A Brief Cease-Fire ...

E and C NEWS

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Highlights of the June 2016 Issue


Taking Care of Our Troops And The Benefit They Have Earned


Tom Shull, the director and chief executive officer (CEO) of the Army & Air Force Exchange Service (AAFES), continues to drive change and adaptation at the Exchange as he looks to position AAFES to thrive in a challenging global retail universe.

In this exclusive Q&A, Shull discusses the ways AAFES took on the challenge of deep and sudden military force reductions; how it has navigated the restrictions of a constrained budget environment and creatively addressed costs and earnings growth, while at the same time reimagining center store merchandising, intensifying national brands and rejuvenating its Express store network.

With his characteristic passion for the resale benefits and their beneficiaries, Shull is candid about doing what’s right by servicemembers, Veterans and their families, and all who have served and earned the benefit. ...


E and C News: When you came to AAFES, the Exchange was staring at a big drop in earnings as troop drawdowns and a dramatic drop in the patron base loomed. How did you and your team keep the AAFES earnings story a positive one in view of this?

Tom Shull: In that regard, I think what we have been able to accomplish during the last four years has been quite remarkable. The AAFES team has been fantastic. I can’t say anything but great things about our team.

We avoided what would have been a forecasted loss of $180 million. With all the things we did — particularly what the Merchandising Directorate (MD) did, led by Executive Vice President (EVP) and Chief Merchandising Officer (CMO) Ana Middleton and her merchandising team — we made a decision early on to focus on intensifying national brands, not only in the main stores, but also in the food courts, in the Express stores, and everywhere we could focus on national brands. We were able to truly enhance the shopping experience while simultaneously driving up gross margin dollars. Senior Vice President (VP), Exchange Credit Jami Richardson and her team relaunched the Military Star card and introduced a loyalty program while Senior VP Trini Saucedo and Services and Food raised the bar in the food courts.

While focusing on intensifying national brands, we delivered strong gross margin results. The most significant contributors to our record year of $402 million in earnings was the focus on national brands and cost reductions we put in place.

E and C News: The bulk of that reduction was from 42,000 employees down to 35,000. Surely that’s not something that’s sustainable — if the new DoD mantra is for exchanges to find more efficiencies, how do you reduce headcount after already taking a 17-percent reduction?

Shull: Correct. The board was fully supportive of doing all of this. It was unanimous in its support. The board recognized the extraordinary achievements of the Exchange team in gaining efficiencies and reversing the earnings forecast in the last three years. What the Department is doing is establishing a baseline starting now, not recognizing what has been accomplished in the past. And that’s really challenging because in totality, we were up nearly $700 million of improvements. This includes gross profit improvement and the cost reductions primarily coming out of the reductions of Computed Number of Employees (CNEs). Few agencies have achieved these kinds of results in such a short period of time. ...



AAFES Fiscal 2015 Million-Dollar Vendors


The following list, derived from information furnished by the Army & Air Force Exchange Service (AAFES), identifies 648 suppliers doing more than $1 million in business with the exchange service in fiscal 2015.

The number of million-dollar companies is somewhat lower than it was on the fiscal 2014 list, but the club continues to be an exclusive one. Its membership list is an honor roll testifying to quality merchandise and sustained performance.

According to AAFES, dollar amounts shown reflect sales versus finance and accounting payments. Previous years’ rankings shown here are based on data furnished in 2015, 2014, and 2013. In the following list, sales generated by subsidiaries, bottlers, wholesalers and distributors of beverage producers have in general been rolled up into one sales figure, assigned to the producer.

In some cases in which each of two or more divisions of a single company did more than $1 million in business with AAFES, sales from divisions/subsidiaries have been combined into a single total. In others, the divisions are listed separately and are marked with an asterisk (*). Not included on the list are government agencies with which AAFES does business. ...



Wearing the Real Deal: Authorized Supply Only


For the last 24 months, Lt. Col. (Dr.) James R. Auvil, USA, OD, MBA, FAAO, has been the program manager of the Tri-Service Vision Conservation & Readiness Program (TSVCRP) at the Army Public Health Center (Provisional), where military optometrists and staff spearhead the optimization of visual performance, eye health, and eye safety in the U.S. military, to ensure a visually ready force.

Any Soldier, Sailor, Marine, Airman or Coastguardsman looking for sunglasses or tactical eyewear will come up with many options, but very few optical devices will actually make it to the Army’s Authorized Protective Eyewear List (APEL). In this exclusive interview, Lt. Col. Auvil discusses some of the eyewear differences military customers and store managers should be aware of and the cutting-edge research and development fueling the next wave of vision optimization. ...

E&C News: What separates items on the APEL list from other eyewear that might look “tactical” but isn’t suitable for missions or military environments?

LTC Auvil: APEL products provide a critical force protection benefit to servicemembers. In the U.S. and internationally, the American National Standards Institute (ANSI) establishes standards for eyewear. The ANSI Z87 standards cover impact resistance for personal eyewear and face shields. When protective eyewear carries Z87 markings, it means the products are rated impact resistant and meet the ANSI Z87 requirements.

On top of that, the military requires APEL-listed optical devices to meet ballistics specifications that far exceed regular impact standards. In fact, the APEL products’ ballistic protection levels are five to six times greater than the civilian Z87 impact standard.

Secondly, it is important to get authentic products. There are only two authorized supply channels for APEL products, and that’s through the Department of Defense (DoD) supply systems such as the unit supply process and the central issue facility, and also through Army & Air Force Exchange Service (AAFES), Navy Exchange Service Command (NEXCOM), Marine Corps Exchange (MCX), and Coast Guard Exchange (CGX) exchanges, and AAFES Military Clothing Stores (MCS).

Those are the only authorized sources to ensure servicemembers receive only genuine APEL products. Manufacturers are required to mark APEL products on the left side of the optical device and are prohibited from marketing or selling APELmarked products outside the DoD.

Those two requirements are intended to prevent anyone from illegally selling an APEL product on the civilian market, because they just can’t mark those things for any use other than DoD use. ...





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