Earlier this year, the Department of Defense suffered significant budget cuts as a result of the sequester. The impact on the Navy is apparent: The aircraft carrier USS Harry S Truman did not deploy to the Persian Gulf as scheduled, and the department is working through hiring freezes, furloughs, and layoffs of temporary and term employees. Starting in April, the Navy started to gradually stand down at least four air wings. The chief of naval operations has announced cuts to facilities maintenance and contract delays.
None of that has made the job of Rear Admiral Mark Heinrich any easier. Heinrich is the commander of the Naval Supply Systems Command (NAVSUP), which provides logistics support to the Navy and deployed forces around the world. He now faces the unenviable challenge of maintaining morale and keeping a complex operation going in remarkably difficult fiscal times.
Commissioned in the Navy Supply Corps following his graduation from the Naval Academy in 1979, Heinrich has logged extensive experience at the Defense Logistics Agency and in Kuwait as the director of the Central Command Deployment and Distribution Operations Center. He has also served as commander, NAVSUP Global Logistics Support, headquartered in San Diego, Calif. Heinrich holds master's degrees in business administration and petroleum management from the University of Kansas and has attended the Kellogg Graduate School of Management Advanced Executive Program at Northwestern University.
DC Velocity Editor at Large Steve Geary recently sat down with Rear Adm. Heinrich to talk about global logistics for the Department of the Navy. In light of current events, it's no surprise that much of the discussion centered on the effects of the sequester.
Q: Many people outside the military have never heard of NAVSUP. Who are you?
A: We are the folks that can provide integrated global capability not just to NAVSUP, not just to the fleet, but to anybody in the Navy who needs logistics support. That is one of the things that we are very, very good at.
Logistics are important to the Navy, and logistics are why NAVSUP exists. In fact, the way we wrote our NAVSUP strategic plan for this year was an acknowledgment that what we are really trying to do is manage logistics networks.
Q: Can you give us some idea of how NAVSUP is responding to the sequester?
A: The harsh budget environment creates opportunity for logisticians. We are working hard to find opportunities within this environment to make things better, and that means continuing to leverage our commercial partners through out-of-the-box supply chain solutions. We are going to continue to work with the Defense Logistics Agency and look for opportunities to leverage their incredible capability and the U.S. Transportation Command.
Q: As you work your way through the impact of the sequester, what are some leadership lessons that you can share with our readers?
A: The most important thing is to be transparent. If people think too many decisions are being made in a smoke-filled room, then trust goes out the door. Trust has a really hard value. You almost can't put a price on it. When you lack trust, costs go up. In any harsh budget environment, trust and transparency are critical.
And the number one rule of leadership is, of course, take care of people. We are focusing on our workforce because these people don't have to stay. They do stay on because whether they wear a uniform or civilian clothes, they are all patriots. So we have to make sure they know we appreciate them and what they do. The momentum to keep our mission in focus isn't driven by a paycheck. Love of country is something we all share.
Q: You are a global operation with customers and operations around the world. How do you establish a positive environment across such a far-flung operation in difficult times?
A: Alignment is key. NAVSUP must be aligned with our fleets and our resource sponsors at OPNAV [Office of the Chief of Naval Operations]. In this harsh budget environment, misalignment with them, from a leadership perspective, would be terrible. We have to communicate. We have to think the same. We have to act the same.
Q: How do your private-sector partners figure into the equation?
A: I worry about our private-sector industrial base because our goal is to ensure that we go right from factory to foxhole, factory to fantail, factory to flight deck. If the factory is being hurt, then that isn't helping us. We have great hope that Congress will come together on a budget agreement that allows us to continue to operate and train. The impact to our industrial base is something we think about all the time.
Q: What specific actions is NAVSUP taking to reduce spending?
A: "Level-of-effort" contracts are not hard to ratchet up or down. Contracts that produce a product are harder. In many cases, it takes a renegotiated contract with our commercial partners. We don't want to renegotiate because when we establish an agreement, we expect to be able to fund most of these contracts at a steady level, but we're at a point where there is a realization that we have to do something. In an environment where we are tying up ships and grounding airplanes, we would not be responsible stewards of taxpayer dollars if we didn't look at it.
Q: Over the past several years, the Navy has been implementing an enterprise resource planning system (ERP). Has that been helpful?
A: We are now looking at our financial data because ERP at its core is a rock solid financial ledger. We have been able to look at the numbers and determine how much money we have allocated against contracts almost to the penny—how much money was committed but not allocated, and where there's money we intended to spend that could potentially be stopped. We have matched the level of effort of our contractors with the level of effort of our civilians. ERP has given us the granularity we need to make very good decisions.
Q: What do you need the private sector to do to help you through this?
A: As these companies work to scrub their bottom lines, not just their top lines now, they are going to help us because as their costs go down, we will get better value for our contracts. In this new environment, we really have to reduce our costs. And that includes the price of material.
Now, of course, the top line has stopped rising. Companies for years had been all about garnering the maximum amount of business, really pushing the top line hard. But now that sales are dropping, they are scrubbing the bottom line to protect profit and are looking to cut costs and be more efficient. That helps us.
Q: What first attracted you to naval logistics? Why are you in the Supply Corps?
A: Graduating from the Naval Academy, I had choices and the Navy's Supply Corps really attracted me. It seemed fascinating. The opportunity to be on a fuel farm in the Philippines, to work all over the world has been great. Of course, things like working on an aircraft carrier and a deployment to Kuwait and all the joint experiences I have had in the Defense Logistics Agency have convinced me it was the right answer.
Q: What is it about the Supply Corps that makes it exciting?
A: The thing that is exciting about the Supply Corps is that it allows you to be a little entrepreneurial. Make no mistake—supply chain management is as much an art as it is a science. So, the fun of this game is you really get to leverage a little bit of ingenuity, and we appreciate that.
One of the things that's really exciting is that we have some of the best kids in America joining the Supply Corps. I talk to some of these young men and women, and they are just great. I will tell you, I couldn't compete against them. They are the best and brightest ... that is for sure.