Hawaii is center of support
 Senator Schatz
 Senator Hirono
 Congresswoman Gabbard
 Congressman Takai
Long tradition of support
 Senator Inouye
 Senator Akaka
Hawaii is center of support
Lynchpin of Pacific logistics
170,000 military patrons
50 percent savings
SITREP
 DoD is targeting the commissary appropriation in its
2015 budget submission, reducing $322 million of the
$1.4 billion annual appropriation in 2016, and $1 billion
in 2017, leaving it with $400 million
 The proposal is direct reduction to military
compensation and is inciting fierce opposition.
 Exchange programs are under stress
 On-base business model threatened
System is strong but fragile
and vulnerable
Convergence of factors all at
once could destroy it
State of play
 Administration recommended a $322 M cut
for Fiscal 16 that begins October 1.
 Congress pushed back. HASC, HAC, SAC
 Problem is SASC—Accepted the Pentagon’s
$322 M cut. Three provisions to transfer
costs to patrons and one provision to
privatize the largest stores including Pearl
Harbor.
Convergence of exchange
challenges
 SDT and base operations funding
 Product and pricing restrictions—tobacco (CVS),
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beverage alcohol
Wage hikes (minimum and SCA)
Shrinking force structure
Commissary as destination
Commissary category encroachment (legislative
proposal)
Off-base competition
Key questions
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Is the Government going to shut down this year?
Is the commissary system going to exist next year?
What about funding for commissaries?
How will sales be effected?
What’s going to happen to the employees?
Are commissaries and exchanges going to merge?
Are exchanges going to merge?
What’s going to happen to my business with exchanges and
commissaries?
 What’s my Association doing about it?
 What can I do to help?
DoD
 Sustain the benefit and its core
deliverables
 Charter an oversight Board
 Adopt best commercial practices
 Operate more like a business
 Do not merge the system at this time
MCRMC
 Create a Defense Resale System
 Single organization single leader, single Board, phased
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transition
Maintain core commissary/exchange benefits
Commissary groceries and essential items sold at cost
Create a business environment that supports
implementation of best practices
Migrate DeCA from an APF organization to a NAF
organization
BCG
 Establish an overall Resale Command
 Implement variable pricing and private label at
DeCA
 Implement “regional” market pricing
 Test modest price increases to Brand Name
Products
 Consolidate Exchange Backroom Functions
 Convert DeCA to a NAFI
 Consolidate DeCA and Exchange Backroom
functions.
Is the Government
going to shut down
this year?
Is the commissary
system going to
exist next year?
What about funding
for commissaries?
How will sales be
effected?
What’s going to
happen to the
employees?
Are commissaries
and exchanges
going to merge?
Are exchanges going
to merge?
What’s going to
happen to my
business with
exchanges and
commissaries?
What’s my
Association doing
about it?
What can
I do to help?
Advocating
• Briefing the merits of the exchanges in the East Wing and
West Wing. Got the President of the United States and the
First Lady to cite the resale system, including, exchanges
for their work to support military people.
 Raised the profile of military exchanges with the White
House.
 Increased the recognition of military exchange
contributions to the military with the Chairman and
ranking members of all key Congressional Committees
including Defense Authorizations and Defense
Appropriations.
• Initiated and launched the Coalition to Save our
Military Shopping Benefits to increase patronage
and galvanize affinity group and patron support
against threats.
• Worked to gain Authority in the NDAA to allow
exchanges to borrow from the Treasury to finance
operations.
• Worked with House Armed Services Committee,
Ways and Means, Senate Finance Committees to
repeal the 3 percent withholding requirement.
• Worked to get relief on interchange fees in the
Dodd-Frank bill.
·
•
•
•
•
•
The Congressional Budget Office recommendation on
consolidation of commissaries and exchanges, price increases,
and commercially redeemable vouchers. It also results in price
increases, primarily for retirees.
Findings of the Bowles Simpson Deficit Reduction
Commission to reduce commissary and exchange funding and
raise prices to patrons.
. S 277 as discharged by the full Senate Veterans Affairs
Committee to provide benefits for injured military personnel
at Camp Lejeune, North Carolina. The bill payer was the
commissary and exchange benefit.
Senator Tom Coburn (R-WV) Back in Black report that
recommended consolidation of commissaries and exchanges
and price increases as part of a $9 trillion deficit reduction
proposal.
An amendment proposed to the 2014 National Defense
Authorization Act to consolidate and increase prices.
• Protecting tax immunity
• Internet tax immunity
• Protecting FAR immunity & fighting
other restrictions
• Protecting MWR NAF siphoning to
support legitimate appropriated fund
requirements
• Protecting status of NAF workforce-health care, pensions
• Protect private & public sector mix
•
•
•
•
•
•
Fighting for freedom of choice
Alcohol & Tobacco restrictions
Dietary supplements
Sugar
Fight supply chain impediments
Support open most efficient sourcing and
resist unreasonable local sourcing
• Support keeping commissaries open to
drive exchange traffic
• Fighting the Bangladesh provision
• Protecting second destination
appropriations and appropriations in other
categories
• Advancing Federal Financing Bank
authority for exchange debt
• ASER relief
• Resisting outright privatization initiative
• Expanding patronage in cyber and brick
and mortar--Veterans
Shareholders have a
voice
The system belongs
to the troops
2016 Defense budget request
$322 million cut to DeCA
• $183 million in reduced
operating costs
• $139 million in “efficiencies”
2016 Defense budget request
 Scheduled store closures: $27.3M
 Labor reduction of 200 FTEs (10.9 percent of above
store level support): $18.8M
 Transportation efficiencies of fresh fruits and
vegetables to the Pacific: $40.8M (assumes contract
start date by January 1, 2016, but is subject to change
based on ACTUAL contract start date)
 Cancellation of case lot sales events: $900K
 Elimination of subsidy to six overseas NEXMARTs
(Navy Exchanges that sell specific lines of commissary
goods at cost): $3.0M
2016 Defense budget request
 Close stores on holidays: $4.5M
 Reduce operating hours: $29.5M
 Reduce days of operation (includes direct labor
and contract labor reductions): $58.2M
 Major impacts of reducing days and hours of
operation include:
 Reduction of 1,480 FTEs (in addition to the 200 above
store level FTEs set forth above)
 Reduces the average number of employees per store to
45 – a reduction of 6 per store
2016 Defense budget request
 Days of operation per week would be reduced at 183 stores: 30 stores would go
from being open 7 to 5 days per week; 47 stores would decrease from 7 to 6 days
a week; and 106 stores from 6 to 5 days a week. Examples of reduced hours and
days include:
 Kaneohe Bay Marine Corps Base Hawaii would have its weekly operating days and hours

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reduced from 7 days and 60 hours per week to 5 days and 49 hours per week;
Fort Irwin, California, reduced from its current posture of 7 days and 62 hours per week to
5 days and 42 hours per week;
Minot Air Force Base, North Dakota, reduced from its current 6 days and 66 hours per
week to 5 days and 42 hours per week; and
Yokosuka Naval Fleet Activities, Japan, reduced from its current 7 days and 75 hours per
week to 5 days and 50 hours per week.
Second and third order of effects include:
 Larger crowds and longer checkout lines
 Potential decrease in exchange sales: According to the Army and Air Force
Exchange Service, approximately 20 to 30 percent of military exchange traffic is
directly tied to customers visiting the commissary
2016 Defense budget request
An additional $139M reduction.
 Including the cost of transportation of
commissary goods shipped overseas in the
price of the goods (second destination
transportation (SDT))--$100M
 Shifting the funding source for commissary
operating supplies from the Defense
Working Capital Fund (DWCF) to the
commissary surcharge. --$39 M
2016 Defense budget request
 Authorize the collection of a fee for service for value-added
commercial practices (online ordering/shopping and curb-side
pickup).
 Authorize the collection of a fee for the use of single-use plastic
and paper bags (incentivizing patrons to supply their own
reusable bags, or pay for a fee for each plastic or paper bag
furnished at checkout).
 Authorize a demonstration project to contract out the operation
of the produce department (currently, six produce contractors
supply fresh fruits and vegetables to commissaries across the
United States. Under this proposed demonstration project, two
of the produce contractors would also operate the produce
departments of the commissaries they supply. This would be the
equivalent to contracting out the operations of those produce
departments).
2016 Defense budget request
 If the Department continues to pursue a $1B reduction
in appropriated fund support of DeCA, more robust
legislative relief is required to: (1) eliminate the
current “sale-at-cost” model, allowing items to be sold
at a markup; and (2) enable additional revenue
generation by authorizing the sale of additional goods
and services that are commonly available in
commercial grocery stores, such as beer and wine, a
variety of gift cards, greeting cards, and seasonal
items. DeCA also would need additional legislative
relief to run more like a business without the current
statutory constraints.
2016 Defense budget request
 Eliminate the current “sale-at-cost” model.
 Authorize markup of product and establish sales prices of products to
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off-set appropriated fund operating costs.
Authorize the sale of all items (except distilled spirits), sold by
commercial supermarkets, to generate revenue to off-set operating
costs.
Use “cost recovery” as a primary criteria in establishing and closing
commissaries in non-remote U.S. locations.
Authorize purchase of goods from whatever source has the best price.
Modify the Berry Amendment to authorize the purchase of operating
supplies necessary to process products (e.g., meat trays) and protective
clothing in overseas areas from non-U.S. sources.
Exempt the provision of goods and services for Defense Retail Systems
from the application of the Service Contract Act.
2016 Defense budget request
 Eliminate the current “sale-at-cost” model.
 Authorize markup of product and establish sales prices of products to

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
off-set appropriated fund operating costs.
Authorize the sale of all items (except distilled spirits), sold by
commercial supermarkets, to generate revenue to off-set operating
costs.
Use “cost recovery” as a primary criteria in establishing and closing
commissaries in non-remote U.S. locations.
Authorize purchase of goods from whatever source has the best price.
Modify the Berry Amendment to authorize the purchase of operating
supplies necessary to process products (e.g., meat trays) and protective
clothing in overseas areas from non-U.S. sources.
Exempt the provision of goods and services for Defense Retail Systems
from the application of the Service Contract Act.
Compensation Commission
Recommendation 9: Protect both access
to and savings at Department of Defense
commissaries and exchanges by
consolidating these activities into a
single defense resale organization.
Compensation Commission
• Would decrease DoD budgetary costs and Federal outlays by $1.0
billion during FY 2016–FY 2020 and result in annual steady-state
savings of $515 million by FY 2021.
• Reductions result from a series of efficiencies, primarily in
consolidating back office functions, logistics systems, and
staffing.
• Studies have projected that both financial savings and
nonfinancial benefits can be achieved through a consolidation of
the three exchanges.51 Including the commissaries in such a
consolidation increases potential efficiencies.
• Proposes a new defense resale executive team that would be
responsible for evaluating, selecting, and implementing these
potential efficiencies. Realized costs and savings therefore
depend upon the set of efficiencies selected for implementation.
Compensation Commission
A single organization should be
established that consolidates DoD’s
commissaries and three exchange
systems into a single defense resale
system, herein referred to as the
Defense Resale Activity (DeRA).
Compensation Commission
 A DeRA Executive Director should be appointed who
reports to a consolidated and simplified BOD. The
BOD should replace the boards that currently oversee
each of the separate exchange systems and DeCA. The
consolidated DeRA BOD should also assume the
responsibilities of the Executive Resale Board and the
Cooperative Efforts Board and should incorporate
expertise from private-sector retail. Supporting
committees should be established and empowered as
needed.
Compensation Commission
 A DeRA executive team, along with operational advisors
from the current organizations, should immediately be
established to define the key attributes of the new
organization and plan the transition.
 Creation of a single organization should facilitate
consolidation of many back-end operation and support
functions, alignment of incentives and policies across
commissaries and exchanges, as well as consistent
implementation of best practices for aligning with the
needs of Service members and the Military Services.
Compensation Commission
 Core commissary and exchange benefits should be
maintained at military installations around the
world by continuing the sale of groceries and
essential items at cost (plus a surcharge) and
other merchandise at a discount. Under the
combined organization, some or all commissary
staff could be converted from APF to
nonappropriated funds (NAF) employees to reduce
commissary employee costs.
Compensation Commission
The branding of the current exchange systems and
commissaries initially should be retained. A director for
each of these branded exchange systems and the
commissaries should be appointed under the DeRA
Executive Director. These directors should oversee
operation of these systems as needed to represent the
unique needs of each military service. Personnel
evaluations for these executives should be cosigned by
the DeRA executive director and appropriate Service
representatives. Branding and organizational structure
can be modified over time by the BOD.
Compensation Commission
DeRA should assume responsibility for the operation
of exchanges but not the other organizations
currently managed by NEXCOM and MCCS. If
approved by the BOD, the current points of
integration and shared resources can be maintained
through liaison positions and formal memoranda of
agreement. For example, if it is mutually
advantageous to share support staff between DeRA
and Marine Corps MWR, options are available to
continue the arrangement that currently exists with
the MCX.
Compensation Commission
Laws and policies should be updated to reflect this
consolidated structure and allow greater flexibility
related to how products are sourced, where they are
sold, and how they are priced, as noted below:
 Allow the sale of convenience items in commissaries at a
profit, including products and services typically found in
commercial grocers. Food and other essential items should
continue to be sold at cost when sold in commissaries or
combined commissary and exchange stores (excluding
convenience stores). This expanded commissary product line
would include beer and wine, but those sales must align with
DoD’s efforts to deglamorize alcohol and reduce its abuse.
Compensation Commission
 Allow for the payment of second destination
transportation costs with NAF. Allow significant
flexibility on local sourcing overseas, particularly when
it is beneficial to the Service member.
 Allow more flexibility in the creation of combined
stores, as currently controlled by Section 2488 of Title 10
of the U.S. Code.
 Allow the use of the commissary 5 percent surcharge for
similar expenses in the exchanges. Conversely, allow the
use of exchange profits to cover commissary costs
currently covered by the surcharge.
Compensation Commission
A portion of Military Service MWR
programs should continue to be funded
from DeRA profits. The BOD should
approve the amount of net revenue to be
contributed as MWR dividends and
should ensure an equitable distribution
among the Military Services.
Compensation Commission
 10 U.S.C. § 2481 should be amended to make clear that
commissary and exchange stores may be combined into single
stores, and that commissary stores or the commissary sections of
combined stores must still sell grocery items at reduced prices. It
should also state that the Secretary of Defense will designate the
defense resale system’s executive director and the DeRA BOD
described above.
 10 U.S.C. § 2483 should be amended to authorize the defense
resale system to receive appropriated and nonappropriated
funds, and to use nonappropriated funds generated by the
system to cover the expenses of operating the system.
Compensation Commission
 10 U.S.C. § 2483 should be amended to authorize the defense
resale system to receive appropriated and nonappropriated
funds, and to use nonappropriated funds generated by the
system to cover the expenses of operating the system.
 10 U.S.C. § 2484 should be amended to state that the
commissaries’ requirement to sell items at reduced prices should
be limited to the following categories of items: (A) Meat, poultry,
seafood, and fresh-water fish. (B) Nonalcoholic beverages. (C)
Produce. (D) Grocery food, whether stored chilled, frozen, or at
room temperature. (E) Dairy products. (F) Bakery and
delicatessen items. (G) Nonfood grocery items.
Compensation Commission
 10 U.S.C. § 2485 should be amended to establish the DeRA
BOD described above, granting the Secretary of Defense
the authority to establish the board, which should include
five voting members—a senior representative from each
Military Service and the Under Secretary of Defense for
Personnel and Readiness—as well as nonvoting members
with experience related to logistics military personnel and
entitlements, and other relevant areas. The section should
also be amended to allow the Secretary to assign a limited
number of active-duty Service members to the defense
resale system, when necessary, including to serve as the
Executive Director.
Compensation Commission
 10 U.S.C. §2487 should be amended to eliminate
references to the separation of commissaries and
exchanges and disestablish the Defense
Commissary Agency.
• U.S.C. §2488, which sets forth limited
conditions under which commissary and
exchange stores may be combined, should be
repealed.
DoD report to Congress on MCRMC
 With some legislative relief, possible to maintain
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benefit while realizing efficiencies.
No merger of exchanges and commissaries at this time.
Develop a business plan.
Complex ecosystem of complementary programs,
products, and services with world-wide reach.
Defense Resale Business Operating Board
Responsibilities of existing boards would conform to
DRBOB
Convert commissary employees to NAF
DoD report to Congress on MCRMC
 Enable the commissaries and exchanges to function on a
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consistent (if not common), and more business-like, platform
Extending the finance and accounting optimizations to DeCA
Sharing logistics networks and/or procurement processes and
technology
Harmonizing human resources management across the
exchange systems
Leveraging the exchange systems’ merchandising and pricing
processes in building up DeCA’s capabilities
Working with the Treasury Department to remove barriers to use
of Military Star and the Exchange Credit Program (ECP) within
the commissary system
DoD report to Congress on MCRMC
 Develop cross-cutting strategic initiatives and tactical
actions to further reduce the commissary system’s
reliance upon appropriated funding, sustain foot
traffic between the commissary and exchange systems
(which is vital to the long-term viability of the latter).
 Board would play a key role in assessing the possibility
of any future proposal to consolidate resale stores or to
merge the commissary and exchange systems into a
single organization and developing a business case for
such a proposal, if appropriate.
DoD report to Congress on MCRMC
 The Department recommends that clear lines be
drawn between authority of the existing boards to
address policy issues such as profit policy, and the
authority of the DRBOB to address business practices.
 The Department recommends that, in lieu of the
current pricing mechanism, the commissaries should
be required to achieve a fixed level of savings to the
customer, based on real-time regional comparisons of
prices for representative market baskets of goods
against lowest-price nearby competitors.
Boston Consulting Group Study
Determine the qualitative and quantitative effects of:
 Using variable pricing in commissary stores to reduce
the expenditure of appropriated funds to operate the
defense commissary system;
 Implementing a program to make available more
private label products in commissary stores;
 Converting the defense commissary system to a
nonappropriated fund instrumentality; and
 Eliminating or at least reducing second destination
funding.
Boston Consulting Group Study
 The impact of changes to the operation of the defense
commissary system on commissary patrons, in particular
junior enlisted members and junior officers and their
dependents, that would result from displacing current
value and name-brand products with private-label
products; and (B) reducing or eliminating financial
subsidies to the commissary system
 The sensitivity of commissary patrons, in particular junior
enlisted members and junior officers and their dependents,
to pricing changes that may result in reduced overall cost
savings for patrons.
Boston Consulting Group Study
 The feasibility of generating net revenue from pricing
and stock assortment changes
 The relationship of higher prices and reduced patron
savings to patron usage and accompanying sales, both
on a national and regional basis.
 The impact of changes to the operation of the defense
commissary system on industry support; such as
vendor stocking, promotions, discounts, and
merchandising activities and programs.
Boston Consulting Group Study
 The ability of the current commissary
management and information technology systems
to accommodate changes to the existing pricing
and management structure.
 The product category management systems and
expertise of the Defense Commissary Agency.
 The impact of changes to the operation of the
defense commissary system on military exchanges
and other morale, welfare, and recreation
programs for members of the Armed Forces.
Boston Consulting Group Study
 The identification of management and
legislative changes that would be required in
connection with changes to the defense
commissary system.
• An estimate of the time required to
implement recommended changes to the
current pricing and management model of
the defense commissary system.
• Report by September 1, 2015.
Boston Consulting Group Study
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ALA developing position paper
Confidential document—first peek
Convince patrons that paying more is good for them
DeCA incurs loss on each transaction
Increased sales—increased appropriations
Cost plus 5 prevents DeCA from having a clear pricing
strategy to compete with private sector
 15-20 percent savings instead of 30 percent
 DeCA must comply with regulations that drive up
labor and acquisition costs.
Boston Consulting Group Study
 Exchanges’ more flexible contract and personnel
framework
 DeCA must operate small remote stores that are not
economically sustainable
 Limited in products that may be sold
 DeCA’s overall business model and regulatory
constraints result in competitive disadvantages that
effect bottom line.
Boston Consulting Group Study
 Improve merchandising & reduce COGS--$110-$165 M
 Reduce Capex--$80M-$120M
 Private label--$60M - $120M
 Convert to NAF--$95 M - $155 M
 Adjust labor mix--$10M-$25M
 Local sourcing--$50 M
 Local source quick win--$5M-$10M
 Reduce goods not for resale cost--$10M-$15M
Boston Consulting Group Study
 Introduce private label, increase price and keep

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margins to fund operations
Reduce # of national brands
Build relationships and improve terms with
manufacturers
Introduce private label
Simplify shelf space
Boston Consulting Group Study
Patrons reported that with
a 5% price increase, they
would shift 30% of their
spend at DeCA elsewhere.
Boston Consulting Group Study
 Consolidating exchanges would generate $175-$265M





annually.
Consolidating DeCA back office would save another
$40-$65 M
Consolidate BoDs
Phase 1—move from cost plus 5 pricing
Phase 2—Convert DeCA to NAF
Exchanges service DeCA’s back office functions and
begin to merge commercial activities such as
merchandising and supply chain
Tread with caution on BCG
recommendations
 BCG took a straight business approach and not a
benefit approach.
 Did not address many of the questions posed by
Congress.
 Several of the business assumptions used by BCG were
flawed.
 Congress should not take down price protections until
the assumptions are validated and true impact is
known.
Tread with caution on BCG
recommendations
 DeCA’s Relative Size in the Grocery Business
 Incremental Category Authorization with Margin
 DeCA utilization of a third party contractor to deliver
products to its US retail stores
 Changing DeCA’s business model form a cost+ to a
margin business model
 Retailer requirement to spend significant resources on
developing, managing and promoting their private
label brands
Tread with caution on BCG
recommendations
 DeCA receives, in some cases, better pricing than retail
because 100% of promotional monies are currently
passed along to customers. This situation is not
always the case with a retailer working on margin. The
net effect is DeCA’s COG is lower than it would be in a
margin business model like retail outside the gate.
 Five percent price increase = 30 percent sales decrease.
Tread with caution on BCG
recommendations
 grossly underestimates the complexity of its proposals,
and the danger of the transition plan it has proposed
 DeCA is not a modern supermarket chain but a
Federal Agency delivering an element of non-pay
compensation
 BCG treats DeCA as an established supermarket chain
and recommends the immediate implementation of
sophisticated retail programs.
Tread with caution on BCG
recommendations
 look specifically at the recommendations for variable
pricing, private label, and regional pricing in light of
DeCA’s capabilities and position in the market place.
 DeCA is a relatively small player in the grocery
industry (1%-2% of US sales)
DeCA is too small to manage a private label program
DeCA buyers do not have accountability for pricing,
inventory management or cost control DeCA buyers
have never managed pricing
DeCA has no system in place that can manage system
or regional pricing
Tread with caution on BCG
recommendations
 Regional pricing normalizes savings but ignores a
critical retail factor or regional cost of living.
 Currently 60% of DeCA’s item offering make it to the
shelf through an industry support anomaly
 “vendor stocking"
BCG does not account for the “cost” associated with
losing industry support of implementing private label
 DeCA’s supply chain is managed by a network of third
party distributors Private label addition may require a
separate supply chain to be established
Tread with caution on BCG
recommendations
 DeCA currently enjoys “best pricing available”
commitment through its ordering contracts 100% pass
through of promotional dollars provides optimum
Cost of Goods (COG) Requirement to price, promote
and position private label adds a news cost tier to Cost
of Goods and erodes existing industry support.
 If DeCA is to operate as a supermarket that product
restrictions would need to be lifted putting DeCA in
direct competition with the exchanges.
Tread with caution on BCG
recommendations
 As a Federal agency, DeCA is a quasi-social
services organization supporting key programs
like small and disadvantaged business, The
National Institute for the Severely
Handicapped, the National Institute for the
Blind. DeCA has had a leadership role in key
Administration programs like Joining Forces
and Healthy Eating. In the “retail world” this all
goes away.
Tread with caution on BCG
recommendations
 The BCG report does an excellent job of
detailing the internal operating changes
that need to be made to DeCA to position it
as a “retail operator”
 However, in its phasing recommendation it
proposes implementing complicated retail
programs before the organization, systems
and expertise are in place to manage these
sophisticated programs.
Distract
and
Divide
Your business is our business
Participation in ALA these days is
not optional….it is necessary part
of your business and an
investment that returns many
fold in many ways.
Your investment in ALA proved its
worth in 2014
 Participation in ALA yields real, tangible benefits for
your business.
 Furloughs and closures averted by 11 days resulting in
hundreds of millions of dollars in sales that would not
have otherwise occurred.
 $200 million cut in 2015 would have resulted in $3
billion lost sales and $600 million cut in 2016 would
have resulted in $6 billion in lost sales.
 Averted major issues that could have impacted
exchange ability to earn revenue and contribute MWR
dividends. Averting hundreds of millions in lost sales.
Keep your seat at the table
 2015 is going to be a pivotal year
 Things are going to change and a lot of balls
are going to be thrown up in the air. Need
pull the cart where you want it to go instead
of getting dragged behind it.
 Active participation in ALA ensures that your
interests are represented in decisions that are
g0ing to be made
 Decisions on product availability reverberate
in commercial sector
Strength in Numbers
 Table is going to be set this coming
year.
 Help your Board of Directors reach out
to sign up companies in the
Association.
 Help demonstrate to policy-makers
that the power of industry is behind us.
American Logistics Association
 Logistics is our middle name
 Manufacturers, Distributors and
Brokers represent 95 percent of the
supply chain
 Have a hand and a voice in what
happens
 Can help agency partners get to where
they need to get
Mobilizing for fiscal 2016
Educating members of Congress.
Input to multiple reports
Working with Compensation
Commission
Gathering more data
Outreach—don’t lobby ourselves
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80 briefings to Senate and House
Economic report
More underway
Frame the argument and shape the debate
Blunt new normal
Support our friends, educate adversaries
Coalition and patron involvement
Energizing advocacy groups – Grass roots
Moving resale to top priority
Congressional Caucus
Messaging – economic, compassionate, mission
DoD outreach—military and civilian
ALA positions on the budget
The Pentagon has a
budget problem but the
resale system is part of
the solution and not
part of the problem.
ALA positions on the budget and
the Commission
• Budget proposal will wreck cherished
benefits
• Budget is a shell game stacked with illusory
savings
• Hits those who need it most—families—
fixed income retirees
• Transfers costs to the exchanges and
attempts to balance the commissary benefit
on the back of the exchanges
ALA position on the budget and the
Commission findings
• Applaud the Commission for recognizing the value
of the benefits
• Keep protections and budget intact until proof is
presented
• If it ain’t broke, don’t break it
• Consequences will reverberate across the base
commerce ecology—MWR, exchanges, base
support services
ALA position
 Puts at risk $500 million in annual industry
support.
 Eliminates $300 million in patron co-pays
 Puts at risk $500 million in dividends from
exchanges to military community programs.
 Still requires DoD to underwrite overseas and
remote location operations but eliminates the
supply chain and economies of scale.
ALA position
 ½ percent of compensation costs
 1 fifth of a percent of tot DoD budget
 2 percent of the DoD’s health care budget.
 Yet one of the most valued benefits.
 Patrons have financed billions of dollars in
facilities.
 System is nearly fully capitalized.
 Helps keep cost of living allowance costs low.
ALA positions on budget
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System has already cut no more cuts-inherently efficient
Stop irresponsible dialogue with facts—no more new normal
As a vital compensation program, should be exempt from cuts.
For Sequestration, these programs should not be cut
disproportionately beyond the minimum reductions that are
mandated by law.
 Certainly should not be singled out for major reductions or illadvised experimentation or reengineering
 The resale system is inherently efficient with DeCA alone
reducing its annual operating costs nearly $900 million a
year. These programs are part of the solution not part of the
problem as our report “Costs and Benefits of the Military Resale
System” demonstrates—their contribution to the Defense
Department far outweighs their costs by a factor of 6:1.
ALA positions on budget
 Nonappropriated funds and surcharge funds are
generated by charges to military personnel and their
families. These funds should not be siphoned off in a
convoluted shell game to pay for legitimate
appropriated fund obligations that have been set forth
by Congress over the years.
 NAF balance sheets should not be used to balance the
budget on the backs of the troops
ALA position on the budget
 There should be no commissary reductions beyond the
over $700 million a year in annual reductions that have
already been taken out of the commissary budget (includes
the $46 million in the just-passed Omnibus FY 2014
Appropriations Act, and the $500 million inventory savings
from outsourcing distribution.
 Commissaries are one of the few DoD programs that has
held costs constant; in FY92 constant dollars, commissary
appropriations have actually declined since 1992.
 The primary purpose military families use the commissary
is the savings offered, they will stop coming when the
savings go away.
ALA position on the budget
 This is an earned benefit, not just a store.
 Commissaries and exchanges are a community hub and
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bring the military together.
Food inflation is expected to double this year.
Would greatly impact DoD’s efforts to promote healthy
lifestyles.
DoD may say the stores will remain open but the practical
effect of the appropriations reductions will be that the
stores in the U.S. will close.
Cutting commissaries is punishing success. These
operations have already cut spending while other Defense
programs continue to increase.
ALA position on the budget
 The cuts will reduce the current 30 percent savings to zero
and the stores in the U.S. would close.
 Economies of scale would be lost for remaining overseas
stores and costs and prices would rise.
 There are huge unknown consequences such as cascading
impact on military PX operations and on-base community
support programs, loss of U.S. supply infrastructure to
support remote and overseas operations.
 Commissary cuts would demoralize the military at a time
when there is so much uncertainty over the entire
compensation package and force structure cuts.
ALA position on the budget
 DoD says that commissaries will not have to pay rent
or taxes under their proposal. Commissaries should
not have to pay rent anyway on stores built and
maintained with patrons funds. The military is
already exempt from taxes under the Supremacy clause
of the Constitution.
 If you shut down the stateside hub stores, the supply
chain will lose economies of scale and prices overseas
will rise as well.
 Commissaries support the Defense mission including
DoD efforts to promote healthy lifestyles.
ALA position on the budget
 Insufficient analysis/study of the consequences of the
reductions
 Commissary is an earned benefit in recognition of
service.
 Reductions to the commissary benefit are out of
proportion to the reductions that are shared by other
Defense program.
ALA position on the budget
 Commissary patrons have built billions of dollars in facilities
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with their five percent surcharge
Food inflation is expected to double in the coming year
Represent a partnership between the public and private sector,
taking advantage of a private sector supply chain that contributes
an additional $500 million a year ancillary support to the
military.
Represent a partnership between the beneficiaries and the DoD
with these beneficiaries offsetting nearly 20 percent of the
operating costs.
Provide a tremendous amount of no-cost compensation to the
Department through state and local tax savings for beneficiaries
valued to the Department at nearly $300 million.
ALA position on the budget
 Power military household income with$2.8 billion in price
savings and another $250 million in income for family members
who work there.
 Is a cherished and well-used benefit with 90 percent of active
duty families using it last year and over 98 million customer
transactions.
 Large operations in the United States anchor and indirectly
underwrite operations in remote and overseas areas—equalizing
the benefit no matter where our people serve.
 Are a flexible benefit that expands and contracts with the size of
the force structure with nearly 150 of the stores closed
corresponding with successive rounds of BRAC and force
realignment over the years.
ALA position on the budget
 Have a declining budget, with funding for the benefit remaining
stable and dropping in real terms during the Defense budget
ramp-up and even when the number of eligible beneficiaries
increased. Allow the Department to economize on cost-of-living
allowances and personnel and operating costs in other areas such
as direct pay and transportation.
 Commissaries support multiple Administration objectives
including: hiring of Veterans and family members, supporting
military quality of life; providing minority and small business
opportunities; and opportunities for the blind and severely
disabled.
 The Defense Commissary Agency is one of the few organizations
in the Department that has been able to produce a clean
financial statement, a major objective of the DoD.
Benevolence and Good Will
 Wounded Warriors
 Snowball Express
 Joining Forces
 Fisher House
 USO
 NMFA
 Cause promotions
 …and a multitude of others
Rational Access
Military personnel are entitled
at least to the same rights and
privileges as the citizens they
are charged to defend.
Sectors have inherent challenges
Just in past year:
 Concessions
 Tobacco
 Alcohol
 Supplements
 Energy drinks
 Sugar
 Healthy foods
ALA position
 Military folks are entitled to the same shopping rights
and privileges as the citizens they are charged to
defend.
 Products that are legal in the general civilian market
should be available to military personnel.
 From a practical standpoint, we find that if legal
consumer products are regulated on base, it merely
forces the troops to go off base.
 If the military wants to control consumption of any
product, it has to be a behavioral change, not an access
change.
2015 Congressional Caucus
 June
10
 Rayburn House Office Building
 The premiere event on the politics &
policy of resale
 Members of Congress
 Defense experts
 Pentagon and Administration Officials
ALA & Resale
Protecting the Benefit