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Highlights of the October 2017 Issue


Serve, Earn and Give Wherever the Mission Goes


Tom Shull, Director and Chief Executive Officer (CEO)

In the annals of military resale, it is rare that a “civilian” retail and consumer packaged goods chief executive the caliber of Tom Shull, the director and chief executive officer (CEO) of the Army and Air Force Exchange Service (AAFES) — now in his fifth year as director — has headed up a military resale organization.

His business and government career, serving in the Reagan White House and on the National Security Council and leading companies such as Hanover Direct, Wise Foods and Barneys New York and as an executive vice president of R.H. Macy and Co., has prepared him well for this time of deeper adoption of “best business practices” in military resale. He is also a 19-year Army Veteran from a long line of military family members — a factor that drives his determination

During his tenure, he has shifted AAFES to a solid financial footing, and built a record of achievement and dividend generation while force numbers drew down. This month, he will cooperatively launch the acceptance of the exchanges’ Military Star Card in commissaries, and next month he will bring the heralded Veterans online shopping benefit (VOSB) to fruition. In this exclusive interview, Shull discusses the transformation initiatives across resale in the context of public service and private enterprise disciplines that define his values and this valued patron benefit.

E and C News: From your perspective, how is the health of the military resale ecosystem on base these days?

Tom Shull: The Exchange benefit is very healthy. During the last five years, the Exchange has proved that improving business disciplines — and not increasing prices — can improve the bottom line.

During fiscal 2016, Exchange performance was exceptional compared to major retailers outside of the gate. The Exchange’s operating earnings (EBITDAR, defined as earnings before interest, taxes, depreciation, amortization and rent) as a percent of sales is 11.7 percent, exceeding Walmart and Target’s respective numbers. One hundred percent of our earnings go right back into the military community.

The Exchange’s ability to maintain earnings and dividends in support of quality-of-life programs, despite forces beyond the organization’s control, illustrates how the benefit has transformed over the past five years, and now sets the standard for affordable and efficient delivery of hard-earned military benefits.

In the past five years, the Exchange has distributed more than $1 billion in dividends to support Army Child Development Centers, youth programs and fitness centers, Air Force Outdoor Recreation and other critical military quality-oflife programs.

For the Exchange, a dual-pronged strategy of cost reduction and an intensification of consumer- valued brands have led the way. In our main stores, we are reallocating real estate and inventory specific to three growth categories: BE FIT, PowerZone and cosmetics. In the mall, we have grown our restaurant and concession businesses with new brands — giving shoppers, especially in remote locations, access to much-needed dining options and services to make their lives better. At the same time, the Exchange improved the Express on-the-go offerings to address the needs of our active customers.

There is a high level of collaboration and cooperation among the exchanges as we prepare to welcome home potentially 13 million honorably discharged Veterans with a lifetime online shopping benefit beginning this Veterans Day. The exchanges share the VetVerify.org landing page and verification process, which Veterans from all branches of service visit to verify their eligibility to shop with us again. ...


The NEX Enterprise: Trusted, Agile, Caring, Relevant


Gerald Outar, Chief Of Staff, Senior Vice President (SVP), Corporate Operations

From keeping the Navy Exchange Service Command’s (NEXCOM) finances shipshape and liaising with the Navy, Government and Congress, to directing disaster relief efforts in the mid-South, Gerald Outar, NEXCOM’s chief of staff and senior vice president (SVP), Corporate Operations, has seen every frontline and behind-the-scenes aspect of the Navy Exchange benefit at work during his extensive career. He also understands intimately the many ingredients that make NEXCOM’s close relationship with Navy servicemembers and Navy commands around the world an enduring success story.

In this exclusive interview, Outar brings the core of these experiences to bear on what makes the NEX — including its various types of stores, uniform programs, services, telecom and food operations — such a strong and supportive connection with and for sailors and their families and the Navy at large.

E and C News: From directing flood relief on the spot at NSA Mid-South, Tenn., to coordinating hot priorities with the Pentagon and Navy leadership, the Naval Supply Systems Command (NAVSUP), exchanges and morale, welfare and recreation (MWR), you’ve seen almost all aspects of the NEXCOM enterprise worldwide in your career. What stories could you share that demonstrate the characteristics and qualities that make NEXCOM such a valuable asset to the Navy?

Gerald Outar: Thank you for the opportunity to speak about the NEXCOM Enterprise and to share my perspectives on our mission.

Let me begin by saying how proud I am to be part of the NEXCOM Enterprise, where a day never goes by without some validation of our relevance to the Navy and our Sailors and their families. I see it in the actions of our stores, in patron letters describing how some team member helped them during a personal difficulty, to Navy flag officers reaching directly into the command to seek our support and leverage our capabilities. There is direct alignment and a connection that is both professional and personal while at the same time palpable.

Many stories quickly come to mind that demonstrate the characteristics and qualities that make NEXCOM an incredibly valuable asset to the Navy. Two stories in particular, both borne from tragic circumstances, easily demonstrate how NEXCOM’s reach and support goes beyond our foundational retail business, and they illustrate what we internally describe as “inherent capabilities” that are generally not readily visible to the average individual.

In early 2003, I was stationed in NS Rota, Spain, as the NEX general manager (GM). Operation Iraqi Freedom (OIF) was ongoing and NS Rota was a receiver site for casualties from the war. Besides the Naval hospital on the base, the Navy deployed a temporary 250-bed tent hospital — think in terms of the well-known “4077 MASH,” but clearly more sophisticated — on one of the fields on the base.

Casualties would come in from the front for treatment with nothing but the uniform on their backs. It was sobering and sad to watch these servicemembers in their pajamas and slippers as they recuperated, having very little in the way of basic comfort items.

The Rota community was galvanized in their support for these warriors, and the NEX was right there along with the many others who were doing good things. Our NEX team, supported by generous contributions from our vendor partners, NEXCOM Headquarters and the American Red Cross, prepared and distributed individually sized and gender-specific care packages to include underwear, T-shirts, shoes, toiletries, phone cards and various other sundries. These went a long way in providing some basic comfort to many, beyond the pajamas and slippers you saw them walking around in on the base.

Moreover, our team would take individual measurements and order uniforms/uniform items to ensure the servicemembers were outfitted for their departure from Rota — whether back to the front or to the U.S.

Because the field hospital required supporting staff, another campsite was built near the field hospital. To support those folks, our NEX team, working with the base Public Works team and others, ran utility lines and deployed a couple of 40-ft. containers adjacent to the fields to provide close support. Retrofitted with payphone stations (mobile phones were not as ubiquitous in those days), vending machines, microwaves, books, magazines and seating areas, these improvised containers provided a place for servicemembers to stay in touch with loved ones while providing a modicum of respite.

This narrative is not unique to Rota. The integration we have with Navy, and the resolve to bring the capability of the organization to support the Navy and our servicemembers, continues to resonate across the Enterprise. This was most recently seen in our support of the USS Fitzgerald (DDG-62) following her collision in June. Within hours of the incident, the senior flag officer in the Area of Responsibility (AOR) reached out to NEXCOM and to our chief executive officer (CEO), Robert Bianchi, and basically said, “I don’t know as yet how I will need you, but I know I will, so I am asking you to stand by to render support.”

That need and support would later manifest itself in a number of ways — cell phone support to the crew, blocking off Navy Lodge rooms for family members of the crew, coordinating with the Navy to re-issue working uniforms, floral arrangements for the memorial service and turning over the Navy Lodge conference room to the USS Fitzgerald for meetings, etc.

But most poignant was a need to have the USS Fitzgerald crew outfitted in service dress blues with all medals and accouterments for memorial services to be held within days of the incident — this, during the summer months when our FA Yokosuka, Japan, store was stocked with service dress whites and we had not yet transitioned to service dress blues.

The collective efforts of many — vendor partners, our headquarters buying and uniform support teams, distribution center (DC), tailor shop associates, including a NEXCOM associate handcarrying the few remaining items on a flight from the U.S. to Japan to ensure they arrived in time — enabled the USS Fitzgerald’s crew to stand in solemn dignity, complete in full military regalia, as shipmates paid respects and honored fallen shipmates on that day of the memorial service.

And today, as this interview progresses, our NEXCOM teams at FA Yokosuka in Singapore and here at headquarters are talking to and working with USS John S. McCain (DDG-56) and Navy teams to provide health and comfort items, phone cards and other amenities to the ship’s crew as she sits pierside in the port of Singapore many miles away from our small store at NRCS Singapore.

While these stories seemingly have a common thread of tragedy, they are not the only ways by which NEXCOM’s capabilities are brought to bear in support of our Navy. They do, however, illustrate the operational control that the Navy has over NEXCOM, the enterprising nature of the NEXCOM team, how together we can bring the capability to bear on a problem, how this direct linkage enables agile response and support of mission requirements and the resiliency of our Sailors and their families. ...



Ensuring Sustained Support For Mission and Coast Guard Family


Capt. Bruce C. Brown, USCG, Commander, Coast Guard Community Services Command (CGCSC)

When he took the took the helm of the Coast Guard Community Services Command (CGCSC) on June 30, Capt. Bruce C. Brown, USCG, was about to be plunged into a fast-track learning experience that has few parallels in the military environment. But the Coast Guard motto is “semper paratus,” and Coast Guard Exchange (CGX)/CGCSC was prepared for the hard work of supporting the Coast Guard and its families as the burden on it grew with each successive storm battering the southeast and the Caribbean.

The urgency of the immediate need might have eclipsed the future planning, but Brown is a quick study, and the entrepreneurial captain and author of several books on ecommerce is focused not only on today’s emergencies, but also on ensuring the support CGX provides to the Coast Guard is strong and sustainable in the coming decades.

E and C News: Welcome aboard! What have been your first months’ experiences at the helm of the CGX? Have there been any surprises or anything you did not expect?

Capt. Bruce C. Brown, USCG: As I approach my first 60 days as commanding officer (CO) of Coast Guard Community Services Command (CGCSC), I can say with all honestly that it has been an incredibly busy learning experience.

This command is unique to the Coast Guard and one of only two O-6 level Financial Management Commands in the Coast Guard (the other being the Coast Guard Finance Center); and our mission at CSC is unique, but incredibly rewarding, as what we do directly and positively impacts every single member of our Coast Guard family, including active duty, reservists, dependents, retirees, civil servants and auxiliary members.

I truly enjoy leading an organization whose sole purpose is to deliver quality non-pay compensation benefits to the Coast Guard family through the Coast Guard Exchange System and our Morale, Well-Being and Recreation (MWR) Programs. I am honored to serve as the fourth Commanding Officer at CGCSC and lead such an incredibly talented group of dedicated professionals who are united in our efforts to strive to continually improve the services that we provide to our Coast Guard family.

The pace of operations has been intense, as has my level of learning our business model. I spent a week with two of our busiest Coast Guard Exchange (CGX) operations in San Juan and Borinquen, P.R., and also toured their Child Development Centers as well as all of their MWR operations, which include robust food and beverage operations, guest lodging, swimming pools and a movie theater. Getting out and seeing our operations first-hand helps me to fully understand how we do business, establish relationships with our operational commanders whom we support, and helps CGCSC make the best business decisions possible.

I also spent time visiting CGY Baltimore, Md., Sector Delaware Bay in Philadelphia, Pa., and TRACEN Cape May in Cape May, N.J., the birthplace of our enlisted workforce and home to Recruit Basic Training. I am especially proud of the role that CGCSC has in supporting our MWR programs. CGX profits are directly tied to the per-capita MWR dividend that every single active duty member receives, and we have been able to maintain the funding level for that dividend in recent years, despite an always challenging retail environment.

Over the next month, I’ll be visiting our CGX operations in Atlantic Beach, N.C. (CGX Fort Macon), and CG Sector Charleston, S.C., as well as Jupiter and CGB Miami Beach, Fla. In November, I plan to also visit several additional CGX locations in Florida, including Fort Myers Beach; Clearwater; St. Petersburg; CG Sector Jacksonville (Mayport); Sand Key and Cortez.

What has been most surprising to me is the amount of hard work and innovation that is expended on a consistent basis to grow and sustain the CGX enterprise to ensure that consistent level of support to our Coast Guard family for many years to come. I am impressed by the level of commitment and dedication that our CGCSC displays to deliver the highest level of quality service to our patrons.

Strategic partnerships with our friends at the Army & Air Force Exchange Service (AAFES), Navy Exchange Service Command (NEXCOM) and Marine Corps Exchange (MCX) continue to play an important role in our future, as does partnership with others including USAA through our CGX Affinity program and MWR sponsorships, the Boys and Girls Club of America, and our role in other programs such as the Armed Forces Sports Program and the Joint Services Leisure Travel Program. ...



Vet-Centric Pathway to Success

Joseph “Ray” Tober, SES, Executive Director


The record of sales success and patron loyalty enjoyed by the Veterans Canteen Service (VCS) in the present millennium is remarkable. It has experienced almost 17 years of sales growth and only one year that could best be described as flat. We asked Joseph “Ray” Tober, SES, the VCS’s executive director, to talk about the organization’s unique ingredients contributing to its stellar results. However, as any who are familiar with the everyday algorithms of retail will see, much of the playbook leans on proper execution of tried-and-tested strategies, but a closer look reveals the degree to which the staff from top to bottom is focused on the customers they serve and how VCS doubles down on making the organization “Vet-centric.”

And there’s no hope for complacency to enter the picture anytime soon: VCS is also broadening its footprint geographically, its outreach socially, and adding new features such as dinner, delivery and overnight services and food trucks and groceries to reach all Veterans, family members and their caregivers in the VA family. No small wonder it was recognized this year with an Excellence in Government Award for outstanding service.

E and C News: VCS has posted sales increases for several years now. In the current ultra-competitive retail environment, what, in your view, have been VCS’s pathways to achieving such success while some retail businesses struggle?

Joseph “Ray” Tober: Our foundation is built on strong, calculated and customer-centric business strategies, taking a variety of factors into consideration as we set our vision for revenue and income growth for the future.

Understanding the desires of our customer base, while relying on sound business analytics and decisions, are contributing factors to our sustained growth. Additionally, our reliance on technology, anticipating and quickly responding to industry trends, excellent vendor relationships, willingness to take risks and challenging old business models and practices, and retaining a highly competent, creative and professional staff, are important elements contributing to our success.

Finally, a sustained focus on the “80/20 principle” — where 20 percent of your SKUs drive 80 percent of your business — and not losing sight of the basics, are key. ...



A Unique Perspective ... From ‘The Trenches’


Susan Edmonds, Store Director, Robins AFB, Ga.

Beginning her commissary career 35 years ago with the Air Force Commissary Service (AFCOMS), one of the Defense Commissary Agency’s (DeCA) predecessor commissary services, Susan Edmonds, currently the store director at Robins AFB, Ga., has worked herself up from an intermittent worker to the leader of a commissary whose sales topped $35 million in fiscal 2016.

“I began my career with AFCOMS in July 1982 as an intermittent sales store checker,” at Fairchild AFB, Wash., Edmonds recalled. In August 1982, her position was converted to permanent part-time, and she has worked in the commissary system ever since as a sales store checker, produce store worker, administrative clerk, grocery manager, store manager and store director.

With experience in so many commissary positions, Edmonds has built a reservoir of knowledge on store-level commissary operations. “Having worked in all departments from the bottom up, I have a much better understanding of how the commissary works, how the different departments work together to ensure the store is operating well, and how each department must maintain its own section while working with other departments to assist as needed.”

The experience, she said, has also allowed her “to gain a better understanding of each employee’s job duties; why tasks must be done a certain way, and what motivates employees. I am better able to lead and manage employee assets to ensure we have the right people in the right jobs when needed, to be ready each day to provide this premier benefit to our patrons.” ...



Learning, Training, Cooperating … To Preserve the Benefit


Lana Frederick, Program Manager for Store Operations Meat and Produce Internship, DeCA Headquarters

Celebrating her 13th year with the Defense Commissary Agency (DeCA) in 2017, Lana Frederick has progressed up the commissary ranks, including sales checker then produce manager at Fort Campbell, Ky., and store manager at Camp Stanley, Korea; and she is currently program manager for the Store Operations Meat and Produce Internship, based at DeCA headquarters in Fort Lee, Va.

When she began her career with the agency in 2004 as a temporary sales store checker at Fort Campbell, she told E and C News, “The impact and value of what each member of the team contributed always fascinated me. Curiosity drove me to learn as much as I could and try to assist as much as possible. Oftentimes, I would volunteer to help in various departments to gain a different perspective. I was essentially learning from coworkers and store leadership.”

In 2007, Frederick became a permanent store worker in Fort Campbell’s produce department. “Nothing could prepare me to anticipate the amount of work and experience I would gain,” she recalled. “Although limited to a degree as to what buy-in I may have had, I remained mindful as to how the operation ran and the various aspects to make it effective.”

Frederick said that during this period, she “practiced patience and understanding,” and these are two ideas “that have remained effective” to the present time. “Our workforce is very dynamic and diverse. Everyone has experienced their career differently and is an asset to our organization. I just wondered if my colleagues knew how critical they were to the mission. Working in produce was not without its challenges. I truly thank all of my coworkers for their many life stories and experiences they shared.” ...



Capitol Hill/House/Senate
Resale-Related Committees in the 115th Congress




Washington Watch
DoD & Congressional Staff Members



Here is a quick look at who in the Department of Defense is responsible for military resale, morale, welfare and recreation (MWR), and associated activities.

Click here for the DoD & CONGRESSIONAL STAFF MEMBERS ...

Enterprise Management Reform Eyes Consolidation Model


WASHINGTON — The Pentagon report required by section 901 of the 2017 National Defense Authorization Act (NDAA) (see E and C News 9/17) has given fresh momentum to the efforts of the Military Compensation and Retirement Modernization Commission (MCRMC), the Common Services Task Force (CSTF), and the Defense Resale Business Optimization Board (DRBOB), which was chartered on Feb. 5, 2016, to develop a package of recommendations and business case analyses to result in a savings of not less than $1.9 billion over the Future Years Defense Program (FYDP).

An important part of the report’s many recommendations was “reforming” operations within DoD’s business lines — in particular within the Deputy Chief Management Officer (DCMO) organization — into systems with a department-wide approach, by taking “explicit action” to shift DoD business operations to “enterprise services” from “the current military department and defense agency ‘stovepipes’ to a whole-of-DoD alignment.”

Asked about any steps the DCMO organization may already have taken regarding enterprise management of military exchanges and military lodging, Christopher Sherwood, a Department of Defense spokesman, said, “The Department is just beginning its journey toward enterprise management of community services and will leverage its experiences in planning and executing similar journeys.” He cited as an example “the consolidation of the military commissary systems into the Defense Commissary Agency (DeCA) and Army’s community services into the Installation Management Command (IMCOM) in the 1990s.” ...

Exchange Services’ Fiscal 2016 Dividends Exceed $304 Million


The exchange services’ combined dividend contribution of $304.5 million in fiscal 2016 was about on par with the prior year, even though the exchanges’ combined fiscal 2016 direct sales of $10.30 billion were down slightly more than 3 percent from the prior year (see chart). Since 2012, the exchange services have cumulatively contributed more than $1.5 billion in dividends to improve military quality of life. ...

Number of Veterans Signing Up for VOSB on Steady Climb


DALLAS — As the Nov. 11 official launch date of the Veterans online shopping benefit (VOSB) approached, the Army & Air Force Exchange Service (AAFES) told E and C News that the number of Veterans verifying their eligibility for the online shopping privilege “has been on a mostly steady climb,” and had reached more than 205,000 as of late September.

The Exchange said the rate of Veteran verifications at VetVerify.org was steady, although it “occasionally spikes due to press and social media coverage.” ...

Commissaries Prepare for Military Star Card Launch


FORT LEE — Among the most recent lower-cost, highprofile — and potentially high-reward — joint-service resale efforts to come out of the Defense Resale Business Optimization Board (DRBOB) is the launch of acceptance of the Military Star Card in Defense Commissary Agency (DeCA) stores. If it is as successful as first envisioned, the initiative promises to boost convenience for commissary customers who are new or existing Military Star Card holders, while also reducing the impact of commercial bank-issued swipe fees on the Treasury and potentially generating additional revenues and earnings that exchanges could redirect to quality-of-life programs and recapitalization. ...

IMCOM Commander Gets VOSB Logistics Brief at AAFES’s West Coast DC


SHARPE AD, Calif. — The Army & Air Force Exchange Service (AAFES) welcomed Army Installation Management Command (IMCOM) Commanding General Lt. Gen. Kenneth Dahl, USA, to its West Coast Distribution Center here, offering the IMCOM logistician a behind-the-scenes look at how this Department of Defense (DoD) military resale organization’s logistics network is transforming to welcome home 13 million Veterans with the Veterans online shopping benefit (VOSB), which is slated to officially launch this Veterans Day.

The Aug. 22 visit marked the first time Dahl, a member of the Exchange Board of Directors since December 2015, toured a U.S.-based Exchange distribution center (DC). Accompanying him on the tour with Exchange officials was IMCOM Senior Enlisted Advisor Command Sgt. Maj. Melissa Judkins, USA.

For the Exchange, the visit was a rare opportunity to highlight logistics efforts for a sitting board member. Dahl was given an operations overview of the DC, including receiving, storage, order selection, flow, transportation, shipping and e-commerce. ...

USS Wasp Ships Store Reopens


PORTSMOUTH, Va. — On June 5, assault ship USS Wasp (LHD-1) reopened its ships store after a two-month renovation. The refurbishment included a new layout, shelving, and a more up-to-date appearance, in line with the Navy Exchange Service Command’s (NEXCOM) ships store NEX branding program.

“We almost completely gutted the store,” said Ships Serviceman 1st Class Amanda Cole, the store’s leading chief petty officer. “We got everything from a new deck to new coolers. It was a much-needed update.” ...


Read more NEWS ...

U.S. Sales Recognized with LG Electronics Sales Achievement Award


VIRGINIA BEACH, Va.United States Sales Corporation (USSC) was awarded a “2016 Sales Achievement Award” by electronics company LG for record sales to military exchanges, which topped $29 million and were accompanied by growth of 57 percent. ...

Beauticians Have a Great Exchange Hair Day


TRAVIS AFB, Calif.Paul Mitchell’s Andrei “Kat” Callewaert and Alyssa Rogers show off challenge coins and certificates of appreciation from Army & Air Force Exchange Service (AAFES) Director/Chief Executive Officer (CEO) Tom Shull, and AAFES Western Region VicePresident (VP) Robert Rice, which they received after Department of Defense (DoD) Acting Deputy Chief Management Officer (DCMO) Dave Tillotson sent a complimentary note to Shull to thank the Exchange for the outstanding service the beauticians provided to Tillotson’s wife during a recent visit.

NEXCOM Helps Students with ‘A-OK’ Program


VIRGINIA BEACH — Since 1997, the Navy Exchange Service Command (NEXCOM) has been offering students a chance to help pay for college through its “A-OK Student Reward Program.” The program’s latest drawing was held at the end of September.

The program offers all qualified students to participate in a quarterly drawing for monetary awards of $2,500, $1,500, $1,000 or $500 for a total of $5,500 per quarter. Since the program’s inception, NEXCOM has awarded $716,500 in savings bonds and monetary awards to students with the help of its generous vendor partners. ...

Navy Yard Food Court Reopens, Fills ‘Social Void’


WASHINGTON — On July 24, the Washington Navy Yard installation reopened its food court for the first time in more than a year after a series of renovations at the site. The Navy Yard Town Center — which began a series of renovations in May 2016, leading to the opening of a new Navy Exchange Service Command (NEXCOM) convenience store and a barbershop — opened the food court as the third and final phase of these renovations.

The renovation was a combined effort between the installation, NEXCOM, the Navy Facilities Engineering Command (NAVFAC) and Civilian Morale, Welfare and Recreation (CMWR).

Rudy Acosta, NEXCOM’s Northern regional foodservice manager, told E and C News that once the last remaining tenants come on board this fall, he expects a target opening of early 2018. ...


Read more NEWSMAKERS ...



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