1. AAFA DSCP Update PRESENTED BY Dennis Dudek Director of Supplier Operations CLOTHING & TEXTILES March 2006

2. Why We Are Here …

3. Why We Need Your Support …

4. Agenda The Year in Review Support to the Warfighter BSM Update Dollars and Sense Issues

6. FY 02 Sales/Services: $ 7.8B FY 03 Sales/Services: $10.4B FY 04 Sales/Services: $11.5B FY 05 Sales/Services: $12.7B FY 06 Projection:$12.3B C&T $2.5B Medical $3.6B Subsistence $3.9B Construction & Equip. $2.7B FY 02 Sales/Services: $21.5B FY 03 Sales/Services: $25B FY 04 Sales/Services: $28B FY 05 Sales/Services: $31.3B FY 06 Projection:$34.3B Land/Maritime/Missiles: $ 3.3B Aviation: $ 3.6B Troop Support: $12.9B Energy $11.0B Distribution: $ 2.5B Other: $ 1.0B Scope of Business #50 Fortune 500 – Above Intel 5.2 Million NSNs 1411 Weapon Systems Supported 48 States / 28 Countries 26 Distribution Depots Scope of Business #172 Fortune 500 – 2 Above Nike 2.7 Million NSNs / LSNs 1200 Weapon Systems Supported 14 States / 11 Countries 22 Distribution Depots with DSCP Stock DLA (20,804 Civilians / 1267 Military) DSCP (2706 Civilians / 71 Military) The DLA / DSCP Enterprise

7. FY05 $12.7B DSCP - 4 Supply Chains l Food Service l Produce l Operational Rations l Recruit Clothing l Readiness l Organizational Clothing & Individual Equipment l Pharmaceutical l Medical/Surgical l Readiness l Equipment l Facilities Maintenance l Equipment l Wood Products l Safety & Rescue Equipment CONSTRUCTION & EQUIPMENT CLASS IV / VII MEDICAL CLASS VIII CLOTHING & TEXTILE CLASS II $2.54B $3.86B $2.71B $3.60B SUBSISTENCE CLASS I Sales by FY 00$5.5B 01$6.3B 02$7.8B 03$10.4B 04$11.5B 05$12.7B

8. SALES: FY 01 - $1.2B FY 02 - $1.5B FY 03 - $2.1B FY 04 - $2.6B FY 05 - $2.5B FY06 - $944M to date INVENTORY: FY 01 - $1.2B FY 02 - $1.1B FY 03 - $1.0B FY 04 - $1.4B FY 05 - $1.4B FY05 - $1.5B PEOPLE: Customers – 14,000 Vendors – 220 Employees – 295 MAGNITUDE: 3,600,000 orders per year -31,000 different items -$2B spent each year - [ FY06 $1,049,000,000] FY05 – The C&T Big Picture

9. C&T Cost Recovery Rates FY96 - FY06

10. C&T – FY05/06 Budget Execution Backorders @ Cost (9/30/04)… $831.8M Month Only Cumulative Balance End of FY05 Net Demands @ Cost.… $1,962.1M Net Sales @ Cost……… $2,222.1M Backorders @ Cost……… $571.7M C&T sold off some of their backorders Demands $213M less in first five months of FY06 BackordersDemands/Sales

11. Supply Chain Management (SCM) Support to the Warfighter

12. “The only thing harder than getting a new idea into the military mind is to get an old one out.” Source: B.H. Liddell Hart, Marine Corps Gazette, January 2003

13. Logistics Challenge OEF / OIF Demand is Erratic Average Monthly Demand Item Prior to OEF FY 04FY 05 Boots Hot Weather Desert5,00082,60036,674 Coat/Trousers Desert17,250160,000125,335 Boots Intermediate Cold Wet9,39224,0007,648 Hat Camouflage Desert7,00090,00019,253

14. Clothing & Textiles The BIG Picture OEF / OIF Top Sales Items

15. Currently Working –‘Chocolate Chip’ Desert Uniform Initial Requirement: 280K sets Coats/Trousers 255K set delivered –50 other items Boots, Helmets, Cold Weather Items, Tents, Gloves, Duffel Bags, Berets, ECWCS Berets Delivered 255K ($2.4M) Flash removal – 25K/month Winter Aviator Gloves 164K order; RFI Item; Delivered 4K ($153K) Delivered 80K Trousers, 88K Parkas ($21.8M of ECWCS) Delivered 242K ($16.8M) Boots, HW & Combat Totals to date: $175M ordered / $95M filled Delivered 38K ($1.3M) Poncho Liners Delivered 47K ($2.2M) Ponchos " I wanted to thank you for DLA’s assistance in helping advance the ball so substantially. DLA has been a key element in what we’ve been able to accomplish, and the progress in recent months had been particularly noteworthy. Purchasing stocks through DLA channels has consistently provided us with high quality items that are delivered on time and to the desired location. " - LTG David Petraeus, April 22, 2005... Email to VADM Lippert, Director, DLA Support to MNSTC-I

16. Army Direct Ordering (ADO) Web-Based Logistics DSCP solution: Use an existing web-based program which currently supports 631,000 Guard/Reservists  Serves 360K Army National Guardsmen  ANG saving $10M / year Test Case: 7 Units deployed in Iraq – Ran from Jun-Oct 2004 – Very Successful – all orders filled complete 311 orders worth $36K Expansion on-going – Afghanistan (16K soldiers), Horn of Africa (100 soldiers) & Iraq (90K soldiers); –872 units ordering, 57,000 Orders shipped –Overall totals: 395,000 items / $6.0M Next Step – Possible expansion to support OCIE Concept Boots, Caps, Hats, Cold Weather Coats, BDU Coats / Trousers, Helmet Covers, and more… 1. Deployed Soldier Needs Item 3. Places Order Via Army Knowledge On-Line 2. Accesses Internet 4. Order Received Stateside at DSCP site (KyLOC) 5. Items Picked; Patches / Insignia Sewn on 6. Order Ships Via US Postal System To Individual Soldier  CSA authorized a test of Internet ordering capability WINNER OF 2005 SUPPLY CHAIN EXCELLENCE OSD AWARD (announced Feb 06)

17. Business Systems Modernization Update BSM

18. Army Recruit Cell Navy Recruit Cell USMC Recruit Cell AF Recruit Cell USCG Recruit Cell Army CIF Cell USMC, Navy, USCG OCIE Cell Recruit Customer Facing Division Clothing Sales Stores Cell National Guard & Reserves Cell AF IEE Cell Dress Clothing IPT Field Clothing IPT Organizational Clothing IPT Individual Equipment IPT Clothing & Textiles Customer Operations Directorate Director Paul C. Diamonti, Mil 0-6 Deputy Director Gary Shute OCIE Customer Facing Division Other Customer Facing Division Other C&T Customers Cell Operating Forces Support Team Other & FMS Support Team Installation Support Team Item Planning Division Customer Support Division See DSCP Customer Operations Directorate Clothing & Textiles Customer Operations

19. Gloves/Wet Weather IST Kevin Peoples Dress Uniforms IST Suzanne Kershaw Outerwear IST Bob Spadaro Dress Shirts/Headwea Cherly Reynoldsr Footwear IST Tom Hutchinson Battledress IST Susanne McHale Accessories IST Harry Veneri Chemical IST Marie Brywka Chemical IST Marie Brywka Organizational Clothing Division Donna Pointkouski ECWCS IST Florence Robinson Individual Equipment Division Terri Scheetz Safety IST Dave Johns Individual Equipment IST Mark Twardziak Tentage & Shelters IST LouAnn Graham Heraldics IST Tom Zassick Product Services Branch Non-NSN IST Coverall/Special Purpose IST Cindy Small Dress Clothing Division Bill McClellahan Field Clothing Division Bob Panichelle Supplier Support Div SMSG Clothing & Textiles Supplier Operations Directorate Director Dennis Dudek Deputy Director Sally DiDonato Clothing & Textiles Supplier Operations Product Services Branch

20. Release 1.1 – Battledress Uniform Went live: 1 December 03 Release 2.1.1 Flags & Insignia Went live: 1 Jan 05 Release 2.1.2 Chemical Suits Went live: 1 Apr 05 Release 2.1.3 Tents Went live: 1 Jul 05 Release 2.1.4 Accessories Went Live: Nov 05 Release 2.1.5 Org Clothing Went Live Mar 06 Business System Modernization BSM What’s Left? Jun 06 – Dress Clothing Aug 06 - Footwear

21. Dollars, and Sense…

22. Recruit Clothing Plan Key Drivers $M Projected Totals BattleDress$494.7 Footwear$141.6 PT/PFU/Accessories$73.7 Cloth$6.8 Dress Outerwear$29.7 Dress Uniform$34.9 Total$781.4

23. Individual Equipment and Clothing Plan Key Drivers $M Projected Totals Safety$44.4 Individual Equipment$291.9 Tentage$142.5 Helmets$51.8 ECWCS$27.4 Gloves$33.7 Special Purpose$68.5 Chemical$386.7 Wet Weather$18.4 Total$1065.3

24. ACU Award Breakout NISH UNICOR $39.7M Large Business Small Business Mandatory Sources $15.9M NIB $92.7M $37.1M $140.0M $ 88.8M Large Business = 5 Firms Small Business = 11 Firms NISH = 1 Workshop NIB = 7 Workshops UNICOR = 5 Plants Hub Zone Wmn Owned SBD Other Small 43.6% Total Base Year $321.5M 7.5% 9.1% 27.6% 28.8% 4.9% 11.6% 12.3% 4.4% 6.6%

26. Joint Meetings of Industry and DSCP Contract Length – Will maintain long-term contracts – will stress advanced notice and timely placement of orders Solicitation Improvements – Will track buy times in FY06 and address specific industry concerns from a supply chain perspective (new mgmt position) Min / Max – Will use correct base figure to calculate and will be more flexible depending on sub-industry particulars – not a ‘one shoe fits all’ approach – will also be able to adjust production lead-times based on material Information Sharing – Will provide current vendors with a 12 month window at the beginning of the fiscal year (Oct) and a 6 month window at mid year (Apr) - based on demand figures – Advance notice the key, even for bad news Technology Issues – Will continue to inform on latest changes – RFID, VIM-ASAP, BSM, etc. ADDRESSING THE FIVE MAJOR AREAS:

27. The Forecast Comprehensive review of items –Every 6 months (start and mid-point of fiscal year) –Reviews past data / customer input –Establishes future projected demand –Prepares projected contract delivery schedules –Passed on to vendor community Reviewed on a monthly basis –Compares actuals vs. projected Demand / Delivery / Stock Levels / Sales –Makes adjustments based on the numbers Projected deliveries are just that – projections –Our ‘Best Guess’ based on all of the data –As much customer input as we can obtain Depends on: –Demand occurring as projected –Inventory hitting goals –Customer item changes (e.g., Army Combat Boot or ECWCS) Projected Delivery Schedules: –OCT: Beginning of our fiscal year (12 month look) –APR: Mid Fiscal Year (6 month look) Notices going out soon – with all necessary caveats

28. DSCP is a Large User of JWOD Program –NIB and NISH production facilities –Always with the intent to broaden base of a product line –Demonstrated by use of the Pie Chart (next slide) Dollars may go up and down, % should remain relatively constant One Exception was the JSLIST program –Now undergoing review –The Committee holds ultimate responsibility for Regulation Compliance Procedures now being analyzed DSCP has asked for a re-check of certifications –BOTTOM LINE: DSCP will continue to use JWOD Tighter controls will be needed JWOD Program

29. Share of Business $1130.3M $213.3M $665.4M $464.0M $128.4M $73.0M Final FY05 Chem Suits Account for $264M

30. DSCP is bound by the Berry Amendment –Had always been very stringent As decided in Oct 05, the component needed to be of a general textile nature to be included –Allowed some relief for some items contributing to making end item –New Requirement (as backed by the AAFA) Jan 06 – Section 833 of Authorization Act –Revised Berry to all materials and components –Much more definitive in what is covered Feb 06 – Implementing guidance received –Vendors must confirm Berry compliance prior to orders Will immediately affect many recently acceptable product lines –Examples: Steel Toes for Shoes/Boots; Gloves; Sneakers –Will need to pursue Relief –All of these will now require a DNAD exception »Basically a waiver request signed by an Under Secretary of Defense –Will require synopsis for “Sources Sought’ to prove need –May require investigation of positive responses –Will require the Services to provide written statement of need –‘Assume’ this will not be a short timeline process –DSCP is pursing a 180 day window of exemption to allow sufficient time to evaluate the situation Berry Amendment

31. Army Utility Uniform –The ACU is still being rolled-out –Demand much less than anticipated Army Dress Uniform –Changes still being developed –Timeline Air Force Utility Uniform –The ABU is being readied for initial roll-out –Timeline Navy Task Force Uniform –Developing the Roll Out Schedule –Timeline Major Uniform Changes

32. Unite Now –DLA was contacted to respond to allegations of ‘sweatshops’ prior to a scheduled news conference (Declined) Always with a threat of involving Congress –We do investigate any specific allegations (never verified) – Informational TENTNET –A new development for the tentage product line –Joint effort of Govt / Industry / Academia VIM-ASAP –Need to continue to use – improves payment –BSM rqmts on ship dates may be forthcoming Other Issues

34. Focus on getting the Warfighter what they need, when they need it, wherever they need it BOTTOM LINE DSCP Will Strive To Make Improvements As Noted – However, we are bound by regulatory limitations Need the Help / Understanding of Industry Working Together to Improve the System