Mayes, Chief Engineer, Transportation Engineering Agency, MTMC

Prof. Gary S. Misch, U.S. Naval War College (Ret.)

Lt. Col. Anne T. Peck, USAF (Ret.) Senior Analyst, Stanley Associates, Inc.

Dr. Richard F. Poist Jr., Professor, Transportation and Logistics, Iowa State University

MG Harold I. Small, USA (Ret.), Consultant

COL Joseph Torsani, USA (Ret.), Consolidated Safety Services Inc.

Dr. David Vellenga, Professor of Business and Economics Albion College

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 fournal are to advance knowledge and science in defense transportation, the partnership between the commercial transportation industry and the government transporter. DTT stimulates thought and effort in the areas of defense transportation and logistics by providing readers with:

• News and 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 on thought and practice in defense transportation;

• Reports on NDTA Chapters.

Editorial Policy

The Defense Transportation fournal 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, or the NOTA.

Editorial Content

For correspondence includmg feature manuseripts and books for review, write: Joseph G. Mattingly Jr. Editor

Defense Transportation Journal Asst. Dean, Emeritus R.H. Smith School of Business University of Maryland College Park, MD 20742 (301) 405-7163 - Voice Mail (301) 405-0146 - Fax (703) 256-3172- Home

jmatting@rhsmith.umd.edu

Government, Corporate, NDTA and Chapter News, Pages Past, Mini-features, and all other departments

Send all news, photos, etc to : Denny Edwards

Managing Editor

Defense Transportation Journal

NDTA

50 South Pickett St., Suite 220 Alexandria, VA 22304-7296

Phone: (703) 751-5011 Fax: (703) 823-8761 Email: denny@ndtahq.com

Dr. Joseph G. Mattingly Jr.

User Taxes ! Infrastructu re!

User taxes are supposed to provide for the funding of common publicly provided facilities for shared private use The idea is to provide a level playing field for those who receive economic gain from publicly provided infrastructures, e.g., fuel taxes for those who use the nations highways to provide and maintain the highways. All modes of transportation are subject to some form of user taxes to provide infrastructure for the use of many in commerce. The users need to know what benefits are gained from payment of user taxes.

Surpluses in all transportation user funds continue to hamper or delay the improvement of our transportation infrastructure. Reported tax receipts vs. the amount of spending has produced these surpluses in the Transportation Trust Funds, e. g., it has been reported that over 14 billion dollars are unspent in the Aviation Trust Fund, over 8 billion in the Highway Trust Fund, and almost 2 billion in Harbor Maintenance Trust Fund. Congress is again trying to remove transportation trust funds off-budget. Many would argue that it is unfair, if not dishonest, to pass a user tax for one purpose and use the funds for other purposes. Some would argue that this is taxation without representation The case for reducing user taxes rests upon the continued need for the stated purpose. When the need for the tax is partially or fully satisfied, the user tax should be reduced to meet the lesser requirements or repealed. Since the law restricts the trust fund's use and prohibits spending more than is taken in, withholding trust fund resources from use does not reduce the federal budget deficit. Not spending the funds creates an accumulated back log of highway bridges needing repairs or replaced, prevents the FM from providing new radar for all airfields, etc. The goal should be to ensure that user charges paid into the Transportation Trust Funds are used only for transportation improvements and not to offset other federal spending. The removal of the transportation trust funds off-budget would contribute to the use of user taxes for their stated purposes. Computer technology is not the only thing that is obsolete when it hits the market. Many improvements in transportation suffer the same fate, e.g., by the time new roads are built after all the political elements agree and necessary studies are completed, the road does not meet the community's need. Ideas expressed on this page are solely th e ideas of the editor and do not necessarily reflect the position of the NDTA or any other officer or member ofNDTA.

Literary Awards

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 FY 99.

1999 Memorial Medal honors - Major General John H. Stanford, USA-Retired, a stalwart supporter ofl\TDTA.

First Place - NDTA's Foundation Memorial 11 Global Access, Navigation, and Safety?" by Phillip A. Iannuzzi, Jr., Medal for Literary Merit and a $500 honorarium.

Second Place - "Reengineering the Defense Transportation System- DoD Systems Migration" by Donald A. Woodward, Jr. I $300 honorarium.

Third Place11 Personal Skills Development -A Mission Ingredient in Logistics" by Theodore P. Stank, Richard F. Poist, and Paul R. Murphy. / $200 honorarium.

Total Cash honorariaAwarded in 1998-99 I $1,000

Selection Process. Copies of eligible articles, with authors identity removed, were provided to all members of the Editorial Review Board. Members voting ranked articles (best article number 1, etc.). Votes were tallied with the lowest score winning.

Dr. Leslie J. Waters, Professor Emeritus of Transportation Kelly School of Business, Indiana University has been a member of our Editorial Review Board for many years. I appreciate his evaluation of articles submitted and his valuable contribution to the contents of this Journal. I regret that he has decided to resign from the Board. He was an outstanding member of our Editorial Review Board His contributions will be missed and he has my sincere good wishes in his continued retirement.

Letter to Editor

Joe, would you advise DTJ readers that a scholarship fund has been established to honor Col Al Wheeler. So far his Clemson colleagues have contributed over $2,000. Our Goal is to raise $10,000 to endow an annual scholarship in his memory. Tax free gifts may be made payable to: "The Alan D. Wheeler Memorial FUJ'!d", sent to the following address: The Alan D. Wheeler Memorial Fund, College of Business and Public Affairs, Box 341301, Clemson, SC 29634-1301. Thanks Rick Clark, Associate Professor of Transportation and Logistics.

In Memorirun

NDTA has lost another founding member, Lt Col Theodore P. Heller, Sr. Lt Col Heller resided at 11205 Granada Drive, Sun City, AZ 85373-1814. Our sympathy and condolences are extended to his family. DTJ

LTG Edward Honor, USA (Ret.)

President

Our 54th Transportation and Logistics Forum and Exposition was a tremendous success by all reports that I have received from attendees At the outset I wish to publicly thank all who made those favorable reports possible starting with Gen Charles "Tony" Robertson, Jr., CINC, USTRANSCOM/CDR, AMC, who keynoted our Military Unit Awards; LTG John "Mike" McDuffie, Director for Logistics, The Joint Staff, who keynoted our opening ceremony and all of the moderators and panelists who volunteered their time to serve on our professional programs As usual this issue of the 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.

Our North Pole Chapter, headed by Ms Debbie Goetze, supported every facet of the forum in a highly exceptional manner. I would be remiss if I did not recognize the six members of our New England Chapter, several members of our Fairbanks Chapter and of course those volunteers who have worked with us for over a decade. I truly appreciate the dedication and support of all of these volunteers. They make our success possible.

I have indicated on several occasions the uniqueness of Anchorage as a destination. However, I must also tell you that the people we worked with over the past four years at the Anchorage Convention and Visitors Bureau were the most professional and helpful of any Bureau that I have worked with over the past 10 years. Bill Elander, Jim Henderson and their staff simplified our coordination in Anchorage and made things happen. I thank all of them for their advice and support.

I wish to take this opportunity to thank Gen Duane Cassidy, USAF (Ret) for his 10 years of service as Vice Chairman of the Board, NDTA. His sage advice has been key to NDTA's success and progress . I wish him well in all of his

future endeavors. Mr. Andrew P. Fogarty, Sr. Vice President, CSX Corporation, is our new Vice Chairman of the Board and I look forward to working with him in the years ahead.

It is not too soon to talk about our 55th Forum and Exposition, which will take place between 1-5 October 2000 in Albuquerque, New Mexico. I visited there in November to identify specific facilities and sites for programs. All of our professional programs and exhibits will be in the Convention Center. We have signed contracts with four hotels; Hyatt; Doubletree; LaPosada and the Plaza Inn. Hotel reservations must be made through a housing bureau. Information will be provided in the February DTJ.

Our Forum and Exposition ends two days before the Annual Hot Air Balloon Festival starts in Albuquerque. I am told that it is quite an event to see. We will publish information in case you wish to stay for the festival.

San Diego, California was selected as the site for our 2003 Forum and Exposition. Our site selection committee heard presentations from two other cities and all had the capacity to host our Forum. San Diego is a superb venue and I am sure we will enjoy it.

Congratulations are in order for Del Smith, Chairman of Evergreen Aviation who received the prestigious Wright Brothers Memorial Trophy for 1999 from the National Aeronautics Association. Del is a strong supporter of Defense Transportation Preparedness and he is a member of the NDTA Chairman's Circle

Welcome to LTG Daniel Brown, the Deputy Commander in Chief, U.S. Transportation Command. Dan comes to USTRANSCOM from the Combined Arms Support Command at Fort Lee, Virginia. As a transporter and logistician, he has been a member of NDTA for many years.

In closing, I wish to thank you for your support during 1999 and challenge each of you to help your Association grow in 2000 by recruiting at least one new member. All of us at NDTA wish you and your family a happy and healthy 2000 . DTJ

AIR TRANSPORTATION: ELEMENTS OF A CHANGING ENVIRONMENT AND WHAT IT MEANS TO THE CIVIL RESERVE AIR FLEET

by LTCJohn D. Daly, 314th Operations Squadron Commander, Little Rock AFB, Arkansas and Dr. Paul M. Needham, Professor of Logistics at the Industrial

National Defense University,

I. INTRODUCTION

"Transportation is a critical element in the mosaic of logistics. It is unique because it depends on a close partnership with the commercial transportation industry."

A Mosaic of Support to the Warfighter Deputy Under Secretary of Defense (Logistics) Department of Defense (1997)

The commercial air carrier industry is vitally important to the nation's rapid mobilization capability. In times of war or national emergency, when the Civil Reserve Air Fleet or CRAP is fully activated, participating air carriers contribute over 50 percent of the nation's airlift capacity. In peacetime also, CRAP carriers are employed by the military to provide airlift services moving military passengers, equipment and supplies. Commercial augmentation is becoming increasingly more important as the nation remains engaged in many parts of the world and the military airlift fleet becomes smaller. The changes occurring within the air transportation industry are troubling and may limit CRAF's ability to mobilize in the future.

Three underlying changes are occurring in the air transportation environment which, when taken together will limit Department of Defense (DoD) flexibility to activate CRAP. These changes are:

• Greater use of "just-in-time" inventory methods creating higher potential for economic disruption to the commercial sector

• Continued consolidation as a result of deregulation of the U.S. airlines

• Greater outsourcing of DoD distribution functions

While these factors make activation of the CRAP more difficult, the following developments increase the possibility that CRAP may be needed more in the future. These include:

• Reduced military organic capability due to the retirement of the C-141

• Commercial demand for air transportation services crowding out the government customer

• A lower threshold for CRAP activation created by the precedent of activating the CRAP for the Gulf War

These six factors are interacting to create an environment where CRAP will be needed more in the future, yet perhaps will be less available. Most of the change on the commercial side is due to the growing use of air transportation as a primary transportation mode for the shipment of goods and services. The marketplace is becoming increasingly globalized and demanding greater air transportation services to fulfill global market competitive strategies.

The military logistics environment is also changing. DoD logistics is in a period of transition shifting from a strategy of "just-in-case" to more "just-in-time" and as a result is reducing inventory. Much of this strategy is dependent upon rapid delivery of essential parts and supplies via air

College of the Armed Forces,

Fort McNair, \Vashington, D.C.

transportation to reduce delivery time. To leverage CRAP participation, DoD is linking the opportunity for this new government transportation business to CRAP members. Does the practice of maintaining less inventory and moving more of it by CRAP expose the DoD distribution channels to critical failure if the CRAP must be activated?

Through an examination of the load factors of the air carriers we can determine if the capacity of the commercial cargo system is maintaining pace with the demand for air cargo transportation. Section four provides an examination of the fleet and illustrates that load factors are on the rise. With load factors on the rise, will the commercial sector still be capable of fulfilling the military's growing need for commercial augmentation? If not, DoD will need to activate CRAP to obtain the necessary airlift or pay a premium to attract the air carriers away from commercial business. However, if CRAP is used what is the impact on DoD's distribution channels?

Section 2 exposes the reader to key factors that are changing the CRAP environment. In Section 3 the growing demand for air cargo is examined. Section 4 examines the defense sector's needs. A statistical examination of the air cargo growth and the system capacity to absorb that growth is found in section 5. Finally, conclusions and managerial implications with respect to the military requirement for the CRAP are presented.

II. THE CIVIL RESERVE AIR FLEET (CRAF) ENVIRONMENT

11 USTRANSCOM could never meet its wartime requirements without its absolutely unique partnership with civilian industry. In fact, the backbone of our Nation's lift capacity lies in its commercial fleets. "

General Walt Kross, USAF Commander-in Chief US Transportation Command

The Formation of CRAF

Using authority granted under the Defense Production Act, President Truman in 1951 issued Executive Order 10219.[1] The order called for the Department of Commerce to "analyze the requirements of civil air transportation and of the Department of Defense for aircraft of the types used by the civil carriers," and "to initiate such actions," "plans and programs," "to meet the needs of the armed forces and to maintain essential civil routes and services."[2]

On the basis of Executive Order 10219 the CRAP was created in 1952. The purpose of CRAP was to expedite the availability of the civil air carriers to support the military and avoid the mobilization problems of World War II. [3] The CRAP system was designed to provide for the orderly transfer of commercial aircraft to military service in an emergency while still providing an appropriate level of air service to the civil sector. By encouraging the voluntary efforts of the civil

air carriers in the CRAF, the U.S. government could avoid the need to nationalize those carriers in time of war or emergency when additional airlift was required.(4] A partnership between the military and commercial air carriers to meet the nation's airlift needs grew out of the CRAP program.

National Airlift Policy

In 1987 President Reagan stressed the need for the partnership between the commercial air carriers and the military airlift system in National Security Directive 280, known as the National Airlift Policy. The National Airlift Policy calls for the military to rely upon the "commercial air carrier industry to provide the airlift capability required beyond that available in the organic military airlift fleet "[5] Today the military depends on CRAP to provide over 50 percent of its emergency airlift capacity. Current deployment planning assumes that CRAP, when fully activated, will airlift 90 percent of the passengers and 40 percent of the cargo.[6] Not all of this capability is immediately available. The CRAP is structured to provide a graduated response depending on the level of the national emergency.

CRAF since the Gulf War

When military resources were unable to meet the growing requirements for Operation DESERT SHIELD, General H.T Johnson, Commander-in-Chief of MAC[?], activated Stage I of the CRAF on 17 August 1990. He believed that CRAP worked very well and "to AMC's credit, many airline representatives shared the view that the CRAP worked better than anticipated for a program never before activated."[8] However, the activation did create economic hardships for some of the air carriers who lost market share when they transferred their aircraft from commercial activities to military deployment missions.[9] As a result, the partnership between the air carriers and DoD became strained. Two major passenger carriers, American Airlines and United Airlines, dropped out of the program and others lowered the level of their participation to reduce their risk if activated. Based on lessons learned from the first activation of the CRAP for the Gulf War, several changes were instituted. The "Aviation Insurance Provisions of what was formerly Title XIII, now 49 U.S.C., Chapter 443 (Federal Aviation Act),"[10] were changed to reduce the air carriers' asset risk and ensure that the loss of an aircraft would not unduly burden the carriers financially. CRAP participants were allowed during peacetime to operate from military airfields and to designate military airfields as weather alternate landing sites to encourage their participation in the CRAF . (11] Operational offsets were also added so that carriers of activated aircraft are reimbursed at a rate of ten hours of flying whether the aircraft flies or not. These changes were intended to correct deficiencies of the CRAP agreements.

The amount of business offered by DoD to CRAF carriers is substantial. Figure 1 shows the level of international peacetime business since 1989 broken out by fixed and expansion buys. [13] Figure 1 also shows that the peacetime business base is growing. In 1996 the value of Air Mobility Command peacetime business exceeded $600 million.(14] AMC anticipates purchasing over $ 700M of charter airlift services in 1997 from commercial airlines participating in CRAF . (15]

In recent years other government transportation business has been linked to CRAP participation as additional incentives for airlines to participate in CRAF. The two most significant actions were the addition of the General Service Administration's (GSA) small package contract and the city pairs program. The small package contract is awarded to one carrier (currently Federal Express) who provides a low fixed rate for any government shipper for packages less than 150 pounds within the Continental United States (CONUS). A similar program is being developed for overseas shipments.

Linking the GSA city pairs program to CRAF participation provided a significant boost to the CRAF program. Under this arrangement, government travelers must travel on air carriers participating in CRAF. With the city pairs program linked to the CRAF, the value to the air carriers of the peacetime government travel business is now about $1.3 billion per year.(16] More importantly, this additional incentive encouraged two of the large passenger carriers who left the CRAF after the Gulf War to reenter the CRAF.[17] Attracting and keeping air carriers in the CRAP can often be a difficult challenge.

Organization of the CRAF

The CRAF is structured in three stages, each providing an increasing level of airlift capability.(18] Stage I is designed for response to a minor regional crisis. Stage II is established for major regional conflicts such as the Gulf War and Stage III provides for a full national mobilization. The available aircraft committed to each stage are used only to the extent necessary to meet airlift required in addition to the military aircraft. The Commander-in-Chief of US Transportation Command can activate each stage with approval of the Secretary of Defense.[19] Carriers must respond within 24 hours for a Stage I or II activation, and within 48 hours for Stage III and Aeromedical Evacuation aircraft.[20] While activated, the air carriers continue to operate and maintain the aircraft while AMC assigns the missions.[21]

CRAF is Voluntary

CRAP is strictly voluntary. No law requires participation. The success of the program simply lies. in the cooperative and contractual arrangement between the government and private carriers. The DoD does not pay for the ownership, operation, or maintenance of CRAF aircraft while inactive. The DoD encourages participation by awarding part of the government's peacetime business to pa1ticipating carriers based on the carriers' commitment of aircraft to the CRAP. (12] This arrangement makes CRAP a cost-effective program to obtain emergency augmentation airlift and provides an equitable way to allocate military peacetime business to the commercial airlines.

In addition to these stages, the CRAP is divided into various segments: the international segment both-long-range; and short-range; national segment both -domestic and Alaskan; and the aeromedical evacuation segment.[22] Each segment is characterized by different types of aircraft, matched by capability to specific mission needs. Figure 2 shows each stage, their corresponding segments, and the typical aircraft in each segment.

The long-range international segment is composed of cargo and passenger aircraft and is the largest section of the CRAF. Stage I consists strictly of the long-range international segment and is designed to "backfill" or provide airlift services when the organic military airlift fleet cannot meet both deployment and normal mission requirements simultaneously. [23] Aircraft found in this segment include the B747, MD-11, DC-10, L-1011, A-300, DC-8 and B-757ER.

The short range international segment supports "short haul operations from the CONUS to the Caribbean, Central America, Greenland, and Iceland."[24] This segment consists of B-727, B-737, MD-80, and DC-9 type aircraft.[25]

The domestic national segment supports movement requirements within the CONUS while the Alaskan national segment supports unique needs in that region. This segment normally consists of B-727, B-737, MD-80 and L-100 aircraft.[26]

The newest segment supports aeromedical evacuation of patients from a theater of operation back to the CONUS and the forward movement of medical personnel and supplies to the theater. Specially modified B-767 aircraft designed with litter kits to carry 87 stretchers and 20-40 ambulatory patients form this segment.[27]

Airline Participation in CRAF

The size and the type of each air carrier's operations and its individual business strategy drive its interest in CRAP. Incentives that are attractive to one group of air carriers are not necessarily attractive to another group. Each carrier has unique requirements and an operating style based upon the type of aircraft in its fleet, the market(s) the airline serves, and whether or not it is a scheduled or non scheduled carrier. "Some airlines commit all their assets to the CRAP, while others will commit much less. 11 [28] In this regard "activation of the various stages will affect each airline differently." The impact of activation on each individual carrier will depend upon the length of its activation, its unused capacity, and its level of commercial commitments. Each carrier must balance the risk of being in CRAP with the risk of not being in CRAP.

AMC policy tries to entice CRAP participation by "as many of the long-range international U.S. aircraft as possible" because they contribute the most capacity to the deployment of personnel and equipment from the U.S. to overseas locations.[29] At the same time AMC, for "the ultimate health of the airline," desires carriers in the CRAP that are not wholly dependent upon the government for their business. [30]

Many smaller charter carriers (non-scheduled operators) find it difficult to participate in CRAP when their business is not totally government business. AMC peacetime business is often last-minute while commercial operations normally are booked much further in advance. In order to obtain government business, air carriers must be able to respond to a solicitation on short notice. The small operator must be positioned to shift aircraft assets from commercial to military operations and back again without undue economic costs.

For the air carrier it is a simple opportunity cost problem. The air carrier's aircraft can only perform one mission at a time. Once committed to a commercial shipper, the carrier is reluctant to cancel or delay the commercial shipper to accommodate AMC.

The business cycle also plays an important role. In times of excess carrier capacity, aircraft are idle and the carrier can more easily respond to short notice AMC requests. When commercial activity is up and capacity is in short supply, for example, at Christmas time, the commercial operator is less able to respond to AMC solicitations.

Historically, AMC can depend on 50 percent of the capacity in CRAP Stage I or about 20 aircraft per day to respond to AMC daily solicitations.[31] The carriers supporting AMC day-to-day are the small, unscheduled operators. The large, scheduled operators do not respond due to already high fleet commitments. Maintaining equity among the various carriers is not easy and requires active management by AMC.

Mobilization Value (MV)

AMC determines a carrier's fair share of DoD's peacetime

business based on the carrier's commitment to CRAP which is measured by its mobilization value (MV).[32] AMC compares a carrier's committed aircraft, number and type, against a base aircraft or wide body equivalent (WBE) to derive its MV. The WBE standard aircraft is the B-747-100. Each aircraft committed to the CRAP is normalized against the B-747-100 characteristics of speed, payload, and utilization rate. [33] The carriers then receive mobilization value (MV) points based upon their commitment of WBEs to the CRAF.[34]

Other factors come into play for awarding mobilization value points besides the amount and kind of aircraft committed. Because AMC seeks wide-body aircraft with longrange capability, a 20 percent bonus is awarded to MD-11 and B-747 aircraft. Air carriers committing B-767 aircraft to the aeromedical evacuation segment receive a 100 percent MV bonus. Additionally, carriers with aircraft in Stage I receive double MV value as compensation because of the greater risk of activation. Apportionment of peacetime business is based upon a carrier's MV points.

A higher MV rating should in theory bring a larger share of peacetime military business for the CRAP participant. However, mission needs, the individual carrier's availability, and aircraft type affect the amount of business a carrier receives or desires.[35] To allow carriers to optimize their portion of the peacetime business, AMC allows the carriers to pool their assets into joint venture arrangements.[36]

Based on carriers' joint venture sharing arrangements, they can now trade MV points.[37] In effect, carriers can sell or trade excess MV points that they do not need or cannot use. The amount of business an individual carrier receives as a member of the joint venture is determined by the venture itself: AMC simply treats the joint venture as a separate entity. Since MVs have a market value, the points can influence the level of participation by a carrier in the CRAP. By adjusting participation in the CRAP, a carrier can maximize its MV and use the excess to gain a business advantage.

Appendix A lists 1997 CRAP air carriers and the percentage of their long-range international type aircraft in the CRAP. Federal Express Corporation (FedEx) has committed 100 percent of its wide body aircraft to the CRAP while UPS provides only the minimum. Each carrier is pursuing a different strategy with regard to their participation in the CRAP. UPS is limiting its risk due a CRAP activation while FedEx is highly exposed.

The next section examines the changing shape of the air cargo market and DoD's growing dependence upon CRAP cargo carriers as the DoD shifts to a "just-in-time" logistics strategy.

III. GROWING ROLE FOR AIR CARGO

11 Two ongoing structural changes in the way business could operate were the major weapons in the battle against rising inventory costs: the information revolution and transportation deregulation."

Anderson/Quinn, "The Role of Transportation in Long Supply Line Just-In-Time Logistics Channels," Journal of Business

Logistics

To understand the changing environment affecting CRAP, we need to look at changes in the overall commercial air carrier industry. When CRAP was formed in 1952, the air carriers operated in a highly regulated, stable environment.

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The transportation of manufactured goods by air was reserved solely for high value products and mail. At that time, information technology consisted of a stubby pencil and a grease board!

Today the airline industry is "deregulated." Air carriers adapted by shedding excess capacity to better compete Additionally, air transportation of many products became an essential competitive strategy of firms as they lowered inventory costs to better compete on a global scale. The aggregate affect of these changes created an environment with a small margin to accommodate CRAP activation. This reduced margin is shown through statistical analysis in section five.

Airline Deregulation

A quick review of the changed regulatory environment helps to understand the need to examine CRAP today The Civil Aeronautics Act of 1938 established the Civil Aeronautics Board (CAB) which "controlled air fares and routes with a heavy hand for some 40 years."[38] Th e major features of airline regulation were: [39]

• Assurance of the sound development of an air transportation system

• Control of market entry by requiring new airlines to obtain a government certificate of public convenience and necessity to operate

• Control of cargo rates and passenger fares

• Control of intercarrier relations such as mergers and agreements

Additionally, the CAB used its regulatory powers to enact policies to "meet the air transportation needs of domestic commerce, the Postal Service and national defense."[40] Inefficiencies in the air carrier system were acceptable if they served a national need. However, many economists saw the nature of the regulated air route system as inflationary and inefficient [41] As a result, "by the earl y 1970s" legislative pressure mounted favoring "dismantling of as many economic controls as possible, allowing market forces free rein."[42]

In 1978 Congress enacted the Airline Deregulation Act. This legislation allowed businesses that met fitness requirements to enter and exit domestic air transport markets at will and set fares in response to market demand.[43] Few in the industry anticipated the tremendous change deregulation brought.[44]

Finding a successful business strategy in the deregulated market was not easy for the air carriers who had been accustomed to the highly protected markets under the CAB . With carriers free to set fares, they were forced to improve operating efficiencies in order to compete.

One strategy taken by the air carriers was to develop marketing programs to maintain passenger loyalty.[45] The major carriers[46] expanded services, such as "computer reservation systems, frequent flyer programs, and code sharing with commuter airlines to feed the parent system ."[47]

A second strategy focused on building market share through mergers and acquisitions. By acquiring another airline, air carriers could infiltrate into "established markets and eliminate a competitor."[48] In the late 1980s a series of mergers and acquisitions provided a period of industry consolidation-Eastern , Braniff, Pan American and Midway Airlines disappeared while others merged into their acquirer's operations.[49]

The most visible airline strategy was the rapid adoption of "hub-and-spoke" route systems. With hub-and-spoke sys-

terns, the carriers intended to "raise the cost of market entry for new and smaller airlines" as a way to protect their routes which were vulnerable to competition in the deregulated environment.[50] The hub-and-spoke route system "provided the most efficient way of overcoming the production indivisibility inherent in the use of large aircraft" thus lowering air carriers' cost of operations. [51]

Large air carriers, prior to deregulation, populated their aircraft fleets with wide-body aircraft that were suitable for city-to-city or linear routes. Prior to deregulation, costs or operations could be recaptured through the CAB's rate setting system. Many of the large air carriers found wide body aircraft unsuitable and too costly to operate in a hub and spoke system. Flight frequency through the hubs did not provide the necessary passengers per aircraft (or density) to make it profitable to operate wide-body aircraft. Smaller aircraft were better suited to the hub-and-spoke route system to maintain efficient load factors and control operating costs. The transition of passenger carriers to smaller aircraft provided opportunities for the all-cargo carriers since the excess cargo hold space available in wide-body aircraft did not exist in smaller aircraft.

The All-Cargo Operators

U.S. passenger airlines historically viewed cargo services as a by-product of their passenger services . [52] Prior to deregulation wide-body aircraft in the passenger fleet were well suited for carrying cargo in the under belly of the aircraft. [53] With the air carriers switching to smaller aircraft, passenger carriers are not well suited today for the dual operation of carrying passengers and cargo. This change created an opportune market for the "all-cargo carriers" to establish a greater foothold.[54] Passenger carriers lost their capability to efficiently move cargo as they converted their fleet to be better suited for hub-and-spoke operations.

Today there are three types of air cargo carriers: 1) integrated all-cargo carriers, (e.g. Federal Express) offering express door-to-door delivery, 2) scheduled and charter allcargo carriers that operate cargo-only aircraft providing service from airport to airport, and 3) passenger/ cargo carriers that carry cargo on passenger aircraft on a space available basis offering primarily airport to airport service.[55] As of November,1995, there were 22 all cargo carriers in the U.S. The largest seven carriers were, by category:[56] Majors, Nationals, Large Regional, Federal Express, United Parcel Service, DHL Airways , Emery Worldwide, Challenge Air Cargo, Northern Air Cargo, Polar Air Cargo The single largest freight carrier is Federal Express.[57]

Changing Cargo Environment

Historically, transportation cost has been a high percentage of the total cost of any product. In most cases shipping by air can be as much as seven to eight times higher than by surface modes of ocean, rail, or truck.[58] Therefore, shippers normally reserved the use of air transportation for items in the following categories: High value-to-weight ratio, Fragile, Physically or economically perishable, and Subject to unpredictable demand patterns.

However , these traditional norms are changing. The movement of goods by air plays a greater role in the competitive strategy of firms. [59] Producers have found that savings from reduced inventory carrying costs can offset higher costs of shipping by air. "Strategic inventory management" is creating an environment where more lowvalue goods are being shipped at a greater rate by air. [60] "Justification of air transport is not so much the value of

the item itself, but the value to the receiver in having it exactly when needed."[61] This is especially apparent in the growing international market.

International Trade

Many new products and services have been introduced in recent years and are marketed and distributed to customers all over the globe. "Manufacturers are developing facilities and selecting suppliers in locations that minimize overall production costs."[62] To service the needs of the global market, shippers are turning in greater numbers to air transportation.

Although it accounts for a relatively small volume of global cargo movement, air transportation is important in global logistics. During the period 1990 to 1995, "airfreight traffic between the U.S. and foreign countries grew by SO percent."[63] In 1994, U.S. airlines flew more scheduled international freight ton-miles than the airlines of any other country, and nearly the all cargo carriers flew 60 percent of those freight ton-miles.[64] In 1995 the "value of U.S . airborne trade reached $355 billion, accounting for 31 percent of U.S exports and 23 percent of imports."[65]

In the commercial sector, the expansion of business operations using "just-in-time" inventory methods is creating a greater "need for speed." The demand for speed is being met with air transportation, primarily by airlines who are providing not only transportation but also "related services: warehousing, project assembly, order processing, and customer service"[66] A "soup-to-nuts" logistics approach where businesses are outsourcing their entire supply chain to integrated air carriers is creating a "partnership in logistics to improve their entrepreneurship and cut significant costs from their cost stream."[67]. In many business sectors "analysts consider the efficiency of such supply chains to be an increasingly important competitive advantage."[68] By not "financing buildings for warehousing and distribution purposes," companies can "redeploy capital" to "focus on their core competency, 11 thus improving their overall competitiveness. [69]

What it means for CRAF

The growing strategic relationship between air cargo carriers and the commercial markets provides both encouragement and a challenge to AMC. On the one hand, AMC desires an economically strong air cargo industry with depth in capacity from which it can obtain augmentation airlift in an emergency. On the other hand, the dependence of the commercial markets

on time critical delivery of products makes it economically and politically harder for AMC to remove from commercial service the capacity committed to the CRAF. The impact of a full CRAF activation would substantially divert the airlift capacity of a primary cargo handler such as Federal Express, which makes up 48 percent of the longrange capability in CRAF. In reality even if Stage III of CRAF was activated, AMC would not be able to access the planned full capability of 26 million ton miles per day (MTM/D) [70] AMC would have to accommodate the cargo needs of the commercial sector and non-deployment defense needs, for cargo carriers. DTJ

ECONOMIC IMPACT OF NDTA FORUM ON ANCHORAGE

Bureaus (IACVB) calculates that the typical national association spends $230,181 in its host city over a 5-day convention. NDTA brought $418,514 into the Alaskan economy during its Forum in Anchorage - nearly twice the national average!

, ALASKA

condensed and edited by Denny Edwards, DTJ Managing Editor

If there was ever any doubt about the importance and economic impact of an NDTA Forum, the recent one in Anchorage, Alaska should set the record straight.

Attendees were asked to participate in a special survey conducted bv A-35 member Susan Krulic who chose the project for her s~nior thesis at the Alaska Pacific University (APU). Her goal was to accurately assess the monetary impact of the NDTA Annual Forum on the economy of Alaska. She considered not only the money spent by the association to actually produce the conference, but also the money spent by attendees on souvenirs, outside tourist attractions, meals, transportation and pre and post-forum trips and sightseeing. If you include pre-forum expenses such as air transportation, registration, advance printing, promotional expenses, etc., the overall impact totals a whopping $2.1 million dollars! Here are some of Ms. Krulic's findings:

• The average Alaska NDTA attendee stayed in Alaska 5 .5 days and spent $1,245 dollars during that time. That is above the national average expenditure for a 5-day convention when you consider that NDTA includes so many meals in its basic registration fee.

• The average NDTA exhibitor costs are less than half the national average-$1534 versus $3433, even when considering the higher cost of shipping to and from Anchorage.

• The International Association of Conventions & Visitor's

• Our attendees originated in the following areas: 42% from the Northeast; 19% from the Midwest; 14% from the Southwest; 13% from the Southeast; 9% from the Northwest and Alaska; and the remainder from OCONUS.

• 16% of us paid under $500 for our round trip air fare, while 21 % payed between $501 - $700, and 22% payed from $701 - $900. 6% payed over $1500 and a few folks (obviously the very rich, or the bargaining impaired) said they shelled out more than $3000 for the round trip! 16% said they used their frequent flyer miles.

• 44% of the attendees rented cars, as did 56% of the exhibitors

• 26% of the Anchorage attendees said this was their first NDTA forum, while 8% said they had attended over 10 previous forums.

• 71 % said they would be coming to the 2000 Forum in Albuquerque for sure, while 25% were undecided and 4% said no.

• Finally, a whopping 99% of those surveyed said that Alaska and the forum (after the first three days) had met or exceeded their expectations! Editors note: probably the remaining 1 % were disgruntled because they hadn't seen a moose!

Ms. Krulic's survey was distributed at the Scholarship Breakfast sponsored by Bank of America. Ms. Barbara Jaworski introduced the A-35, APU senior and encouraged the audience to participate. 353 returned the brief questionnaire (nearly 30% of the forum attendees).

Cold War Ship Carries NATO Weight

Ukrainian ship moves heavy combat equipment to Kosovo

by: Edward Baxter, Public Affairs Military Sealift Command, Europe and Bram de Jong, Public Affairs, 598th Transportation Group

0n the 10th anniversary of the fall of the Berlin Wall -a ship built to carry Soviet military cargo instead carried U.S. Army equipment for American peacekeepers in Kosovo. "Ten years ago, I never would have imagined this," said Capt. Oleg Stebnovsky, 36, master of the Ukrainian cargo ship Balakleya.

The location is Bremerhaven, Germany. As Stebnovsky speaks, he watches an Army Bradley fighting vehicle ascend the stem ramp. " It's a fitting tribute to this da y in history - when the Iron Curtain lifted across the continent - today, we are wo rki n g toge t h e r to main tain t he peace in Kosovo , " said St ebnovsk y, speaking Engl is h ¼ith a heavy Ukrain i an acctint.

So rn,· 700 pi eces o f eq uipm e nt b e long ing to the Army ' s 3rd Brig ade Combat Tea m, 1st In fantr y Division , were loa de d on t he ship No w 7-8 for tra nsit t o Thessalo n iki, G re11:ce From Greec e, th e ca rgo wa\ rnu t ed in long m otor con voys no rth through Mace do n ia to Kos ovo. It arr ived in the American sector of Kosovo in time for the midDecember relief of the division's 2nd Brigade Combat Team. The latter unit has been deployed in Kosovo since early July.

Balakleya was designed and built specifically to carry Soviet heavy combat equipment, according to Capt. Stebnovsky. Commissioned at Nikolayev, Ukraine, on August 17, 1977, the ship's cargo holds were designed to transport Soviet heavy battle tanks, and other wheeled and tracked vehicles. "The cargo hold entrances are some 20-feet in diameter - every inch of this ship was calculated i«Qrding to drt baffle~," $aid tebnov~, who

The MV Balakleya in the Bremerhafen Nordhafe11 Jfos t si.ie has been used to transport NATO cargo, however. The ship was used in recent months to transport some British military equipment and supplies bound for Bosnia and Herzegovina - off-loading at the port of Split, Croatia.

Balakleya, named for a small city in the southern part of the Ukraine, near the Black Sea, is perhaps more used to carrying commercial cars for companies such as Nissan Motors. "But, I hope we can do this again sometime in the future," said Stebnovsky.

The vessel was contracted by the avy's Military Sealift Command. About 7,000 U.S. Army personnel based in Europe and the United States~ d~loy,eg,to partiClPJte in Operation Joint t;iuat4lau, tation force, or . 1b.e tastF.otte

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Every good deed has consequences many of which are unintended.

Decisions have consequences. Most include both favorable and unfavorable outcomes. A good decision-maker will identify and consider all the likely consequences of a pending decision. Unfavorable outcomes will not be ignored or rationalized away but given proportionate weight in the decision process. When this is done, unintended (not anticipated) outcomes will be minimized.

When the decision was made by NATO to launch a declared conflict against Yugoslavia, several consequences of the decision were acknowledged, reported and discussed in the media. The final decision was rationalized by arguing that numerous humanitarian considerations and preventing a major conflict in the Balkans outweighed the monetary and personal costs of the conflict, and the monetary and personal costs of peacekeeping after the conflict ended. An unstated consideration was the need to define a longterm mission for NATO now that the Cold War was over. The unintended consequences of NATO's decisions that were not considered, or if considered, never acknowledged by NATO, included:

• Increased defense spending worldwide, i.e., a new arms race. A nation that believes justifiably or otherwise, that at some future time its internal decisions may bring down the wrath of NATO, will spend more on arms, not less. An unintended consequence of its action will be proportionate increases in defense spending by its neighbors.

• The race among nations to become nuclear powers will accelerate. Countries that cannot match NATO's conventional forces will opt for a nuclear and/or chemical/biological weapon capability. And it is quite likely that smaller nations will pool resources to achieve this capability.

• Alliances, as counterweights to NATO, under whatever guise, will increase. A Russian-Chinese alliance in some form is almost a certainty. In this respect, Russia fears NATO, expansion to the East. China fears American involvement over Tibet and Taiwan.

• No matter NATO's good intentions, a precedent has been set by the air strikes against Yugoslavia. NATO's action was "out of theater," that is, not contemplated in NATO's charter. Grievances worldwide, real and imagined, will have

their supporters within NATO countries. One may be sure that the Black community in the United States will not stand idly by should a "Kosovo" occur in Africa. No NATO nation with a significant minority population will be exempt from such pressures.

• A poor example has been set for the upcoming generation. The message now is "Might makes Right." In other words, NATO, or the United States acting unilaterally, will act when it has overwhelming power. When it does not, for example, in responding to China's repression or Tibet, nothing will be done. Secretary of State Albright's rationalization that 'We do what we can do" has a hollow ring indeed.

• United States military spending, by definition, must increase given the fact that we must allow for deployment of our military forces not only when our national interests are threatened, but also when they are not. To a lesser extent such will also apply to other NATO member countries.

• With a U.S. led NATO demonstrably willing to militarily involve itself in humanitarian/political causes worldwide, the opportunity for mischief by America's most likely adversaries increases exponentially. For example, we will probably never know why the People's Republic of China failed to act against Taiwan at the height of NATO involvement in the Balkans.

If the United States continues on its present path, it is not too much to ask that to the greatest extent possible, both favorable and unfavorable consequences of any future military action be candidly stated and debated.

Clinton H. Whitehurst, fr., Ph.D., is Emeritus Professor of Management and Economics, Clemson University, and a Senior Fellow of the Strom Thurmond Institute of Government and Public Affairs.

The views presented here are not necessarily those of The Strom Thurmond Institute of Government and Public Affairs or of Clemson University. The Institute sponsors research and public service programs to enhance civic awareness of public policy issues and improve the quality of national, state, and local government. The Institute, a Public Service Activity (PSA) of Clemson University, is a nonprofit, nonpartisan, tax-exempt public policy research organization. DTJ

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tingencies. Acquisition Level II-Program Management and Acquisition Level I-Communications/Computer certified. Adept at working with international military and multinational civilian workforce. MS in Human Resource Management. Seeking management position in transportation/logistics for a challenging, profit-producing unit in a multi-national organization. Willing to relocate worldwide.

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The 54th Annual NDTA Transportation and Logistics Forum and Exposition

Anchorage, Alaska • October 2-6, 1999

LTG John M. McDuffie, USA Director for Logistics

The Joint Staff

ank you, General Privratsky for your kind introducwn. I am very honored to have been asked to be your keynote speaker. The NDTA is a great organization. The unique relationship between industry and DoD is so important. One of our country's national treasures is the ability to project forces anywhere in the world and to do this requires DoD and the commercial transportation industry to work hand in hand.

In keeping with the theme of this years' forum, "Global Challenges and Changes , " I intend to present a broadbrush perspective (one over the world) of the history of military transportation since the Revolutionary War through the present. I will end the presentation with some of the projects that Joint Staff J4 directorate is pursuing in our Focused Logistics piece of the Chairman Joint Vision 2010, discussing the challenges we face tomorrow.

In order to appreciate our future requirements, we must look back on our history to see how force projection was accomplished and what shortfalls re<ulted.

So let me start with the Revolutionary War. Getting the force to the battlefield encompassed the use of wagons, horses and feet! Movement of 29 wagons for each brigade was at a tedious pace of 20 miles per day. As an example, the transit from Richmond to Yorktown, a distance of 80 miles, took four days. Road marches moved at a pace of 13 miles a <.lay. Throughout the war, tile soldier , carrying a pack of about 60 pounds , was the main source of logistical support. If you look at the war in terms of modern times, General Washington's crossing of the Delaware River portrays the early use of sealift for moving the force.

During the Civil War railroads and waterways played a

significant role in transporting and sustaining forces. The configuration of America's transportation system gave logistical advantages to the North over the South. The cargo capacity of steamboats varied-from the 250-ton steamship Factor-to the large steamship Sultana at 1700 tons. Supply officers calculated that an ordinary steamboat of 500 tons could carry

enough supplies on one trip to subsist an army of 40,000 men and 18,000 horses for nearly two days.

Utilization of the rail systems increased the ability to sustain troops for a longer period of time. When speaking of the Atlanta campaign, General Sherman explained, "A single stem of railroad, 473 miles long supplied an army of 100,000 men and 35 , 000 animals for a period of 196 days. Wagon movement would have created a greater demand. For instance, to have delivered that amount of food by ordinary wagons would have required almost 37,000 wagons with 6 mules each, allowing each wagon to have hauled 2 tons , 20 miles each day. "

The Spanish-American War was fraught with confusion, wasted motion and lack of coordination. The mobilization of men and materiel for the Spanish-American War was little short of remarkable. The major problems centered in the Port of Tampa, which served as the Sea Port of Embarkation for the Cuban invasion. This was a poorly equipped port, unable to accommodate rail-to-ship interface, resulting in port congestion. Port operations were so slow that at one point, railcars were stacked up as far north as Savannah, GA, a distance of over 340 miles.

In the early upload, the port support activity consisted of stevedores using wagons to move equipment onto ships. Because of poor wharf facilities, they had to move items over improvised platforms across the 50 feet from the railroad siding to the vessels in the channel. There was no shortage of supplies-only an inadequate system of accountability. Hence, there was very little chance of necessary items being in the right place at the right time. In spite of these shortcomings, a formidable fighting force was assembled and loaded on ships for Cuba.

In the beginning of U.S. participation in World War I, the Port of New York was the major Port of Embarkation. Altogether, 88% of troops bound for overseas went through this Port. Two main problems resulted-lack of cargo prioritization and congestion. The War and Navy Departments and the Shipping Board resorted to priorities to gain preference in transportation. As time went on, other government agencies in all parts of the country were tagging their shipments, so that practically all government freight was shipped by priority. This led to the reality that when ALL cargo was granted priority, NONE has priority. The result was incredible port congestion. At one point over 200 ships lay in New York harbor awaiting cargo and fuel, and railcars backed up along the Atlantic seaboard as far as Buffalo, NY. The commander's burden of packing, marking and shipping unit equipment was eliminated when the War Department issued a new directive. The new order directed that all units moving overseas would turn in their equipment prior to departure and draw new equipment on the other side. This was the early stage of prepositioned equipment.

At the outset of World War II and our preparation for Operation Torch in North Africa, sufficient supplies were not on hand nor properly warehoused in the United Kingdom to completely support the American portion of the force. The result was heavy reliance from the civilian workforce (particularly women) to sustain depot operations. A lack of logisticians made it impossible to unload supplies from the United States and to separate and store them for upload to Africa. Troops were completing their training, receiving equipment and moving to ports for embarkation. However, much of the equipment that had been shipped for these units could not be located because it had not been properly identified, thus requiring duplicate shipments from the United States. At the African Port of Debarkation, many supply ships arrived improperly loaded. Needed supplies were stored in the lowest holds and manifests were often lost or misplaced.

The Korean War again revealed lessons of insufficient port facilities, and the need for port security and logistical command and control. Gross mismanagement of the sealift ships forced the activation of the National Defense Reserve Fleet. An activation of 700 ships! Movement of ships from Japan and the United States jammed Korea's harbors, creating further delays. The average in-port time during the Korean War was 22 days. Compare this again with the average in-port time today of between 3-4 days. Host nation Support was heavily relied upon. Stevedores were used to help in-port labor and offloading consisted of cargo being thrown from the ships and into nets and carelessly dropped to the ground. Every time a case of rations was broken, something was stolen. It was estimated that we were taking a 10% complete loss on all subsistence items passing through the port.

In 1950, the transportation network became congested because too many people were giving directions in Pusan.

The new order directed that all units moving overseas would turn in their equipment prior to departure and draw new equipment on the other side. This was the early stage of pre-positioned equipment.

The Pusan Base Section was hurriedly organized. A few extra unassigned colonels in the headquarters acted as expediters and would take over operations from the regularly assigned lieutenants and captains, thus creating havoc. Throughout the Vietnam War, we continued to experience lessons unlearned from previous conflicts, namely, overloaded port facilities and need for visibility of in-transit cargo, and during Vietnam most cargo was transported by ship. The dependence on sealift placed a considerable strain on the limited port capacity of South Vietnam. The Port of Saigon had a deepwater berthing capacity for ten ships. This facility, which supported both civilian and military cargo, was overloaded. Vessels anchored offshore were called forward and partially discharged based upon priority of their cargo. This unusual process increased turnaround time tremendously. By 1968, only a third of almost 2 million tons of cargo flowing into Vietnam could be identified. The late Lieutenant General (Ret) Joseph Heiser summarized the importance of tracking cargo, "In each war, because supplies were low or nonexistent or could not be located, we lost critical time getting the support required by the combat troops. The worst situation is to arrive in combat with an excess of non-critical items and a shortage of critical items."

The Grenada experience revealed a lack of sustainment enablers. Sustainment supplies had to be airlifted to the Grenada Airport by C-130's, but the airport only had the capability of supporting one C-130 on the ground at a time. Synchronization and prioritization became critical operational issues for support. While the 82nd could fight upon its arrival in Grenada, it could not sustain itself for more than three days at a time.

During Operation Desert Shield/Storm, port clearance challenges and lack of material handling equipment became evident problems which eventually contributed to the six month requirement to build the combat force. Because of the ultra-modern and expansive port facilities in Saudi Arabia, we didn't encounter space problems that had been prevalent in previous conflicts and deployments. However, this brought about one of the biggest challenges during Desert Shield-the ability to perform accelerated port clearance. This was the first major war where the United States shipped most of its required equipment and supplies by container, thus optimizing strategic lift space. Thousands of containers passed through the Ports of Debarkation during the Gulf War buildup. Approximately half of the over 38,000 arriving containers had to be opened to find out their contents and who it belonged to. Once contents were identified, delivering the containers

forward proved extremely challenging. Rough terrain container handlers were scarce. The XVIII Airborne Corps had only 8 handlers to service an entire corps-sized force. As the trailers and cargo moved forward, receiving units often lacked the capability to unload them. The increased turnaround time for vitally needed trucks further exacerbated the already difficult job of port clearance and onward movement. As you can see, we also required the use of Host Nation assets.

In Operation Restore Hope, DoD again relearned the lessons of lack of Reception, Staging, Onward Movement and Integration (RSOI), enablers and automation capabilities for joint movement control. The inability to synchronize airlift, sealift and the arrival of port operators during Operation Restore Hope in Somalia contributed to significant challenges. At the Port of Mogadishu, essential port

bility, cap on theater personnel and a requirement for rapid force closure over unfamiliar terrain, including the flooded Sava River, presented a formidable challenge. The iron soldiers of Task Force Eagle did a magnificent job with deploying 25,000 troops, their equipment, sustainment, and life-support, more than 1,000 kilometers across former Warsaw Pact countries during the dead of a Balkan winter.

Operation Noble Anvil (Kosovo) was the first all-air war, which in turn produced its own set of problems. The airlift operation completed during Operation Noble Anvil was nothing short of astounding! As you heard it said many times during the conflict, the war was completed from start to finish using nothing but air power. The piece of the air power equation that didn't get as much press was the total number of sorties completed during the Kosovo War. Sealift was not used to deploy any forces prior to the agreeoperators, the 7th Trans. Group, were unable to arrive in theater until several days after the first ships arrived. Much of their equipment did not arrive until D+46. At the airport, more than 50% of the main body of the 10th Mountain Division arrived in country before the Army had an Arrival/Departure Airfield Control Group organized. Joint Movement Control was hampered by the inability to influence strategic flow. As a result, visibility of assets and force tracking were lost. Without essential automa-

We as a transportation and logistics community do a great job in reviewing past conflicts and identifying our shortcomings in each operation, but how well we avoid mistakes of the past is another matter.

ment signed on 9 June 99. The airlift and air war price tag includes a robust involvement of tankers required to sustain an air operation of this magnitude. After the agreement was signed on 9 June 99, the force comprising Task Force Falcon was required to move into the US Sector of Kosovo. It was at this time that the decision was made to use two of the US's newest LMSR's to move, the yet to be validated requirement, from Germany to Turkey via the Straits of Gibraltar. Use of the Bob tion capabilities , the Joint Task Force was unable to receive critical reports such as air and sealift movement data. The combination of late-arriving port operators and automation capabilities resulted in the Joint Task Force's inability to adequately prepare for or execute reception and onward movement of arriving forces.

Operation Uphold Democracy in Haiti was another operation which demonstrated the importance of Joint Unit Deployment and the ability to adapt to changing missions. The initial mission for Operation Uphold Democracy in Haiti was peace enforcement. All plans and support requirements were based on the 82nd Airborne Division's needs. While en route to Haiti, the mission literally changed in flight, from forced entry to peacekeeping, which negated the need for an airborne assault. As the planes were recalled to the port of embarkation, the 10th Mountain Division was alerted and subsequently deployed. The difficulty in rapidly adjusting to such a change demonstrated the impact of the lack of an automated system capable of reconfiguring forces and their accompanying support requirements with little or no notice.

Operation Joint Endeavor in Bosnia which involved the rail movement of troops from Germany and marked our Army's first major operational deployment via rail since the Civil War. At the time of execution, the rail deployment plan was based on a planned deployment rate of 20 trains per day As the deployment began, it became apparent that the rail capacity would only throughput about half that rate. Ad-hoc force tailoring decisions had to be made to compensate for the reduced rail lift capacity This combination of ad-hoc organizations with unknown capa-

Hope was significant as it was en route to fulfill its mission as an APS-3 prepositioned ship, in Diego Garcia Hope was required to download its partial APS3 load in Antwerp, proceed to Bremerhaven to load TF Falcon , take them to Greece, and return to Antwerp to continue her previous mission. Soderman was in a reduced operating status in the US and was activated in less than four days. The movement of both Hope and Soderman, the time that it took to load them and deliver their respective cargoes, exceeded all expectations of their capabilities.

We as a transportation and logistics community do a great job in reviewing past conflicts and identifying our shortcomings in each operation, but how well we avoid mistakes of the past is yet another matter. We have repeated many of the lessons we're supposed to be learning rather than fixing the problems and not having to re-learn them. Our jobs as senior logisticians and transporters is to assure that we institutionalize fixes to problems.

This leads us to present-day operations. Today DoD faces an increasing number and a much more diverse role to play in worldwide operations. It is not just combat operations anymore. Present US military operations represent a trend in the increasing number and diversity of worldwide operations that DoD has been engaged in since the end of the Cold War, from the U N.-directed monitoring of the treaty between Egypt and Israel at the Sinai in 1992 to the latest effort in Kosovo. The world remains a very dangerous place.

There is little chance the United States will confront a Soviet-like global military challenge in the near future. Nevertheless, threats and threatening conditions exist today. The past ten years have been marked by great

dynamic change and great uncertainty. The violent mix of global, political, economic and military conditions will continue to bring stress to international order.

Although the fundamental purpose of warfare is unlikely to change in the future, the conduct of war will be far more complex than it is today. The lessons of Operation Desert Storm and subsequent operations in Southeast Europe have not been lost to our adversaries who in the future will be far less likely to array conventional forces against the United States. Terrorism, weapons of mass destruction, information operation, and infrastructure war are just a few of examples of the types of attacks that are out there.

During the foreseeable future, these broad and complex dangers will continue to represent a formidable barrier to the emergence of a stable, secure, and prosperous international order and will pose significant implications for U.S. military planning and force deployments. Thus, we must maintain focus across the spectrum of global issues and continue to maintain American might.

Maybe we have learned lessons from previous wars? But how well have we integrated changes resulting from those lessons into progress for DoD? At the present time there are 54 C-17's in the DoD inventory with plans to acquire 134 by FY05. At the present time they are delivering at a rate of about 13 aircraft per year with plans to increase that production to 15 per year. Delivery of the Large Medium Speed Roll-On/Roll-Off Ships (LMSRs) is in full swing with over 50% of the vessels already delivered to the government. The United States Transportation Command is the Department's executive agent responsible for establishment of the Voluntary Intermodal Sealift Agreement. As most of you are aware, the Secretary of Defense established the VISA program into Law in January 1997 and stage three contracts have already been signed. USTRANSCOM anticipates contracts for stages I and II to be signed in the very near future. Expansion projects for the Ready Reserve Force RO-RO's are fully funded and also in full swing. Of a total of seven projects, four have been completed and add 108 thousand square feet to the surge sealift capacity. When the program is complete, an additional 200,000 square feet will have been added.

The USMC Maritime Prepositioning Force Enhancement program is presently unfunded. However, most recent language in the 1999 House Appropriations Committee report directs that an existing LMSR be transferred to the Marine Corps. It further recommends $320M for procurement of one additional LMSR for the Army be funded. As we speak, the SASC is deliberating on whether to fund the 20th LMSR. Finally, although requests for proposals have yet to be finalized, DoD is pursuing a proposal to modernize the C-5 aircraft, which is estimated to provide an additional 40+ years of service life.

We continue to make progress in our prepositioning strategy to meet our force projection requirements. An 8th brigade set of equipment will be fielded as directed by the Defense Planning Guidance and be placed in a Prepositioned status beginning in FY00 with completion in FY0l with APS-3. The entire additional set of equipment will be positioned aboard the 8 LMSRs programmed for PREPO and will not require additional shipping. Things are on-track.

Our en route fuels infrastructure is fully funded in the MILCON program. We currently have over 400 into-plane contracts in place at commercial airports around the world and we are also aggressively seeking privatization options at several en route locations so we don't have to build and

maintain massive infrastructure.

So where do we go from here? Discussions about future initiatives lead us to the Chairman's Joint Vision 2010 concept. As most are aware, there are four operational concepts that make up the overarching JV2010 concept. Dominant maneuver, precision engagement, full-dimensional protection and Focused Logistics. Within the Focused Logistics concept, however, this audience is no doubt most interested in the Joint Deployment tenet. The Chairman clearly stated the overarching goal for this transportation tenet with the challenge, "We must be the world's premier deployer." Toward this end we now attempt to take advantage of the explosion in transportation technology now, and in the future.

Without getting into specifics, we are presently monitoring concepts in lighter-than-air technology, high-speed sealift and lighterage, shortfield take-off and landing advances, to name a few. These are programs that offer great promise of increasing the amount of people and cargo delivered in a much shorter time frame. Advances in the commercial transportation industry abound as high-speed ferries are now in operation around the world carrying people and cargo at speeds in excess of 50 knots!

Our JLOTS program, continues to enjoy both success and joint partnership between Army and Navy. There are three JLOTS initiatives presently being pursued, all aimed at augmenting the capability to conduct JLOTS in a Joint and in harsher, more severe weather conditions. The Rapidly Installed Breakwater (RIB) is a sea state mitigation device whose final Advanced Technology Demonstration is scheduled for Jul 2002. The funding stream for Sea State 3 crane initiatives is progressing and we're expecting to have the Advanced Technology Demonstration for this by start of FY00. JMLS system is in the Operational Requirement Doctrine phase and progressing well. The significant achievement of the JLOTS program is the Joint cooperation between Army and Navy that we presently enjoy.

You can see we have had many challenges which we have overcome. We did this through good ol' American know-how and working together as one team. However, we face even greater challenges in the new millennium. Much more complex and diverse. I don't have all the answers, so I challenge each you to think of possible solutions to these future needs. The need for the United States to deploy forces abroad and be the world's premier deployer for a wide range of operations will always be there. But, as demonstrated in the partnerships established in the CRAP program and the eminent completion of the full VISA program, the close relationship between the powerful civilian and military transportation industries will continue to be the key to our success. Again I thank you for your gracious invitation, and I will continue to be here to help in any way I can. Remember, nothing happens until something moves.

Dialogue

Crowe

Mike, I felt your address was most interesting as you provided a snapshot of the past and where we need to go in the future. What is the most significant roadblock to moving information systems that are presently available that are benchmarked in some ways with the private sector? What do you see as the most significant roadblock and how can we as an Association help?

McDuffie

First, the logistics community has never failed our military, we have always succeeded. I think we have an effective system to a great degree because of the redundancy. So when I talk to the CINCS and key leaders who are used to having success in logistics I remind them that we are becoming smaller and that sizeable investment in logistics modernization is needed-similar to what we do in a new bomber or a new fighter. So one of the first challenges is to be able to stand and make our case with military leaders that we have got to truly take a revolutionary approach to modernization. Our systems must be web-based and if they are not I don't know why we are spending money on it.

Secondly, it is necessary to change the attitude of our workforce from the standpoint of just accepting change. They have a legitimate concern-they are worried about their jobs if a new system is introduced. We must figure out how to bring new capabilities, and to convince people that they are going to be a part of it. These are just two of the issues we face in bringing technology on sooner.

Crowe

Mike, sort of a follow-up. A lot of what you and I see is a need to work the culture issue. It is difficult to ask people to leave behind a known answer and knowledge base. That is also a difficult issue in the private sector. You talked a lot about changes in asset investment. We hope to look at where these assets are going to come from to handle this as opposed to one large significant surge. The point being, asset utilization is going to become paramount Looking ahead, we talked about globalization-and in fact the world is getting smaller. Is it thinkable that we can incor-

porate global support into this asset equation or are we going to do this on our own? Is that thinkable out in the world that you can see?

McDuffie

Absolutely, we have got to get better at leveraging other nations' capabilities when we conduct the multinational operations. We have come a long ways in Bosnia, although it did take some time. After six months of Bosnia we started some things; the United States took care of fuel and the Germans did a lot of transportation and so on. We are pushing an agreement now called Acquisition Agreements and it is really an evolution of what the old NATO agreements were but these are bilateral between us and another country. The agreement allows us to exchange goods and services, however, not major weapon systems. Another thing we are trying to do is set up a matrix that displays what capabilities various countries are bringing to the fight. That is a tough step to get 19 nations to agree. We cannot go it alone. For instance, when you look at strategic air-it is the United States, so everybody comes to us.

Crowe

Mike, you have really set the tone and I believe that over the last decade or longer we have really forged together a unique partnership between the private sector and all of you in the Defense business. Mike, I want to thank you for a great keynote. In my years as Chairman you have had the most unique approach to our keynote, and with lots of humor and insights. Thanks for a job well done. DTJ

screen presentations, charts and diagrams have been omitted from this section due to space constraints.

Corporate Profile

Dimensions International, Incorporated (DI) was incorporated in 1988 with headquarters in Alexandria, VA and 27 locations nationwide.

D DI has been ISO certified since November 27, 1996. DI is an employee owned company.

Corporate Capabilities

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D Information Security Services

D Human Factors Engineering

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l to r: Mr. Ronald T. Sorrow, Ex ecutive VP of Sales & Marketing, TRISM; Mr. Bruce Moore, V P of Cargo Applications, Sabre, Inc.; Mr. Bill Villalon , VP & Head, Global Marketing, APL, Ltd.; MG Kenn eth R Privratsky, USA, Command er MTM C, Forum CoChairman; Ms. Bonnie Green, D ep u ty Maritim e Administrator for Inland Wat erway s & Grea t Lakes, US DOT, Maritime Administration; Mr. David Swierenga, Chief Economist, Air Transport Association of America; Mr.John Gray, VP & GM, Business Development, Union Pacific Railroad

Mr. Ronald Sorrow

Executive Vice President Trism, Inc.

The subject of our panel today is the Changing Environment. I guess it depends on the perspective of how you look at change today. As Alan Greenspan said, "We do not fully understand the new system dynamic," or as another great American Yogi Berra put it, "The future just ain't what it used to be". It is clear that there may be different ways of thinking about change - but there is clearly no debate that change is a known constant in our business and personal lives. And these future conditions will in large part determine our business success as well as our personal happiness.

The panel discussion issues today will include a discussion of changing transportation environment from many different perspectives. All major transportation modes which are directly involved with the DoD are participating here. We will look at current and future impact of acquisitions, mergers and consolidation trends. We will examine the governmental and regulatory environment in which we must operate and anticipate. Lastly, we will look at the impact of information technology on our ways of doing business.

With the help of Ed Honor and the NDTA, we've assembled some of the leading talent in the industry today John Gray, Vice President, Business Development for the Union Pacific Railroad; Bonnie Green, Deputy Maritime Administrator, Inland Waterways and Great Lakes for the DoT, Bill Villalon, who joined us from Singapore, APL Vice President, Global Marketing, David Swierenga, Chief Economist for the Air Transportation Association of America and Bruce Moore, VP of Cargo Applications for Sabre. It is an incredibly bright and talented group and I will introduce each one separately and then they will begin their presentations.

Mr. John Gray Vice

President, Business

Development

Union Pacific

Railroad

I would like to thank all of you for the opportunity to speak to you today concerning the rail industry. What we are going through right now; some of the issues we have in

the industry; how those affect some of the military issues that you are having to deal with; and then some of the trends we see that we think will be influencing how we deal with military freight in the rail industry. I have tried to keep this principally to a rail industry look and military transportation challenges. For the most part, I think all of the information that we have here is from a rail industry perspective.

Today I would like to briefly discuss mergers in the rail industry, and their relationship to asset productivity; and how these influence our ability to serve some of the military needs; electronic commerce; and intermodal developments in the rail industry. I would like to talk about those within the context of some of the needs that have been identified to us by the military for what they are looking for in their rail carriers That there is a need for assured access to the commercial assets that are available, the commercial networks that are available. On time on plan delivery of material; and lastly the use of commercial best practices both to simplify the business for the rail industry and for the military.

Looking first at the issue on mergers. The essential truth that has come about in the rail industry in the last five years. As a result, it has been replicated in Mexico where again there are only two rail carriers. It is a basic part of what the rail industry has evolved into over this time period. And what we have seen it result in is there is a lot more head-to-head competition than there has been in the past. Broader geographic coverage by each carrier. We go more places. Because of this there is more ability to provide single line service and usually better controlled service. We have at last in the industry the opportunity to do some things in interline service improvement. Interline service improvement represents initiatives that have been hanging for ten years and haven't really gone very far. I think I attended my first AAR board meeting concerning interline service improvement almost eleven years ago and we still haven't seen much progress on it. One of the reasons we saw very little progress was because there were so many rail carriers you had so much coordination to do, that it became a rather daunting task! With a limited number of carriers, a limited number of interchange points that are critical to us and consequently the ability possibly to make this program work. But the big thing that has been driven by the merger movement is emphasis on asset productivi-

ty. The consumption of capital in this industry is enormous. At our own railroad on a $10 billion a year operation , we consume about $2-2.4 billion worth of capital each year. So in the last three years, we have spent close to $7 billion dollars in capital improvements again on property that is about $10 billion in revenue. Now this is not dissimilar to the other rail carriers. Certainly we have the largest of the capital budgets because we are the largest of the carriers.

The rail industry hauls roughly 40% of the freight that's moved in the United States and about the same proportions for the Canadian carriers. Now we do this and unfortunately only take in about 11 % of the revenue that is available for transportation. Something which I continually think makes us either very efficient or very stupid in terms of our pricing policies. But the bottom line is that over the last twenty years, since the industry has been deregulated there have been some dramatic increases in the efficiency and productivity in the industry. Volume is increasing a little bit however revenue has actually gone down and that is one of the issues we are continually dealing with. As that with the downward trend in revenue with deregulation, we have a high productivity curve to maintain the profitability of the systems.

We are seeing an expanding traffic base which is pushing up the needs for additional capital dramatically as we look forward over the next fifteen to twenty years. The implications on this is that capital productivity is going to be a critical issue. You can't spend this much money and stay in business without making this capital extremely productive The assets that we utilize are going to have to compete on a very tough playing field if they are going to be funded. Non-traditional funding sources for assets will be in demand in places where we can look at acquisitions of assets in a different way from what we traditionally do. And specifically for our freight handling equipment high levels of productivity are going to be necessary if we are going to be able to replace and sustain the freight handling fleets.

So what does this mean to the military. We handle a lot of military equipment going to training exercises. These are handled generally on sixty-five foot but mostly eightynine foot chain tie down flat cars. Heavy duty flat cars that quite frankly have very little commercial application. They are principally in our fleets to handle military equipment. The average age of these cars is thirty and half years. Under the current rules without full rebuilds on these cars, they will have to be retired. The average will have to be retired in seven and a half years. Freight cars are allowed to get to forty years of age and stay in operation . But they will have to be retired. The other major car type that we utilize for military transportation are intermodal flats that can handle twenty foot containers. Again the intermodal flat car that handle twenty foot containers as a specialty item open top flat car, is a disappearing animal. It is one which is not a useful commercial asset to the extent that we have twenty foot container capable flat cars other than our commercial double stack equipment. The double stack equipment that handles the commercial international business and a growing part of our domestic container business is where we are growing our container fleets at present and where we expect to grow them in the future. At the same time that we have these fleet needs and challenges as we go forward, we also have the issue that total military utilization of this equipment has declined in the last ten years. Obviously a lot of this decline is due to limitations on training funding.

It is due to limitations on funding for a variety of sources. We understand the reasons for it . Each year this equipment produces generally lower revenue levels for us than the past year. So we need to look more aggressively in this area to determine what we can do to adopt best commercial practices to some of the freight equipment that will continually be available. How we can utilize commercial equipment and adapt either military tie-down systems or military loading configurations. So that we can more effectively use commercial equipment to supply some of these needs.

The potential solutions for this are fairly straight forward. But they are not something that happens immediately . We have looked at issues on joint venture of equipment with Department of Defense and of course adoption of standards that permit more effective utilization of commercial equipment. The other issue is one that is a little bit more complex and that is an improved scheduling of the utilization of some this equipment. A flat car that goes to a training exercise at Ft. Irwin for example. The training exercise will be about three weeks long typically. During that period of time, there is not enough time to reposition that flat car across the country reload it for another customer either military or commercial and get it to destination and then get it repositioned back into Southern California to return that same unit from the training exercise.

The second area I would like to talk about is in the area of electronic commerce. It is something our business is making huge strides moving towards almost exclusive electronic interrelationships with our commercial customers. Obviously, we still have customer service people to pick up the phone. But the vast majority of information our commercial customers receive or give to us about their shipments; about the whole customer service process comes thrnugh the electronic network. More and more that electronic communication is through the Internet. We do mainframe to mainframe communication with our customers. We do PC to mainframe communication with our customers. But more and more we are seeing both the demand from our customer base and from our own ability to serve these customers be focused on Internet solutions. We feel that in reality truly effective use of the rail network as we go forward during the next five to ten years is really going to be based around the ability to use the electronic information systems. Looking at it from our perspective and also from the perspective that most of our commercial customers have demanded from us in terms of Internet solutions. There are a lot of good advantages to it. It can be run on any type of workstation. The access is worldwide. For the most part, our customers find it very easy to use. Particularly as we are getting the Internet systems more refined. It is more automatic in the updating of software, the communication is realtime and for most of our customers that is very important part of our ability to provide them information and then we are able to provide through the technology of today very effective security on the information we pass back and forth with our customers. In fact, we find the security tends to be better on the Internet than on our mainframe to mainframe communications at this time. But most of the day-to-day transactions that our customers need to accomplish with us can be accomplished through this medium right now. It has become an essential part that our customers have found in the way they do business with us. Now if we look at what is happening in some of the electronic environment in the mili-

tary, we also see a lot of emphasis on improved electronic communications and we have seen increasing emphasis on the issue of Internet solutions. The required improvement in intransit visibility is something that the military has indicated that is very important to them. It is something that comes almost naturally through a lot of the commercial systems. It is ironic that is something very important to the military but it is much easier because of the environment in which the commercial customers work. Our commercial customers in fact tend to have much better visibility of their shipments through our network than the military does. Simply because of the direction of the electronic environment they are able to utilize. We find it more cost effective for both parties when we are using this type of environment.

So what are some of the issues surrounding our military customers. Number one is the government bill of lading. There are those of us that were convinced that the government bill of lading was invented in prehistoric times and hasn't been modified substantially since and particularly the people that have to use it. Everything on the government bill of lading that goes into our system has to be done by hand. There is almost no ability to automate the government bill of lading within the commercial systems. I know that there is emphasis on and programs to adapt it a little bit more effectively or look at commercial alternatives. Look at different ways in which commodities can be described so that they fit within the commercial framework. But quite frankly as long as the government bill of lading is in its present form, it is rather difficult for the industry to provide the level of service for military shipments that they really need We have seen a great deal of progress in that area for both the military and other government applications.

One thing that is important in this is carrier involvement up front All carriers don't look the same. We don't use the same type of documentation for our shipments by rail as FedEx does for the simple reason we need different types of information. We don't use the same documentation that water carriers do again because we need different types of information to effectively manage the operations on our system. So one size does not fit all. Quite frankly it is something we found very encouraging the level to which the various government agencies are willing to bring the carriers in up front and work through the issues that can make the electronic commerce more effective. We think in general that the whole electronic area represents one of the biggest win-win opportunities between the rail industry and the government that we have available on the table today. We talked about the bill of lading and the critical nature of the problem with it. Since we started Internet Bill of Lading System, we rarely have the same issues we have traditionally had in the past on bad information getting into the system and giving us problems operationally.

The last area I wanted to comment briefly on is the intermodal environment. The intermodal business is a major area of growth for the rail industry. For the two Western U.S. area rail carriers, it is about a $4.5 billion dollar business for us and that is for the two of us on a business basis about $18-19 billion with $4.5 billion of that is the intermodal business. It is an area in which we have seen double digit growth in volumes and revenues over the last ten years. One of the things that have developed is that there are a lot of intermodal facilities around the country. The commercial intermodal facility network is extremely dense it covers an awful lot of areas that both

the commercial customers and military need coverage from. During the last fifteen years in particular, it has become intensely integrated with the network of ports The largest stream of intermodal traffic that we have is from the Port of Los Angeles. In fact it loads onto our railroad about six to seven trainloads of containers daily and these are 250 container trains. In the past, there has been a combination of containers and trailers that move intermodally. There still is some of that combination but essentially for us, the intermodal business has become containers. We will continue to convert the vast majority of domestic business over to container product rather than a trailer product It is important to us for cost and productivity reasons It is also important for a lot of our customers in the level of service we are able to provide in containers versus trailers. What this says and getting back to the equipment issue very briefly, is we are going to have an awful lot of equipment incapable of handling containers. But for the most part this equipment is most effectively used with forty foot and higher containers in length - forty-eight to fifty-three foot containers and really most of this is designed to handle effectively fifty-three foot containers. One of the things that we have found is that obviously the intermodal network does not always get to everywhere the military needs to go even within the United States The net result of this is that a lot of containers have to be directly loaded at a military installation. Particularly some of the ammunition installations. We have also found that the ability to do this is not what it needs to be either for the military or for ourselves. Some of this comes from the use of what has become a non-standard intermodal container. It certainly not non-standard everywhere in the world; it is certainly not non-standard in a lot of the water carriage; but it is non-standard within the U.S. domestic intermodal network.

Next steps. Where do we go? I think we are both working in a changing environment. It is an exciting environment. We both need to do more with less. I think we are both getting towards that. We certainly need to work together to deal with some of the equipment issues. There has been a group formed to start dealing with the flat car issue. We think that is a very encouraging sign. We think there is time to deal with issue effectively. We have got the time to get in place to build the equipment that is necessary if new equipment is necessary and solve some of these problems. It is not something that is going to fall apart in the immediate future but it is something that is time to address know so that we don't have an issue several years from know. We are making real good progress jointly on a lot of the electronic commerce issues and I think it is an environment that we need to continue to make progress on. I think we are moving forward on the intermodal scene. But that is an area where I think we need to do more. I need to learn more from both sides of what the needs and capabilities are. Finally and I think that this is an important part of what all of us are all about and that is to nurture the environment which has developed in dealing with these problems

Mr. Bill Villalon APL Vice President, Global Marketing

Thank you very much and good morning. I am very pleased to be here today. I think my panelist that went before me and the opening remarks suggested some com-

The fundamental relationship between the military and the commercial service providers began to change in the Gulf War.

mon themes . I as well will be touching on some similar themes. One in particular that I think is noteworthy that I will be developing today will talk about what I see to be the coming on a lot of the commercial developments and activities and the direction of marketing in the commercial world and some of the parallels that can be drawn with military activities in the Post Cold War environment. I think this Forum again offers a very good opportunity to blend both the commercial and defense communities to meet and compare notes on trends, technological developments and evolving needs.

As you know, major changes have been underway in both the ocean and intermodal sector. My hope is to provide you with a carrier view of where we believe we are today, where we think we are going from a technological perspective and also a service expansion and industry structure. As a U.S. flag operator with some 150 years of history serving the U.S. trade lanes, APL has been a key participant throughout much that period in the sealift effort through two world wars, conflicts in Korea and Vietnam and most recently in Desert Storm. So we have some perspective on the U.S. sealift needs and capabilities and how these have evolved over the years. Today we see important parallels between the new requirements of our commercial customers and those of a military whose peacekeeping role in the post cold war era involves an entirely new vision of engagement in readiness around the world and I think as a launching off point we may wish to consider what our commercial customers are telling us about the changing environment of their business.

First, their business is increasingly global. They source and distribute worldwide. They require global reach of their suppliers and door-to-door intermodal capabilities. Product life cycles have been radically compressed. Time to market is very short and this requires fast, flexible supply chains that can quickly ramp up during implementation phase and then be disassembled equally as quickly. Pointto-point transportation is giving way full service logistics that emphasizes business solutions, value added contingency planning and closer and more cooperative shipper and carrier relationships. A highly competitive global market place demands on-time delivery; guaranteed space and equipment availability and adherence to strict performance metrics . Adaptability is critical with a need for full visibility into the supply chain pipeline. The customer must be able to easily aggregate, assemble and analyze data and then quickly make decisions based on that data with the carrier providing a transparent service overlay to the supply chain directed by the customer. Shippers are basically telling us they want to streamline their transportation and logistics.

They want fewer carriers, and fewer interfaces and more comprehensive service offerings and simplified pricing .

As the physical port-to-port movement in the ocean shipping industry becomes more of a commodity business offered by many, logistics providers increasingly differentiate themselves through a combination of information management capability, landside activities and added value services. Global reach - the ability to rapidly deploy assets to hot spots. Ready access to assets and capacity when and where needed. A growing emphasis on full service logistics rather than simply point-to-point transportation. Flexibility to sustain or quickly dismantle pipelines in response to changing global situations. Increasing reliance on information technology to build this flexibility into the supply chain. Does any of this sound familiar? I believe it should. I think that just as the nature of conflicts and U.S. military engagements have changed in the Post Cold War environment so has the nature of defense logistics. Multiple simultaneous conflicts; smaller deployments of ground forces; deployment over longer periods of time in peacekeeping and reconstruction situations. All points to new emphasis on the sustainment phase of the sealift.

At the same time, the fundamental relationship between the military and the commercial service providers began to change in the Gulf War reflecting important operational and industry developments. At the heart of the new relationship, is moving away from viewing transportation as a series of isolated transactions and taking a more holistic or supply chain pipeline view. This approach of using customers operation commercial or military comprehensively focusing on customized solutions to manage inventory, control costs, reduce cycle times and improve efficiency.

Our industry has seen tremendous innovation over the last decade. As industry leaders such as APL, have invested heavily to meet changing customers demands. Advances in information technology have given us new capabilities to track customers freight down to the stock keeping unit level. From the inputs to finished products, reaching from the suppliers factories in very remote areas with poor infrastructure to the end users warehouse or even the store shelf of the retailer. The shipment status information also forms the basis for electronically generating shipment documents, exception-based management reports that identify potential bottlenecks in the supply chain and permit quick adjustment of routes and schedules to meet changing conditions and to measure internal and vendor performance. From even remote locations in Asia, the Middle East and elsewhere, we can now obtain detailed packing list information in as little as thirty minutes of its entry and then be able to compare this information halfway around the world with purchase orders or to modify shipping instructions as changing conditions demand. This information previously took anywhere from three to ten days to reach our customers. We have also been able as commercial and military needs have demanded to quickly deploy trained personnel with local expertise in fairly remote areas and again with relatively poor infrastructure and to develop appropriate information and communications tools and to expand the pipeline capability. Most of what our commercial customers are telling us that they are seeking out. Because of cost, more and more remote locations but they are totally unwilling to compromise information and this has created obviously a lot of potential opportunities.

In fact when we look at how the competition is moving forward in the area of global trade, shortened product life cycles requiring very fast times to market and com-

pressed shipping seasons to accommodate market demand while minimizing inventory carrying costs. The parallels between the commercial and military I believe are quite striking. Industry focused initiatives likewise designed to reach broad consensus on electronic business interoperability standards among supply chain partners are also moving forward. These include common formats, business processes, content and systems interfaces. Energized by the Internet platform, these initiatives hold the promise of truly seamless synchronized order fulfillment and demand planning across what is now termed as the extended enterprise

APL for its part has developed a family of complimentary Internet-based proprietary tracking products focused on obtaining high levels of supply chain visibility. For example our net track system tracks orders and inventory at the stock keeping unit level and our home web-based portal the first, the first of its kind in the industry, allows the user to custom format data to enable fast shipment tracking and analysis of shipment status information via the Web. Regulatory reform under the Ocean Shipping Reform Act (OSRA) of 1998 reflects ocean carriers new capabilities in the new more cooperative shipper carrier relationships they have helped foster. OSRA encourages individual confidential contracting and eliminates the public filing of confidential contractual information. Removing limits on the ability of any one or more shippers or carriers to enter into to contracts and to recognize multi-trade and global logistics. Armed with this new flexibility carriers and shippers have been freed to join forces and put mutually beneficial individualized logistics solutions together free from interference from either government or competitors.

Last but certainly not least industry consolidation has been a fact of life in recent years. I don't presume to minimize the concerns of the defense implications of recent mergers and acquisitions which pair foreign and traditional U.S. flag operators . But Talso want to make sure we don't overstate the case either. The structural changes in liner shipping we believe are no different than the wide range of consolidations that are experienced in cross border acquisitions, mergers and strategic alliances and other industries. Passenger airlines have formed international alliances as most of us know to serve more markets, share terminals and ground services and to achieve economies of scale through expanded networks and bundled services. This is likewise true in the telecommunications sector. In all of these sectors as in ours, there is an common theme and that theme is a continuing downward pressure on pricing. Excess capacity and competition have steadily driven prices down to where carriers must optimize utilization and control internal costs in order to maintain high service levels. Liner shipping in all cases is a highly cyclical business and with high fixed costs in a relatively uncertain revenue stream. U.S. flag carriers are additionally constrained by unique labor tax and regulatory requirements. Consistently, we are lagered performers in the 80s and 90s in the U.S. equity markets. So yes, traditionally U.S. flag carriers turned to sources of "patient" capital overseas. In so doing, we believe we have gained much more than we have given up and the benefits extend to our worldwide sealift capabilities as well. Thru mergers , acquisitions and alliances, ocean carriers have combined and leveraged their operational strengths in multiple trade lanes to offer service and operational improvements and improved global coverage. By rationalizing vessel equipment and terminal assets, they have optimized utilization and significantly

improved their operating efficiencies These improvements are of clear benefit to the commercial and military interests and frankly without foreign capital that probably would not have happened The primary difference from DoD's point of view is that the transaction of the vessel owner instead of taking control of assets the military is on demand access to vessel space and an extensive global intermodal system under a pre-negotiated contract. Again what characteristics does a successful ocean carrier bring to the table in the 21st century. Global surface reach , optimal access to and utilization of assets through strategic alliances. Customized confidential contracting. Supply chain solutions. Access to IT system that can link modes, terminals, equipment suppliers, vendors and customers, all of the participants in the extended supply chain and to provide customer visibility and control over the supply chain. Whether it is the Internet or the desktop. Taking full advantages of the efficiencies of this new transportation logistics environment does require us to let go of some older functions. As we learned in the Gulf conflict, military sealift is no longer a matter of simply redeploying hard assets that is ships . It is by gaining immediate access in an emergency situation to a privately financed and operated pipeline of ships, trains, trucks, containers, terminals and importantly an informational network and infrastructure. We believe this carries a far greater value to U.S . sealift capability than taking control of ships independent of the rest of this network which I have described. I might add that this same trend towards outsourcing is widely prevalent in the private sector. A growing number of manufacturers have been persuaded to outsource some or all of their logistics capabilities and supply chain activities to allow them to focus on their core business. APL learned this lesson ourselves earlier this year with the sale of our stack train assets to a private operator. At a certain point, it became clear to us that owning , maintaining and operating an intermodal network to support global, international and domestic requirements was becoming cost prohibitive. By retaining an equity participation however in Pacer International, the buyer and building the right combinations of guarantees into the sale, we got what we really needed which is assured access in control rather than ownership and I think this is a useful dichotomy. The second assumption we must reexamine involves the historic nature of the transportation and logistic transaction. It may have made sense in the past to negotiate vanilla transportation services as a series of transactions based solely on volume and price; but because the supply chain approach is about a continuous flow of cargo managed at real time its focus is service and value added. A closer kind of relationship between a carrier and a customer is needed one in which we work together in the early stages of discussion on items such as sharing information about each others operational capabilities, developing solutions, planning for contingencies and clearly delineating lines of responsibility and communication. Thus the value of the total contractual relationship, service guarantees, volume commitments, value added market conditions will set the ultimate price we believe.

The Voluntary Intermodal Sealift Agreement (VISA) and vessel contingency contracts helped to unlock the potential of the supply chain pipeline in a contingency. These commit a specified portion of vessel space and intermodal assets on demand in stage increments at pre-negotiated prices. They are extremely sophisticated contracts that view the defense logistics supply chain quite comprehen-

sively. They have a high degree of flexibility built in to accommodate rapidly changing conditions and they involve close cooperation between commercial carriers and the military. A good example, representatives of the Defense Department, Maritime Administration and U.S. carriers have been meeting regularly as the Joint Planning and Advisory Group OPAG) specifically to develop supply chain models for supporting different types of conflicts worldwide. We continue to discuss issues such as the value of potential business loss or commercial commitments unfulfilled as a result of sealift activity and the need for peacetime cargo commitments to support the overall economics of this on call diversion of assets during conflict. But we believe these and similar details will be resolved overtime in the part of a evolving process that is inevitable and on balance overwhelming positive.

As we conceptually evaluate the economics of what I would term the U.S. flag equation as an ocean carrier, one of the clear advantages of being a U.S. flag is the ability to engage the offices of FMC to ensure free and open access to markets globally. As many of you are aware, the FMC is working to resolve a frustrating and unacceptable situation that persists in the Peoples Republic of China. Whereby we are precluded from operating land based activities and must turn to government-owned entities who effectively are competition to perform these functions. Chinese carriers conversely operating in this country have no such circumscription on their activities. Absent a strong FMC, the odds of ever satisfactorily resolving this and similar issues would be remote in deed. Again, this access is viewed as a material benefit by the ocean carriers.

In summing up, I believe I speak for the U.S. flag carrier community as well as for APL specifically when I say we are dedicated to making this unique private public partnership work and fulfilling our national security obligation as U.S. vessel operators. We are critically aware of the public trust placed upon us to deliver for the men and women on the front lines. We look forward to working with our military counterparts on an ongoing basis to provide creative solutions that assure their safety, relative comfort and effectiveness in the field. When you need us we will be there.

Ms. Bonnie Green

Deputy Maritime Administrator

Inland Waterways and Great Lakes

Well I very much welcome the opportunity to be here with you today and especially to share with you some insights on the changing environment of maritime transportation. Under Secretary Slater's leadership, we at the U.S. Department of Transportation with the active involvement of other government agencies and private sector stakeholders have been assessing the current marine transportation system along with the actions needed to ensure its ability to meet the Nation's needs in the future.

Throughout our history, America's port and navigable waterways have been a key factor in our extraordinary growth and prosperity. Navigable rivers and canals were, in fact, America's first interstate transportation system. A marine system or MTS as we have come to call it at DoT, remains an essential and valuable part of our Nation's overall transportation system.

Early this year, Secretary Slater established the Congressionally mandated Marine Transportation Task Force (MTS). This included users, service providers such as

federal agencies, ports, commercial carriers, shippers, labor, recreational boaters, fishermen, environmental organizations and other stakeholders. MARAD and the Coast Guard co-chaired the task force. The task force built upon efforts already taken as part of the Secretary's initiative. A major contribution of the report is to set forth in very understandable terms the value of America's marine transportation system. It provides economic value by affording efficient, effective, a dependable all weather transportation of people and goods. The report also addresses the very significant environmental value and recreational value of our marine transportation.

The United States fulfills its national security mission through a safe and effective marine transportation system. It provides national security by supporting the swift mobilization and sustainment of America's military. The task force took a hard look at the current state of marine transportation system. Similar to our highway system, our ports and waterways are becoming more congested. The infrastructure is aging. Many of the channels and berths are not able to handle the larger modern vessels in service today. Numerous federal, state and local agencies have overlapping responsibilities for infrastructure and operations. Lack of coordination contributes directly to inefficiencies, limited effectiveness and excess costs.

By 2020, U.S. trade will increase 100 to 200%. To accommodate this projected growth, ships will continue to increase in size and draft. These trends coupled with a 12% annual growth in passenger ferry vessel service and increased recreational boating will add stress to our marine transportation system. The report examines in detail the trends and competitive pressures confronting us over the first two decades of the 21st century.

Documenting the current state of the marine transportation system and analyzing trends are not of much use if we don't know the outcome we want and need. Task force members adopted this a vision statement which summarizes what our marine transportation system should be in 2020. Realizing this vision requires assured public and private sector commitment and actions. This effort leads us to identifying strategic areas for action. Including improved coordination among public and private entities and stakeholders. Identifying adequate funding. Insuring America remains globally competitive, highlighting the significance of our marine transportation system to our citizens, capitalizing on information technology and protecting the environment while ensuring the safety of all users. Let me stress that while safety is linked here to environmental protection, it is key to all strategic areas.

The ability to move people and cargo freely without infrastructure impediments or congestion delays is essential. The quality of the information systems is a key determinant of the safety, security, environmental soundness and mobility of the system. The development of information systems to monitor more effectively cargo, passengers and vessels both for the private sector and the government will serve commercial operations as well as incident response, emergency management and law enforcement.

Two primary goals of the Marine Transportation System are the safety of people and property and the protection of the environment. These areas are of paramount importance to all MTS users and stake holders. The rising demands for efficient and uninterrupted operations to service the protected growth in passenger and cargo movements should be balanced with the need to invoke safeguards and inspections to protect against the array of secu-

rity threats and to support military mobilization. Two main focus areas for recommended action are organized crime and terrorism and military mobilization and national defense. The Presidential Commission on Crime and Security in U.S. seaports will heighten awareness of security issues and the in area of cargo crimes, smuggling and terrorism and will develop a coordinated interagency approach to port security.

One of MARAD's basic mission areas continues to lie with the education of the maritime workforce. The shortage of good help is a topic the next NDTA panel will address in greater detail. The Maritime Security Program (MSP) and the Voluntary Intermodal Sealift Agreement (VISA) are programs that support competitiveness and mobility within the MTS as well as national security. MARAD's recent approval of the transfer of Crowley American Transport's three MSP agreements to Automar International Car Carriers three ro-ro vessels, all less than ten years old, provides a capability the military needs. To compete in the international market place, U.S. carriers have been active in seeking strategic alliances with foreign entities. MARAD has worked with industry on these matters with the primary objective of assuring that U.S. citizen control remains for MSP vessels and for preserving American jobs. Just last week MARAD and USTRANSCOM approved the VISA FY2000 enrollment. Six new companies added approximately 350,000 square feet of capacity to VISA.

National Port Readiness Network is a coordinating organization of nine federal agencies with the mission to support the movement of military cargoes through U.S. ports during a deployment. The organization is made up a steering group, working group and local port readiness committees. MARAD is the permanent chair. MARAD administers a program that conveys surplus federal property both Base Realignment and Closure (BRAC) and GSA to non-federal public entities for the development and operation of port facilities. This program creates jobs, revitalizes local economies and helps ports obtain land to expand. Port expansion increases capacity which will help accommodate the projected increase in freight growth.

The Center for the Commercial Deployment of Transportation Technologies (CDOT), located at CAL State University-Long Beach, is a Congressionally sponsored program chartered to identify and demonstrate advanced transportation technologies that improve national defense, rapid deployment and logistics capabilities and leveraged government, industry and academic resources. MARAD and TRANSCOM are partnering with CDOT by providing technical assistance. Under CDOT sponsorship, a series of evaluations designed to enhance the body of knowledge associated with current and emerging high speed sealift platforms has been conducted. The objective was to collect specific engineering ship characteristic data and to gain insights into operational considerations associated with high speed sealift for DoD power projection applications. The evaluation involved a ninety-one meter catamaran vessel capable of carrying 450 tons moving at 43 knots with a range of 250 nautical miles. The high speed sealift trimaran haul form also will be evaluated. Another commercial platform with potential for high speed sealift is the pentamaran design To evaluate the effectiveness cargo and equipment systems, CDOT sponsored a full scale technology demonstration in conjunction with the loading of the large medium speed ro-ro USNS Sisler which was loaded with Army war reserve materiel in the port of Antwerp.

The efficient marine rail concept is another project sponsored by CDOT. The system addresses congestion at marine terminals, inland intermodal facilities and distribution corridors. It is designed to move the majority of cargo storage and sorting away from water front terminals to inland intermodal terminals. The Philadelphia Agile Port Study is a Congressionally sponsored evaluation of existing and currently planned facilities which include the fast ship terminal and intermodal capabilities. It will compare these capabilities against demand requirements for commercial and military cargo.

I would be remiss if I did not mention two ongoing public-private partnerships of both commercial and strategic value. One is the Ships Operations Cooperative Program that strives to increase competitiveness by improving the safety and efficiency of shipboard operations. The other is the Cargo Handling Cooperative Program which pursues industry driven enhancements to cargo handling. Members include stevedoring companies, rail and trucking companies in addition to traditional shipping companies.

Let me return briefly to the report of the Marine Transportation System Task Force. A recurring theme throughout the MTS initiative has been the need for comprehensive coordination, leadership and cooperation among federal, state, regional and local agencies as well as private sector owners and operators. MTS users are often unaware of the other public and private users activities and inherent limitations. Shortly, these recommendations for improved coordination essentially are the next steps. Secretary Slater will charter the National Advisory Council which will provide all non-federal stakeholders with a continued voice.

Let me conclude with this very important task force recommendation. The MTS task force expressed a desire to better inform the general public and policy makers as to the value and role of the marine transportation system in people's daily lives. It urges stakeholders to give priority to promoting the overall value of the marine transportation system through their existing trade associations and other outreach efforts. It is something we all can and should do better. On behalf of all of us at the Maritime Administration, we look forward to continuing our successful relationship with the National Defense Transportation Association as we pursue the bold vision for the future of America's marine transportation system. Thank you.

Mr. David Swierenga Chief Economist Air Transportation Association of America

Thanks very much again for an opportunity to talk with you. Since I am an economist, I want to start all with a little story about Albert Einstein, who was a brilliant scientist and when he died he went to heaven. He liked to ask people what their IQ's were. So he meet someone with the IQ of 160, oh terrific we can talk about the theory of relativity. He would meet someone else and he would say well my IQ is 140 well that's fine we can talk about the developments in quantum mechanics. Then he would meet somebody whose IQ was 85 and he paused and smiled and said well let's talk about economics.

So let's talk a little bit about the economics of the airline industry. I will try and touch on some things where the airlines and the military interface and hope you will come

away with a little an understanding of where we are going and have maybe have some good questions for us. First of all a little of the history of air transportation. What we see though is that the airline industry really got it start following World War II. We are not a very old industry. We really got our start in 1945 and since then and especially since the development of the jet airplane have seen really unprecedented growth. In 1998, $600 billion revenue passenger miles. That is about 600 million passenger enhancements in 1998.

So an industry that has grown pretty dramatically since World War II. A high growth industry and in fact it is expected that our industry is going to continue to grow pretty rapidly. Four percent is sort of the long haul rate of growth that we are looking at for our industry. What that means is that by the time we get to 2010, we are looking at something like 1 billion passengers for the U.S. air carriers. The industry will respond to that with orders for airplanes. It is expected that our fleet which today is about 5500 jets will grow to about 8000 jets by 2010. The interesting thing here I think especially for people who are involved in shipping on the airlines is where that growth is likely to occur. We expect most of the growth to occur in the smaller aircraft. The 737s and the A320s class of airplanes. The 150 type airplane. The other growth area is the RJ (regional jet), this is a fairly new phenomenon in our industry about 300 of these aircraft now in U.S. fleets and that is expected to grow by about a 100 airplanes a year. This is a very small airplane, 70 seats or so, but it thisis expected that is going to be one of the high growth areas. So again, what that says to us is that growth in air transportation is likely to biggest in the smallest airplanes. We do expect there will be some growth in the wide bodies but as specially in the two engine wide body. So you are talking about the 777, 767 that type of airplane.

Well as I mentioned we have about 5500 airplanes in the fleet and of those 4400 are passenger jets and about 1000 are freighters. With increasing number of airplanes coming into the fleet, naturally you would expect that aircraft operations are going to increase. Today, about fourteen million operations per year, that is departures and arrivals, and the annual growth rate is expected to be about 2_% reaching to something like twenty million departures per year by the time we get to 2010. Now a slightly smaller increase in the number of departures than in then in number of passengers and even though we are acquiring airplanes mostly in the narrow body two engine category, the average size of those airplanes is still increasing. So today when you buy a new 737 it will 150-160 seats and likely to replace an airplane that is 100 seats.

The theme of this session is global challenges. This kind of growth in operations of the airlines I think presents the U.S. air transport industry and in fact the world air transport industry with its number one global challenge. In 1998, we went up to 839 air traffic control events per day. That is 839 delays of fifteen minutes or more. So far in 1999, we are up to 1070 per day and compared to the 1997 figure of 672 per day what we see developing is a crisis in air transportation air traffic control systems. Not only do we have an increase in the number of delays but when we look at the average length of those delays we find that not only the number of delays increasing but the length of those delays are increasing as well. So that when in 1997 we were looking at 7.4 minutes per departure each and every one of the 7 or 8 million departures in the United States has associated with approximately 7 _ minutes of

What that means is that by the time we get to 2010, we are looking at something like 1 billion passengers for the U.S. air carriers.

delay and those numbers also increasing sharply in 1998 and again in 1999. When we look at where the delays are occurring, gate delays don't happen very often but when they do happen they are often very lengthy. The average gate delay in 1997 for the first seven months was 31.7 minutes and that was an increase of about 30% over the same period a year ago. Taxis out delays occur most often. Generates probably half of the delay in the system and the average taxis out delay 9.7 minutes per event and that is up about 15%. Now the reason that highlight those two areas gate delays and taxis out delays is that both of those categories of delays have to do with what is going on in the stream of traffic overhead. If there is no place to put an airplane in the stream of traffic overhead, the airplane sits on a taxis way waiting for departure to be fit into that stream. Gate delays are often because of a ground hold system that the FAA has incorporated when weather affects lets say Chicago they may hold aircraft on the ground at airports around the country who destination is Chicago and so those delays can be very lengthy and sitting under sunny skies and the pilot tells you that we have a weather delay because of weather at the destination. The idea here is to be as efficient as possible in our consumption of fuel and hold the airplane on the ground. But the problem is that nobody has been able to do that very effectively. You can not tell when there is going to be an opening for that aircraft at its destination. We have built in here a little bit to much caution probably on the part of the FAA rather than dispatching those aircraft and letting them orbit around an airport and keep some pressure on that airport runway for the most efficient arrivals.

I would like to turn to a different subject here I and talk a little bit about how the airlines serve the public. Five airlines account for nearly 75% of the traffic hauled in the United States. What we have in the United States in fact is a consolidating air transport industry. More and more traffic is moving on the bigger and bigger airlines. In fact if you look at the top ten airlines, you are looking at something like 95% of all the traffic moving on just those ten or eleven airlines. You get much the same kind of picture when you look at our cargo fleet. The two obvious big dogs here FedEx and UPS carry 45% of the traffic. The next biggest carriers are all passenger carriers however United, Northwest, American and Delta and the reason for that is the enormous amount of belly cargo and in particular the enormous of belly cargo that moves across the pacific where both United and Northwest are the major carriers. Well not only do we have a consolidating industry in the U.S. with the big carriers carrying the bulk of the traffic.

We also find that air carriers are establishing alliances around the world and that is a growing trend. In 1994, there were 126 airlines involved in 280 different alliances and these are alliances of broad variety. They could be just simply common frequent flyer programs or they could get up to agreements that have anti-trust immunity for scheduling aircraft capacity and setting prices. That number has grown in 1998 with 204 different airlines involved in alliances worldwide and 793 different alliances that have been established. One of the things that is happening is while the industry is consolidating here in the United States, we are prevented from merging around the world. So American Airlines can not merge with British Airways. But what they can do is establish a marketing alliance of one kind or another with that company and that kind of thing is happening on a global basis. In a sense we see the global airline industry consolidating as well. Moving towards a half dozen or so major alliances. So you have One World and Star and that sort of agreements that bring together a number of air carriers to provide seamless transportation around the world.

Although the industry is consolidating, in the United States. Almost all carriers participate in the CRAF program (Civil Reserve Air Fleet Program). A fairly large number of air carriers are participating in this important program. I don't know that the CRAF program was activated during Kosovo but it was for the first time activated during the Gulf War and was quite successful in providing additional airlift capability for the military. Today in the stage one the lowest level of activation, about 85 airplanes available and that moves up to stage three about a little over 700 aircraft av a ilable in the CRAF program out of the fleet of about 5500 airplanes. In Kosovo, we did provide some lift. The commercial airlines were no doubt the least important of the categories. Most of the airlift that we did provide was to move passenger rather than freight

Ours is an industry as I have already indicated that is growing and therefore we have enormous capital needs to sustain that growth. You have already heard some of the other speakers talk about capital requirements in transportation. It is a capital intensive kind of business and it is for the airlines as well. As of June of 1999, U.S. air carriers had firm orders for 1123 aircraft and options for another 1800, 2700 aircraft on order or optioned. It takes about $23 billion dollars a year for airplanes for the U.S. airline industry and this is an industry whose profits peaked at about $5 billion per year in 1997. So this is a tough chore for the U.S. air carriers to continually modernize their fleet. One of the things that concerns people right now is in fact are those airplanes that we have on order and options that we hav e so many on order and option that in fact we are going to wind up with excess capacity and produce a problem that we had for instance in the early 90s excess capacity led to low prices on economic prices and the industry lost a lot of money. Well in fact deliveries for the industry are going to bounce around between 300 and 350 airplanes over the foreseeable future. However, when you take away the retirement of airplanes what you get is a net addition of aircraft to our fleet of about 17 5 airplanes a year which gets to be a much more manageable kind of number. Turns out that is about a 4% increase in the capacity of the airlines. By the way, talking about moderni z ation of our fleets, this year marks the completion of a very major program undertaken by U.S. air carriers to modernize with respect to noise. By the end of this year all U.S airlines will have their fleets completely stage three compliant. We

accomplished this approximately two years before of the rest of the world. Right now there are discussions already underway to move to the next level stage four. What worries the U.S. air carriers of course is that we make a tremendous investment in converting to stage three and we want to have the use of those assets for a reasonable of their life. So when we begin to talk about stage four, we hope that is still sometime off in the distance. Nonetheless, it does have us somewhat concerned.

The airlines profit has bounced around Beginning in 1990 we went through a period of enormous losses, we lost $13 billion dollars in that period of time. We call it the valley of the shadow of death because there were so many carriers that went out of business at that time Think about all of the companies that went bankrupt during that period of time. That situation has turned around today where we are now profitable and earning between $4 and $5 billion dollars a year and generating cash because of depreciation charges of around $10 billion a year. So with the profits that we have, we should be able to manage a $20 billion dollar annual investment program in new aircraft technology. The U.S . industry's average profit margin however is steadily above the profit margin for the U.S. airline industry. The industry average since 1979 is actually slightly less than 1%. In other words out of every $1.00 of revenue that the industry takes in, we keep less than a penny in profits. On the other hand, corporations in America typically average around 5-6%, in other words out of every $ 1.00 of revenue for those corporations they keep five or six cents in profits. Although we have turned profitable and we are approaching that U.S. industry, in our best years we are approaching that, we still have a long ways to go to get our margins up to standard in this country. A number of challenges that face us. I mentioned a few of them. Certainly modernization of our air traffic control system is going to be front and center for the U.S. air carriers for the next ten years. Environmental issues are going to be a tremendous challenge for U.S. air carriers because of the enormous investment that is implied. To be able to do this, while maintaining some level of profitability will all be enormously difficult to achieve . I will finish with those sort of challenges laid out before us all and hope that you have some interesting questions

Bruce Moore VP of Cargo Applications Sabre, Inc.

Good Morning. Thank you for giving me the opportunity to present to you. My focus today will be the tremendous number of exciting developments and challenges facing the air cargo industry.

I have centered my discussion around two key topicsalliances and their impact on the air cargo business and the technology changes needed for the future. I would like to speak on three of the latest industry initiatives, which are underway

Cargo 2000 is an IATA Special interest group and is made up of seventeen freight forwarders and 20 airlines . These airlines represent almost 40% of the airfreight carried in 1998. The goal of Cargo 2000 is for the members to use a common set of processes and technology to book and track shipments for a time definite product. The tracking will be done at the piece level. Each cargo shipment will be monitored in a central database, any issues which arise, such as missing pieces or late shipment, will trigger an alert

or a discrepancy message, which then will be sent to the participants of the airbill. The Forum for Air Cargo in Europe (FACE), has representation from the airline, freight forwarder, and shipper communities. Several of the airline and freight forwarder members, are also members of Cargo 2000. One of the key differences between Cargo 2000 and FACE is that there are shippers who are members. This is because the FACE membership feels that this type of industry initiative cannot be a total success if shippers are not involved in determining the business processes. And finally we have industry alliances such as Oneworld and Star.

If you created a Venn Diagram of the airline participants involved in each of these initiatives, you would see a lot of overlap . There is a common goal through each of these industry efforts, which is to offer a seamless and consistent time definite product to the customer. This is needed so the forwarders and air carriers can effectively compete with the integrators. Another key factor for these initiatives to be successful is that data exchanged between companies be accurate and timely.

The growth of e-commerce and the globalization of companies with worldwide manufacturing and worldwide product distribution has resulted in an increased need for time-definite shipments all over the world. Air cargo carriers can meet this challenge if they invest in technology and streamline business processes. There are tremendous challenges - most carriers have different business processes in handling cargo, whether it is acceptance procedures, terminal processes, or revenue management concepts, to name just a few. The same can apply on how each carrier applies their EDI capability. For example: Some carriers may trigger certain types of messages at aircraft push back and others may trigger the same type of message at wheels up. And finally the key item is trust. Most of the companies have historically been competitors They now must assume good faith in conducting business, because they are now trading partners. For example: One of the core assumptions for Cargo 2000 is that when shipments are received by the airline from the forwarder, the actual freight tendered will exactly match the forwarder's booking. This is definitely a change in the current business processes.

These challenges I have mentioned represent no small undertaking. Any of these initiatives whether it is Cargo 2000, FACE, or other airline alliances will need to expend a tremendous effort modifying their business requirements and processes.

A little background on cargo automation. Almost all carriers have a variety of systems, which support the entire shipment life cycle from booking to operations, to accounting to management reporting. These systems cover a variety of technical platforms from mainframe to client/server to web based applications.

I would now like to discuss the limitations of the current systems that are in place, how data can be used more strategically, and a brief discussion regarding the Internet. Today many companies have an operational system as a core and a variety of client/server and other systems interfacing with the operational system. Generally these systems have been developed over time and the interfaces between systems are generally very complex . A positive aspect of these systems is their reliability and their capability to handle growth. Today's systems also support a high transaction rate, provide rapid response times, and have a high level of reliability.

This reflects a high level logical depiction of today's systems. The key point this slide represents is that there is no

shortage of systems and even a less of a shortage of data. In fact, some reports forecast data will be growing in excess of 50% per year. This growth in information and the limitations of the current environment presents and interesting business and technical challenge.

In fact, many uses of today's cargo systems will begin to feel like this individual: What do I do with all of this information?; The air cargo business is growing, but so is capacity. How do I fill the planes?; How do I get a strategic advantage?; and How can I better support my customers?

The future environment will need to migrate to customer centric processing. The processing must be built around the customer, rather than just the event, such as booking a shipment. As I mentioned earlier, we have tremendous amounts of data that is rich in customer information. We need to take this data and match it to business rules thus enabling the power of automation.

Where can this take us? Improve decision support when accepting a booking or a shipment Answer questions such as: value of the customer to the network, most efficient routing, etc. Off scheduled operations and providing information on how to re-accommodate the shipment. Which customers get priority? Automatic notification to the customer, etc.

The future topology will provide infrastructure a true client/server environment that allows end consumers to access content through an intuitive interface.

This new topology must: make sure the operational data is populating the data warehouse and operational system; use a web front-end to the operational system to provide customers with tracking, ordering and other key business processes; and use a web front-end to facilitate offline analyses with your data warehouse.

The Internet is definitely here, and is part of a trend that anything that begins with an "E" must be good, whether it is E-Commerce, E-mail , or EDI. The web is a powerful delivery tool and everyone seems to be developing a website. There are important considerations before you step into this arena such as: Why do you want to be on the web? What does the customer want? How good is the data you will be presenting?

And possibly most important, make sure your business processes are in place so you can deliver what you are selling. In today's environment, data integrity issues can be masked to a certain extent, but once you go online, the accuracy of your data is opened to the world.

Another important consideration is that you must make it easy to navigate. If it is more complicated than making a phone call. The success of the site could be affected.

Then you need to develop metrics to validate your success. Items such as reduced call volumes, tracking certain types of activities, which customers are using the site and their frequency.

There will be a major sea change in how business is conducted over the next few years. The globalization of the economy and the advent of alliances will have a major impact on the air cargo industry. In addition, the air cargo business is projected to exceed an average growth rate of 6% over the next several years, but capacity is also growing tremendously, thus putting tremendous pressure on yields.As a result there will need to be major changes in how technology is applied and how business is conducted in order for the business to remain competitive. DTJ

Q & A not available for Panel I due to technical problems in transmission of manuscript.

Panel II ''Meeting Future Manpower Needs~,

l to r: Mr. Ed Kelley, VP, American Maritime Officers; Capt. B. ]. Smith, Director, Pilot Training and Standards, Delta Air Lines; Mr. Gary Hartter, President, Landstar Ranger, Inc.; Mr. Andrew Fogarty, Senior VP, CSX Corporation, Chairman, Commercia l Board; BrigGen]ohn Regni, USAF, Director of Personnel Resources for the United States Air Force Director of the Air Force Personnel Operations Agency; Mr. Roger Kallock, Deputy Under Secretary of Defense-Logistics, Department of Defense; Mr. Eric L. Mensing, VPMilitary Affairs, APL, Ltd., Forum Co-Chairman

Mr. Roger Kallock

Deputy Under Secretary of Defense - Logistics Department of Defense

Thank you for the warm welcome Thanks to each of you for your concern about DoD logistics and your willingness to join us this afternoon. I can tell you that we have an interesting group of friends here on the dais who are chafing at the bit not only to present their points of view concisely and simply in about 15 minutes, but to also respond to your questions. I think that collectively we all owe each other a great vote of thanks to come here to Anchorage, a state that I dearly love. I appreciate the fact that you took the time away from your jobs to come up here and participate under the NDTA banner in a program that is important to the future of transportation, logistics and supply chain management in the Department of Defense . As many of you know, I joined the Department of Defense about a year and half ago and I am very indebted to some folks that are in this room, Ms. Mary Lou McHugh and the Transportation Policy group, a number of the senior military leaders that got me through boot camp in the Pentagon during my early days when I understood very little about the topics, and I certainly didn't appreciate the degree to which acronyms were used. Frankly, people spoke a little softly. When I was with an Army Colonel up at Letterkenney and I had been to about 50 military installations, I asked Colonel Hamilton to tell me how do I get people to stop calling me sir. He looked me in the eye and said sir get used to it, sir. This issue of meeting future manpower needs and the importance of this particular topic to the preservation of freedom and democracy and the importance of the U.S. military in the days ahead is one that is deserving not just of this panel's discussion but a lot of discussion in the future. I have had the privilege in the last 16 months of working with a terrific group of senior military logisticians. Another big acronym is the LRSSG; that stands for the long-range or logi stics re-invention senior steering group. But when I reall y try to find out what the difference is between lean, mean and green velocity management, agile infrastructure, precision logistics and high-yield statistics, I just found that each service has its own name and own individual ways of expressing things. But really all we are about here is how do we improve warfighter confidence

in the supplies and the things that are needed to carry out the mission at the point and time that it is under consideration, whether that be a wartime mission or a humanitarian mission. Wherever it is in the world, we've got to be ready to do it and we've got to be able to do it with the same confidence that we have in the private sector of getting goodquality supply from people like our catalog firms or some of our retail consumer goods or even the computer business today. Where the shortness of the supply chain is really an important asset in terms of raising consumer confidence and I think the warfighter's confidence should be good or better than the consumer's confidence.

I am very impressed with the American people and the leadership that has been shown in the transition in a number of organizations. Some of you may have had your picture taken with the Iditarod winner and seen the Alaskan husky; I asked what kind of dog is that and Martin Boser said it is any dog that can run fast and pull a big load. That pretty well typifies the American people, at least the folks in the logistics community that are working hard to try to bring together across the supply chain their own individual capabilities. They are running fast, pulling a big load. I think the military folks in particular represent a group of thoroughbreds that we need to follow, to help them accelerate progress to the important objectives. I think across the board the caliber of individuals serving in the military and DoD has never been higher. The service members are better educated, better trained and I think more challenged than ever before. That has to be for all of us in government and industry alike. We are really operating in a new environment, fueled by information and driven by knowledge. We need to be able to respond to situations, whatever they may be or wherever they may be in the world, on a much more condensed time dimension. It is a constantly rolling collage of challenges that our military is being asked to respond to. In light of the fact that the American economy is the strongest in a generation and perhaps in histor y. Unemployment is at a three year low Wages are up. Productivit y is rising . Inflation is checked. So the demand for skilled workers is growing dramatically. Unfortunately, all of this is occurring at a time when private sector companies are also see king to explore and utilize th e exciting benefits being offered by core competences, third party logisticians specifically. They are outsourcing th eir entire

logistics function. We've got about ten million people or 7% of the U.S. workforce involved in transportation careers. Transportation is the most expensive logistics process representing over 40% of most companies' logistics expense. $400 million in U.S. alone and globally over $2 billion. DoD spends over $200 million a day or $10 million dollars an hour in logistics expenses. Transportation is right at the core of the function that led the transformation in many private sector organizations, not just the outsourcing or the streamlining of the transportation function but taking the transportation professionals and helping them expand their capability to serve their companies in much more robust and inspiring ways. The way I see it the transportation field is at the crossroads. Much of the seasoned transportation workforce is retiring. Yet the demand for skilled workers is expanding. Well-trained, knowledgeable workers will be needed to ensure safety, state-of-theart technology and competitiveness that will be required for the Nation's transportation system in the 21st century.

In the new millennium, two areas will have critical impact in manpower requirements. First the impact of globalization and second the role of technology, and therein lies the dilemma, particularly for the government, in that the military develops skills obtained by schooling and on-the-job training. In many cases, they are the same skills highly sought after by the private sector. The transportation industry, as you will find and hear in the next couple of hours, has a similar dilemma in maintaining the capability to recruit or retain the skilled work force to meet its global challenges and technological advances during the 21st century.

It is in this context that our panel will address their comments on the important issues, from government and industry perspectives. So I would now like to introduce our distinguished panel. We are going to take about 15 minutes apiece.

BrigGen John Regni, USAF, Director of Personnel Resources for the United States Air Force Director of the Air Force Personnel Operations Agency

My task this afternoon is a bit daunting. I need to be able to outline the Department of Defense perspective on meeting manpower needs and do that for four distinct branches of the military. What I hope to do though is pique your interest and inform you a little bit on some of the trends and challenges that are facing each of the Services and then respond later in the panel discussion on your questions and answers.

These are extremely challenging times for all branches of the Services. What we are trying to do of course is maintain our combat-ready forces. We are sustaining that with a blend of new recruits and instilling in them some very high skills and high technical training. We need healthy retention as well to keep our experience levels where we need them. There are several factors that are affecting us. There are some push factors that have to do with retention and that is related mostly to our operations tempo that we are experiencing in the 1990s and looking forward to in the next century. Op tempo and the resulting sacrifices and demands placed on the military family are causing people to question career decisions and maybe push them over to the civilian side. There are some pull factors which we really don't control. The robust economy that Mr.

Kallock mentioned and the demand for the military ethos as well as the high tech skills and of course there are very lucrative opportunities in the private sector.

I will very quickly summarize some of the trends that the military services are facing and point out some of the differences in generational values and goals, as well as review how the services are doing attracting quality folks into each of our branches; moving to retention and look at the tempo and how that is impacting the services. I will be closing with not only where we are headed but offer some things to think about; how we might be able to share scarce resources within the Department of Defense, with other federal agencies and in private industry.

There are 1.3 million men and women on active duty and every year we have to recruit 200,000 new folks to sustain our forces in a robust job market with the lowest unemployment in 30 years and the increased propensity of high school graduates going directly into college. This is putting some strain on our system. What we need to be able to do is operate our all-volunteer force in times when the economy is as prosperous as it is. We love having the economy this way. We all like our stock portfolios. So, what do we need to do to succeed in this competitive market? One of the things we are working on is regenerating awareness and looking at the role models for youths across America, the teachers, coaches, counselors and parents, to make sure they understand what the military services have to offer. And of course we need to communicate a sense of purpose and we are working some image areas in that regard.

There are many lucrative opportunities for folks other than to come directly into the military. Annually, the Department of Defense conducts surveys of youth 16 to 21 years old which shows a propensity of youth to join the military services, those that responded that they would definitely want a career in the military or probably leaning in that direction. We have gone from about 32% of youth here down to about 25% and that is all services. When you look at inilividual services, only 12% male and 7% of the women feel that they are definitely interested or probably interested in a career in the Air Force, for example.

To the American public, the military remains an institution that is held in very high esteem. We have a worldwide mission, key to our Nation's success in global power, and our integrity and honesty are part of our core values. We are very attuned to some of the values of the generations and the changes over time. There is a new generation out there, four years old through 22-just graduated from college with some important value changes. For example, they take a blend of what the Boomers thought was a good goal in life; as well as the Xer's. They want a terrific life and a terrific job. And then there is a team focus that really blends nicely with the military. We are having varying degrees of success on recruiting the right numbers. The Army needs 74,000 a year, they are a little bit under that this year. The Navy needs about 53,000, they are right on target. The Marines are doing very well at meeting their goals of about 32,000-33,000. The Air Force is 1700 short this year at meeting number goals. We measure quality many different ways. The Department of Defense's goals are that 90% of all new recruits have a high school diploma and that at least 60% of them score in the top 50% in mental aptitude. The Army is right at 90% as is the Navy. The Air Force has a little bit different standard than the Defense Department. They look for 99% high school diplomas and 80% in the top half of mental aptitude. This quite frankly has us concerned. We were at the 84% range. Now

we are down to about 76% of our recruits and that is something that we are addressing. The military's operational tempo (OPTEMPO) is high. There have been 93 major deployments around the globe since 1990. All this is factoring into retention decisions that our individual soldiers, sailors, airmen and marines are making. There are a lot of good things going on across many facets of the career fields within the services. But there are some challenges as well. The Army is having difficulty retaining the Captains and Apache pilots but doing very well on the enlisted side with re-enlistments. There is no surprise that in the Air Force as well as the other services, pilot retention is one area that has all of our attention. We are also seeing challenges in the other officer corps as well. In our enlisted area, all three of our indicators are below our historical averages and goals. Airline hiring drives a lot of pilot retention. The airlines can quickly absorb all of our pilots that can leave and still not satisfy all of their demands. So, what are we doing about all of this? In recruiting, we are putting more recruiters on the streets. All of the services are doing this. We have focused some of our bonuses by skill, as well as college programs, not only paying for college but repaying some college loans. We are increasing our advertising efforts across the board. On the retention side, our focus is OPTEMPO. We can better manage that, to provide more predictability and stability for our troops and their families. We are targeting our re-enlistment bonuses by skills and increasing special pay for example for deployments as well as bonuses for pilots. Quality of life is something that really impacts the family and we are making great investments here. And lastly, depending on what skills, we are looking at how we might best share some of these scarce resources between the military and private sector. Two quick examples: the air traffic controller between the military and the FAA and of course pilots with that huge demand for new hires There is probably some ground still to be plowed on how we might best share these scarce resources.

Mr. Andrew Fogarty Sr. Vice President, Corporate Services CSX Corporation

Shifting gears now from John's (BrigGen Regni) excellent overview, from a public perspective, we will talk a little bit more about a specific industry within the broad spectrum of transportation services that you deal with and one right now that is involved basically with two sets of challenges at CSX. One, dealing with the major changes that are now affecting the maritime business, particular container carriage and the other being the rail business. So I will try to put this in the context that makes sense to you, and move on to the common challenges I think we face in the manpower planning. There are enormous numbers of them and some significant differences but by and large the redundancies of everything we discuss are sort of overpowering. I will then turn to the three elements of successful manpower planning, with strong emphasis on recruiting, retention compensation and benefits and then obviously lifestyle issues. Finally, I will try to conclude with a few of the lessons that we think we have learned and are going to try and embody in our 2000 to 2003 strategic manpower plan. CSX is now in the process of finalizing a transaction with Maersk Lines to sell from Sea-Land as it is currently constructed the major international liner assets which include the vessel assets and most of the major terminal

assets, including most of the major domestic terminals. CSX will be left with two businesses then when this transaction is effective by the end of this year, the first a domestic shipping business which essentially will continue to provide services to the three domestic trades , Alaska, Hawaii, Guam and Puerto Rico. Secondly, we will also retain a business that will specialize in terminal services, largely offshore and largely in Hong Kong and the People's Republic of China. There are three subjects that have a lot of us involved with trying to put a portfolio together that is going to be customer responsive. In order to be a major rail freight carrier in the next decade, intermodal services are key, as are logistics services, as are IT services. So in many ways, both within the context of the railroad and outside in separate portfolios, we are trying to move forward as a company to have some breakthrough opportunities in each of the three.

As many of you in the audience know, over the years we have had an extensive series of involvements with the defense community. Sea-Land right now is effecting a transition where we are trying to work with Maersk and the Department of Defense to make sure that our obligations under VISA (Voluntary Intermodal Sealift Agreement), our obligations to NDTA and to the Maritime Security Program are all upheld. Defense is our major customer for the domestic business

On the rail side, we are hopeful, post Conrail, to expand the defense business. We think there is a lot of growth potential. The densities in the Northeast would seem to me to create an enormous set of logistical challenges. We obviously feel that the more efficient our network becomes in reliability and transit times, the better we can be a service provider to the military.

Our challenge for the year 2000 and beyond is basically to try and integrate what is now the largest railroad east of the Mississippi. The contemplated revenues in the year 2000 will exceed $ 7 billion. There are sufficient route miles to circle the world There are sufficient track miles to circle the world two and half times. We have over 3600 locomotives and in excess of 100,000 rolling stock. We handle a significant amount of intermodal traffic. The pre-Conrail network would have basically gone north to Philadelphia and to Chicago as well, so right now the new network goes essentially from Montreal to Miami and from New Orleans to Chicago. The opportunity set for us is obviously one in which, if we take advantage of this over the next several years, we will constitute a network that no one has been able to put together before east of the Mississippi. That is certainly what our shareholders and customers expect and what we have to have our employees believe they can do.

Right now we have 35,000 employees Before the Conrail merger we had 29,000. In 1980, when Congress passed the Staggers Act, we carried on the non-Conrail network track tonnage and ton miles at approximately 90% of what we carry right now. At that time, we had 78,000 employees. A comparable number pre Conrail was 29,000. So we went from 78,000 to 29,000, which is one of the major reasons we have an enormous gap between the seniority of people who came in and spent their careers with the railroad and survived the downsizings, to folks we are desperately trying to hire to fill the gap. About four out of five of our folks are members of 13 unions which have national bargaining and an enormous impact on what we can do and how we can do it and what it costs to do. This is not just a series of challenges and opportunities just facing CSX. It is obviously generic to the whole rail business.

If you were to look at our opera ting staff and particularly senior management, you would find very long seniorities. Typically an operating person came to the railroad after he graduated from high school. If they are 50 years old, almost inevitably they have 32 or 33 years of seniority. We right now have about 55% of our staff in a position to retire if they chose and within three to five years 80% could leave. So if that is not a clear and present danger, I don't know what is. They are very much aware that we have the enormous obligation to try to move forward and make the job setting that they are going to confront over the next sever-

We are trying every

way

we know once again to make our company and our

with our labor position and the Federal Rail Labor Act, puts us at a higher level than the military. We don't have nearly as many problems as the military does from a standpoint of salary and benefits.

future attractive to minority candidates.

al years responsive to what they know comes with the game. But looking ahead in addition to having to try to replicate the very conscientious set of folks we have out in the field that make rail operations work, when we plan for succession in the field we cannot be complacent to get the same kinds of people with the same kinds of skills that historically have worked. This won't surprise anyone. In order to go forward, IT, asset management, yield management and logistics, that seems almost like an unholy four horseman. But they are always in front of us and they always circumscribe the types of skills that we are looking for. Whether it frankly be in operations or commercial or any of the support services.

There was an excellent article in the Wall Street Journal with respect to the sort of a day in the life of an Air Force recruiter several weeks ago regarding the challenges faced as endemic of generally what goes on within the Defense Department. When you compare DoD with our company, there is a terrific confluence of factors that make our manpower staffing requirements almost identical in many ways. A stronger economy is the single most important factor because it basically either causes or allows the rest to occur. Post secondary education is becoming the norm not the exception. We had people who generationally wanted to continue to become railroaders. That is no longer necessarily the case. We have a number of locations that are not very attractive for folks to work, from the coal mines to the Everglades to some of the very dense urban areas. We have to recognize that and we have to try to get people who are willing to work in a variety of locations because they can't in every instance be selective. The military does light years better than the rail industry does in terms of women and minorities. Nonetheless, we think we both face the challenge not only because it is the right thing to do but it is the necessary thing to do in the next five to ten years. We must do a better job at recruiting and retaining women and minorities.

The portability of skills on the military side I think is more of problem than it is within the railroad industry because by and large when a person gets in there and stays five to ten years he or she becomes pretty focused in their specialities and usually pretty much involved in staying the salary and benefit tracks that they are in. So we don't suffer as much from a series of threats as the military does. Salary and benefits, once again for reasons largely having to do

As regards recruiting, this is an area that I have personally become heavily involved with over the last several years. There is no single way any longer to try to attract folks to have an interest in our company. So we go after entry level every way we possibly can, high school, college and mid career and obviously a number of the mid-career candidates that come to us are folks from

the military. We used to have an advantage when the rail business was a major employer and frankly had a great a reputation of excellence. We didn't have to go very far to get the folks we needed with college degrees. That is clearly no longer the case. We do focus very heavily on northeast and southeast region universities and with the Internet increasingly we try to extend our web even farther because there are some specialties that we can offer people. We are trying every way we know once again to make our company and our future attractive to minority candidates. So far we have had an excellent response to Internet initiatives. We have both an intranet and Internet set of information sheets that people can draw on. We ask our employees to become ambassadors to folks that might have an interest in CSX, particularly on the rail side. We are moving towards testing and we do this now basically for two reasons. One is we are finding increasingly by making our managers define jobs with specific expectations for skills, it sometimes clarifies in ways that reduce overall requirements but in any case establish a point of expectation that their supervisors then can bring to defining how many people they need to work for them with what skills. The second reason we test frankly is not to exclude people but make sure we have a better fit. Testing has made an enormous difference for us in that area. The Federal Rail Labor Act was passed early in the 20th century when railroads were the largest employer in the United States. It covers the rail industry and airlines and our employees are among the top 1% paid in the United States in terms of contract employees. They certainly work very hard. In addition to the boundaries that this places on our ability to affect our cost very much on the labor side, there are also a significant series of work rules that affect how we can run the property. When there is a labor disagreement in the rail industry, it is ultimately reconciled in the Congress, which is neither to labor's nor management's benefit. Nonetheless, as long as it is the law, it will stay that way.

Overall we go to our Compensation Committee of the Board of Directors. We basically say we have three objectives as we move forward in compensation and benefits. We have to maintain marketing competitiveness and that is not only with respect to our sister railroads. We are trying to persuade our employees whether they be a contract employee working on a receiver train of a coal tipple to someone in Jacksonville who handles dispatching. If we

Many of our decisions

up until several years

ago were intuitive and because of that they were usually random and wrong.

with when we talk to our employees are a little bit more disturbing, in the sense that they feel we are not an industry that has made significant progress yet or significant enough progress with respect to seniority and hierarchy. We are considered to be an organization that is very much top-down driven. We are clearly not culturally diverse. Once again to move forward and attract people, we have to show the public and our employees a face where they really want to come to work.

create shareholder value, the whole company benefits from that. It creates jobs and an economic future. Even more specifically for our managers we are putting increasing emphasis on having more and more of their compensation at risk because they are the folks who are supposed to act as the conduit between shareholder input of dollars and working with the employees to try and make our company much more effective.

As regards emerging issues, there is one set of issues that divides interest of the more senior employees and the junior employees in our company. Healthcare costs are starting to rise again very rapidly. Unfortunately as one of the leading indicators, I think the last three or four years have largely been a honeymoon at least for private employers. Now we see the numbers going back up again, unfortunately double digits. The older more senior folks are worried about post-retirement medical benefits. The younger people are worried about family coverage. When it comes down to retirement, the older people are worried very much about the annuity aspects of their retirement. Younger people want investments, they want returns, they want opportunities to use their decisions to make optional bets with their dollars over time that the company provides. It is a very major difference when you talk with our people. A cafeteria benefits model would even be more inclusive in a sense of allowing an individual to choose among and between a whole array of welfare and health programs. We haven't reached that point. But frankly I see that happening as we turn more and more of our attention to younger employees. When we ask our employees basically what it is they take away, what is it that we have to respond to, what is it we have to bring to the board, they basically reaffirm what most of us already know. The job demands in the rail industry are difficult. Over the years, many of our people have been transferred as many times as they would in the military. We can become isolated geographically. Our business is an outdoor sport Whether it be a hurricane or very difficult winter weather or heat, a lot of our people basically by the time they are in late forties or early fifties, have had about as much fun as they can stand of the constant demands of crisis, which again is very similar to the military. Even if they are not concerned about being at the end of the trail, their families usually are. Perhaps the cultural aspects of what we are dealing

It is not entirely barren because we are responding in a number of ways that have so far made a significant difference. By decentralizing decision-making in the railroad, we get two advantages . One is that it allows young people to have the opportunity to-make more important decisions. Also, they will not necessarily have to move between the regions over time to advance their career-because we have the ability to achieve things on a regional basis that in prior years could never be achieved unless they moved to headquarters or another location. Some young people like the opportunity of having job mobility and we are trying to play upon that and over time have different exposures both professionally and geographically and they seem to respond to that very well. Obviously we feel that there are very good long-term earning possibilities in the railroad because we think this is an industry that will grow in terms of shareholder value and up until very recently we have had Wall Street actually show that is the case. With respect to labor, our hope is, going into the 21st century, this will be the next breakthrough for the railroads. It will not come on the asset side. There aren't going to be any miracles with respect to new network breakthroughs. But we really feel that there is some way we can fundamentally break the barriers. Rail labor has shown an enormous interest to move forward and we are really hopeful that over next several years we can make a breakthrough.

What does all this mean for our planning purposes? Well, it is interesting when you step back and you ask some of the bright young analysts. Many of our decisions up until several years ago were intuitive and because of that they were usually random and wrong. Now we understand when we get a database and we follow over time what people really want and where they want to work and what the test scores say. We can now began to quantify goals inductively, not topdown objectives. The most important thing is having a database which is reasonably user friendly and which requires every manager to quantify what he or she is expecting to achieve and the resources necessary to get there. That would mean nothing, however, if we didn't have top management spending a lot of time trying to review to see what the outcomes truly are. Everything from a specific set of Board actions to our CEO to each of the business unit heads focuses on accountability and starts every major planning session with a human resource perspective. We know we will not solve these problems overnight. We will not solve them in the next three-year planning period. But while we are taking an incremental approach, there is also an intolerance of decrementalism. We cannot fall back in any way. So managers who come forward with 26 good excuses but no growth usually find that their plans are rejected. There has to be a proactive opportunity for us to make progress in manpower planning. One of the things we found several years ago when we were emphasizing recruiting and all of the terrific people we were bringing in is that essentially inadvertently we were creating a sense of double standard that all of the people being brought in were young, bright, smart and

hardworking and the folks there weren't worth all that much. It is a little bit of an overstatement but inadvertently we were creating that sense. Now we are trying to go ahead and reemphasize to the folks that really carry the weight of the work every day that we value them very highly and we want them to stay as long as they are healthy and family circumstances permit. Until we start to make the whole organization know how important we felt about this, increasingly we were getting back when we asked folks, yes, we understand your objectives with respect to your shareholders, yes, we understand your objectives with respect to customers, what about us? I think if our 2003 plan means anything at that end of that period of time hopefully we will be able to demonstrate to our employees that, absent their very significant and sincere involvement, we are just not going to achieve any of our goals as an organization.

Mr. Gary Hartter President Landstar Ranger, Inc.

I am extremely honored to have the opportunity to sit on this panel and discuss the impact of meeting future manpower requirements. On the subject, I feel a little bit like Zsa Zsa Gabor's fifth husband. I know what is expected of me but I am not sure if I can still make it interesting.

I will give an overview of employer-employee thoughts, industry comments, research and then specifics as to how Landstar is addressing truck capacity, recruiting and retention. Recently, I read the remarks of a speaker in a speech that was delivered to a strategy group regarding employer workforce relations. What struck me was the comment that no one wants to be married to their work but it is nice to be engaged. I see most successful companies moving from the attitude that work is just another transaction. I paid you, now we are even.

Today I see passion, heart and spirit. Those are some words I would use to describe the workforce of successful companies. Even loyalty seems to be back, along with commitment and partnership. So what has happened: I think intrusion of reality in the form of a tight labor market. Pilots, technicians, experienced owner-operators, truck drivers and managers, to name a few, are now being courted royally by employers. What matters to people has not changed much in the last 25 years. What has changed is how employers act and that has changed the workforce's reactions or attitudes. We find that people care and respond to how their company carries out its citizenship. Like all smart investors people care whether the company makes its numbers, whether its plans look feasible. People want to work for companies that are making money and have a viable future.

So, as we look specifically to the truck transportation industry it is well known that the trucking industry has been experiencing serious driver retention problems, especially in the truckload area. The Gallup Foundation conducted research published in 1998 that addressed the issue of driver retention. The Gallup research model treats retention in a most non-traditional manner. Otherwise, it explores reasons why truck drivers stay in the industry rather than why they leave it. Over 800 drivers were interviewed to determine the features of the job and the work conditions that contribute most to their satisfaction. Five job features emerged as the most important factors of overall job satisfaction: consistent driving assignments,

genuine managerial support of their drivers, pay, on-theroad company support and working hours.

With this in mind, let me discuss how we at Landstar are addressing the driver retention issue because we think we have got some good news. Our truck capacity of 9,000+ and growing is provided by our owner-operators. Our freight is booked by our agents, over 1,000 strong, throughout North America. For every business capacity owner that joins our team, we increase our gross revenue by $118,000. So along with safety, retention and recruiting, it is a very important factor that we retain our owneroperators at our company. To give you some idea of where we stand, our annualized turnover of business capacity owners in 1997 was at 48%. In 1998, it stood at 49%. In 1999, we think we will improve over those numbers by about 2%. Now these percentages may sound high to those of you not familiar with the trucking industry but they are really among some of the best in the industry. Many large carriers are experiencing turnover ranging from 100 to 115% annually. So how do we do it. The retention program at Landstar can best be summed with the acronym SOAR-selection, orientation, assistance and retention. Regarding selection, Landstar's strict safety standards insure that only the safest owner-operators are selected and qualified . Standards relate to motor vehicle records coupled with the evaluation of financial responsibilities and earnings expectations that assist Landstar in selecting only those operators who fit our success profile. In other words, we only accept six out of every ten operators. Orientation-every new business capacity owner attends a two-day orientation before transporting their first shipment. The training is offered at nine different sites throughout North America . The training includes an overview of Landstar, how to find loads in the system including a hands-on training of the computer and exploration of the website containing available shipments ; how to run a business including calculating your fixed cost, cost per mile and fuel management. Finally, the course concludes with an all-day safety training program including decision driving, hazardous materials and brake certification training. Safety, computer and business management seminars are conducted at events throughout the year on a continuing basis. In terms of assistance, we have a department whose sole responsibility is to assist new contractors in becoming successful in the Landstar system. They provide counseling and support when and if the business capacity owner has a problem. In short, we develop trust, empathy and understanding with all new business capacity owners. Retention-business capacity owners and family appreciation events A dynamic web site with profit and problem-solving applications. Open door policy and the freedom to run your own business have been a few of the many retention programs at Landstar. In other words, the business capacity owners run their own business, pick the freight and decide when they need to be home with their family.

So in closing, I would like to say that we walk the talk. Our future manpower needs are met through improved retention by offering our business capacity owners technology that offers consistent load opportunities, frequent in-field interface between our business capacity owners and management, timely and prompt pay settlements, retention support teams that insure quick response to the business capacity owners' problems that may occur while they are on the road. Finally, our model allows our business capacity owners to make their freight selection

through technology to accommodate their work schedule, in turn offering our customers a quality level of service

Mr. Ed Kelly Vice President

American

Maritime Officers

The maritime industry has an acute shortage of personnel today. Unless we take corrective action soon, it will only reach a point from which we will not be able to recover. This has major national security implications because the commercial maritime industry provides the extra mariners needed to activate and crew government-owned strategic sealift ships for military contingency operations.

So that you may better understand the nature of commercial marine operations, let me describe how our industry works. I will limit this to only a deep sea operation and exclude the inland operations and operations on the Great Lakes. While there are ship operating companies, mostly in the petroleum industry, that hire their own crews, most ship operators today obtain their personnel from one or more of the seven major maritime unions in the United States, three for the licensed officers and four for licensed personnel. I belong to the American Maritime Officers or AMO The other officers unions are the Masters, Mates & Pilots usually referred to as the MMP , and the Marine Engineers Beneficial Association or MEBA, which incidentally is the oldest maritime union in this country The major unlicensed union is the Seafarers International Union. They have two affiliates, the Marine Firemen's Union and the SUP, the Sailors Union Pacific. Another unlicensed union that you see in many of the U.S. flag ships is the National Maritime Union. The size and compensation of a ship's crews are determined by the U .S. Coast Guard. They will issue a certificate of inspection or as we say a COI that prescribes the minimum number of licensed and unlicensed crew members required for the safe operation for each ship in the U.S. flag registry. I should mention that our foreign flag shipping competitors also have their own COL It may be called something else, but it lays down the number of ratings and unrated people that they require for safe operation. For companies under contract to unions for manning, it is the job of the union to insure that qualified personnel are on board at all times to meet all of the COI requirements. To do this, industry schools affiliated with specific unions train, certify and upgrade members to meet Coast Guard and international agency requirements. These industry schools are the finest in the world. Mike Sacco has one at Piney Point . There is one at Lithicum which is run by the Master, Mates & Pilots the Calhoun School in eastern Maryland and a school at the Star Center in Dania, Florida.

Like the military, the maritime industry cannot go into the open market and hire middle grade management or supervisory personnel. We must take an initial accession and over time go out on our own in order to produce a second mate, able bodied seamen or QMED. Once we experience a shortage in attracting or retaining personnel we , like the miliary, must live with this shortfall for at least five years. The operating tempo of commercial ships is driven by the fact that a ship just like a truck or train only makes money when it is operating or carrying cargo. Therefore the goal of ship owners is to operate their ships continuously and the goal of our unions and our people is to make sure that these are well maintained and they can operate continuously and the companies can make a profit The

best thing for a union is a company that makes a profit. The worst thing for a union or for my members is that the company goes into bankruptcy or we as a union drive them into bankruptcy. Most commercial ships operate approximately 340 days a year. This number is misleading because the rest of the time the ship is either going through repair or inspections required by the Coast Guard or the classification society. In years gone by, one of the main attractions of a career of a mariner was to be in ports you could visit and the opportunity to travel while the ship was in port. Today turnaround time in port is measured in hours instead of days as it used to be. When you are in port, there are frantic efforts to take on stores, to do repair work that cannot be done at sea or in shipyard, the loading and unloading of cargo and the filling out of a thousand pieces of paper. In short, time in port is usually more exhausting on the crew than the transit time between ports. The Exxon Valdez is a prime example of a crew that was overworked in port and fatigued when they went to sea. Fatigue leads to accidents and accidents lead to investigations and investigations leads to demands on the people that will live with them for ten or twenty years. One of the problems Mike Sacco is having with the Seafarers is to recruit people and he has got people throughout the country recruiting. In the years gone by we were able to recruit from the unemployed for those with limited background and those who wanted to crew. Today you can recruit a hundred people and only 20 % will be able to meet all of the requirements laid down by the Coast Guard as a result of OPA 90 which came about as a result of the Exxon Valdez grounding.

The commercial mariners today usually spend anywhere from four months at sea followed by two or four months ashore. Travel and any required schooling or upgrading training takes most of the shore time. These work rules or practices have allowed U.S seafarers to become a vital asset in national security planning. Because at any one time, about half the seafarer manpower pool is ashore; these are qualified people are ready to activate and crew the government owned strategic sealift ships, such as was done for the Ready Reserve Force (RRF) during Desert Storm and Desert Shield. Union mariners went for months without vacation because it took nearly every available mariner to activate 76 RRF ships and 8 Fast Sealift Ships. Industry schools gave crash courses to certify members whose qualifications had lapsed; then they closed their doors so instructors could go to sea. The shortage of merchant mariners is not limited to this country. There is a worldwide shortage that concerns members of the IMO (International Maritime Organization). Studies reveal a continuous decline over the past decade in the available number of mariners, especially ratings or unlicensed seamen. A recent report from Denmark noted shortages in their merchant fleet and observed that there are fewer members to recruit from in post-Baby Boomer era and that young people are less prepared to spend long times away at sea than previous generations. There were also significant changes to the geographic pattern of supply. The number of seafarers from European countries has sharply declined, while seafarers from the Far East have increased . The Philippines is a major source of supply with over 20% of the world's seafarers coming from there. But there is a growing supply and demand for Chinese seafarers and commentators suggest that in the long term, they will become a worldwide supply source for mariners. This has national security implications if you take a look at the

majority of merchant ships are crewed by Chinese, or the majority of the Filippinos that are crewing the ships on the third flag registry are Muslims. Commentators suggest that this may become a problem. The international implications in the maritime world, both at sea and ashore, are immense. More than half the senior officers currently manning the world fleet are from European countries. Their age profile however is higher than that of seafarers from any other region, while recruitment levels in these European countries are among the lowest in all regions. This could have profound implications also for the shoreside sectors of the international maritime industry, especially in traditional maritime countries All sectors of the industry currently rely on indigenous expertise derived seafaring careers. This includes ship operating companies, classifications societies, underwriters, port authorities and government inspection service. The maritime industry must carefully consider these changes and address now the question of from where the next generation of senior officers will come and how their recruitment, training and career development will be planned and managed.

The main factor contributing to the manpower shortage in this country can be explained by a good economy and very low unemployment. Those who are either looking for a job or willing to consider changing jobs are in short supply and the competition for their services is fierce. On the unlicensed side, where the industry has historically recruited from the ranks of the underprivileged, it has been difficult to find people who pass required drug tests. On the licensed side where the majority of new accessions come from the United States Merchant Maritime Academy or one of the six state maritime academies, new Third Mates and Third Assistant Engineers are recruited by the hightech industries for positions ashore. Many are being offered up to $65,000 a year and a chance to be home with their wives and families every night . Much is made of the high cost of maritime labor. The Public Healthcare Service has been the sole provider of medical care for the U.S. merchant mariners ever since it was proposed by Alexander Hamilton and established by Congress for that purpose in 1798. This system existed until the Johnson Administration, when the ship operators were directed to establish healthcare for crew members unlike any other employer. In my opinion this d.id more to reduce the competitiveness of the U.S. merchant marine than any other single action in the U.S. maritime history.

Like in every other industry, operators have experienced soaring medical and healthcare costs. But like most industries, the U.S . flag merchant marine competes internationally, frequently against mariners from developing countries with pay scales significantly lower than ours. In competing with mariners from developed countries like Norway, Germany and other first-tier countries they allow earnings of their mariners to be exempt from home country taxes in order to promote their national shipping registries. Many of these countries also offer free medical coverage for those going to sea as well as their families ashore. In 1980, when President Reagan declared that the country would develop an RDF or Rapid Deployment Force, it became apparent that our sealift was going to play a large role in afloat prepositions, strategic sealift and resupply. Experience told us that these are tasks that have historically fallen upon the shoulders of the U.S. flag merchant marine. We in the AMO along with the Seafarers International Union decided to go after every possible job. We started recruiting personnel and revamping the training in our schools to include

Navy communications, operating convoy or amphibious formations, underway replenishments and other tasks that are unique to government shipping jobs. We soon learned however that DoD was more interested in the lowest cost for such services than quality of service. Best value to them was the lowest cost. Companies that bid on these contracts will operate and maintain ships under pressure to provide the lowest price. A downward spiral developed with each and every new contract. To get the jobs, AMO members agreed to accept low wages. But there are definite limits below which our members will not and cannot go. This trend started first with contracts led by the Military Sealift Command and continued with contracts awarded by the Maritime Administration for the operation and maintenance of ships of the RRF. We must find resolution between the seemingly insatiable desire of contracting offices to accept only the lowest cost for commercial sealift and the publicly stated policy of the government including the DoD to support a robust U.S. flag merchant marine. The two goals are not compatible. Even today when the industry is struggling to attract qualified personnel, DoD contracting officers interpret the Department of Labor Service Contract Act in a manner that would lead one to believe that DoD expects U.S. maritime labor to work for minimum wages. There are changes underway to crew training requirements that will cause the mariner manpower pool to contract even further and will put another crimp in strategic sealift planning for Defense needs.

By the year 2002, sweeping changes in the Standard of Training Certification and Watchkeeping for Seafarers Convention, strongly supported by the U.S., will be in full force. Coast Guard commander Kevin Eskook described this pending change in the rise of the maritime manpower last spring in an Army War College report. He concluded that the resulting impact to U.S. mariners is that additional training expense will be incurred to maintain these qualifications. Employers will train only those mariners they definitely need and will reduce the number of "inactive" mariners who maintain their own qualifications while working ashore. Two other regulatory changes, brought about with the strong support of the U.S., will also be in full force in 2002. These are the International Safety Maritime Code and the 1996 Telecommunications Act which eliminated the requirement for the U.S. flag ships to carry radio telegraph equipment if equipped with the global distress and safety systems (GMDSS). As a result, all licensed U.S. deck officers must be able to perform all the duties performed by the traditional Radio Officer. In the recent past, a Deck Officer only had to meet two requirements: possess a valid U.S. Coast Guard license and have a radar endorsement to show that he or she has taken required training and had demonstrated proficiencies. By 2002, a licensed deck officer will be required to possess four additional skill endorsements, a GMDSS systems license plus he or she will have to establish proficiency in the four elements of basic safety. In 1996 they had the U.S. Coast Guard license and then a radar endorsement. In 2002, they will require eight levels of training and certification . Most of these proficiencies must be demonstrated on a regular basis at a tremendous cost to the unions and the individuals.

All these changes are intended to improve safety and are strongly endorsed by the U.S. maritime industry. They will make the ships of the world much safer for all of us to work around. But they have potentially negative overtones for the nation's strategic sealift planning. The training will be expensive and much of the requirements are unique to

MILITARY DEPLOYMENT/ HUMANITARIAN RELIEF

1,232 MISSIONS

111,000,000 LBS. OF CARGO

TANKS, TROOPS, & HELICOPTERS

BLANKETS, FOOD & MEDICINE ENGINE

24 HOURS A DAY

EASONS. THERE'S

ship type. Interchangeability between ship types is an important aspect of activating and manning ships of the RRF. Further compounding the RRF problem is the composition of the fleet itself that, reasonably enough, primarily contains ship types not common in the U S.-flag fleet, such as roll-on/roll-off ships, crane ships and offshore petroleum discharge ships.

I hope that I have convinced you that we have a serious maritime problem and without some positive actions will only get worse. I believe that there are some things that should be tried in an effort to reverse current trends. With regards to government contracts to the crewing operations or maintenance of ships, contracting offices should be directed that the lowest cost is not necessarily the best value if done at the expense of maritime labor. Contracting offices should not be allowed to be an instrument to drive down seagoing wages. Graduates of Kings Point and the other state maritime schools receiving federal support should be required to seek employment afloat or obtain a waiver based on non-availability of a job at sea. Such a program should be phased in over a two-year period. Congress should examine the feasibility to reduce or eliminate federal income tax for U.S. mariners sailing internationally for more than 180 days a year. This would contribute directly to improved competitiveness of U.S. flag ships and be an attractive feature of a seagoing career. The government, meaning MARAD, the Coast Guard, MSC and TRANSCOM along with the maritime industry, should also look at reestablishing junior entry-level positions at sea on U.S. ships that are funded jointly by government and industry. In the past, such positions as Junior Third Mates and Third Assistant Engineers, Ordinary Seamen and Wipers served as a training base similar in effect to a reserve training group. The broader training base resulted in a better cadre of professional mariners without placing an undue cost burden on ship operators. Finally, the Navy's move to contract out the operation of ships in the combat logistics force to commercial operations and replace the blue jacket crews with civilian mariners is good for the civilian mariner pool employment and overall cost saving.

Captain B. J. Smith Director of Pilot Training Standards Delta Air Lines

The airline industry has really changed a great deal since the Deregulation Act of 1978. The only constant we have known in the airline industry is change. In 1978, 39 domestic carriers carried 250 million passengers. In 1998, carriers carried 600 million passengers and it estimated that by 2010 we will be carrying a billion passengers a year. Obviously there is tremendous demand out there and thank God the engineers haven't taken all of the pilots out of the cockpit yet. So we wind up with a demand for pilots. Our traditional place to get pilots has been the military. Why? Because they come with very finite skill sets, highly trained skill sets and there is a maturity that really goes a long way with our customer service. From an economic standpoint, most of our training programs are truncated or shortened by 50% to 60% based on the skill sets that the military pilot brought with it. So it is a tremendous economic boon to the airline industry that you send us such highly qualified pilots. We do appreciate that.

There is a tremendous demand out there. So where else are we going to get our pilots from? We have a gradual increase of our age 60 retirements and that is mandated by

Graduates of Kings Point and the other state maritime schools receiving federal support should be required to seek employment afloat or obtain a waiver based on non-availability of a job at sea.

the federal government We have to retire at age 60 Basically we have a constant retirement. We lose pilots each year, 3 to 4% for medical problems and we also have a new phenomenon-pilots retiring early. A lot of the retirements in the airline industry are due to the stock market. As the stock market vacillated up and down, pilots found that their retirement was in jeopardy so they elected to go out early. This creates even more of a demand. We find ourselves in a hiring process that is less cyclical and more of a pipeline, based on the economics in the airline industry. This has gotten a lot better, however. Our demand for pilots will continue Competition for military pilots in the airline industry is extremely high If the airline industry hired every military pilot available during those periods of time, we would still be 40 to 70% short of our needs. If the military can't supply the pilots to us then we have to go to the regional airlines and they have some interesting challenges ahead of them. There is a tremendous growth at the bottom of the airline industry in the regional jets, so much so that you may see 30 to 40% at the bottom and only 2 to 3 % growth at the top. So they have a tremendous need for pilots. As we siphon the pilots away from them, their experience level goes down. That creates some real concern in the airline industry, especially with wholly-owned subsidiaries that as the experience level goes down our focus on the oversight and the safety equation needs to go exponentially up and we are very keen on that. But it is an issue of where we are going to continue to get the number of pilots necessary for the regionals. One of the first things we are starting to see in the United States that has been widely accepted in Europe for a long time is abinitio training; training from the beginning is highly unusual in the American airline industry. The major airlines probably will not be forced to even look at abinitio programs until around 2010. But right now the regional airlines are looking at abinitio training in a large degree. Horizon at Western Michigan University and Mesa at San Juan College in Farmington, New Mexico are examples of that. Among the regionals, 20% of their pilot groups are over age 40. Basically, these are pilots who came from a lot of the failed carriers that were associated with deregulation. 80% of the pilots they have are under age 30. Among the regional carriers, between 30 and 40% of their pilots are always looking to move to the majors. This means we are churning them

up at a tremendous rate, forcing them to get into a tremendous amount of expense. One of the airlines that we interviewed budgets between $600,000 and $1million a month to take care of training costs just from what they are losing to the major airlines. In addition, the University of North Dakota and Amarillo Aeronautical University are establishing their credentials to train pilots. Of the people available out there, the regionals are hiring three out of four people that are coming through their doors and as I have said the experience level is going down so they really have a challenge ahead of them in maintaining the excellent safety equation they currently have.

There will be constant demand on the military pilot. To tell you otherwise would not be a reflection of reality. We need to take some proactive steps as we move forward here into the future as to what we are going to do. I guess you can say that the major airlines have been identified as a predator. We are out looking for the most highly qualified people we can possibly find. That is no different than anyone else. What is different for us is as we see the regional carriers and we own more and more of our regional carriers. Our concern for safety is really a driving force that is making us go out to the high schools and colleges to build bridge programs and to compete for the very same asset that all of these gentlemen up here are competing for. We need to work together and partner with the military and other people to come up with innovative ways of meeting all of our collective needs for pilots. We are talking basically about active duty pilots. But the airlines face a very unusual challenge in support of the total force concept. Currently at Delta Air Lines, we carry about 200 additional pilots to meet the requirements of the National Guard and the Reserves from our pilots serving in the National Guard and Reserves for total force. That is about an $18 million burden that we take on each year. When we are talking about the generation X's and Y's and when I was in the Guard and Reserves I came from the Jurassic fighter pilot generation. I guess we were poster boys for greed and avarice because we did it in addition to flying for the airlines. Today there is much more a move for quality of life where flying for the total is in lieu of flying for your airline. So that is the reason we carry quite a few more pilots. We have a real vested interest in partnering with the military to find ways to meet our collective needs for our pilots. Thanks a lot for your valuable time.

quarters and at the major air commands. If we did not offer this incentive pay for those types of assignments, you could imagine how many folks would be first to volunteer to go to those assignments. So our philosophy is that we pay the incentive pay through the course of the career as long as you are meeting your flying gates. You have to earn months of flying in the cockpit for so many years to qualify for the next gate. That also allows us then to take that talent and to career develop those pilots as the move from one grade to the next toward more responsible positions and also provide the expertise for our warfighting planning staffs.

Q. Hurricane Floyd. What is CSX doing about building an alternative switching operations center as an option to the facility in Jacksonville that can accommodate instances of down time such as recently experienced during the hurricane.

Fogarty

A:Interestingly enough when the last major rail merger occurred in the late 80s, between the Chessie and the Seaboard systems there was a decision made to basically build a bunker in Jacksonville that could collectively deal with crew calling and train dispatch service and it was made to withstand major hurricane assaults. There wasn't a great deal of consideration given to the people who would have to staff it. Our attitude has changed a great deal. Now the expectation is don't get in the bunker ahead of time and feel as if you are going to stay all the way through. But rather when the Mayor of Jacksonville said they were going to evacuate the city we told our employees to stay with their families. But there is a lesson to be learned and that is the technology now after ten years does permit us to decentralize at least two of those three functions and the expectation is that we will at least establish a redundancy in the next several years to try to deal with this circumstance if it happens again.

Q.What we can do as the shipper and receiver of products to help with driver retention?

Hartter

A:I

Questions & Answers:

n: Why do we in the miliary continue to pay pilots flight '-<Pay when they serve in non flying status position? Let's put the bonus monies towards the pilots who do fly.

Regni

A:Let me answer this question by offering the Air Force position on this. We have about close to 14,000 pilot positions in the United States Air Force active duty and 75% of them are active flying positions. The other 25% are spread across operational planning staffs, either at headquarters Air Force levels, major air commands as the director of operations, or in our joint and unified commands staffs where our warfighters reside. We have designed our pilot aviation career incentive pay to do two things: to recognize inherent dangers of flying and also to serve as an incentive to continue to fly through your career. Quite frankly we need pilots with their experience and operational skills on the planning staffs in the head-

think this is a right-on question. One interesting piece of information that I recently read in a study was that the average driver or owner-operator in that truck spends about 40 hours a week loading and unloading, the amount of time that the average American spends at their job. The unloading time or loading time for a 53ft trailer should be about 2 hours. We are losing productivity with long periods of loading and unloading. As a matter of fact about a billion and half dollars a year in truck productivity is lost through just the loading and unloading time that those trucks have to sit at a dock or wait to be unloaded at a dock. I would also add that the amount of time that is spent in having to wait to be loaded or unloaded adds to driver fatigue, and loss of wages to that driver. If they are not moving, they are not earning money. It is a very large frustration factor to that driver when they are not moving that piece of equipment down the road. Specifically as it applies to this audience, one of the areas that we have been working hard at in concert with MTMC and through the NDTA is the issue of munitions carriers carrying munitions across this country and looking for safe haven. 1 would say that a lot of progress is being made. There are a number of installa-

tions out there that do a wonderful job of giving trucks a safe haven when required. There are also a number of installations that we have not yet been able to strike the right chord. I know there is some progress being made there. So I would say the two areas that this group could help us with is getting the equipment unloaded promptly and when we do have a load of sensitive material on the trailer that if there is some way we can help with some safe haven that would be a tremendous help to that person or persons in that truck.

,) : Generally the Service Contract Act has the effect of '-<.r aising wages required to be paid. Why does it have sucli a different effect in maritime labor?

Kelly

A:It does not have a different effect. But by not putting the act in the way it was written, what the government has done is force down the wages in the out years. The reason we look to have this act in effect is that we don't want the wages bid below the level that was established in the first year.

,) : Please explain the logic behind moving from military '---<.! o commercial sealift with the purported shortage of merchant mariners.

Kelly

A : Right now MSC , like the rest of us, is having trouble flr ecruiting people. I think the Commander at MSC will tell you that he has a sizeable budget to recruit people. But when the unions go out to recruit people, we recruit three or four people for every job we have . We hold onto them like Delta does. So we have the luxury of going out and running the training programs at all times. I submit to you that it would be cheaper going with the commercial crew and operations would not suffer at all. I would welcome the opportunity to run a test program manned by U.S. Merchant Mariners against a civil service manned crew. Let's give it a try and see what is the cheapest.

,): What actions are being taken to use the community college system as another avenue to tap into recruiting and developing future professionals?

Smith

A:From Delta's perspective, we have used incentives in the form of scholarships to each and every one of our employees that wants to better themselves upwards of $3000 to go back and work on their associate degrees. Also we have brought the community colleges in on campus to Delta at many of our places, in particular Atlanta, Georgia to try help us with the some of the shortfalls, particularly mechanics which are a critical shortfall for the airline industry and we are robbing them from the merchant marine We are trying to address some of our own internal needs in a very win-win situation and giving people a time away from the jobs during normal working hours to better themselves with continuing education.

,): Can you explain why the United States Marine Corps is not experiencing the same recruiting and retention problems shared by the Army, Navy and Air Force.

Regni

A:The United States Marine Corps' tempo is no different. The Marines are doing a superb job in recruiting and meeting their goals and they recruit about the same numbers that the Air Force recruits. They have done an excellent job of creating an identity of an elite corps and transmitting this image across our country that they are very selective, they are lethal and they have a proud history and it is a privilege to belong to this Corps, which is all true. The Marines also have gone to great lengths to make sure that they have resourced their recruiters, providing them with enough field recruiters, television and advertising and other means to make sure they are successful. When you walk into a Department of Defense recruiting office you are more likely to find seven Army recruiters, four to five Navy recruiters, three Marine recruiters and one Air Force recruiter and that is a func-

tion of the gross numbers that each service is looking for to recruit as well as propensity and difficulty in getting them to join. The Marines have done a superb job of resourcing their recruiters and staying very focused on the target and projecting a product. The other services can learn and are learning much from the Marine Corps. We are in a very competitive market particularly in an office with multi-service recruiters On the retention side, each service has a different force structure and different requirements. They have built infrastructure to sustain themselves based upon their re-enlistment rates and what they expect to keep and it is different for each service. The Marines are meeting their re-enlistment rates but they only need 20% to 25% of their initial recruits who are still on active duty when it is time to make the re-enlistment decision. The Air Force on the other hand historically has needed 55 %. It is different for each service and each

service has different rates. The Marines are doing well in meeting their re-enlistment rates and the Army is doing well on theirs. You might have seen some discussion recently on how the services are doing on meeting their Congressionally mandated end strengths. The Army you have heard for months are going to miss their recruiting goals by up to 7,000 folks but I am told the Army is meeting end strength and that is because they have had a strong upsurge in re-enlistments where more soldiers are electing to stay in. So there are varying degrees of success. The concern we have in the Air Force on re-enlistments is that we have sized our training infrastructure when we downsized the Air Force so small and it is finite that we don't have flexibility to keep our force at sustainable levels at the current re-enlistment rates.

QWhy did CSX sell Sea-Land?

Fogarty

A:It is a decision we reached very reluctantly after a decade of attempting to make the business an attractive business for the capital markets. But there has been a pile of evidence that essentially says the capital markets will not permit a publicly traded company to own liner assets. That is the reality of the situation. It is a structurally flawed business where a chronic overcapacity just limits your structural and strategic options and particularly for a U.S. company which has to play by the rules. It became increasingly transparent that in order to retain those portions of the Sea-Land assets that could create shareholder value, we had to break and offer the assets that weren't to a company that is able to basically make an asset play and move toward a market share which is basically what Maersk's view of the world is and will continue to be.

Q. In the future, how do you see the computer in the cab of the truck helping with driver retention?

Hartter

A:Weare already seeing some of the future; in our case the owner of that truck is able to access the Internet system at our company and looking up its own loads and make their own choices to what loads they are going to be handling. So we are seeing a lot the future now and there is more coming. One of the Class A truck manufacturers, Volvo, introduced its first new model truck that is hardwired for Internet access. There is a company called Park and View that has external hookups at over 150 truck stops throughout the country which literally allows that tractor to pull up to a truck stop, like in the old drive-in movie theaters, and, with the introduction of these new hardwired trucks, and can now through the use of a laptops exchange e-mails between their house and the comfort of that tractor. It is going to go a long way toward not only communication between the shipper and the company and the driver of that piece of equipment but also I think it elevates certain family values that they will be able to practice though communications at home. But one last comment that I would make in terms the new factor of the computer in the truck not only the computer in the truck that we are seeing in our company that makes a difference but also while dad is going down the road with that load today mom is at home on the PC accessing our freight system and she is picking loads for

dad and then letting him know when he empties that I have picked a load for you to get you back home.

QWhat is the value of the Merchant Marine Reserve? What are our suggestions to make it valuable if it is not?

Kelly

A:The Merchant Marine Reserve is very valuable to the United States. It is a Reserve program where people that have licenses and Reserve commissions get specific training over their 20-year Reserve time. Every graduate of the Merchant Marine Academy at Kings Point in New York has a Reserve commission. We are encouraging our people to remain with the Merchant Marine Reserve specifically for that training.

Q. Why is the Maritime Administration not involved m the U.S. Navy skills?

Kelly

A:We are doing a lot of recruiting from the Navy. The problem is converting the individual's sea time to what the Coast Guard will accept, so they can sit for a specific license. In the past couple of years, we have had some retired admirals sailing as masters on some of our ships. We had quite a few retired Navy captains sailing as masters on our vessels and we encourage that. We would love to get more. We train them. We help them get their license.

QAre retired pilots attracted to the major airlines?

Smith

A: Absolutely yes. It used to be if you were over 31 years old, you could forget about being hired by a major airline. That changed a long time ago. There is a market out there. We encourage the pilots who are retiring from the military to come see us.

Q. Are the pilots in the military actually attracted by the airlines or disenfranchised by the military?

Smith

A:That is a tough question. Having been in the military, the needs of the service a lot of times are being dictated politically in the world and have a lot to do with what your perspective is on the time you spend in the service. If you are in conflict and you are often separated from your family, there is not anything anyone can do for you to make the experience very rewarding for you, although the military has made great strides forward in trying to do that. That is a tough question. We like to think that we don't actively go out and try and take anybody's assets away from them. And I think the military is trying to do a good job at trying to incentivize their people to stay. I will tell you that there are a lot of innovative things being looked at and things going on. Quite frankly, the British, Germans and many of the European militaries ran into problems with pilots a long time ago. The military is working as hard as possible to make the life of their pilots and everyone in the military as good as they can. The good of the service and a lot of times it is the juxtaposition and the history of your country that is going to determine what your taste is of that experience. Mine was excellent. DTJ

l to r: Mr. Eric L. Mensing, V ice President, M ilitary Affairs, A P L, L td ., Foru m Co-C h airm an; Mr. W illiam R. Lucas, D eputy to th e Co mmander, MTMC; COL Albert E. Arnold, III, USA , Proj ect Manager, Defense Trav el Sy st em; MG Mario Montero, USA, Asst. Deputy Chief of Staff for Logistics, US Army; BG Barbara Doornink, USA, Commander, Defense Distribution Center, Defense Logistics Agency; RADM Gordon S. Holder, USN, Commander, Military Sealift Command; Mr. Frank Weber, Dep. Dir. for Logistics and Business Operations, USTRANSCOM; Mr. Richard L. Brown, Dir. Military & Govt. Sal es, Emery Worldwide A CNF Company

MG Mario Montero, USA Asst. Deputy Chief of Staff for Logistics U.S.Army

I think leadership is absolutely critical to creating conditions that will favor change Not leadership by the comm ander, but leadership up and down the entire chain of command. It is all workers feeling they are a vital part of bringing about change. It is leadership that believes in something passionately enough to inspire others. There is no question that LTG McDuffie demonstrated passion when he gave his presentation. Leadership must also be compassionat e . W e have all gone through downsizing, rightsizing, mergers and outsourcing efforts. All have taken their toll on the cuJtural and moral fiber of organizations . Leaders have to deal with that dynamic

You need leadership that creates an environment that will demonstrate the worth of individuals, and that give s authority to match responsibilities, and that underwrites mistakes when they occur so that subordinates have the confidence that their d ecisions will be supported. Every time we question their judgement we risk the natural tendency of them reverting to the more defined way of making dec isions. That is not what we want.

We need leadership that builds trust through con sistent and transparent behavior, that uses the past as a sourc e of ideas, that creates a vision base d on core values Wh en you do these things, you get disciples and advocates that will help you bring about change. Making a proclamation and saying "thy will be done , " does not necessarily bring ab o ut the kind of change th a t we need. It is hard work. For th e military and its industry supporters, the challenge is much more daunting because of the way that we are disp e rs ed around the globe and bec ause of the complexity of our missions. To quote Tug McGraw "what you also need is people to say "I believe and I will stick with it."

Through leadership , t h e organization will l e arn to believe and support change But leaders must also b e sensitive to how much change an organization can assimilate before you threaten the ba sic fabric that is needed to ca rry on the day-to-day op erations while we work towards bringing about change. This is part science, part art; som e is intuitive based on experience Most can not be measured. A pe rson I respect very much once said that we have lo ts o f

experts that can describe the cost of something but fewer folks know its true valu e.

A basic principal in all that I have just said is the value of people. This is not just my opinion. Yest e rda y, we heard Andy Fogarty talk about taking care of peopl e in CSX and valuing the experien ce that " old timers " bring to organization. Gary Hartter us ed the term good citizenship t o d escribe their people ori e nt e d approach to leadership. General Creighton Abrams when he was Chief of Staff of th e Army just after Vietnam, was quoted as saying "the Army isn't about people, the Army is people." It was a very powerful statement at the tim e that helped bring value back to the soldiers and their families that served in the Army. W e owe him a tremendous debt of gratitude for that approach that he took. Mr. Gordon Bethune in 1994 said that he could see Continental's biggest probl em the second he walked in to the door. It was a crummy place to work, he is quoted as saying. Years of lay offs, wage freezes, broken p ro mises, mistrust and fear. He went back to basics. He encourage employees to reach out and embrace a greater purpose. Made them feel an integral part of the organization. From that he was able to instill an attitud e that fostered change in ca ring for the organization. Southwest Airlines creates a trusting secure environment in addition to concentrating fi erc ely on the mission as a low cost fr e quent service airline. The y have mutual trust which has paid big dividends and en abled the company to embrace change.

The examples I ga ve are certainly not m eant to be all inclusive. The y are merel y examples . I am not sa ying that good ideas and proclamations won't work and are not important. Just that people are the most import ant ingredient in bringing about change. The work environment has much to do with succ ess or failure as we attempt t o bring about change. C hange requires risk taking, w e all know that. We also know that you can not get to second base if you keep your foot o n first . To bring about chan ge requires creativity and inno va tion and those two ethics are clos ely allied with risk taking. r think it is an accurate stat em ent to say that peopl e are reluctant to take risks wh e n th ey feel insecure or not tru sted or mistrust their lead ership in the organization.

I mention e d attitud e e arlier. Attitudes are p art o f any organization ' s c ultu re and ethic. Attitudes ar e ageless. Attitudes determine whether we go forward o r r etreat.

Whether we persevere or we quit. Whether we remain open to new opportunities or are frozen in the past. Consistency and trust can shape and influence attitudes. What do you think your workforce thinks about change? Have you really ever ask them what they think about change. What is your attitude and vision? Does you walk match your talk? This issue could be debated for hours. I do not have the magic solution, but I am convinced, however, that we can make progress. In regard to attitudes about change, there is no challenge that can withstand sustained thinking so I think we need to continue. I believe success in implementing change has everything to do with how we inform, convince and motivate the workforce. Now while I did not talk about performance based contracting specifically, or best value contracts, or converting to strategic guidance to implementing instruction, I did so in an indirect way. Because I am totally convinced that the only way you can achieve total success in those three areas that I just mentioned, is through a well informed trusted workforce that wants to help the organization move forward.

The panelists will treat all of these issues and we are all prepared to answer your questions after the break.

RADM Gordon S. Holder, USN Commander Military Sealift Command

Thanks for this opportunity. Not many opportunities arise where you can come up and literally say what you think. And I am convinced that is the right way to do business. If I say things I don't mean, then I have to remember what I said. If I only say the things that I mean, then I don't have to worry.

I would also tell you that the precursor panels were absolutely mandatory to gain the most out of this third panel which is "The Challenge of Change." Because if you don't understand the environment and the constraints of the environment or you don't understand where we are in manpower, then you have missed two of the very basic prerequisites for implementing change . You have to know your surroundings. You have to know your workforce. MG Montero has already talked about the leadership issues and I am not talking about those issues; they are givens. It is an amazing piece for me. I have always been an operational guy. My headquarters is as close to Washington as I want. It is in the Navy Yard not in the Pentagon. I go to the Pentagon when called. I can say quite honestly and with a certain amount of pride I have never actually had to serve in the Pentagon. This is the Sealift's fiftieth year; we celebrated in grand fashion fulfilling missions and most importantly are looking forward to the future. Five decades of lessons learned. Five decades of preparation for the future. In the last five years just to give you some numbers, our force structure of ships has gone from 113 to 137 that doesn't count the Ready Reserve Force (RRF). That doesn't count some of those one time charters. These are ships that we can reach out and touch that are either government owned or under direct long-term contracts that we operate. Conversely, our personnel have gone from 1,991 people in the headquarters to 1,430 and at Delta, 500 folks. So if you say that change is new, I would tell you that is not true. Change is continuing and constant. My conversations with some of the industry and my challenges are translating best practices to best value. When it comes down to it, the people that want to measure my performance do it in how many dollars I am trying to save. What is the product we are delivering to the

warfighters? The dollars will take care of themselves because they will be wisely spent. That is a significant challenge when your bottom li,e metric is tell me about the dollars. The world changes quickly. I visited Singapore and APL, and Ed Kelly talked about it, the number of days that ships used to spend in port downloading and uploading. Now we do that in hours. I was on one of the APL ships in the last hour just before they were sailing and it was a 6000 TEU ship and it had b~en in port something like 12 hours and they were about to sail. The CEO of APL took me on board and we visited with the Master. The ship was crewed by 21 people. I mean we are doing something fantastic when we operate ships with that small a crew. I am also operating logistics ships for the Navy with 150 people and the Navy is manning those ships with sailors that count in the numbers of 400 to 500. That kind of change is inevitablt, we have to go there. What we haw to do though is align our processes so that our contracts produce the kind of value we need. Going back to my APL example, after the visit, we were discussing their in-transit process. They do the QA for Lexus. I stopped and said "what ." then turned to the CEO and asked "how can you do that.,,, He says, "we were doing the QA anyway just before we - tufted this brand new automobile into the container, and Lexus sin.ply asked us if we would open the hood and the look at the engine and see if it was there too." So a little bit of outsourcing. I asked how long they would continue to do that. He said "until it becomes a bother. Til then I will simply turnaround and contract it out to someone else and will continue that process of keeping our front office focused." We need to be able to do that. We need to integrate our systems and those are challenges we face. Some of our changes are minor and procedural. The biggest ones are changing the culture, changing the mind sets, changing the paradigms in this cultural environment

The Naval JG (Inspector General) has is su ed a report saying that echelon two commands dL not know where their cost centers are and do not know what there profitability is. Isn't that amazing? I mean this is a Navy that has been doing business for over 200 years. This a Navy that has contributed to the national defense without significant total loss; certainly we have had some ship losses during the wars, etc. Even during Desert Storm, if you recognize that the triple eight took a mine hit, stayed on station for another week with a hold that was about eight feet tall and about six feet wide in the hole. The Princeton took a mine hit that same morning and her combat systems were back up within an hour defending the rest of the forces out there. So this is a Navy that has always succeeded. Brute logistics, we do it. We have always been able to' find the workarounds. When you come back and say what is your profitability? In my business, I am not about making a profit. In fact, I am about making my bottom line zero. Because when you are a working capital fund, that is the measure. No profits. No losses. But if you don't make a profit, where do you find your money for re-investments.The resistence to change is one that I use Jack Welch for, he says there are three kinds of people in his employ: one, the people that are brilliant and are always ready for change; two, the people who aren ' t so brilliant and resist change; and then the third person is the guy is not brilliant but is ready to change. Of those three types of people, Mr. Welch says he examines them for about six months when they first come on board and you can imagine the first type he keeps, the third type he really has to ponder because of the energy and desire to succeed and the middle person there that mentioned to you is fired. We don't do business that way. In the military we strive to work

with people. Our civil service process is one of guaranteed security. Which means job enjoyment. How do you move somebody that has been doing the same job for twenty years? How do you engender their trust, when in fact you are not going to fire them, you are just going to eliminate their position and retrain them? But if your functions are decreasing because you are becoming more efficient then you have to find a way to move your workforce. Some of the workforce has to go to retirement. Some have to go to other agencies. Those are processes that are incumbent among leaders and executives across the spectrum to bring into place. Otherwise, the resistance will just simply overwhelm us. The third point out of the IG report, is the Jack of education. The educational process is one that is in arrears in my mind. Some of the other services, the Army in particular, because I know they have a transportation corps, the Air Force has a logistics segment, and how you balance and d rive change from a supporting position is sometimes like pushing the rope up the hill. It is awfully hard and so you've got to communicate that process.

What are some of the specifics then that MSC have done and the one that changes inside our organization? Phil Quast my predecessor twice removed took MSC through what he called a re-invention and that is when we started. In 1995, we started a reorganization process that went from a hierarchal pyramid which we were very comfortable with. Today the environment is such that I have to be able to talk to anybody in my command at any time, and I want them to think that they can talk to me. I want them to not only think it but I want them to know it. I purposely never close my office door unless it is absolutely so sensitive that I can't allow someone walking pass to hear the discussion or somebody else walks in and closes the door and says do you mind That kind of open communication is absolutely essential. So we put together a matrix organization and we call them project managers and each of our major product lines are profit centers and organized that way. We have one that does ship conversion that isn't a profit center but it is such a huge piece of our business, we provide new ships and convert ships for military usefulness that we have elevated it to that range. Then we have functional centers that are comptroller, personnel, legal and contracts. That is interesting isn't it, that our contracting officer is not a program, but is a functional support center. And yet, my contracts officer, a navy captain, comes to me and says I recommend you sign this $250 million contract or he comes more likely and says Admiral I just want to Jet you know I signed a $250 million contract for you today. Oh, do I to know anything, should I tell the CINC; should I tell the CNO. Well no it is okay I have already told their staffs and they know all about it. So that is the empowerment process. Is there risk associated with that, you bet. But the essential piece is, the communications.

The empowerment is something I took away from Admiral Bud Flanigan, who now works on Wal] Street. He was a four star by the time he got to his 28th year of service, but his comment to me when I made flag, was Gordon "remember one star should do one star work and four stars should do four stars work." So I have taken that analogy and tried to drive into my staff to allow them to do their work. Sure I ask questions and sometimes I will reverse the process and is that harder? Sure. But it is also much faster in meeting our requirements. It is the only way when someone calls and says can we deliver a product tomorrow. Because the programs are constantly out with business surveys. They know where the markets are. They know where the ships

are. And they are able to work with the ships around the world to make sure we understand where our lift assets are, and so allowing the people to engage in that process. More recently, we have gone off site, a great little facility over at Wye River and certainly it has much more reputation than MSC's visit but it is a great organization and brought selected members of the staff from around the world to bear and worked on a couple of questions. What are we today? What do we want to be? Just for the sake of discussion, I chose the year 2010 because I am convinced that if you get too far outside the palm you are just smoking and if you are in the palm you can't affect it anyway accept with Jots of concentration. So we chose the year 2010 and said where do we want to be in 2010? Use the environment and assessment; identify the environment just from our perspective and then said what do we need to do to get there? We brought people in from around the world and let them talk. Then we wrote down actions and created a Board of Directors, which is that group and the ESC (Executive Steering Council) and we will meet monthly. But the difference is, instead of having someone else chair it, I chair it, so that my people are talking directly to me . The Board comes in hopefully on at least a quarterly basis and we drive to meet our instinct. We have set in panels to take actions and make our ideas actionable with a due date. But the due date is only to force the function as opposed to say what is the product. If the product is not ready, then we will change that. Hopefully, we have made all of our Board of Directors proponents of change

Some of the specific things that we have been able to do outside of our environment was to have an initiative called quick freeze, which to bring aboard first Naval ships of our logistics program, bags of food instead of boxes of food, bags of food that are partially prepared, but the point is we are looking at those kinds of processes. I have had the Secretary of the Navy and the Undersecretary over for discussions and one of the highlights was to serve them lunch that had been prepared 20 minutes before they arrived. It will save us in fact manpower before we are done with it. Interesting resistance to change here, if you do that you will take away jobs. It is not about jobs, it is about doing the right thing in the most efficient manner possible. We will just press on with this. We are going to force this function. The Secretary is forcing this across the Navy as a manpower savings. One of the things that I want to do with it, in addition to being more efficient, is to then take those people I save and retrain them into other shortage areas and that drives right to the manpower issue. So that is a specific example of a benefit and resistance to change that might be there. We are implementing a financial management system across the command that makes us CFO compliant. It replaces eight legacy systems and puts decision-making data in the hands of decision-makers. It is quick; it is understandable; it is accessible. The same database via web technology across the Command. It takes data, creates information and then alJows knowledge to be applied. That is what it is about. It is changing data management to information to knowledge. Allowing decision-makers to see across the spectrum how that works. It is powerful. The dilemma here and the challenge is that it is the left hand; that is CFO compliancy; the JS will telJ you that is good stuff. We have some issues of course-you always do when you are trying to change an enterprise. In the last three or four months, I have come to learn a lot about a system called the Standard Procurement System. It is a contracting tool; it is the right hand problem and it is also a DoD directive to have a single contracting process and of course the left hand/right hand failed to com-

municate and as we are driving to implementation of our financial management system, I find out that all of the interfaces to this single standard procurement system are not in place. We are going to go forward. We are not going to stop. So how to move forward in changing a culture, driving the process, getting data that is understandable and then being able to use it. Where the financial management system of today is taking us, is that when we do a transaction I will be able to see it in minutes. So when it hits the computer and goes to the database , we will be able to see the impact of that. We will have not only an old accounting system which a comptroller really needs, but we will have a management system that allows us to forecast. Which takes us right back to the IG's point on being able to see your cost centers and seeing the impact. The other issue of course is on the working capital fund . That means I have no appropriated budget. So my issues are, set my rates two years in advance and tell my customers I am going to charge you in the year 01 and that is a stabilized rate across the fence. My issue with that process is that it is okay because we will drive our rates down hopefully and with TRANSCOM working some great initiatives on rate strategies to get the rates to be reality and be compatible and comparable to commercial rates. But what is the readiness factor? Another big one for me is how do I get re-investment capital? There are a couple of ships that I would like to buy back for the Navy, TRANSCOM and Defense Department. I will need about 200 million dollars to do that. Where do you go to get those kinds of investment capitals? Who is going to loan you that money? In fact this is a conversation I had with the Secretary, if I could get back 200 million I could give back 300 million dollars over my cost in five years and would have useful ships for at least ten to twenty years, our estimate of their remaining life. Those are significant issues that we have to challenge ourselves to tackle. Not in brute logistics but as a process change. We have a warfighting structure. I would ask you what is the Defense Department's business strategy? The Navy has just recently, with Secretary Danzig being the forcing function, developed a business vision and it is signed by the Secretary of the Navy, the Commandant of the Marine Corp and the Chief of Naval Operations. It is a small pamphlet that says four things. It says that we will continue to innovate and foster those continued conceptual technology and operational superiority pieces. We will continue our emphasis on people and we will recruit, engage and retain. We will have decision support systems that deliver recognizable value for every dollar invested. That is the way business works. That is the way we have to work. We will have an organizing workforce based on teamwork and outcome. The outcome for us is very simple: deliver on time when the force needs it and support the CINCS. That is important. If we don't do that right, then somebody's going to get hurt. It could be your son, my daughter or one of our grandchildren just think about it. This is important. This is the way we have to go and do business.

Mr. Richard L. Brown Dir., Military & Government Sales Emery Worldwide, A CNF Company

Achieving improved results through better business practices has always been a key objective in every organization I have been associated with, both within government and in the private sector.

But before I start, I want to pass on a little story that I heard about a guy who was trying something new:

A man bought a new BMW and was out on the interstate for a nice evening drive. The top was down, the breeze was blowing through his hair, and he decided to open it up a little bit. As the needle jumped up to 80 mph, he suddenly saw flashing red and blue lights behind him. He thought to himself there's no way they can catch a BMW, so he tried to out run the policeman. Then the reality of the situation hit him. He says "what the heck am I doing?"and pulled the car over. The cop came up to him, took his license without a word, and after examining it in the car. He said "you know it has been a long day, this is the end of my shift, and it's Friday the 13th . I really don't feel like doing all this paperwork, so if you can give me an excuse I haven't heard before, I will let you go." The guy thinks for a second and says, "last week my wife ran off with a cop. I was afraid you were trying to bring her back."

Just like the guy in the BMW, when we move forward with new practices, if they are implemented properly, we don't have to worry about someone wanting to bring the old ones back.

Today, most companies understand that there is always more they can do to improve their worth to their stockholders and their customers. As a result, industry leaders commit to continuous improvement programs that transform the way they do business.

These changes in business practices often result in the need to change the way the companies are organized; change the way employees relate to each other and to their customers; and change internal and external procedures and practices. While all of this is occurring, we owe it to the stockholders to maintain and increase our profitability.

Once the new procedures are operational, the success of these adjustments are measured against our business plan. Did our growth in market share and increased marginal profit meet planned expectations? Is feedback from our employees positive? Are there further modifications that can be put into place? And have the customers recognized what this added value brings to the changes to the services? The process continually evolves as new business practices are adopted and fielded. Any new practice ultimately focuses on the needs of the customer. Likewise, it should produce win/win benefit from the provider. We evaluate all new business opportunities against a firm business plan. There must be an expected return on investment before the process can move forward If after the analysis the process looks to be profitable, we assign an implementation team to the project, we them give them the resources they need and empower them to start the change process. Part of this empowerment allows them to draw the expertise they need from all components of the company. This is key to achieve the best possible value results.

Success is rewarded with increased customer satisfaction and a growth in profits that is shared by both the employees and the stockholders. As an example, the methods used to develop and implement our company's new guaranteed heavyweight air freight service that we provide for our commercial customers, is a good example of how this process works. Early customer surveys indicated that many of our customers desired a wider variety of service levels tied to a guaranteed performance. Our industry benchmarking told us that while this practice was the standard when shipping small packages, it would be a rather unique offering in the heavyweight air freight arena . Our corporate board evaluated the potential product mix to determine the fit within our existing resource base and decided that this market offering had good market potential. So, their next step was to form

an integrated implementation team made up with members from our operations, airlines, sales and marketing functions. The team was led by operations and empowered to develop the processes and procedures necessary to bring this new service to market. When they were ready, we test marketed the service in 13 selected geographic areas. After a successful trial, the company decided to expand the service to all major North American markets. Again, project teams were formed to communicate the program to and get buy-in from all employees Employees at all levels were trained in areas related to sales, freight marking and identification, prioritized movement of the freight, data capture, billing and dispute resolution. We measured performance at all levels, tracking product growth and on-time performance levels at both our airline and service centers. We also tracked our data and reporting quality. Feedback mechanisms were developed to facilitate analysis and process adjustments. To date, results have been impressive and we just recently expanded the product to our key international markets.

To wrap up my portion, I want to leave you with what I call ten steps to successful business practice implementations. Top management involvement is essential. They allocate the resources, establish the business goals , and empower the process owners to make the changes necessary to effect organizational culture and procedural adjustments. Use all of your technology resources to work smarter. For example all of our manuals and procedures are available to all of our employees through our in house Internet. Early success builds confidence and motivate and excite others. Demonstrate the added value you can deliver to your customers. Accurately measure performance and provide the timely feedback mechanisms to allow for fine tuning. Reward good performance and communicate! Make sure your customers, your employees and your stockholders understand, agree with and are part of the solution from the start. If you do, initial resistance is quickly overcome and new practices become permanent.

workforce and workload. We basically have gone down through a lot of innovative measures. Only 1500 people had to take involuntary separations. They either retired and were placed and we think that is a huge success story. A lot of things happened in this to be able to take that kind of a downsizing in personnel and at the same time maintain and grow in efficiency. We went from a work week that was five days and basically 8:00 am to 4:30 pm to a work week that extends to 20 hour days and the two primary distribution sites. During Kosovo and all our air logistics centers, seven days a week 24 hours a day. We have gone from a workforce that had only one skill to a multi-skill workforce. Dramatic change. Some people could not cope with the change and that is why they retired. Those who are willing to change have made great progress and that is important to us as we go forward.

General Privratsky started a very aggressive benchmarking program with some pretty great results. At one point in time, the DLA depots were meeting all of their standards but they were no longer competitive with this commercial industry. Quite frankly, no longer where we need to be or where the Department of Defense was taking its acquisition policies. Less piles of iron places, means you have to put more movement in those that you have remaining. Now we are in the process of moving to hours. We are no longer measuring in days but hours in the one day. That is pretty significant. But probably more significant is we are trying to balance that with our customers' requirement. Some of them do not want it fast. They want it in a time definite mode. They want it in a value that is important to them or they want the visibility on it. The picking up or the processing time is important because that is another tool in our bag. But it doesn't do any good to send something fast if that is not what the customer at the other end of the fight needs. We are balancing that also.

BG Barbara Doornink, USA Commander Defense Distribution Center

Today, we'll be taking a look at the past, present and future of the DDC. As we go through the brief, you will see evidence of the change or evolution of the DoD distribution network. I don't think you will see any other DoD activity that has changed so much in such a short time.

Our current mission is to distribute, store, and manage material, and information enabling a seamless, tailored worldwide DoD Distribution Network that provides effective and efficient support to the CINC's, Military Services and other Agencies in theater and out; during war and in peace. In December of 1997, they disestablished three organizations and created one. We are about change. Getting smaller and growing at the same time. Picking up more missions as the Department of Defense figures out where things needs to be and how they need to be organized.

We picked up map support offices. We are truly in the CINCs backyard everywhere. That is another part of us. New change for us. And this is kind of an interesting one and everything else that we do is funded in one pot of money and maps are free and this is in another pot of money. So another financial system for us to cope with.

We continue to drop infrastructure. Personnel statistics continue to drop. When we acquired the missions from the Services of running the depots, we had a pretty significant

One of the major tools that allowed us to do that was the final implementation of the Distribution Standard System (DSS). It took 5 years to do this. We had to overcome having five legacy systems inside of our depots. Trying to interpret what we were looking at on almost a daily basis to see whether we were making progress of where we had problems. It is very important in terms of our business practices, the perspectives it gives us and setting the preconditions for success with AIT (Automatic Identification Technology). This has been absolutely key to change and one that in combination with DSS caused some really trauma in our workforce. We have a very interesting and diverse workforce. Our average age is about 48 now and it continues to get on the older side not the younger. We have not been hiring in. And so to move to computers and put AIT into their working areas was pretty traumatic for them. Lots of training; lots of bargaining with the unions; lots of thought process. But the good news is that they have seen what it has done for them. The RF (Radio Frequency Tags) technology allows our inventories to improve on a daily basis. We have great hope for what 2D barcode can do not only in bound or out bound as we are currently printing 2D barcode labels in all the depots but in bound as it allows us to get better definition of our inventory coming through the door. The Optical Memory Card (OMC) has been a huge success in the Army; the Navy is moving out smartly on that; and in certain areas of the Air Force it has had some success. So we think this is huge. And the good news it is working its way back into our depots in terms of reaction of customers and we have a lot of converts. PowerTrack has been a great innovation for us. A pretty dramatic change. It is a wonderful partnership and we are cer-

tainly huge advocates of it. The web-based windows application is key . This is a leader in terms of where we think an awful lot of our business needs to go. We want to be webbased to be flexible. We have warehouses full of documentation. One of the things we hope this will do as the business rules are changed, is allow us to do well with some of that. The payment process here for the carriers is that we have moved into days instead of months. It has turned into a great traffic management tool for us. It has turned into a financial tool because we know where our assets are being committed. And we don't have a third party, meaning a financial guy making a decision, the transportation officers who are the actual shippers are working with the organization that does that shipping and they resolve things and then decisions are made. Just powerful stuff in putting it at the right level. Not without challenge of course. First of all the challenge is getting all the DoD team to work together to decide what we really wanted. That challenge continues. But I think there is progress being made there. I talked about retaining the billing of ladings. We need to figure that out. Whether we are allowed to retain that on CD instead of just the paper. Our scanners today allow us the kind of definition that should allow us to do that We need to have the changes take place that will authorize that. One of the big problems with having a web-based system , is access to the Web. DISA is working very hard to insure that we have that kind of access. The nipper net is still not substantial enough for us to do that It doesn't work well if you put something in and you have to wait seven minutes before you get the information back. When we got the go ahead after testing to implement that, we were so excited about it that we put it in fifteen additional depots in four months instead of about the ten months we were given to do it. It has been a huge benefit.

Some of the tailored logistics things that we have learned from include: Premium Service is our warehouse under partnership with FedEx. It is a very important niche business for us. Putting the right things there really helps the system and we think that it has a great growing future as a niche; PowerShip Plus is another commercial venture that allows us as DSS (Distribution Standard System) prints the label and says where we are going to send the product it simultaneously tells the commercial carrier who then begins the routing and it all comes out on the same military shipping label. Dedicated trucks are a huge success story in CONUS and we are looking at a version of that for overseas that implies the same thing. It all comes down to what the customers want down there. That is what drives our train daily. The time definite delivery is huge That is absolutely what customers want. We have customers tell us don't send it on an overnight express service, we rather get it on a our dedicated truck. That is an important part of the tailored service. The constant communication; adapting to change. If we don't communicate, we can not respond. The customers got to tell us what they want and we've got to tell the customers what we are capable of doing and what we will drive towards. If we do that, we find understanding and takes us to the next level and we don't go backwards we go forward.

On the horizon, a lot more change for us in the future. Our primary distribution site in San Joaquin, California, is a combination of two depots, the sharp Army depot and the old DLA depot at Tracy, they combined to become San Joaquin in 1992 but they never really combined. I challenged the depot commander to posture himself to project power for the millennium out there and he did and came back with some dramatic changes and there are starting to

move through those. As a minimum, we have a 30% productivity improvement. We have a one time savings over 10 million dollars in just the number of people we are losing. And we will be able to put all our automation and information into one site and still be able to have a large and robust infrastructure available to build on for contingencies in the Pacific. Forward positioning both in Europe and the Pacific has great potential. We are working first with Germany and then learning from our successes there to take that to the Pacific. We are engaged with the CINCs there. What we are talking about here is putting not war reserves but the right things forward for that first burst to shorten that time. One of the statistics that brings it home when we looked at FY98's push to Europe, we found that only 4% of the product accounted for 90% of the weight by air and that tells us something. Why don't we drive that 4% closer to where it needs to be for the big one. So we are working those issues hard. Once again we think that this has some real potential. Doctrine is incredibly important as we have so many pieces of the pipe moving in different directions. This is a fast tracking doctrine working under J4. DLA (Defense Liaison Agency) is our primary activity and DDC (Defense Distribution Center) has lead working with the CINCs several working groups going. I think November, we will have the prototype draft out on the street for comment. But basically, what we are beginning to do is recognize where we are today and the changes that are in progress and set what we hope are the directions for the future so that everyone knows the rules when they come to the war. A-76 is being conducted aggressively in the DDC. Three of our depots are waiting for decisions right now. We have six more in that process and we announced seven more this spring. Probably the most important that we have realized out of A-76 is that it is an agent for change and that it forces people to look at all of their processes because they are competing to retain their jobs. That is a powerful tool when you are competing to retain your job. So we have had change take place where it would have been very difficult in the past. We are very hopeful on the outcomes. The Joint Logistics Warfighter Initiative is a recognition that there has to be an end-to-end integrated management of the logistics supply chain. This hopefully going to be tested in February. It is really recognition from the vendor to depot to foxhole and back, something needs to be looked at and balanced in terms how the customer sees it. The focus here is on the customer. Do they have what they need when they need it.

We used to define ourselves successfully by how much product we could store; how many warehouses we had; bigger was better; how long we held it more important. That is no longer our view. Our view today is that we will manage information and the result is material will move. We will define our success by not having a lot of things. Products will move quickly through there because they are the right products ordered for the Department of Defense being used by our consumers as they need them. One of our challenges that we see out there is the stealth logistics problem. In the name of goodness and all sorts of wonderful programs, we have an increasing number of stove pipelines heading into the customers. And one of our ways of attacking it is a program called the Delivery Value Management (DVM). Which basically recognizes that and says we need to get a handle on that; we need to get a look at. In fact most things would not come through the depots. But there would be a recognition of where it is and where it is entering and how we go forward with it. As change takes over very quickly, we are very concerned that we find that right balance. We talk about our

cost reductions and our operating efficiencies and they are extremely important. The reason we exist is to support that warfighter and so whatever we do and whatever efficiencies we take, we have to be very cautious in that it doesn't affect our ultimate responsibility to support the fight.

COL Albert E. Arnold, III, USA Project Manager, Defense Travel System

I decided to talk to you about some of the things that we have done; are doing or planned to do with the Defense Travel System with regard changing or implementing business practices. I think even though it is a business system, I think some of the things that you are going to hear you can either extrapolate or interpolate for other business systems; for tactical processes, etc. and I will leave that up to you.

What we are doing is really a revolutionary system. We are implementing revolutionary changes. The biggest thing though is we have to maintain our customer service. Right from the very beginning there were folks that started this before I came on the project that actually did the classic business process re-engineering. If you pick up a textbook and you see what does business processing re-engineering say, its says you are suppose to benchmark; make the business case; come up with a solution and then implement it. But above all you need a "leader" at the top of the food chain. This project started under the Undersecretary of Defense Comptroller, Dr. Hamre, with that leader at the top of the food chain. Classic business process re-engineering says that if you want to implement change, report to the top change. You can't get much closer to the top than Dr. Hamre.

So what did we do? As I said it is the classic business process re-engineering, its not just automation. We didn't just automate it to get to the wrong point faster. Existing policies and procedures and even laws were changed. You don't have to certify your long distance phone calls anymore - that was a law we got changed. We involved various process owners right from the very beginning and we are very proud of this because this is an absolute outside the beltway solution. It wasn't guys sitting up in the Pentagon coming up with a solution. In addition, it was guys outside the beltway in industry. Travel administration is not a core DoD competency. So if we want to do what industry is doing, we go to ask industry how they are doing it and have them provide us some information. We also worked with bunch of governmental organizations (e.g. GAO, GSA, NSA, Congress). An interesting aside there was one we forgot early on and that was FEMA. When you are doing travel administration, we found out we had to do FEMA. Why? Because of the hotel/motel fire safety act that FEMA has responsibility for. So we pulled in a lot of the process owners. And above all, kept communicating, over and over again, with all the process owners. Not only inside the Department of Defense but with industry and the other executive branches.

We also had a pilot program. And the pilot program tested that concept of operations with 27 different service and agency volunteers. What they did was tested the concept with over 50,000 people to find out if it worked. Again outside the beltway, a solution for those of us that are going to have to live with this outside the beltway. It accomplished a whole bunch of objectives and we wouldn't be where are at today if we didn't have that pilot program to get that feedback from those folks.

Of course, it would not be worth doing if it was going to cost us too much. So we did an economic analysis. We start-

ed this economic analysis early; we got all the stakeholders together; we all the services together; we got OSD PAE right involved from the beginning. So that when we completed our economic analysis, everybody signed up to it and we knew what it was. It said that yes it was better. Obviously they were not all direct budget quality savings, there was some opportunity cost savings there also. I can't tell this has been worth its weight in gold. All the way from inside the Department. All the way through the executive branch and to Congress. As some of you know, we did have a protest. The economic analysis that we provided to the General Accounting Office (GAO) was upheld 100%. The economic analysis also forms the basis for our after the fact performance measurements. Again, if we are going to say we are going to do this and it is going to make sense to do this, well we want to make sure after the fact we do that so it forms the basis for how well are we doing or how well do we need to change the mark on the wall. We will know that because we have formed the baseline from our economic analysis. Communications is the linchpin for any and all of our successes. We established a web site to exchange information not only internal to the Department but also with industry. When we put out our RFP, we put out a draft to industry for comment. We made a presentation before an industry trade show, we got the question well could you send me a copy of your RFP and I said no it is on our web site and one of the vendors said I don't have access to the Internet and I said if you can't access the Internet then we don't want to do business with you. Eventually everybody has gotten along with that. We are communicating through the Web. We have provided numerous draft RFPs for the industry to communicate on. We had pre-solicitation seminars. We held pilot conferences and other defense travel systems conferences in our first region defense travel region six the upper Midwest area. We have put responses to questions, both from internal government and to industry out on our web site. There hundreds of frequently asked questions out on our website that anybody can go out there and look at. We have had process actions teams - the people that provide me my adult supervision on day-to-day basis. Basically is an 08 steering group comprised of the services and agencies; 06 working group and then there is another subordinate organization that is called the commercial travel office working group that works all the issues comprised of all the functional areas altogether. One of the things that we have found was that we had to come up with some innovative ways to communicate information about the program in addition to the website to get it implemented. What we came up with is a target chart. How do we normally communicate things? The normal communication is a policy flow. The other way that we communicate information to folks is the outside circle. That is the public affairs. Articles in post newspapers or flyers or something like that the public affairs folks put out. Not everybody has subsribes to the Army, Navy or Air Force Times. So we felt there was a void there that we wanted to make sure that we got all the information to all of our customers of what the Defense Travel System it is and isn't. We have devised some handouts that the quarter before show up before deployment and implementation that is going to say coming soon and the quarter of implementation a little bit different look same kind of theme that says know arriving and then the quarter after implementation it will be another reinforcing thing to help get the word out that there is actually something called the Defense Travel System and here's what it is. The other thing that is probably important is that everybody has to have

something to rally around. Right from the very beginning, we established our seal and got it registered with the heraldry folks and we also got a logo. We test marketed it, again outside the beltway. We found some interesting things. We have field tested a whole bunch of our other stuff, again outside of the beltway. We have heard a little bit about unions. It is important that we embrace unions up front and explain what the benefits are. We did that with the eight or nine national level union folks in the Washington, DC area and hoping to get buy in from them. They said basically yes we like it but it is going to be at the local level. So what are we doing? We are putting together a package that we will provide to base and installation commanders with talking points for them to talk to the unions up front and early before we have to implement.

So what are our challenges? The challenges for the Defense Travel System are a lot of cross functional issues. Who owns it? It belongs to a whole bunch of different people. The integration of infrastructure. Integrating with service and agency and unique systems. Information system security across the department. We can fix it for each base, but we are trying to come up with a corporate solution. The inter and intra agency coordination is never ending. Acquisition reform growing pains has not been easy to do. Performance oriented specifications; "best" industry practices; maximizing use of COTS products; and best value. Put those four things together and it is really hard for us in the Department of Defense to do that. Another challenge has been turnover of high level personnel from our customer base. The real challenge for us in the Department of Defense with implementing business practices is do we align DoD non-core business process with COTS products, or align COTS products with our DoD business processes. That is really our challenge when you are talking in the business area. Hopefully it is more of the former So what are our lessons learned? First training, one of the things that we underestimated was the amount of training that was required. Secondly, the need to simplify. Third point is that senior leadership is critical. Lastly, to continue the process of communication.

Mr. Frank Weber

Dep. Dir. for Logistics & Business Operations USTRANSCOM

The Defense Travel System, in fact the entire Department of Defense, is really in a period of unprecedented change. I mean everything around us is shifting. And what it has made clear is that there is a new skill set involved that is real important for successful leaders, managers, workers and organizations at levels and that is how do we manage the change process itself.

Now we like to go back in DoD and pride ourselves historically on being at the forefront of introducing technologies, processes, change not just in DoD but throughout the private sector. The reality though is that today that dynamic has changed. Particularly in the transportation environment where today we are following and adopting the practices of the private sector. An interesting question of how did we end up with this reversal of roles. Well I would submit that it is not because folks in the private sector are smarter, more motivated, or more clever than those in government. What I would offer to you is because they have been at it longer. That the imperative for change has existed for a longer period of time in the private sector than it has in the Department of Defense. I trace it back to the recessionary

You have

to engineer how we acquire informatio11 services that are key enablers to all those process changes.

period of the early 80s. When in fact many corporations and commercial entities began to realize the need to look outside their traditional corporate boundaries in order to provide if not the same better service to their customers at a cheaper cost. In fact that started a cycle of change. It opened up new opportunities as the private sector discovered that things like outsourcing, focusing on core competencies, etc., really opened up new markets and opportunities. At the same time, customers began to raise their expectations.

Well the time is here within DoD where the budgetary pressures are upon us. And they are upon us at a time that the very operational framework of the defense travel system is changing. We really are a 911 system today. So we have customers who rightfully demand the same kind of service from the commercial sector at a time when the demands on the system from a variety of other sources are placing unprecedented requirements and really shifting the entire framework for how we have historically done business.

I like to talk in terms of full spectrum change because that is what it is. I will submit to that virtually every process in our peacetime transportation system and wartime transportation system is undergoing some sort of transformation. It is full spectrum vertically as well because you just can't reengineer the transportation system . You have to re-engineer the financial system. You have to re-engineer the acquisition system. You have to re-engineer how we acquire information services that are key enablers to all those process changes. So we are embarked across the board on a wide range of initiatives. The real important question is how do we put all together to get to some sort of end state in the future. So what does this mean? First of all, we are never going to be like industry and we can't be. It is interesting TRANSCOM just recently completed a worldwide customer survey and one of the responses was very telling. As you know our customer base basically divides into three fairly discreet elements : the warfighting CINCs, the service headquarters and shipper agencies, and it was fascinating in the response to a question inquiring adoption of commercial practices. The warfighting CINCs first and foremost says do not try to be like Wal-Mart you are a readiness organization. Other shippers and activities said you need to be like Wal-

Mart. So the answer obviously is how do we bridge that gap in a way that maintains that readiness capability which is the only reason that we have a defense transportation system while at the same time providing those value-added services at the reasonable right costs for our customers.

Six lessons having been engaged in a number of re-engineering initiatives over the past several years. Lesson one: making the decision to change. Change is hard. But it is important that we invest the time up front to articulate what we are trying to do. Change for change sake can't be afforded. Is the process that we are looking at really broken? And have we identified who the process owner is and have we gotten them involved? Lesson two: get the organizational buy-in. Selling the need for change. Trying to get everybody to buy into the game is a losers game. One hundred percent buy-in does not occur. Organizations have certain behavioral patterns just like people do. But it is important that you have two constituents and that is the process the owner has to implement to change and you need senior leadership advocacy and the fact is if you don't have that senior leadership involvement change isn't just difficult it is impossible and you are organized for failure. Lesson three: start with a clear-cut strategy. The fact of the matter is that change is an expensive proposition. Organizations are like any other living entity they have so much energy, capital, time that we can quickly dilute their attention and focus by overwhelming them with a less than clear focus. Lesson four: know your proce~ 2s. Knowing who the players are and what the processes are in the process you are trying to change. Making sure the law of unintended consequences doesn't get you. Under your processes going in. Lesson five: commit to true engineering . This is hard. All of us think we are experts in what we are trying to do. So we know the endstate to start. Be careful when someone tells you to think outside the box. Because typically what they are saying is get out of your box and climb into mine So what does that mean, it means we have to be open to change and go into the change process with our eyes and ears wide open and let the data and analysis tell us where the we ought to go. Calibrate and validate. If you are not measuring, you are not playing. Impor'.:1nt you have tc know when you have achieved success. And the last one, 1e-engineering is a tough process, hard and draining, and the worst thing we can do is get through it and then not know how to implement it. So we have to be thinking about that exit strategy going in. It goes back to having the core process owners engaged and making sure the resources are in place. So that when the reengineering function is done, in fact we can put it into production.

The reality is that we have to learn to manage change because this period of change that we are in isn't going to end. It is just going to be a way of life. And our responsibility is to learn hov 1 to manage. Change is hard. We are in for a bumpy ride. But at the end of the day it is well worth the effort.

Mr. William R. Lucas Deputy to the Commander Military Traffic Management Command

MRM-15: You have heard some about that. We really want to get into electronic Bill of Lading information. There may still be some argument in the margins about whether we got the right data elements. But we are headed in the right direction. It is going to give us real time data so we can do things like distribute analysis and real time performance measuring. So MRM-15 we are knee deep in the surface pro-

totype as well as the sealift prototype.

Households Good Re-Engineering: That one required a lot of persistence to get it off the ground. But what we finally did we stopped debating in the world of adjectives and we started testing in the world of nouns and we are finding some real good things coming out of that . We are also extremely committed to helping Mary Lou McHugh and the services on the Full Service Moving Program. But again, one of the challenges was persistence and it paid off.

Global POV Processing: Has been a real success story. It is one of those things where if you focus internally, you probably don't want to give up the function. We outsourced it and are getting wonderful results. It was the right thing to do and there will be some other areas where we will continue to do those sorts of things.

Defense Table of Distances - started out when Congress told the finance side of the House to stop using that old paper book that shows mileages and lets get something that is more up-to-date. So we tried to find a solution that could fit finance, travel, cargo and household goods. We now we have that. Does everybody love it? Not everybody. But generally the feedback we're getting is really positive. We are trying to be Web-enabled in all of our systems. Electronic Transportation Acquisition is how we are re-inventing CONUS Freight Management and taking that functionality and putting it onto the Web and including things like spot bids or like a virtual carrier contact office where you can come in and look at things on line. But the other piece of it is that really creates the front end where ultimately you can log in one time and access any of the multitude of Traffic Management Decision Support Systems that we have. There a lot of challenges right now trying to deal with DoD through the Web. There are firewall issues. Some of the carriers out there who have been caught trying to transmit data to us when the information security folks closed the curtain. We are trying to work around those and trying to get a commercial path into MTMC.

There are a lot of re-engineering kinds of things VISA (Voluntary Intermodal Sealift Agreement) , we have voluntary enrollment contracts. We have negotiated voluntary contingency contracts that get us the committed capacity in wartime and we will know the terms, conditions and rates in advance. That ties back into USCO2 which is the peacetime contract. First time doing best value in sealift. A lot of angst out there. There are going to be a lot of lessons learned. But it is not low cost technologically acceptable anymore it is best value. We have been doing that on the domestic side with something we call the Optimum Benefit Negotiation. In one recent case, because of best value, 47% routes went not to the lost carrier but to the best value carrier. So we are committed to seeing that through but we ask for your indulgence.

Some of the lessons we have learned. We've got to try to lay the groundwork and get the buy-in. But at some point and time, you've got to make the decision in press. You are not going to get everybody's agreement. You got to set some stretch goals. If you don't do that, you are going to get down to that lowest common denominator. Don't let perceptions distort reality. Some of the problem we have is in communication where bad facts get out there and makes it a little bit difficult to implement. Don't wait for the perfect solution. This is a journey and we are all going to be learning together. Eliminate old baggage. We have to establish an aurora of trust. We have to be able to speak openly and candidly. Communicating inside your organization with very clear strategic guidance. It is important to us in leadership that we communicate exactly what it is we are trying to accomplish.

Questions & Answers

{") : What do we do to make sure we convert strategic ~ guidance know-how to implementing instructions and the relationship between TRANSCOM and the components?

Lucas

A:Well one of the things that we have tried to institutionalize, as you all may or may not be aware, TRANSCOM does not have HCA acquisition authority; that rests with the service components. But TRANSCOM has the mission of getting us to the warfight and so we as components in the acquisition mode have to make sure we are buying what our major customer wants. TRANSCOM issues us strategic guidance and that's where you always get into that balance of are they giving you broad strategic guidance or are they telling what size nuts and bolts you need to make this car run. I think we are working that pretty well. Then we have to amplify it not only to the contracting chain but make sure the rest of the folks in our organization understand what it is we are trying to execute.

Holder

A:My add-on would be that this is part of the circular process. In a hierarchal organization, TRANSCOM would have written the strategic guidance, developed the strategic plan in isolation and then said here do this. The good news for us is that is not how we do business today. I think the synergism of components being involved in the development of the CINCs strategic plan and then coming back with the requirements of implementation and driving that through our own organizations, empowering my people to come back and be part of that process, that is really the power of where we are going.

Weber

A:The actual process that occurs is, for example, acquisition strategic guidance that is issued is, in fact, worked with the components first. Typically that is sort of a standing rule we have. Sometimes, unfortunately, that doesn't always happen . Communication is a lot more ongoing and constant than I think a lot of folks realize.

Q.Why have we ended up with another DTS? What is the added value of going to the small DTS?

Arnold

A:The Defense Travel System, that is the name of the system. The saying is the buck stops here. That clearly was me As I said, I am a signal guy I am not a transporter. When we started the process , we were trying to come up with a name. It is a DoD-wide system. The word defense is probably better than joint. Joint connotes tactical operational kinds of things. So the word defense is better than joint. It is travel and it is a system. We ended with that. We have been very careful especially in transportation forums not to use the acronym so that we do keep the separation. With respect to the benefits to be gained. We have CTO's (Commercial Travel Offices) today, so why do we need the system. We are not doing away with the Commercial Travel Offices or travel agents. What we have done is streamlined the overall travel administration process. As you all know, it is very paper intensive today . We don't trust people today. People are not treated like honest responsible adults. Essentially we have taken the

paper out. Provided the supervisors who are really responsible today anyway. We are aligning authority with responsibility as far as the travel is concerned.

QHow do organizations change to meet new processes?

Brown

A:First, define if the process is profitable. In the civilian sector that is the first thing that we look at to make sure we can make money at doing this new process. Once that is determined and we get buy-in from the senior management we assign a project manager and give him full authority to use the tools within the company to initiate the process . Then do the benchmarking to see that the results that were promised are in fact produced. So if anything in the change arena, the fact that one single ownership at a lower level than the senior person can make a decision to affect that change and work that process to fruition.

Q.Tell us about the new TRANSCOM/DLA partnering initiative. Why now? How will it be different from business as usual? How are you organized? What are the deliverables? How might it change DoD logistics?

Doorn i n k

A:First of all, TRANSCOM and DLA have been partnering on a number of things already We have a very active relationship because quite frankly it is a natural relationship. The products that depart the depot system are almost always organized directly by some part of TRANSCOM Whether that is MTMC in guaranteed traffic or on aircraft or sealift, it is departing in the Defense Transportation System. So how well we interface as two organizations with this mission of supporting warfighters in peace and in war is very important. We are partnering on a daily basis to do that.

Webe r

A:The intent of that effort is really to bring some analytical rigor to improving the strategic distribution processes. One of the things we are working through now is how will it interface with the ongoing Joint Theater Distribution Test and Evaluation sponsored by OSD and being run by General McDuffie with the theater CINCs. So we are establishing that relationship and probably will use it as a good chunk of the modal for the Army's velocity management approach. It involved a lot of organizations because the distribution process is obviously bigger than TRANSCOM and DLA combined and that is part of the process now that we are putting together for General Robertson and General Glisson.

QWhat has been your experience in discussions with the warfighting CINCs regarding civilianization of responsibilities previously carried by military personnel?

Holder

A:It is a great discussion topic. Every CINC, particulary Navy CINCs, say do it for less. It is the green-eye shaded comptroller saying do it for less but give me the same product. It is a reliability issue . The CINCs themselves understand the issue. I think there is a tremendous opportunity for civilianization of some of our military billets. The next step to that is totally unionizing and civilianizing

a force. That drives to a question that is risk management. That drives to sole sourcing potential. And some of those issues that we have really got to drive through. It has been a dual phased process. First a Navy that had sailors on every ship and no civilians. Then the merchant mariners that were doing convoy operations and that are now doing logistics more and more and the civil service mariners that are part of the MSC and in that phase into the total civilianization. So it is an educational process, it is communications and it is a change in culture. It is a difficult process because of those three paradigms that have all got to change and one that will continue to attack.

{"") : DoD has started to change. Can we expedite the '--Q rocess through government or is it just too big?

Weber

A:Yes there really is. I think it is going out to the DMC (Defense Mangement Council) brief that is being planned. Most of you are familiar with the DoD logistic strategic plan that lays out some pretty aggressive initiatives for the logistics community. When you start to peel it away, you can quickly get frustrated by a lot of the issues. But, in fact, there are a number of tremendous initi.atives that have already occurred within the Department of Defense and that are planned on fairly aggressive schedules and in fact are resourced within the Department. And the plea of that brief, I believe, will be to insure that those resources and that commitment to those time lines stays on track. The consensus is that a log strapped plan really is the benchmark for what the Department wants to do in terms of revolutionizing its logistics processes.

If PowerTrack has such a great financial and operaional benefit, why does the carrier base have to pay fo e product?

Doomink

A:That is a question that came up from the very beginning and there are a lot of ways of talking about that. There is a problem when you impose it during mid-contract cycles, it will show back up in the rates and it is a cost of doing business. Probably the most important thing here is when you are talking about a system where we use to have routinely long wait times in payment. Ms. McHugh talked about the commitment to make the three day a reality. That is very important. Because you talk about the revenues that are passing to the commercial side. If we are passing those in three days, they are making that 2% back very quickly. For small carriers, it is almost more important. We have a number of small carriers that support us through guaranteed traffic. We found if we are more responsive they are very pleased with that kind of service. I think it is a win-win. The most important part is that the Department of Defense money is changing hands a lot faster under it. So there is an advantage.

ting best value if your data source for that performance is some what in arrears. And hopefully in the best value process one of the things we will be pushing toward is a lot more self reporting by the contractors themselves so that they can tell us how they are doing. But clearly it is an area that requires some focus groups from us to follow up on. I do have statistics on some have shown that we are doing exceptionally well.

Holder

A:Ialluded to this earlier. Certainly best practices are out there. If we only look at our own organizations for best practices, we are suddenly limited. So you have got to do a benchmarking effort and then you go to your best practices and those benchmarks that you have decided are pretty good and begin the conversations to help evaluate that process. The critical and most difficult step is taking that to the best value. You must have metrics that truly identify what the value is to the ultimate customer-in our case 99% of the time it is some CINC or sailor or soldier or airmen that needs this commodity. If we are not delivering it on time at the right instant, then it doesn't work very well. MSC has over the past several years been working to go from "cheap technically acceptable" to the "best technical process" we can use for the best value. But that is a process we are really struggling with to get properly defined. In talking with some of the industry people that I interface with routinely, it is one that will require a lot more dedicated effort to drive us forward. I think we need to work very hard at defining the proper metrics and how to measure success or acceptability. If you default to the comptroller role then you are going to end up getting something that won't allow you to provide the proper risk assessment on whether the carrier or whomever is doing it on the margin. That is what gets us to this kind of requirement-it is a very difficult process.

Doomink

A:I

think the most important thing here is that we understand that we in the Department of Defense are still not very good at this part of it and we have hard work to do. DTJ

Q. What do you do to check to insure that the best value contract award was, in fact, the best value after execution?

Lucas

A:Well

that is an area that I think we need a lot of improvement in. It gets back to this define, measure and improve the ability to have metrics and real-time metrics. Sometimes it is difficult to track whether you are get-

Keynote Speech and Panel Summarizations: (screen presentations, charts and diagrams have been omitted because of space contraints)

Keynote Speech: LTG Ed Honor, USA, (Ret.)

Panel I: LTG Ed Honor, USA, (Ret.)

Panel II: COL Norbert Grabowski, USA, (Ret.)

Panel III: COL Denny Edwards, USA, (Ret.)

NDTA Forum Photo Album Sponsored by

NDTA Forum Photo Album Sponsored by

NDTA Forum Photo Album Sponsored by

N e 'vv s

MTMC

Soldiers and civilians with MTMC's 841st Transportation Battalion partnered with U.S. Army Reserve units to set a record in ship loading. They loaded 1,648 pieces of equipment bound for Bright Star on the USNS Dahl That individual cargo sets a record for the most pieces load ed to date on one of the MS C's newly built roll-on/rolloff vessels. Th e Dahl was one of three ships loaded at the Georgia Ports Authority Garden City Terminal, Savannah, GA . The ships were loaded for Bright Star at the terminal over a four-week period in August and September. The 841st provided direct support throughout the deployment to the 1189th Transportation Terminal Brigade of Charleston, SC, which was designated MTMC's strategic port operator.

In other news, MTM C' s household goods re-engineering program has received national recognition. MTMC's program was one of 10 winners in the 1999 Government Computer News Agency Awards for Excellence in Information Resources Management. The award went to both the Personal Property Pilot Program and the Pilot Transportation Operational Personal Property System, or PTOPS The biweekly magazin e honors federal ag e ncies "with a record of excellence in the application of information technology to improve service delivery." MTMC's award was accepted Oct. 27 by Phyllis Broz, Program Manager , Reengineering Personal Property 11 I wa s very pleased to accept this award on behalf of all the dedicated people who have worked with me over the last five years," said Broz. 11 I am thinking particularly of the MTMC information management and acquisition staffs " 11 I am thinking of the people who gave their total support and worked so hard to get the pilot moving." MTMC arranges for the movement of 650,000 personal propert y shipments annually for Department of Defense service members. Currentl y, Broz directs a household goods pilot program in North Carolina, South Carolina and Florida. The pilot, moving about 9,000 shipments annually, seeks to incorporate quality of life corporate practic es into the movin g process for service members. These measures include: full replac ement prot e ction; in-transit visibility; toll-free phone number with move r; and improved claims pro c ess . MTMC was nominated for the award by SRA, International, a contractor who helped develop software applications for th e pilot. 11 Our program was selected from among 40 others," said Broz. 11 It app ears we were selected becaus e we have develop e d a user-friendly Web-based system that has a direct bearing on improving the quality of life for service members."

The Military Traffic Managem ent Command is testing the concept of using a third-party logistics company to manage Department of Defense shipments. A pilot program will be conducted in the ne a r future in Alabama, Florida and Georgia. "We thought this would be a good test region ," said Frank Gallu zzo , program manager. "There are a total of 28 military transportation offices and depots in those three stat es that handle over 50,000 shipments annually. The test

will assess readiness and surg e, customer service, cost, interface capabilities with the Department of Defense transportation systems, use of small businesses and risk," said Galluzzo "In the commercial sector, studies have found an increasing use of third party logistics providers," said Galluzzo. "With emphasis on customer service at the lowest overall cost, it was det e rmined to test the use of a 3 PL provider for the movem ent of domestic freight shipm ents," said Galluzzo. MTMC is undertaking the pilot in a partnership with the Defense Logistics Agency. The winning contractor will be required to handle Department of Defense freight shipments originating in any of the three states . There ar e 28 transportation offices in the pilot states. They includ e Army, 7; Navy, 8; Air Force , 4; Marine Corps , l; Defense Logistics Agency, 7; and MTMC, 1. A draft request for proposal is on the MTMC Web site at www://mtmc.army.mil. Pilot organizers will hold a meeting Dec. 2 with military representatives and over 70 carriers interested in bidding for the contract. The meeting will be held from 8:30 a.m. - 4:30 p.m., at the Key Bridge Marriott, 1401 N. Lee Highway, Arlington, Va. "We're going to talk about Management Reform Memorandum #15 which has spawned this pilot and also other pertinent aspects of our draft request for proposal," said Galluzzo. A question and answer period is scheduled for potential bidders. Final release of a proposal is slated for January 2000

On the 10th anniversary of the fall of the Berlin Wall-a ship built to carry Soviet military cargo, is now loading U.S . Army cargo for NATO's peackeeping force in Kosovo. "Ten years ago, I never would have imagined this, " said Ukrainian Capt. Oleg Stebnovsky aboard the cargo ship Balakleya at the port of Bremerhaven, Germany, as he watched a U.S. Army Bradley fighting vehicle ascend th e stern ramp. "It's a fitting tribute to this day in history - when the iron curtain lifted across the continent - today, we are working together to maintain the peace in Kosovo." Some 700 pieces of U.S. Army equipment - including humvees, Bradley fighting vehicles, and armored personnel carriers, will be on its wa y to Thessaloniki, Greece, aboard this Ukrainian ship, as of tonight. From there, the equipment will be moved forward into the U.S.-controlled sector of Kosovo , as part of a scheduled turnover planned for mid-December. Balakleya was designed and built specifically to carry Soviet heavy comb at e quipm e nt , according to Capt. Stebnovsky Built at Nikolay ev, Ukraine, on August 17 , 1977, the ship's cargo holds were designed to transport Soviet heavy battle tanks, and other wheeled and tracked vehicles. "The cargo hold entrances are some 20-feet in diameter-every inch of this ship was calculated according to Soviet battle tanks, " Stebnovsky said. Stebnovsky also said the ship was designed to carry hundreds of troops. "They built a sauna and a gym specifically for their moral."

TC

On February 10, 2000 at 1000 hours, th e Transportation Corps Aviation Association will host a ceremony at th e US Army Transportation Museum, Fort Eustis, VA, to memorializ e 22 soldiers of the 140th Transportation D e tachm e nt (Cargo Helicopter Field Maintenance) who were killed when Viet Cong sappers blew up their barracks in Qui Nhon, Vietnam on the night of February 10, 1965 Their barracks was the Viet Cuong Hotel, a four-story building leased by the U.S. Government in the port city of Qui Nhon. This tragedy, in which nearly half of the unit was killed or injured, was one of the worst losses of

American lives, experienced in a single incident in the war for the Army and the Transportation Corps. The 140th Transportation Detachment provided aircraft field maintenance support for, and was deployed to Vietnam with, the 8th Transportation Company (Light Helicopter)(H-21) in December 1961. These units, along with the 57th Transportation Company (Light Helicopter) and the 98th Transportation Detachment, were the first U.S. Army helicopter units to arrive in Vietnam. The names of the 22 soldiers will be engraved on the Memorialization Wall located in the entry lobby of the U.S. Army Transportation Museum. The memorialization was sponsored through a donation from Northrop Grumman Technical Services, Inc.

MSC

The U.S. Navy named a long-term prepositioning ship in honor of a Vietnam Medal of Honor recipient during a recent ceremony at Military Ocean Terminal, Sunny Point, NC. The ship, chartered by the Navy's Military Sealift Command will be named MV Maj. Bernard F. Fisher (T-AK 4396), and will be used to strategically place Air Force war stocks at sea. The ship's namesake, retired Air Force Col. Bernard F. Fisher, will be an honored guest at the ceremony. Air Force Vice Chief of Staff Gen. Lester Lyles, USAF, will be the featured speaker. Maj. Bernard F. Fisher was awarded the Medal of Honor for actions in Vietnam in 1966. Maj. Fisher was assigned to the 1st Air Commando Squadron operating from Bien Hoa Air Base in South Vietnam when he rescued a downed airman from a Special Forces camp that was under attack by 2,000 North Vietnamese Army regulars. While directing his own air cover, Maj. Fisher landed his A-lE/H "Spad" aircraft, taxied almost the full length of a debris littered runway, and despite withering ground fire, rescued the downed pilot and gained enough speed to lift off and fly to safety.

The U.S. Navy's Military Sealift Command awarded a historic $20.3 million three-year fixed price contract with an additional $10. 9 million two-year option to Geo-Seis Helicopters, Inc. The Fort Collins, CO company will operate two SA-330J Puma helicopters aboard three MSC combat stores ships on a rotating basis beginning in January 2000. The commercial helos will deploy aboard the ships in place of the Navy helicopter units normally assigned to the ships. MSC combat stores ships are the floating Wal-Marts™ of the Navy-supplying the Navy combatant fleet with everything from fresh food to spare parts.

AMC

Despite a significant increase in operations tempo for fiscal 1999, Air Mobility Command celebrated a record-breaking year in safety, as it experienced the fewest fatalities in the history of the command. While operations in Kosovo provided ample opportunities for personnel injury and damage to equipment, no accidents occurred that could be attributed to personnel, according to Col. Terry Lowe, Director of Safety for AMC. "The fact that we didn't have any aircraft accidents there [Kosovo] can be attributed to the great people we had operating, maintaining, loading and protecting the airplanes, planning air traffic and everything else that contributes to the overall success of the mission," Lowe said. "While the potential for many mishaps was there, considering what we did in Kosovo, I think the difference was that people recognized they were in a higher risk situation and took appropriate risk control measures." There

Continued on page 73

MTMC

The National Defense Transportation Association recognized the professional performance of Spc. Brian S. Woodrum, of the 835th Transportation Battalion, Okinawa, Japan, the Military Traffic Management Command's Soldier of the Year in an awards ceremony held at the MTMC headquarters recently.

During the ceremony, Col. Clark C. Hall, HQ MTMC chief of staff, who represented retired Army Lt. Gen. Edward Honor, USA, (Ret.), NDTA president, presented Woodrum with an official NDTA plaque recognizing his professional military contributions to successfully completing the MTMC mission at Naha port on the island of Okinawa.

Woodrum successfully competed against MTMC soldiers at the battalion, group and finally command levels in areas that tested his physical capabilities and knowledge of the Army and the MTMC. Woodrum has served in the U.S. Army for nearly four years.

The National Defense Transportation Association also recognized the professional performance of Staff Sgt. Miwon T. Matchett, of the 837th Transportation Battalion in Pusan, Korea, the Military Traffic Management Command's Non-commissioned Officer of the year in an awards ceremony held at the MTMC headquarters here recently.

During the ceremony, Col. Clark C. Hall, HQ MTMC chief of staff, who represented retired Army Lt. Gen. Edward Honor, NDTA president, presented Matchett with an official NDTA plaque recognizing her professional mili-

tary contributions to successfully completing the MTMC mission in Pusan, Korea.

Staff Sgt. Matchett successfully competed against MTMC NCOs at the battalion, group and finally command levels in areas that tested her physical capabilities and knowledge of the Army and the MTMC. Matchett has served in the U.S. Army for over 11 years.

Photos by: Sgt. Jacqueline Richardson,

U.S. Anny Visual Infonnation Center, Pentagon.

tter one year in operation, an innovative Military ·raffle Management Command program for shipping rivately owned vehicles gets the thumbs up verdict from Department of Defense service members.

Customer feedback shows that 99% of all Department of Defense service members who shipped their vehicles since the Global Privately Owned Vehicle Contract began last November are satisfied with how they, and their vehicles, were treated.

"This was the best move in my 30 years of service," said Maj. Terry Spanier, who shipped his vehicle from Belgium to Minnesota.

"The inspection was the easiest one I've had. The people were very informative, very helpful. There was a personal touch to this move that I've never seen before."

MTMC's decision to use one contractor to handle all shipments is the crucial difference between the old and new methods. Under the former shipping methods, a vehicle could change hands up to nine different times during the process, according to Charles Helfrich, program manager for the POV contract , Since American Auto Logistics, Inc. of Woodcliff, N.]., was awarded th e two-year, $394 million contract last year, service members have seen improved delivery times and less damage to vehicles, said Helfrich

Other significant changes to the system include convenient drop off points near major airport hubs, one-hour vehicle processing, and on-site claim settlements for minor damage. Service members can also track their vehicle's location any time throughout the shipment process via the Internet or by calling a toll free number.

Service members, such as Spec. Lorenzo Humphrey, welcome the many changes.

"This is a lot better than the old system," he said. "The whole experience was painless. I was in and out of the center within 10-15 minutes and the people are courteous and helpful. The customer service aspects are what made it great for me."

Humphrey, who will soon leave Army service, had his car shipped from Germany to Los Angeles, Calif. He said he was happy his final car shipment as a service member was a pleasant experience.

"There were no headaches. My car arrived three weeks early and they called to let me know. That was a completely different experience. On my first overseas tour , I was told to look at a Stars and Stripes every day to find if my car

Humphrey was also pleased with the condition of his vehicle on arrival.

"I had my car detailed before I left, and when I picked it up it was in exactly the same condition as when I left it."

Wendy McIntosh, a civilian employee at Fort McNair, Washington, D.C., who shipped her vehicle three times, said she liked the convenient drop off locations.

"I like that I didn't have to drive to strange locations to deliver and pick up my vehicle," she said.

McIntosh said she was impressed that the process was simple and convenient.

"Everyone was interested in making sure the vehicle was delivered on time and in good condition," said McIntosh . Capt. David Andrus also liked the new drop off locations. Andrus, stationed at Mountain Home Air Force Base in Idaho, shipped his vehicle from England to Seattle in August.

"I like that they are using one company," said Andrus "I can tell the difference. Before I had to drive at least an hour and a half to drop off my car. This time it was only a ten minute drive."

Instructions on a service member's car just back from Turkey assist turnover to owner.

Baltimore Vehicle Processing Center is one of 33 operated by the Military Traffic Management Command as part of the Global POV Contract.

Tech. Sgt. Karen Brown, an Air Force communications specialist, said she was pleased with her recent shipment from Atlanta to Belgium.

"The personnel were courteous and attentive in both places. I could call daily to get the latest status of my vehicle and always got the facts."

"I take very good care of my car," said Brown, "so it was more than a relief to see that my car was taken good care of. It was in the same condition as when I shipped it."

Although damage claims have decreased under the new contract, if damage does occur during the shipment process, it is easier to resolve claims. With the old shipping system, it was harder to pinpoint liability because the vehicles were "touched" by so many, said Helfrich. The new contract eliminates that problem. Now, claims are settled quickly.

Ronda Echerd, the government representative at the vehicle processing center in Seattle, Wash., said the on-site claims settlements, for amounts less than $500, have increased customer satisfaction.

"I've seen several very happy individuals, because they no longer have to worry about getting several estimates and filling out lots of paperwork," said Echerd.

Andrus agreed. He found minor scratches on his vehicle, he said, and his claim was settled within an hour

"Overall it was a very positive experience," said Andrus. As the contract enters its second year, those administering the program, such as Judith Dewing from the vehicle processing center in Chievres, Belgium, say the changes have made life easier for everyone.

"I feel like the Maytag Repairman because nobody comes to me to complain," said Dewing. DTJ

Continued from page 71

are three categories in which mishaps can occur-flight, weapons and ground, and three classes in which mishaps can be ranked based on severity-Class A, Class B and Class C. Class A refers to mishaps resulting in fatality, destroyed aircraft or more than $1 million in damage. Class B includes those resulting in permanent partial injury or more than $200,000 in damage. Class C, the most common mishaps, are those resulting in hospitalization or more than $10,000 in damage. Fiscal 1999 was the first time in years that the command did not experience any flight Class A mishaps. However, there were several near midair collisions during Kosovo, which shows the command there is still room for improvement, according to Lowe.

The Department of Defense honored Rep. Stephen Buyer, the General Services Administration (GSA), executives from three airlines and Air Force Reserve Maj. Gen. John Miller in a ceremony Oct. 5 for their roles in the passage of landmark legislation permitting military reservists to use government City Pair fares when traveling by air to perform weekend training. The three airlines represented were Northwest Airlines, US Airways and Continental Airlines. At the ceremony, hosted by Charles L. Cragin, Principal Deputy Assistant Secretary of Defense for Reserve Affairs, participants marked the law, enacted earlier this month, which allows drilling reservists to buy airline tickets at the GSA City Pair contract rates. Miller, the mobilization assistant for Gen. Charles T. "Tony" Robertson Jr., commander of Air Mobility Command, conducted several meetings with the airlines involved and was instrumental in introducing the airlines to this concept.· Miller said he couldn't have been as successful in his role in getting this legislation passed without the overwhelming support of retired Gen. Walt Kross, former AMC Commander, and Robertson. "General Kross and General Robertson were key players in explaining to the airlines how this initiative would ease the financial burden on the command's reservists and how it had the potential to help increase airline revenues," Miller said. DTJ

25th Annual FAA Aviation Forecast Conference

(Combined Conference of Commercial and General Aviation) March 7&8, 2000

Washington, DC Convention Center Call 202-267-9943 or e-mail helen.kish(g'faa.gov for info, or visit http:/ /api.hq.faa.gov/apo_home.htm.

Future NDTA Trade Shows

2000 NAVTRANS Transportation Symposium & NAVSUP Household Goods Workshop

Norfolk, VA• 10-14 January

2000 MTMC Transportation Symposium

Atlanta, GA • 2-6 April

2000 NOTA Transportation & Logistics Forum Albuquerque, NM• 1-5 October

2001 MTMC Transportation Symposium

Atlanta, GA • 8-12 April

2001 NDTA Transportation and Logistics Forum Milwaukee, WI • 29 Sept-3 October

2002 NDTA Transportation & Logistics Forum

Greensboro, NC • 5-9 October

~NORTHWEST

VAIRLI NES

11/J UNITED AIRLINES

A .D eltaAir Lines

United Airlines, Delta Airlines, Northwest Airlines, and Continental Airlines announced their partnership in a new indepen den tl y owned travel web site. The

new site, the first multi-airline travel portal, will provide customers with convenient online access to airline, hotel, car rental and other travel services in addition to Internet offers. The new site will provide access to the carriers' online products, and the airlines believe it will offer the most comprehensive selection of online airfares and other travel information available anywhere on the World Wide Web. The site will feature published fares from virtually all carriers worldwide and will welcome the posting of Internet fares from other carriers as well.

tAPL, a leading provider of worldwide container transportation and logistics services, recently announced the appointment of Arthur 0. Thomas to the newly created position of manager of trade and regulatory affairs.

Acting as APL's liaison to the international trade, documentation and trade-finance communities, Thomas will collaborate with these sectors to improve procedures and streamline processes related to the movement of goods in global

Providing Mission Critical Solutions

commerce. In another development, APL told a group of industry officials meeting in Europe recently that emerging markets such as those in Asia and Latin America can offer even more exciting opportunities for developing effective supply chains than the more mature markets. "At first glance, the relative absence of infrastructure, technology and training in developing countries presents a daunting picture for firms pursuing global marketing and production strategies," said Donald McKay, Director of Logistics Strategy for the Business Logistics Unit of APL Logistics, Oakland, CA.

The Internet's potential for enabling a streamlined, global

approach to the management of I ' government and corporate travel became significantly clearer today when spokespersons for Aldmyr Systems, Inc., an application service provider based in Lanham, MD, announced the introduction of an Internet-based software application called Zegato(tm). Aldmyr, a leading provider of business process re-engineering and automated travel management solutions to federal and defense agencies, officially unveiled the Internet travel application at the 54th Annual Transportation and Logistics Forum and Exposition, sponsored by the National Defense Transportation Association.

Trans World Airlines now guarantees a

,. seat for customers who fly on the air-

line's TWQ flights between Lambert/St. Louis International Airport and six U.S. destinations. TWQ is TWA's unique brand of business service that offers closein departures at Lambert, electronic ticketing and laptop computer connections at the departure gates, first-flightout and last-flight-in schedules at St Louis, and complimentary access to the Ambassadors Club for full-fare passengers, as well as priority coach seating for Platinum and Elite I-level Aviators(r) frequent flyers who cannot get a first-class seat. Free copies of The Wall Street Journal are also distributed on morning TWQ flights.

•

U·S AIRWAYS

In a ceremony marking the new relationship between the city of Washington and one of the area's largest private employers, US Airways Chairman Stephen M. Wolf presented a jet engine on behalf of the airline to Mayor Anthony Williams for the training of aircraft mechanics at the University of the District of Columbia (UDC). "We are a Washington-based airline and we serve more people with more flights in the greater Washington-Baltimore area than anyone else, but there are reasons well beyond these for us to be here today," Wolf said at ceremonies marking transfer of the engine to UDC's Aerospace Technology Program. In other airline news, US Airway's inflight magazine,

Attache, for the second consecutive year, earned top honors at the 12th Annual "Ozzie" awards, winning the 1999 Editorial Excellence Award for the best magazine. The award is given for content quality, overall design and production. The magazine, published for US Airways by Pace Communications, also won the Ozzie silver medal for Best Use of Illustration.

To better accommodate growing cargo vol-

umes between the U.S., Mexico and Central America, Crowley is making several service enhancements this month for the benefit of its customers. The company will add a third Roll On/Roll Off (RO/RO) vessel to its service between Gulfport, MS and Mexico, Guatemala, Honduras, Nicaragua, and El Salvador. Adding the new vessel to the rotation will allow for a sailing every three days, instead of every five days presently, and boost available capacity in this Crowley trade lane by SO percent.

sThey came from diverse loca-

KITTY HAWK

tions for Kitty Hawk's Second Annual Leadership Conference. Kitty Howk International Sixty-seven company leaders got charged up about the company's direction in 2000. They were shown not only the plan for their own business unit, but also what to expect for other units. Leaders are expected to help their team members understand the big picture, so top leaders made the investment to bring everyone up to speed. Sure it cost some money to assemble this large group, but investments pay off. Through understanding of different pieces of the company, which was made easier through the fellowship offered at the event, the company will realize benefits in improved communication between business units, which will naturally lead to customers receiving better service.

Twelve Atlas Van Lines agencies Atlas Yan Li~ have earned on eof the indus,.,...._ try's top quality awards, Atlas, the country's third-largest carrier of household goods, has awarded its distinguished Milton M. Hill Quality Award in 1999 to those agencies displaying the highest level of performance within the organization. This year's winners are Alexander's Moving & Storage of Tustin, CA; Hayward, CA; Portland, OR; Baltimore, MD; and Nashville, TN , Collins Bros. Moving Corp., Larchmont, NY; Golden Van Lines, Inc., Longmont, CO; McCormack-Payton Storage & Moving Co., Grandview, MO; Paxton Van Lines, Inc., Springfield, VA; Powell Moving & Expediting Service, Inc., Grand Rapids, MI; Thomas Transfer & Storage Co., Inc., Mountain View, CA; and Walker Transfer, Inc., Huntington, WV.

A tlan ta-headquartered r-_.lSur-fAir~ SurfAir, Inc. has announced the purchase of the freight forwarding business of FWXpress of Portland, OR. The purchase was announced by SurfAir president and chief executive officer, Douglas A. Fisher. SurfAir is a global freight forwarding and logistics provider.

The Port Authority of NY /NJ

A recently met with shippers in Toronto to thank them for their support of the Port of New York/New Jersey. Representatives of five Port tenants joined the Port Authority in formally recognizing the more than 100 attending members of the Ontario shipping community.

Last month on Sunday, November 14, 1999, a 3 7-ton, 780-square-foot marble carving will be dedicated during a noon Mass at the Basilica of the National Shrine of the Immaculate Conception in Washington, DC. This original work of art, valued at $1 million , was carved in Italy and transported to the U.S by Farrell Lines Incorporated aboard its ship, the M/V Argonaut. The dedication ceremony marked the completion of a transportation planning, logistics and safe ocean transport process that began more than two years ago.

The Port of Lake Charles is setting the stage for the new millennium by breaking all previous records for cargo handling at the Port's City Docks. The Port of Lake Charles set a new high in cargo tonnage moving through the Port's City Docks, Port Executive Director Glenwood W. Wiseman announced. The port handled 175,000 tons of rice, cornmeal, corn, flour and other food products at its City Docks during the month of October. This cargo was a mix of commercial and food aid cargo headed for Indonesia, the Balkan Region, South America, Africa and other developing countries.

Battelle's work in the chemical and biological defense arena continues to strengthen with the recent win of a 10year, $17 4 million contract with the DoD. The contract win continues Battelle's 13 years of operating the Chemical and Biological Defense Information Analysis Center (CBIAC) at the Aberdeen Proving Ground Edgewood Area, MD, for the DoD. The CBIAC serves as the DoD's focal point for chemical and biological defense Scientific and Technical Information (STI). DTJ

C hap ter

Baltimore Area Chapter

The Baltimore Chapter held a luncheon at the Fort Meade's Officer Club on September 30th , 1999 This event was fortunate to have representative from the Red Cross Speaker's Bureau, Ellen Fogg , address the group on Y2K Emergency Prepar edness. After this informative interview, the honored guest speaker of the day, General Montero was introduced. General Montero spoke specifically to the issues of Acquisition Reform and change within the Army and to the broader issues of Re-Engineering within the DoD A time of questions and answers was provided.

Bob Reilly, Capter President, closed out the meeting by acknowledging members/friends of the chapter who received Regional Awards to include : Mike McVeigh, Emery Worldwide; Brenda Barry, US Coast Guard; Larry Mawn, Central Delivery Service; Chuck Bolduc, BAX Global ; Jaon Buedel, Retyired US Coast Guard; Tom Swartz, Overnite Transportation. This was followed by a 50/50 drawing and door prizes.

In other news, on October 28th, 1999, The Baltimore Chapter hosted a Transportation and Logistics Night at Fort Meade Officer's Club. This was quite an evening. Attendees heard from regional organizations who provided an overview of their "mission" with highlights of their calendar year. Also attending was special guest General Edward Honor, representing the NDTA.

Lastly, the Baltimore Chapter hosted its Annual Christmas Social on December 15, 1999 at the Fort Meade Officer's Club. A buffet-style "All You Can Eat" dinner was enjoyed by all. A highlight of the evening was a drawing for a $50 savings bond and the traditional gift exchange.

Hampton Roads Chapter

On November 18th, the Hampton Roads Chapter held its first ever raffle to benefit the American Red Cross Disaster Relief Fund for the Hurricane Floyd victims. Our expectation was to raise $ 1000. We had many commercial members donate prizes including a weekend hotel sta y, a car rental, restaurant gift certificates and flower arrangements. To our surprise, we had 32 luncheon guests, and raised a total of $1600. The Red Cross representative was quite pleased with the check we presented to him that day

Washington , D.C. Chapter

On October 28th, 1999 , Jim Etzel and Ra y Schaible attended th e University of Maryland School of Business "sponsor Appreciation Scholarship Luncheon", where they formally presented the Washington, D. C. Chapter Scholarship recipients, Ms. Melanie Calabria and Mr. Scott Markham their 1999 scholarships. Also presented chapter scholarships during a separate ceremony were Ms. Eileen Xie and Ms . Kristin Lamoreaux, both attending George

Washington University. General Bill Tuttle, LMI President, presented Melanie Calabria a scholarship for $1000 during the ceremony During the October 1999 luncheon meeting, the D C. Chapter voted to increase the Chapter Board by four members. The new board members selected are: Mr. Gary Karr, American Express, for a two-year term; Mr. John Romps , PWC, for a two-year term; and COL Mike Rushie, USAF Ret. , Eagle USA and Katherine Landau, each for a one-year term

Southern Germany Chapter (Stuttgart Germany)

On December 4th, 1999, the chapter held their annual Christmas outing event. This was a huge success. Every member was able to go into the forest accompanied by the local Forest Meister and select their own Christmas tree. While every one was waiting their turn to get their tree, they were rewarded with Hot Cider Gager Tee), or normal tee, with bratwurst and brotchen. Due to the snow fall this turned out to be a memorable event. The Mayor of the town also joined us to kick off this event and was awarded a certificate of appreciation from the chapter for his support. The chapter has been invited back next year to start the event off at the city hall with a reception with a special invitation from the Mayor. The evening went on with a tour of one of the oldest working water mills in Germany (Hellground Water Mill). This mill is located in one of the most scenic areas in Germany (Odenwald). After taking a tour of the water mill all of the members retired in the Gasthaus for a traditional German meal.

From November IS-18th, 1999, the A-35 committee sponsored a booth at the 1999 USEUCOM/MTMCEUROPEAN Traffic Management, Mobility and Training Workshop in Sonthofen, Germany. Thanks to Round trip ticket contributions from U.S. Airways and Northwest/KLM we were able to hold a raffle which generated over $1,100.00 for the NDTA A-35 scholarship fund. Our chapter would like to personally thank U.S. Airways and Northwest/KLM for their contributions and allowing us an opportunity to help our young transporters achieve. DTJ

l tor: LTG Edw a rd Honor, USA, (Ret ) and organization representatives speak at the Baltimore Area C hapter's Tran sportation and Logisti cs Night held at the Fort M eade Officer's Club.

(let) Ron Conardy presents Ms M elanie Calabria of the University of Maryland with the D .C Chapter Scholarship. (right) Ron Conardy presents Johnnie Barnes , Chief of Staff for Congresswoman Eva Clayton, with a special reward for his initiative in stirring help for flood ravaged North Carolina See story on next page.

NDTA Members Ease Flood Victims Plight

by John Randt, MTMC Public Affairs

When the work was done, the first thing Ron Conardy, Washington, D.C., NDTA chapter president, did was to throw away his shoes. Next, Conardy changed into new clothes and threw away the shirt and trousers he had been working in. That was the reality for Conardy and seven other NDTA members and family members who, Nov. 6, volunteered a day of work for Hurricane Floyd victims in flood-ravaged Eastern North Carolina.

NDTA members from Washington and Baltimore were assigned to remove the waterlogged contents of the Turner

Prince Center, near Princeville, N.C Floodwaters had totally covered the double-wide trailer on Sept. 17 and stayed that way for over a week. Nothing in the interior could be salvaged Before the trailer was demolished, it had to be cleared of debris . Each member of the NDTA group said it was the worst environment they had ever had to work. "I don't think many people knew how devastating it was, 11 said Conardy, a transportation contractor. His work mates agreed. " It was the absolute worst environment I have ever been in, 11 said Janet Noel, of the Office of Secretary of Defense for Transportation Policy. "When I consider the losses they suffered, I am just glad I did not have to go in anyone's home." Baltimore Chapter president Bob Reilly said he uses an example to explain the devastation. "Just go home and imagine your entire neighborhood is submerged in water for several months,"

Ron Conardy throws debris from fl-ooded trailer into waste disposal truck. Elaine Conardy, in gauze Mask , is at right.

said Reilly, an account executive with Emery Worldwide , "This is what you have to deal with in the future , " said Reilly. "To y s, clothes - your entire lives - have to be taken out and dragged to the curbside." The flood losses

were especially meaningful to Curtis Moore, a transporter with the Military Traffic Management Command. Moore grew up in the Eastern North Carolina town of Greenville, about a ZS-minute drive from Princeville. "It was an emotional feeling," said Moore "I have relatives in Kinston and Tarboro who lost their homes, cars, animals - everything. 11 Coast Guardsman Jim Christ, of the Baltimore chapter , said the hours worked in Princeton "gave me a greater sense of worth "

Other members who volunteered their time included: Tom

Lydon , a Washington chapter board member who works for Evergreen International Airlines, Conardy's wife, Elaine, and Noel's daughter, Teresa Hooder.

The NDT A members got the idea to go to Princeville after hearing a presentation from Johnnie Barnes, chief of staff to Rep. Eva Clayton, the U.S. congressman from

Turner Prince Community Center where NDTA volunteers offered their reli ef help.

North Carolina's 1st District. "We heard from Johnnie Barnes on Oct 18 1 11 said Conardy "At that point, all I had heard was some of the small things on the news. 11

The NDTA chapter members were among some 500 people on 10 buses who volunteered to help out The Congressional Black Caucus and the Congressional Black Caucus Foundation sponsored the effort. The 500 volunteers included many Congressmen and their staff assis tan ts.

Following the day's work, participants attended a concert. Candles were lit around the hall. "The frustration is there was a lot to do and not enough time, 11 said Noel.

To continue the aid process, Reilly is hopeful a council of churches will continue support to the community. There was a final postscript. Among the mounds of water-logged debris removed from the trailer was a nylon American flag in good condition . A former Marine, Conardy posted the American flag on a pole at the trailer's entrance. DTJ

NDTA volunteers assist flood victims. Pictured are:

Tom Lydon (left), Teresa Hooder, Curtis Moore, Ron Conardy, Elaine Conardy and Janet Noel.

H O n O r R O 11 of Sustaining Members

These firms support the purposes and objectives of NDTA.

AAR Cacb1lac Manufacturing

ABF Freight System, Inc.

Air Transport Assn. of America

Alamo Rent A Car

Alaska Cargo Transport, Inc.

Aldmyr S~tems, Inc.

Amencan Airlines

American Automar, Inc.

American Express Government Services

American Maritime Co!19ress

American Maritime Officers

American Road Line

American Roll-on Rol!;<>l1t,.(,(ipi4~;" 1

American Shipbuil~

American Trans Ai

Anteon ColJ)Orati

APL Limited

ARINC, Inc.

Associated Aili freidht

Assn. of Ame'ncan la'Rrdads

Atlas Van Li , I .

Enron Facilities Setvices

Entel'J?rise Rent A Car

e-lhinktank.com

Evergreen lnt'I Airlines, Inc.

Farrell Lines, Inc.

FedEx

Federal Soles Associates, Inc.

First American Bulk Carrier Corp.

Pilot Air Freight

Port Authority of N.Y. & N.J.

Port of Beaumont

Port of Oakland

PricewatershouseCoapers

Prime Hospitality Corp.

QUALCOMM

R& RTrucking, Inc.

Express, Inc. Inc.

Aul~&lbsic:iaii; Syslwris:-1"'-':=!ilM-o-;IM.anll

Ba

Bas

BAX

Bristol As

Carlson W Cendant

Center for Trans~ti Education)

Coach, USA

Comp_uter Scien

COMSAT Mobile

Consolidated Freig

Consolidated Safety

Crowley Maritime Co

CSX Transportation

Dallas & Mavis Specialized Co

Delta Air Lines, Inc.

DHLAirways

Dimensions International, Inc.

Distrid No. 1 • PCD, MEBA

DoHor Rent A Car Dynamics Research Corp.

Eagle USA Air Freight

EDS

Emery Worldwide

Regional Patrons

Advantage Rent-A<ar AirTrans Airways

Albuquerque Convention & Visitors Bureau

American Labelmarlc (Text-Trieve)

American Management Systems, Inc.

American Moving & Storage

Assn.

American Ship Mgmt., LLC

ApaUo-Galileo International

Arven Freight Forwarding, Inc.

Avis Rent A Car

Bay Ship Manas,ement, Inc.

Candlewood Suites

Century Technologies, Inc.

OAG Worldwide

Old Dominion Freight Line, Inc.

Systems Division Service lfoologies Corp. an Lines, Inc. . . Xpress Enterprises, Inc.

Waterman Steamship Corp. (Central Gulf Lines)

Omni Air International Visa USA, Inc.

OSG Shii:, Ma~nt, Inc.

Overnite Transportation Co.

Choice Hotels International

Concurrent Technologies Corp.

CSI Airline Services

Daedalic Industries, Inc.

Extended Stay America, Inc.

Flight Time Corp.

Gelco Government Network

Great American Lines

Greater Milwaukee C&VB, Inc.

Greensboro Area C&VB

Green Valley Transportation Corp.

Hertz Corp.

Howard Johnson's Plaza, Arlington

Hyatt Hotels & Resorts

INNOVATA

Innovative Logistics Techniques, Inc.

Interstate Van Lines

Logistics Management Resources, Inc.

Lynden, Inc.

MCRFederal

MEVATEC Corporation

Military Li~ Publications

Modem Technologies Corp.

Munitions Carriers Conference

National Car Rental

NCI Information Systems, Inc.

Networks Enterprises, Inc.

North American CLS, Inc.

North American Van Lines

Oakwood CC?1P0rate Housing

Omega World Travel

Pace International LLC

Port of Corpus Christi Authority

Port of Lake Charles

Quality Support, Inc.

Radian, Inc.

Ruthem Transport Services

Savi Technology

Sea Box, Inc.

Spokane Area C&VB

StarTrak, LLC

System Technology Assoc., Inc.

TRANSCAR, GmbH

TechMate

Thrifty Car Rental

Tra~er Bridge, Inc.

Trailway Transportation System

US Bank PowerTrack

Virginian Suites, The

American Roll-on Roll-off Carriers, LLC

APL Limited

Bristol Associates

CSX Transportation

Emery Worldwide a CNF Company e-thinktank.com

Evergreen International Airlines, Inc.

International Longshoremen's Association, AFL-CIO

Landstar System, Inc.

Lockheed Martin Mission Systems

National Air Cargo, Inc.

Sea-Land Service, Inc.

TRISM, Inc.

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 NDTA programs to benefit our members and defense transportation preparedness .

Bookshelf Ideas

Dr. Joseph G. Mattingly, Jr.

Logistics and the Extended Enterprise-Benchmarks and Best Practices for the Manufacturing Professional, by Sandy Boyson, Thomas M. Corsi, Martin E. Dressner, and Lisa H. Harrington with Elliot Rabinovich, published by John Wile y & Sons, Inc., 605 Third Avenue, New York, NY 10158-0012

The text is based upon a four-year research project devoted to the study of best practices in suppl y chain management Over 600 companies were involved in the study. The authors studied the challenges and opportunitis facing these companies as they sought to manage purchasing, transportation , warehousing, and order management/customer service processes in an integrated way. Both conceptual and analytic tools necessary for managers to master a holistic, integrative orientation to supply chain management are provided.

This book is organized into two parts: Part I Strategic Concepts and Best Practices, five Chapters as follows: 1Logistics / Supply-Chain Management: The Hub of the Extended Enterprise, 2-Logistics Best Practices, 3-Best Practices Companies in Action, 4-The Outsourcing Megatrend, and 5-Outsourcing Best Practices; and Part II Applying Best Practices to Your Company, four Chapters as follows: 6-Assessing and Improving Your Supply Chain, 7-Benchmarking for Better Results, 8-Moving Toward the Truly Extended Enterprise, and an Appendix SupplyChain Diagnostic Tool.

One only has to study the book to realize its potential to the understanding of logistics/supply chain management in t)J.e extended enterprise. The diagnostic tool should prove to be useful to many managers in their anal y sis of their current operations. I recommend it for reading by logistics managers and teachers of logistics.

Logistics Software-1999 Edition by Richard D Haverly and James F. Whelan of Andersen Consulting for the Council of Logistic Management, 2805 Butterfield Road, Suite 200, Oak Brook, Illinois 60523, Cost $ 75.00 for Council Members, $100 00 for nonmembers.

This annual survey of logistics software is available only on CD-ROM which requires a Windows 95 system to access detailed information on over 1,000 software packages of interest to logistics personnel. Individual data sheets for each software package shows such things as: system name, vendor (address and phone number), contact, functions provided, vendor comments, price, maintenance fee, installation history, frequency of major updates and new releases, hardware, languages, data bases, processing mode, code provided, and distinguishing characteristics.

The survey is divided into four subsections (mainframe , minicomputer, microcomputer, and client/server) to assist readers in identifying those packages which have the greatest potential for their operation or their company's configuration of management information systems hardware. The CD-ROM's search engines can be accessed by vendor, software, function, or keyword. The Software Selection tool contains detailed infromation for system requirements, installation and instructions for use. Instructions for using the program can be found online. Just select the 'Help' Command button or click on the

'Help' menu from the main form of the program

This Logistics Software is of interest to managers of logistics, managers of logistics information systems and students of logistics.

GAO Transportation Reports prepared by the U. S. General Accounting Office. The GAO publishes reports which are of specific interest to readers. We have listed several examples of some recent issues on transportation subjects:

GAO/RCED-99-138 Passenger Facility Charges-Program Implementation and Potential Effects of Proposed Changes May 1999

GAO/RCED-99-176 Surface Transportation-Moving Into the 21st Century, Staff Study May 1999

U. S. General Accounting Office , Post Office Box 6015 Gaithersburg, MD, 20760, Telephone 202-275-6241

Col Denny Edwards, USA, (Ret.)

Military Living's European U.S. Military Road Atlas, Plus Near East Areas by L. Ann and William "Roy" Crawford, Sr. Ph.D.; published by Military Living Publications, P.O Box 2347 , Falls Church, VA , 220420347, 1999.

"You see the military installations first". This has been the slogan for military maps and atlases since they first started publishing them back in the '70's. Military personnel know exactly what that means ; the military posts, camps, bases and stations are highlighted and are the most prominent feature of the maps. To a traveling military family this is invaluable as they move about the country on temporary duty or on a permanent change of station. Only recently have comm e rcial firms that do business at military installations found it to be a useful tool as well. Trucking firms particulary use it to find defense facilities, even to the point of locating which gates they should use for military deliveries.

The U.S. version of the Atlas has long been a hit with servicemen and women. Now comes the European and Near East version, made even more useful by the constant changes from drawdowns, relocations and overseas base closures.

Aside from the great cartography, the Atlas has many other helpful features such as: information on military lodging, RV /FAMCAMPs, auto rental, banks, bowling centers, shuttle buses, clubs, chapels, exchanges and commissaries, medical and dental facilities , gas stations, travel offices, gyms, MWR/Services facilities, APO / FPOs, travel offices, fast food and other dining facilities, Rod and Gun Clubs and more.

Helpful appendices show travelers international communications and telephone usage, international traffic signs, traffic laws, U.S. support authorized in each country, electrical currents , and conversion of metric measures

The Atlas will be of obvious interest to all U S. Forces and diplomatic and government personnel stationed in or traveling to Europe and the Near East, plus others who just want to stay abreast of where the U.S. currently has bases in the areas

To bad the Cold War is over-the bad guys would have found this to be a treasure trove of useful information.

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