DFAS Road to Transformation Tom Bloom Director Defense

DFAS. . . Road to Transformation Tom Bloom Director Defense Finance and Accounting Service September 2003 Your Financial Partner @ Work

The DFAS Mission and Vision Mission: Provide responsive, professional finance and accounting services for the people who defend America. Vision: Best value to our customers l l 6/16/2021 World-class provider of finance and accounting services Trusted, innovative financial partner One organization, one identity Employer of choice, providing a progressive and professional work environment Your Financial Partner @ Work 2

DFAS Magnitude of Operations l l l l l 5. 7 M military, civilians, retirees, annuitants paid 7. 3 M travel payments 11. 2 M invoices paid $346. 6 B in disbursements 124 M accounting transactions $1. 45 T total liabilities $12. 5 B in foreign military sales $176 B Retirement Trust Fund manager 267 active Do. D appropriations World’s Largest Finance and Accounting Operation 6/16/2021 Your Financial Partner @ Work 3

DFAS at a Glance Total Workforce OAS Overall Ratings -- 2000 -2003 Results 6/16/2021 Your Financial Partner @ Work 4

Total Work Force 24% Decline in Total Workforce since July 1999 6/16/2021 Your Financial Partner @ Work 5

Customer Service Matrix Corporate Overview 6/16/2021 Your Financial Partner @ Work 6

Why Transformation? l l In today’s arena, continual adaptation to changing customer requirements, market influences, and technology improvements is a matter of survival External Drivers l l l President’s Management Agenda Quadrennial Defense Review (QDR) Defense Planning Guidance (DPG) 2005 Base Realignment and Closure (BRAC) Internal Influences l l 6/16/2021 Achieve tenets of DFAS-vision to increase mission effectiveness Strive for operational excellence Your Financial Partner @ Work 7

What is Transformation? l l l Transformation is the Roadmap to move DFAS forward Transformation is Integration of all DFAS initiatives to accomplish our mission and achieve our strategy Transformation is Action to implement the best course of change to improve our operations Transformation is a Journey. . . 6/16/2021 Your Financial Partner @ Work 8

Transformation Objective l l Transformation supports the DFAS Vision to be the Best. Value for our customers and a World-Class organization Best-Value l l World-Class l l l Competitive in the marketplace “Brand name” is accepted as industry leader Organization becomes a benchmark for others DFAS success stories: l l 6/16/2021 DFAS Garnishments - best-value due to cost, efficiency, timeliness, and systematic approach DFAS Civilian Pay - 1 of 4 to provide pay services for entire civilian government workforce Your Financial Partner @ Work 9

2003 2002 2001 2000 1995 1991 DFAS Transformation from the Beginning DFAS Implementation Site Consolidation Competitive Sourcing (A-76) DFAS Business Evolution Balanced Scorecard Transformation Integration 6/16/2021 Your Financial Partner @ Work 10

DFAS Strategic Direction Vision DBE Strategy & BSC Transformation From: Regional Focus From: Budget. Driven Organization To: BL & PL Focus To: Leadership. Directed Strategy From: Processors To: Value Creators Strategy Define Enable Future State • Customer Focused • Value Driven • Efficient $ BSC Budget Transact Analyze Process Advise Current State • Build & Operate System • Process Transactions • Respond to Customers Build Own Customer Focused Strategy Based • World-class provider of finance and accounting services • Trusted, innovative financial partner • One organization, One identity • Employer of choice, providing a progressive & professional work environment Metrics Driven 6/16/2021 Your Financial Partner @ Work 11

Competition Generates Value Competition Customer Choice Customer Perceived Value Generate Value DFAS has chosen to TRANSFORM the Agency in order to increase value to the customer 6/16/2021 Your Financial Partner @ Work 12

Transformation Process l l l Transformation process begins with analysis of a function and leads to implementation of the best improvement Must fully understand the business function before determining best course of action to effect improvement Functional analysis tool is the Business Case Analysis (BCA) l l l 6/16/2021 Analysis by Business/Product Lines (Segment Approach) BCA presents alternatives and supporting information to DFAS leadership for a decision BCA presents a recommended course of action from available Transformation Strategy options Your Financial Partner @ Work 13

BCA Process Identify Function for Transformation Conduct BCA Six Step BCA Process 1. Identify Team 2. Define Scope 3. Define Current Organization 4. Conduct Market Research 5. Analyze Options 6. Provide Recommendation Transformation Option Decision High Performing Organization (HPO) Government 6/16/2021 Your Financial Partner @ Work Transformation Actions Competitive Sourcing (A-76/FAR Part 15) Private 14

DFAS Transformation Schedule l l l 21 BCAs from FY 2003 -2008 9 BCAs scheduled for completion to support DFAS BRAC planning FY 2003 BCA Schedule: l l l 6/16/2021 Marine Corps Accounting (Completed) Vendor Pay (Completed) Technical Services Organization (TSO) (Completed) Acquisition Services Division (Completed) Disbursing (In Progress) Your Financial Partner @ Work 15

Business Case Analysis - FY 2004 Schedule 6/16/2021 Your Financial Partner @ Work 16

Transforming DFAS through Lean Thinking l Lean Thinking -- tool for stopping waste and creating value l 5 principles of Lean Thinking l l l Customers determine value Identify the value stream Make the process flow Let customer demand pull the process along Drive for perfection Progress comes in bursts (kaikaku) and incremental improvement (kaizen) 6/16/2021 Your Financial Partner @ Work 17

Lessons Learned l l 6/16/2021 Detailed functional flowcharts of “As-Is” processes are mandatory for complete understanding of current processes & functions A clear, well-defined scope statement of the function is critical to the successful completion of the BCA and a recommendation that is achievable Transformation actions must be integrated and reviewed continuously by the leadership to ensure the agency is moving forward together LEAN THINKING must be a foundation of any transformation option Your Financial Partner @ Work 18

Transformation Integration l Leadership Council determines the best course of action to achieve: l l Transformation consolidates all internal DFAS improvement efforts utilizing: l l Greater effectiveness Increased efficiency Continued productivity gains Corporate restructuring Workload consolidation Business process improvement Transformation integrates external impacts to include: l l l 6/16/2021 Competitive Sourcing Base Realignment and Closure (BRAC) Business Management Modernization Project (BMMP) Your Financial Partner @ Work 19

Success Stories We have already reaped benefits from BCAs Identified duplicative processes – Marine Corps Accounting l Multiple entry of the same data in the Journal Voucher process Identified non-standard processes – Vendor Pay & TSO l Different practices for paying invoices & processing payments even within the same network l Non-standardized practice & delivery of voice communications function results in increased cost for DFAS Identified antiquated processes – Acquisition Services l 5 copies made, stapled, and sent l 4 copies thrown away, 1 used 6/16/2021 Your Financial Partner @ Work 20

What Does It All Mean? l Transformation involves “Moving Forward Together” l l Active participation enables best ideas to emerge l l Transformation will allow us to become more competitive and provide the best value to our customers Customer and employee involvement is critical to define changes necessary to support transformation actions Communication - Communication l l l 6/16/2021 “Straight Talk” video presentations by Director, DFAS “By All Accounts” newsletter articles Employee and customer presentations e. Portal postings Feedback via hq-transformation-team@dfas. mil Your Financial Partner @ Work 21

Conclusion l Bottom Line - Transformation is a Journey l l 6/16/2021 Long-term path to continually evaluate and improve functions Integration roadmap for past, current and future change efforts Your Financial Partner @ Work 22

DFAS Your Financial Partner @ Work 6/16/2021 Your Financial Partner @ Work 23