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October 2004

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PURPOSE & VISIONPURPOSE & VISION

Strategic Purchasing Initiative (SPI)

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October 2004

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Business Transformation: Bottom LineBusiness Transformation: Bottom Line

“The willingness to focus at the decisive place and time necessitates strict economy and the acceptance of risk

elsewhere and at other times.

 To devote means to unnecessary efforts or excessive means to necessary secondary efforts violates the principle of focus

and is counterproductive to the true objective. 

Focus applies not only to the conduct of war but also to the preparation for war.”

Economy of Effort

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October 2004

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THE BURNING PLATFORMS or

WHY WE NEED TO CHANGE or

How Parochialism Hurts the Corps

THE BURNING PLATFORMS or

WHY WE NEED TO CHANGE or

How Parochialism Hurts the Corps

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Internal and External Budget Pressures

(By calendar year, as a percentage of GDP)

                                              

Source: Congressional Budget Office based on Social Security Administration, The 2002 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds (March 26, 2002); and Department of Health and Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, 2002 Annual Report of the Board of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds (March 26, 2002).

Projected Outlays for Social Security and Medicare Outstrip the Programs' Revenues Sooner Than the Trust Funds Reflect

USMC pressures include:ModernizationAging equipmentAging facilitiesIncreased QOLGWOT

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Politically Radioactive Solutions

Alternative Corrective Action

- Raise taxes

- Reduce benefits

- Reduce discretionary spending

Defense as a share of total discretionary spending

More extremecorrective

action required as time passes

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Strategic Business Plan Goals

• Aggressively improve business processes based on: — 5 MROC decisions— CMC POM06 guidance

• Bottom line metrics:— Realign 1,700 Marines to operating forces (by FY12)— Realign $600M ($40/$120/$200M annually by FY 08/10/12)— Clean Financial Audit (FY 07)

• Key secondary metrics:— ABRM Policy published— Satisfaction/performance measurements— Competitive sourcing meets MROC decision metrics (900 Marines)— Business information standards and architecture— Percent of OPBUD’s organized with essential info elements

The “incentive” is to assist The “incentive” is to assist CMC afford the MAGTF CMC afford the MAGTF 2015 capabilities we need.2015 capabilities we need.

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STRATEGIC PURCHASING INITIATIVESTRATEGIC PURCHASING INITIATIVE

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Service Acquisition Burning Platform

• Resources— Over half of our purchasing is acquisition— $2.9B non weapons system

• Training— Little or no systematic training— Ultimate customers lack confidence in contract support

• Organization— Little understanding of the process and who owns it— Process is slow and unfriendly - driving customers out

of USMC at 3-5% premium for contract support

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Why SPI?

Purchasing Best Practices & Best ChoicesPurchasing Best Practices & Best ChoicesPurchasing Best Practices & Best ChoicesPurchasing Best Practices & Best Choices

IMPROVEDIMPROVEDSUPPORT TOSUPPORT TO

THE WARFIGHTERTHE WARFIGHTER

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What is Strategic Purchasing Initiative (SPI)

• A strategic approach to purchasing goods and services

• Covers:— Resources— Training— Organization and structure

• Based on significant analysis— Spend analysis— LR/LB research— Other organizations

• Linked to PPBE to assist CMC afford MAGTF 2015 capabilities

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Private Sector SPI Actions and Successes

• Actions— Conduct firm-wide spend analysis— Rationalize supply base, consolidate contracts— Establish long-term partnerships with best suppliers— Help key suppliers improve quality, cost, service— Integrate key suppliers into organization

• Results— Ford Motors saved 3% a year of purchases— AMR saved 20% over 5 years— Honda saved 17% over 4 years— Chrysler saved 4% a year for six years— Many firms realize reductions in inspections and improved

delivery or service/product

Source: Source: RAND Project Air Force Report RAND Project Air Force Report Implementing Best Purchasing and Supply Management Practices - 2002Implementing Best Purchasing and Supply Management Practices - 2002

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More SPI Success By Others

• DoN Administrative Services— Minimalist scenario 1% Savings vs Aggressive scenario (3.5%)— Benefits include socio-economic primes becoming more competitive

• USAF - Commodity Councils— Wave I - Aircraft Accessories/Landing Gear/Ground Equipment— Wave II – Engines/Electronics/Secondary Power— Wave III – Aircraft Structural/Instruments

• Private Industry— Aberdeen Group low balls saving at 30% & exceeds client

expectations— Numerous financial success stories & improved support to operators

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Leveraging the Total Force

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Conduct an end-to-end review of Marine Corps’ product and service acquisition practices in order to identify opportunities for improvement.

Coordinate the development, approval, and implementation of action plans based on the following approaches:

(1) Coordination of Marine Corps purchasing related initiatives(2) Process mapping, analyses, and best practices(3) Spend analyses, commodity councils, and benchmarking

SPI IPT Mission

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SPI is More Than Contracting

Requirement Generation

ContractingActions

Execution Management

Who Owns the overall Process??

Who are the Stakeholders??

What skills do we need to develop??

How do we deliver effective

training??

How can we improve the

overall process??

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Service Acquisition Service Acquisition Product Acquisition Product Acquisition

Spend Analysis

ProcessMapping & Analysis

InitiativeCoordination

Spend Analysis

ProcessMapping & Analysis

InitiativeCoordination

SPI Dual Approach How can we improve Marine Corps purchasing of products and services?

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The Battlefield

Skill ShortfallSkill Shortfall

In-EfficiencyIn-Efficiency

In-EffectivenessIn-Effectiveness

Simple WasteSimple Waste

PBSAPBSA

Acquisition Training Initiatives

Acquisition Training Initiatives

Spend AnalysisSpend

Analysis

RCO CEOssRCO CEOss

End-to-End AnalysesEnd-to-End Analyses

E-ProcurementE-Procurement

Informed Purchase Strategy

Informed Purchase Strategy

Excessive AutonomyExcessive Autonomy

Small Business Strategy

Small Business Strategy

Fragmented PurchasingFragmented Purchasing

GCSS-MCGCSS-MCClass IXClass IX

NIMSNIMS

3PL3PLFISC/USMC

stockFISC/USMC

stock

Other ServicesOther

Services

Cherry PointCherry Point

Weak Common Situational Awareness

Weak Common Situational Awareness

External DatabasesExternal Databases

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

DoD e-MallDoD e-MallGSA AdvantageGSA Advantage

Prime VendorPrime Vendor

Community ManagementCommunity Management

RIMMRIMM

DWSSDWSS

Areas ofConcern/Interest

Sample of Initiatives &

ImprovementsIn Progress

Decentralized ProcessesDecentralized Processes

Duplicate ProcessesDuplicate Processes

Roles & ResponsibilitiesRoles & Responsibilities

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Small Business Strategy: Balancing Needs

Small Business Strategy

Small Business Strategy

Consolidation/ Consolidation/ BundlingBundling

PrimePrimeContractorContractor

TargetsTargets

Small Business Small Business Subcontract EvaluationSubcontract Evaluation

Factor TargetsFactor Targets

SmallSmallBusinessBusiness

UtilizationUtilization

SubcontractorSubcontractorTargetsTargets

Coordination Coordination With With

OSN SADBU/SBAOSN SADBU/SBA

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Expected Results from SPI

• Purchasing consolidation

• Supplier partnering & DoD partnering

• Purchasing consolidation

• Supplier partnering & DoD partneringSpend Analysis

• Process standardization

• Process best practices

• Acquisition training

• Roles and responsibilities defined

• End-to-end synchronization

• Process standardization

• Process best practices

• Acquisition training

• Roles and responsibilities defined

• End-to-end synchronization

ProcessMapping & Analysis

• Existing initiative deliverables for use with SPI

• Eliminate duplication of effort

• Identify areas requiring further attention

• Existing initiative deliverables for use with SPI

• Eliminate duplication of effort

• Identify areas requiring further attention

InitiativeCoordination

Tangible Savings Results and Required Investments

• 1% per year for PR07 (commitment in Nov 04)

• TBD % per year for POM08 (commitment in Nov 05)

Tangible Savings Results and Required Investments

• 1% per year for PR07 (commitment in Nov 04)

• TBD % per year for POM08 (commitment in Nov 05)

SPI OverallSPI Overall

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SPI Vision and Relationships

Strategic Purchasing Initiative (SPI) Strategic Purchasing Initiative (SPI)

PBSA TrainingInitiative

PBSA TrainingInitiative

Base SupplyStudy

Base SupplyStudy

InitiativeCoordination

InitiativeCoordination

Process Map& Analysis

Process Map& Analysis

SpendAnalysisSpend

Analysis

BusinessTrainingBusinessTraining

ImprovementEnabler

ImprovementEnabler

ImprovementEnabler

ImprovementEnabler

ImprovementEnabler

ImprovementEnabler

ImprovementEnabler

ImprovementEnabler

TrainedAcquisition

Team

TrainedAcquisition

TeamSavingsSavings Returned

WarfightersReturned

WarfightersBetter

Cycle TimeBetter

Cycle TimeOther

OutputsOther

Outputs

Better / Cheaper / FasterWarfighter Support

Better / Cheaper / FasterWarfighter Support

DoD AcquisitionGoals Met

DoD AcquisitionGoals Met

Whichincludes:

To develop:

Resulting in(output):

Resulting in(outcome):

IMPROVE BUSINESS PROCESSESIMPROVE BUSINESS PROCESSESIMPROVE BUSINESS PROCESSESIMPROVE BUSINESS PROCESSES

ImprovementEnablers

ImprovementEnablers

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Summary

• Significant resources are spent in purchasing— Significant amount is for services— Significant amount going outside USMC contracting

• Other organizations have dramatically improved purchasing

• Need better skills— To frame and maintain relations to external providers key issue

• Need to support small business goals

• Deliberate program to improve process/reduce costs over POM08 is needed to help CMC finance critical MAGTF investment – without impacting local programs

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Bottom Line

The Marine Corps is a combat force -- not a business. To be successful, however, we need to support warfighting

excellence with well-managed business processes that are both effective and efficient.

- M.W. Hagee

Commandant of the Marine Corps

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October 2004

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BACKUP SLIDESBACKUP SLIDES

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7 Business Processes

• Installation Support (DC, I&L)

• CSS/Logistics (DC, I&L)

• Acquisition (SysCom; DC, I&L)

• Information Technology (C4I)

• Training (DC/CD/MCCDC)

• Financial Management (DC, P&R)

• Human Resource Management (DC, M&RA)