Defence Storage and Distribution Agency (DSDA) was created as a result of the 1998 SDR. DSDA sits within the Joint Support Chain in DE&S with a role to manage storage, processing and distribution tasks on behalf of its main customer base, the IPTs. In addition, DSDA has the capability to undertake repair and refurbishment, processing and testing of materiel, as well as operating the reverse supply chain93.
In 2005, the MoD chose the in-house proposal put forward by DSDA to meet the Future Defence Supply Chain Initiative (FDSCi). Major changes were subsequently instructed in order to achieve savings of c.£50m p.a. by 2010. The changes included:
• 40% reduction in headcount; and
• three site closures: Stafford (by end 2007), Llangennech (by mid-2008), Longtown (by mid 2009).
DSDA has produced savings of approximately £60m p.a. since 2005.
However, DSDA recognises that there is scope for further improvements in efficiency and effectiveness. A recent initiative by the Treasury, the Operational Efficiency Programme (OEP)94, has proposed a new business model for DSDA to make better use of the resources available.
A number of actions are to be implemented, including:
• merger of DSDA, British Forces Post Office and the Disposals Services Authority (DSA) into a single Integrated Provider Group (IPG) in order to rationalise overheads and take advantage of potential synergies; and
• introduction of shadow charging to IPTs, to ensure internal customers become responsible for the costs that are borne by DSDA on their behalf.
For example, in these discussions it was noted that within the last 5 years only c.35% of the materiel stored moved and there is an increasingly large number of product lines stored (c.1.4m lines), many are or relate to equipment that is no longer in use.
The DSDA service is currently "free" to the IPTs (i.e., no charge is placed on the IPT) and spares / inventory is not charged against the RDEL control total until used. Therefore there appear to be inadequate incentives for the "owners" of inventory (the IPTs) to minimise their stockholdings for the benefit of the wider system. If IPTs were charged for the cost of storing (and distributing) materiel, it may lead to a more efficient use of the service. In addition the merger with DSA is intended to allow IPT to dispose of those assets no longer required in a more efficient manner.
Reforms within DSDA remain ongoing and there is still potential for further commercial opportunities which will take the form of partnering and growing third party revenues95.
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93 The reverse supply chain is defined as the process by which surplus, repairable, damaged or waste materiel is returned for reallocation, reclamation, repair or disposal
94 Operational Efficiency Programme: final report, HM Treasury (Apr 09)
95 This is a response to the contracting for availability scheme which will mean that DSDA is no longer the primary logistics supplier for the MoD, and will be required to co-operate and compete with other companies and will need to be in a position to exploit outsourcing opportunities