The Medical Supply Chain Directorate has a long legacy of service to the Department of Defense (DoD) as a key component of the military medical supply chain. Headquartered at the Defense Supply Center-Philadelphia (DSCP) as part of the Defense Logistics Agency, it serves as the warfighters’ executive agent for some $4.2 billion a year in medical materiel and services. Its customers range from individual warrior medics and Navy corpsmen to small medical field units to entire fixed-base and floating hospitals.

The Medical Supply Chain Directorate also provides medical supply chain support for military retirees, eligible dependents, and various non-DoD customers, including the departments of Justice, Homeland Security, Veterans Affairs, and Health & Human Services, as well as the Indian Health Service, Federal Emergency Management Agency (FEMA), and the National Institutes of Health.

Headed by Col. Marsha Langlois, the directorate integrates the requirements and processes of two primary groups – the military medical care provider (the customer) and the medical materiel suppliers (manufacturers, vendors, and distributors). Langlois agreed to a Q&A-format interview to explain how that effort has evolved, where it now stands, and what the future holds.

 

The Year in Veterans Affairs & Military Medicine: What role does the Medical Supply Chain Directorate play in providing medical services or supplies to DoD?

Col. Marsha A. Langlois: My job is to integrate the Supplier and Customer Operations Directorates to improve support to the warfighter. The entire medical supply chain focuses on supporting the combatant commanders, making sure they have a single point of contact for the end-to-end supply chain. On one hand, the directorate integrates with the customer to provide support and training and advocates for customer requirements; on the other, it is the acquisition arm, developing contracts, doing one-time buys, and managing and providing contract administration.

How does it interface with the different DoD and service medical providers?

Our interface with providers is indirect. We interface most extensively with the medical logistics ordering sites, which might be medical treatment facilities, the logistics divisions of combat support hospitals, etc. However, when we are procuring a new medical product or complex piece of equipment, we may communicate directly with the health care provider to ensure we understand the complexities of the requirement. Most of our customer orders are through electronic ordering mechanisms. We conduct customer assistance visits and one-on-one training with our customer ordering sites.

As a result of lessons learned from combat operations in Southwest Asia, nearly every warfighter today receives basic field medical training. The new “warrior medics” are highly trained, and full medical teams, including surgeons, have been assigned to frontline service. How has that affected what and how and with whom the directorate works?

Rapid improvements in medical technology and our focus on having the best medical equipment right there in theater to support the warfighter has meant we really have to be on the forefront of the development effort, because new products often require immediate integration. The goal is to ensure the warfighters have the best medical care in remote and far-forward locations, with a real push to get them into the field quickly. So there is much more agility required now to be right there and ready to procure those new products and still ensure that we get the best sources and prices for the customer. Today, that focus also extends to the non-medical person in theater due to the Combat Lifesaver [CLS] program, which has been extremely effective.

Does the directorate warehouse materiel or serve instead as a just-in-time facilitator between manufacturers and medical care providers?

We really have reduced our inventory levels and moved from traditional depot operations into best commercial business practices, so we stock very little – mostly military-unique items and critical care supplies that aren’t quickly sourced and require immediate release at a moment’s notice. Otherwise, everything is via prime vendor and electronic catalog. We do some single buys and long-term contracts, but most of our support comes from the prime vendor.

We also leverage the commercial sector, especially in peacetime, contracting with manufacturers to maintain a fixed amount of stock and the ability to deliver it within a specified time frame, based on customer-provided requirements and forecasts. To meet DoD surge requirements, that can be expanded under a directorate contract that essentially pays the manufacturer to maintain or manufacture, assemble, and deliver items in a specified time frame, ensuring DoD receives fresh products without the need, cost, and time required for traditional orders, storage, maintenance, and disposal of expired items. To speed delivery of contingency-related materiel to the field, the directorate has established “air bridges” on the U.S. East and West coasts, using commercial overnight air carriers to ensure we can move critically needed materiel anywhere across the globe for reliable, efficient, and uncompromising support to the warfighter.

Do you work primarily through distributors or directly with manufacturers?

Our prime vendors are distributors who order and distribute supplies through our Distribution and Pricing Agreements [DAPAs] made with manufacturers, and a few distributors. We pre-price through pricing agreements with manufacturers and some distributors, who then provide those items to prime vendors at pre-approved prices. Then, our customers order these pre-priced medical supplies from our prime vendors, in accordance with our prime vendor contracts.

Who are these prime vendors?

They are commercial medical distributors. Manufacturers can’t do the distribution piece and you don’t want to make customers order from thousands of different manufacturers, so the distributors handle a wide range of products at predetermined prices. These are broken down into pharmaceutical contracts and medical/surgical contracts. Then we have an area between those two where we may not have a distributor for some ancillary supplies – such as lab or dental items – that we put into an electronic catalog contract. For example, we negotiate contracts with manufacturers or distributors, they give us portions of their catalogs, we pre-price those and make them available for customer ordering from our Web-based Electronic Catalog [ECAT]. These ECAT supplies are delivered directly from the manufacturer or supplier to our customers.

How have directorate operations been affected or changed since 9/11?

The medical directorate has been around for a long time, but since 9/11 we’ve seen large increases in workload and sales and high-priority requirements. We’ve had increases in ordering volume, new contract requirements, and requirements to expand existing contracts to support the warfighter. For example, the basis of issue for Combat Lifesaver kit used to be two per squad. After 9/11, most commanders required at least one CLS in every vehicle, and those requirements have continued to increase as new warfighter threats have been identified.

On average, how is the directorate’s annual work – by percentage of dollars spent – divided?

Pharmaceuticals average anywhere from 70 to 80 percent, medical equipment 10 to 15 percent, and the balance would be in an “other” category, which essentially means medical/surgical products.

Approximately 85 percent, or $3.6 billion, of the directorate’s business is conducted through its pharmaceutical and medical/surgical prime vendor programs, and about 5 percent [approximately $188 million] through ECAT. Of the remainder, roughly two-thirds – or $333 million – is for capital medical equipment and the balance – some $146 million – uses DoD’s traditional depot system.

Is the directorate involved in the actual selection of the items it provides or does it only respond to specific orders from care providers?

We don’t select items; we just procure what the customer requests. There are some instances where we use technical specifications to help identify commercial manufacturers to provide items. So if a customer orders a National Stock Number [NSN] item and that item is no longer available or obsolete, we have technical people who can look at the specs for that product, then we go into the commercial industry to find other products that meet those exact specifications. We’re not selecting a substitute, but offering the customer an exact replacement for an NSN item. Sometimes we find the NSN technical specs are obsolete and we have to go back to the customer to see what they really want and get new requirements from them.

Are directorate purchases conducted under long-term contracts, individual purchase orders, or some other relationship within the supply chain?

Based on sales, approximately 75 to 85 percent of our sales are through either a prime vendor program or ECAT contracts. About 8 to 12 percent are for individual delivery orders and one-time contracts. The remainders are orders against long-term contracts that do not go through prime vendors.

Does the directorate typically deal directly with manufacturers or through suppliers?

We do a little of both. We establish Distribution and Pricing Agreements with manufacturers and with a few distributors or suppliers. Our prime vendor contracts are with distributors. We like to work with manufacturers to get the best price, then almost everything goes through our prime vendors or ECAT.

To meet the unique readiness requirements for DoD contingencies, we try, to the extent possible, to purchase access to inventory rather than buying and storing the inventory itself.

Our business is entirely demand-driven. When vendors have new products to offer, they first must demonstrate them to the clinicians supported by the directorate. If the clinicians want the product, they create orders or demand projections for it. Once those are received, the directorate contacts the manufacturer or distributor and negotiates a fair and reasonable price. Once the price and other conditions are set – and depending on the nature of the product and anticipated demand – it is added to a prime vendor or ECAT catalog and made available to those programs.

What have been the highlights of the past year or so for the directorate?

The first is working with our customers to establish new prime vendor requirements in preparation for our new Medical/Surgical Prime Vendor Generation IV contract, which we’ve been working on for the past year. We’ve been asking our customers what they need the next-generation contract to do for them, trying to improve the prime vendor program with each contract and considering lessons learned from previous contracts.

We’ve also made dramatic advances in automation to support our customer. For example, we’ve developed and made some functional improvements to our automated sourcing tools so our customer can get the best price from the most reliable source. Also, we’ve worked to improve the data that we get from our suppliers. Med/surg data is a problem everywhere because the products are titled and cataloged differently from different vendors and manufacturers. So we might have a part number and nomenclature that differs across 10 different locations throughout the supply chain. We have developed a database to help us look at items our customers buy. Using that database, we have been able to cleanse and synchronize much of our medical/surgical data to ensure our customer gets exactly what they need and to reduce ordering errors. The Medical Product Data Bank [MEDPDB], while still in development, is being used by DSCP and VA to facilitate data research, standardization, and reduce medical supply costs.

We also developed an automation application to help us reduce customer and vendor errors that were causing delays in payments. We used some of our other sourcing and research tools to help us streamline business processes and reduce supply backlogs. Ultimately, we have been and continue to seek ways to work more efficiently, reduce costs, and minimize customer workload. We’ve also been working hard – and made some successes – in moving new products that our customers were buying and needed but were not under contract; we have been moving those to DAPAs or ECAT.

Last year, we supported the USS Comfort humanitarian disaster relief mission – Continuing Promise 2009. The Navy’s two hospital ships have gone out about once every 18 months to do disaster relief and humanitarian assistance missions. We have placed a medical supply chain person on each ship to assist and facilitate any DSCP requirements and provide medical supply support for those missions. These officers are deployed with the Navy hospital ships for approximately four to six months on those missions.

What, if any, milestones or changes are you expecting in the next six to 12 months?

We will be finalizing the Gen IV contract award, and expect some increased workload and requirements to support pending military mission changes. Also, we are beginning a new initiative to support a really challenging approach to standardization of medical/surgical products.

We already have, in all the services, a pretty viable standardization program for our institutional health care requirements, but we don’t have a strong viable standardization program for med/surg products for our operational customers – combat support hospitals and field units providing medical supply support. The goal is to develop standardization from end-to-end throughout the supply chain, from what we use in peacetime medical treatment facilities to what the warfighters use in combat medical facilities.

That will be very challenging. The clinicians will still be involved in the decision on what will be standardized, while we find the contracting instruments to support that and make sure it is sourced. You really have to have good coordination and synchronization between the clinicians and logisticians on something like this. We also are working to integrate new data tools to streamline our ability to use data in a variety of ways and improve access to the customers. For example, our customers are using five or six different data research tools to research and source their orders. We are developing a single database that will be accessible through their ordering system.

We have a forward team at Fort Detrick [Frederick, Md.] supporting the three services’ operational medical cells and will be bringing that team to full operational capacity in the next year. It started out with one person located there for about 10 years, but we began increasing that into a team the past couple of years. Our goal within the next six to 12 months is to increase that to anywhere from eight to 12 people supporting the three service medical logistics operations. Each service has its own surgeon general, each of whom has a medical logistics field-operating agency, all located at Fort Detrick. Our guys provide support, on a strategic level, to the services’ medical supply needs. Once fully operational, we also will be able to handle emergency, one-time buys at Fort Detrick. In that same time frame, we will be developing the IT [information technology] requirements to support the Gen IV contract.

We also are working on a joint solution for contingency requirements, a strategy to determine customer go-to-war requirements for the services in a joint manner. Right now, each service has its own method for contingency requirements determination.

Is there anything you need that isn’t yet part of the program, something to improve your operations beyond what is already on tap?

Everybody is always looking for increased resources, of course, but what we need most is an improved partnership with the services. If we want to improve support to the services, we must become an integral part of their decision process on items, products, strategies, or any changes they make so that we can immediately begin developing acquisition strategies to help support those changes.

The other thing, which might seem simplistic, is a really improved sourcing tool. And we have to develop ways to improve the data for our customers. We’ve been working with industry for about five years to get them to adopt an international standard for med/surg products and we’re very close to getting there. Once we do, it will drastically improve product identification. That would be a standard everyone accepts, so a given manufacturer’s product will have the same name or unique item identification everywhere.

Any final thoughts?

We’ve been successful in our partnership with the VA in trying to move forward in finding efficiencies between us for cost avoidance. That has been a long, slow process, but both DoD and VA agree that is an area where we want to continue to work.

We have a lot we need to do to improve and streamline our support, which is always our goal. However, the processes we have put in place, expanded, and improved upon since 9/11 have saved thousands of U.S. service member lives and millions of taxpayer dollars while pioneering a logistical business model that promises even better performance and expanded application in the future.

This article was first published in The Year in Veterans Affairs & Military Medicine: 2009-2010 Edition.