an Effective Supply Chain
Rear Admiral Mark F. Heinrich
Naval Supply Systems Command
Chief of Supply Corps
Rear Admiral Mark F. Heinrich became commander, Naval Supply Systems Command (NAVSUP) and 46th Chief of Supply Corps on July 22, 2011. Previously, he served as commander, NAVSUP Global Logistics Support headquartered in San Diego, Calif.
Heinrich’s additional flag officer assignments include extensive joint experience. He served as director, Logistics Operations and Readiness (J-3/4) for the Defense Logistics Agency (DLA), headquartered at Fort Belvoir, Va. He deployed to Kuwait from June to December 2008 as director of the United States Central Command Deployment and Distribution Operations Center at Camp Arifjan, where he applied deployment and distribution expertise to enable the planning and execution of joint and combined force military operations. His first flag officer assignment was as commander, Defense Supply Center Richmond, Va., the lead supply center for aviation within DLA. The center is now known as DLA Aviation.
Heinrich is a native of southern California. He was commissioned in the Navy Supply Corps following graduation from the Naval Academy in May 1979 with a Bachelor of Science degree in engineering. He also holds master’s degrees in business administration and petroleum management from the University of Kansas. He is also a graduate of the Kellogg Graduate School of Management Advanced Executive Program. He is a member of the Defense Acquisition Corps.
Heinrich’s sea tours included duties as assistant supply officer of USS Kinkaid (DD 965), and supply officer of USS Gridley (CG 21) and USS Constellation (CV 64).
His additional shore assignments included serving as force supply officer on the staff of Commander, Naval Surface Forces; commanding officer of the Naval Petroleum Office; supply officer of Naval Air Station Whidbey Island; executive assistant to the commander, Naval Information Systems Management Center; and special assistant for pollution prevention and compliance in the Office of the Assistant Secretary of the Navy (Installations and Environment).
His personal decorations include two Defense Superior Service Medals, two Legions of Merit, a Defense Meritorious Service Medal, and various other awards. He is a qualified Surface Warfare Supply Corps officer and a naval aviation supply officer.
Q: You released the Strategic Plan 2013-2017 and your commander’s guidance in mid-January. What distinguishes the new Strategic Plan from the previous version?
A: It has been more than eight years since Naval Supply Systems Command [NAVSUP] has had a comprehensive five-year strategic plan. Given the dynamic environment in which we’re now operating, we needed a clear outline of our priorities going forward.
As the commander of NAVSUP and the chief of Supply Corps, I saw the undeniable benefit in the shared responsibilities and mission of these two entities I lead. The merged capabilities of these organizations create the arsenal of the Navy’s premier business managers and logisticians, delivering readiness to our warfighters while remaining stewards of public trust.
The Strategic Plan I’ve put forth outlines the path ahead for NAVSUP and the Supply Corps. The plan provides a roadmap for our personnel, stakeholders, and customers to understand our long-term objectives with four goals: world class workplace; unity of effort; effective, efficient performance; and data driven decision making.
By defining both near- and mid-term tasks, we combine action steps with long-term vision to face the challenges of an increasingly harsh budget environment. The strategic objectives will help us meet these goals allowing us to continue to perform in the exemplary manner that defines our community.
Q: Looking at your Commander’s Guidance, what are your primary initiatives and how will you go about implementing those?
A: Our four primary initiatives are: (1) Create and sustain a world-class workplace. The goal is to create and sustain a working environment that fosters teamwork and collaboration, rewards innovation, and provides the tools, resources and developmental opportunities employees need to be effective. This initiative is about ensuring our civilians, military and contractor workforce are prepared to face and overcome the inevitable barriers that arise within the environment that we operate within. This means improving communications, providing training to ensure our people are certified in the areas of acquisition, finance and supply chain management.
(2) Drive unity of effort across the Naval support network. The goal is to drive unity of effort throughout the Naval support network by strengthening relationships, optimizing processes and focusing on customer outcomes. Driving unity of effort means leveraging the subject matter expertise within NAVSUP and our strategic partners to strengthen our relationships, drive best practices and stay focused on customer outcomes. It is imperative that NAVSUP become the advocate for Naval logistics and quality of life initiatives.
(3) Refine our internal business processes to deliver effective, efficient performance. The goal is to continually refine our business processes to lean out non-value added steps and reduce operating costs. Refining our internal business processes means actively employing CPI resources to lead efforts focused on delivering effective and efficient performance across the NAVSUP enterprise to enhance support to our customers.
(4) Create and sustain an environment that enables datadriven decision making. The goal is to create and sustain an information environment that leverages evolving technology to deliver greater transparency while facilitating data sharing. This will enable the enterprise to make better, more informed decisions. It is imperative that our information systems remain relevant and provide the correct data for our personnel to make datadriven decisions. We deliver value by our mastery of the supply chain, powered by Navy enterprise resource planning [ERP]. By mastering it we increase effectiveness by improving efficiencies. Navy pilots fly F/A-18s ... Navy surface warfare officers command Arleigh Burkes ... and Navy submarine qualified officers drive the Virginia class. We “Fly ERP ... our weapon system.”
Q: What will be the command’s biggest challenges in 2013?
A: Our guidance comes from the Chief of Naval Operations’ tenets—Warfighting First; Operate Forward; Be Ready—which direct us to deploy to the strategic maritime crossroads of the world, and to be ready when it matters. With the pivot to Asia, the U.S. Navy continues—and may even expand—operations overseas. While other services are moving their forces back stateside, the Navy is the nation’s first line for immediate response to crises, and the service of choice to assure allies, to build partnerships, to deter aggression and to contain conflict. Given these mission sets, I believe our biggest challenge is the financial environment. We will rise to this challenge, proving our worth in a time when budgets are significantly cut. As the Navy’s business leaders, our people know how to stretch $1 into $10. It is part of our culture to make every dollar count.
While I take our current financial situation very seriously, we will turn this budgetary challenge into an opportunity wherever possible. NAVSUP and the Supply Corps will turn the proverbial lemons into lemonade. We will continue to partner with the fleet and other providers to offer more efficient solutions to deliver the mission as set by the CNO. We will work jointly to support our customers where it makes the most sense, forgoing service parochialism. We’re proud of our history of direct involvement within the joint governance structures, and of our daily interactions with the fleet and providers.
NAVSUP and the Supply Corps are worldwide, and we think globally. Our Supply Corps officers are on every platform and expeditionary unit in the Navy. Even our female officers are serving on submarines now, like Lieutenant Britta Christianson, who, in June 2012, became the first woman to qualify in submarine warfare.
Our unique perspective is critical in these times because of the value we add across the vital global horizontals in the Navy—supply chain management, contracting and acquisition, financial management, fuels management, and business system management—skills which apply to every weapon system and every platform, and skills which we can deliver in spades.
Q: What is Navy Supply doing to prepare and plan for the drawdown from Afghanistan?
A: I think you have to look to the CNO’s Navigation Plan to understand that, while all the talk is of the preparations for a smaller presence in Afghanistan, the Navy presence will actually increase in that part of the world. Of his three tenets—Warfighting First; Operate Forward; Be Ready—the “Operate Forward” tenet means that we will be the first line of defense; we will be ready to engage with our resources focused on providing the necessary effect.
From an increased littoral presence in Bahrain—mine countermeasure ships, coastal patrol ships, and soon the littoral combat ship—to engagement in Horn of Africa, to the Asia-Pacific pivot, I can safely say that, in light of the planned Afghanistan drawdown, NAVSUP and the Supply Corps are focused on our enduring mission as we return to our historical environment of maritime logistics in the Central Command area of responsibility.
During this transition period, one of our Supply Corps flag officers, Rear Admiral Bob Gilbeau, is leading the logistics of the drawdown. And as we look forward, we are advocating for expanded capabilities in the Middle East and the Pacific to support the readiness of our operating units through our partnerships with the Defense Logistics Agency [DLA] and United States Transportation Command [TRANSCOM].
Q: Last summer you launched a distribution continuous process improvement initiative. How did that go and what were the conclusions?
A: We are making progress on this complex initiative to deliver $100 million in transportation savings.
Bringing together subject matter experts from across NAVSUP, the fleet, TRANSCOM and DLA, the team’s first step was to understand how the current ‘as is’ process is working to identify inefficiency and areas of opportunity in the processes.
Beyond the savings goal, success on this project is defined as delivering policy that drives processes and behavior to meet customer requirements at the best value to the Department of Defense. This means carefully defining our sourcing algorithms and understanding the net effects of redistributing serviceowned material to fulfill new requirements.
The team is looking to internally source stock and to utilize free issue material to replenish assets which will result in a lower overall transportation bill to DoD. Stock positioning is another area the team is investigating, looking at what types and how much material should be forward positioned. Fleet-ordering behavior is being reviewed to understand how actions taken by fleet personnel may inadvertently cause second- or third-order effects that drive cost increases.
Q: What are the challenges of bringing more biofuels into the Navy supply chain? At the current of near-term predicted levels, will there be issues with storage facilities and delivery systems for the different types of fuel?
A: The main challenge of bringing in more biofuels into our Navy supply chain will be the commercial availability of the biofuel product. The biofuel industry is not yet mature and many of the existing plants are not yet producing the quantities that the Navy requires.
The supply chain also must be considered. To support the Navy’s needs, a biofuel supplier must be able to blend their product with traditional JP5 and/or F76 up to a 50 percent blend ratio. Transportation is another factor to be considered. Due to the large fuel volumes required, the most cost-efficient way to transport to a Navy location is through pipeline, railway or barge. Therefore, the location of the biofuel plant can be an important factor since being strategically positioned to take advantage of established supply chains, including transportation, could affect overall cost.
To provide a biofuel blend to the Navy, a potential supplier must be able to demonstrate a potential to meet all applicable environmental regulations. They must also demonstrate the potential for commercial viability. Additionally, their product must be cost competitive with traditional petroleum products since DLA Energy awards contracts using full and open competition with low price, technically acceptable procedures.
For the Navy to certify a biofuel blend, the fuel must be a drop-in replacement for traditional fuels with no adjustments to be made by the operators to accommodate a change in fuel type. The biofuel must meet all environmental and safety requirements, require no change to aircraft, ship or infrastructure, and have the ability to be mixed or alternated with traditional petroleum. Using a biofuel blend must not require any modifications or enhancements to the Navy’s existing fuel storage or transfer infrastructure.
The bottom line is that the Navy is doing its part to be prepared as the biofuel industry matures. We are working to certify various production pathways as they become commercially available. We are investigating the capabilities of prospective alternative fuel producers, including a recent meeting with Golden Renewable Energy LLC, a company producing renewable fuel products from waste materials such as fats, oils, and greases and municipal sewer sludge.
Q: There were a couple of overseas projects that were underway last year—in particular the fleet logistics centers in Bahrain and Sigonella. What is the status of those projects?
A: NAVSUP is working towards converting Fleet Logistics Center [FLC] Sigonella Site Bahrain to NAVSUP FLC Bahrain.
In light of the 5th Fleet’s operational tempo and strategic lay down, a dedicated Echelon IV command in Bahrain can best support the emerging logistics mission. This FLC would be fully empowered to address the rapidly expanding suite of material, services and support called for by NAVCENT, 5th Fleet, CNIC’s regional commander, NSA Bahrain, Isa Air Base, DLA and other stakeholders in the area of responsibility.
NAVSUP already has a large presence in Bahrain in the form of FLC Sigonella Site Bahrain. So, with incremental resource investment, endorsement by the 5th Fleet commander, and approval from SECNAV and CNO, we intend to put a dedicated Echelon IV logistics provider in theater to focus on the 5th Fleet warfighter.
Q: How does Naval Exchange Service Command’s inventory management, asset visibility, contracting services and delivery of quality products to its clientele stack up against similar retail businesses in the civilian world?
A: The Navy Exchange Service Command [NEXCOM] operates for one reason—to provide a valuable benefit for our military members and their families. The $2.8 billion retail business operates over 300 NEX retail selling locations on 100 military installations worldwide from Djibouti to Singapore, as well as online at www.mynavyexchange.com. NEXCOM carries 150,000 stock-keeping units [SKUs] across its varied store formats. In comparison, a Super Target carries 125,000 active SKUs in any given store.
In 2011, NEXCOM’s shrink was 0.3 percent of sales compared to a retail industry average of 1.4 percent of sales, thus giving them approximately $15 million more profit compared to the retail average. NEXCOM profits are invested in the Navy Morale, Welfare and Recreation fund to provide support facilities and events for Navy sailors and families—our shareholders!
NEXCOM’s corporate contracting team operates under DoD regulations and maximizes competitive procedures to the greatest extent possible. Its contracts either generate revenue or provide supplies and services required to sustain operations. As a Navy organization, NEXCOM establishes industry relationships under greater limitations and scrutiny than a commercial retailer.
To improve its supply chain efficiency, NEXCOM opened a state-of-the-art 350,000-square-foot Northeast Distribution Center in Suffolk, Va., last October. This impressive facility increases productivity through reduction of steps and automation in receiving, picking and shipping. NEXCOM’s nine distribution centers process $1.1 billion of merchandise at cost per year. In FY12, NEXCOM’s distribution centers issued $4.4 million at cost per day worldwide.
While sales and profits are extremely important to the NEXCOM business, sailors and their families are at the heart of NEXCOM’s mission. For commercial retailers, the holiday selling season typically begins the night of or the day after Thanksgiving. In November 2012, with encouragement from the CNO, NEXCOM began the holiday selling season earlier to enable deployed sailors to take advantage of holiday specials by shopping online.
NEXCOM took a fresh and more sane approach to Black Friday by emphasizing Navy core values, family and holiday tradition through its ‘Navy Blue Holiday’ season. This new take on an expanded holiday selling season made it possible for families to spend time together instead of rushing off to take advantage of limited-time, limited-quantity sales. It also provided broader access to Navy Exchange sales items for afloat and deployed sailors.
Q: Across the command how important are relationships with small businesses and how do such partnerships benefit Navy Supply?
A: NAVSUP is committed to utilizing small businesses to provide goods and services. In addition to the critical role that small businesses play in our economy and communities, we recognize the important role they play in helping the Navy accomplish its mission. The Global Business Solutions [GBS] contract is one great example. Awarded in August 2011, it is a contract reserved for multiple small businesses to compete to provide Service Contract Act type support services across 15 business categories. As of the end of FY12, small businesses received more than $100 million of contract work through this GBS contract. Similar contracts are being worked in other markets with equal success, and new markets are currently being analyzed.
NAVSUP is doing much work in the area of strategic sourcing to drive best value in our procurements. Strategic sourcing can often be viewed negatively as people assume that small businesses will be precluded from opportunities. However, for more than four years now, we have led the way in balancing goals of efficiency, demand management and improved contract arrangements with the goals for socio-economic participation. Intensive market research and analysis identifies what role small businesses play. NAVSUP works toward a goal that the resulting contract strategy maintains or increases small business share of the commodity or service. So far, small businesses have benefitted from this strategy. We’ve set an aggressive goal to award nearly $2 billion in small business contracts over the next year.
Other examples of successful small business strategic sourcing relationships can be found in office supply procurements and furniture. Since 2005, the small business share of office supply procurements grew from approximately 20 percent to more than 85 percent. Similarly, the strategic sourcing initiative for furniture delivered a small business share of nearly 60 percent last fiscal year, far exceeding the NAVSUP small business goal. Long-term relationships with small businesses are very important, and we will continue to seek opportunities to maximize small business participation in our business.
Q: Any closing thoughts?
A: Going back to the financial issues we are facing, I’m proud to say we’re doing okay.
Though money is tight, our military and civilian workforce is willing and infinitely capable of meeting the needs of our fleet customers. We make the greatest contributions in times of need, and we do so in the back office environment, behind the scenes, and without fanfare because we do it to make a difference, not to be gloried.
Navy ERP could not have been instituted throughout the supply system at a better time. It gives us asset visibility, accountability, and the ability to get things done quickly, efficiently, and right the first time. Effectively written contracts, like our performancebased logistics contracts, ensure best value for our customers and to the taxpayers who provide those funds.
When the dollars are down, Navy leadership looks to NAVSUP and the Supply Corps to lead, and these are times when we can make our greatest contribution to the Navy. Our new five-year strategic plan will guide us in the right direction as we face bumps in the road ahead, and the world-class workforce of NAVSUP and the Supply Corps are well prepared to innovate, adapt and overcome the challenges that come our way. ♦