In the early 1990s, one of the most notoriously inefficient federal government agencies was the Defense Personnel Support Center (DPSC), which is responsible for providing food, medical supplies, and clothing to the U.S. military. Located on an Army base in South Philadelphia, DPSC followed conventional, but outdated, military procurement practices. Military customers were used to ordering massive amounts of supplies through DPSC, a bureaucratic and unresponsive system, and then waiting months, not knowing when, how, and if they would receive their shipments. DPSC stored excessive quantities of goods in central depots, as well as in warehouses at local bases, resulting in warehouses full of outdated and obsolete goods. Due to mounting criticism, in 1991, the Department of Defense subjected DPSC to market competition by allowing military installations to purchase supplies from any distributor, terminating DPSC's monopoly, and provoking an intensive self-evaluation of existing practices.
Rather than hiring external management consultants, DPSC turned to its own personnel to lead a complete restructuring, which incorporated private sector better business practices and applications of Electronic Data Interchange (EDI). The transformations were designed to vastly improve the agency's responsiveness by permitting customer choice with total assurance that combat readiness remained a top priority.
DPSC adapted a conglomeration of several innovative services to maximize the efficiency of every aspect of the distribution process. The Prime Vendor Program allows customers to choose the medical or food item of their choice from an electronic catalog. DPSC then identifies a commercial distributor to take and deliver orders within each region. Instead of relying on hundreds of manufacturers for deliveries, DPSC customers now have one delivery agent. Inventory and handling costs are reduced, fresher products can be obtained, and a wider range of choice is available, thereby reducing overall system costs. The Quick Response Program utilizes advances in computers to enable suppliers to adjust their production in response to shifting demands, facilitating faster delivery. To ensure the military's combat readiness on short notice, DPSC introduced a system of shared production with private firms, eliminating the need to stockpile thousands of items. For example, it developed a triangular partnership with Terry Manufacturing, an Alabama clothing producer, and the McDonald's fast-food chain. In normal times, Terry produces McDonald's uniforms, but during military alerts it switches manufacturing to military uniforms. Due to shared production, during Operation Desert Storm, DPSC was able to deliver 100,000 uniforms to Kuwait in less than four weeks.
As a symbol of the success of this initiative, the warehouses on the Philadelphia base that used to be crowded with outdated and aging supplies now stand empty since there are no longer excessive reserves to store. From Fiscal Year 1992 to Fiscal Year 1994, DPSC decreased inventories by 35 percent in Clothing and Textiles, by 38 percent in Medical, and by 31 percent in Subsistence. The Prime Vendor contract allowed Fort Lee in Virginia to reduce the value of their food inventory from over $500,000 to under $40,000. Customers have overwhelmingly reported much greater satisfaction with the new services. With Quick Response, customers now receive products within 72 hours after ordering, significantly faster than the previous average delivery period of 60 days. The new system created a stronger, leaner, and more responsive industrial base upon which the military can depend in the event of mobilization or national emergency.