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Editorial Comment — May 2019

Resale Recap…

So far, 2019 has been like riding a roller coaster … in slow motion ... and sometimes backwards. There have been ups and downs, but the thrill is gone.

On the surface, it might appear that not much has happened … but it has been a busy year.

• Early in the year, the Defense Department’s three military exchange systems, along with the Coast Guard Exchange (CGX) and the Defense Commissary Agency (DeCA), established a joint buying alliance to share common data and maximize combined buying power to increase savings for exchange and commissary shoppers.

• A month or so later, only 90 days after stepping into the number-three position in the Pentagon, acting Chief Management Officer Lisa Hershman authorized continued preparation for a merger of the three DoD exchange systems and DeCA. She also gave the go-ahead to hire a full-time DeCA director.

• One week later, 27 military and veteran service organizations in the Military Coalition petitioned Congress to hold hearings and require a General Accountability Office (GAO) study of the proposed merger plan — explored in a business case analysis (BCA) prepared by a DoD Community Services Task Force, working in concert with the Boston Consulting Group (BCG) — to determine whether it is a prudent plan of action.

• As spring began, DeCA inched ahead, expanding a shelf-stocking test begun last summer. In this day of higher minimum wages and lower unemployment, shelf-stocking help is not easy to come by; but no matter how the shelves are stocked, it is a necessary cost of doing business. “Free” vendor stocking may have solved problems in the days of the sell-at-cost commissary system, but there is little room for the concept in the variable pricing/private label system currently in use. What “vendor” pays for stocking private label SKUs?

• Soon after, DeCA notified the trade that it would change its time-tested resale accounts payable process later this year “to align with commercial best business practices,” by going to a daily pay system. Foreseeing major alterations to accounts receivable processes and information technology (IT) programs, the supplier community responded with a barrage of questions and concerns.

• DeCA’s answers to those questions so far indicate that the full effect of the payment process change has yet to be completely understood. And as it became clear that alterations to resale suppliers’ IT systems and ordering agreements might be significant, it was also learned that the continuing deployment of DeCA’s Enterprise Business Solution (EBS), especially regarding cybersecurity issues, really needed the clout of a Senior Executive Service (SES) executive director to keep things moving, so a help-wanted notice was posted.

• As Memorial Day approached, we asked the Pentagon whether or not a hiring action had actually commenced for a full-time DeCA director, and were told by a spokesperson that leadership in the office of the Undersecretary of Defense for Personnel and Readiness (USD, P&R) “is currently reviewing both the position requirements and hiring options for the DeCA director position.” The spokesperson added that “a decision on when to execute hiring options for this position will be made in the near future.”

• In military family matters, Capitol Hill focused primarily on the horrendous conditions in some military housing ventures, and as the Senate completed its markup of the 2020 National Defense Authorization Act, the only resale matter considered was the possible sale of alcoholic spirits in commissaries. But as we were sending this issue to press, it was learned that the House Armed Services Committee (HASC) would be asking for that GAO study after all.

Meanwhile, outside the gate, commercial retailers, especially supermarketers, are fielding new concepts, new promotions, new ideas … luring military shoppers away from on-base resale outlets. Commissaries struggle to provide a benefit in the face of a drastically new business model based in part on fewer brand-name choices in the stock assortment; and exchanges strive against strong, innovative commercial headwinds to furnish abundant support for important quality-of-life programs.

Stay tuned … as we hope to see if HASC pushes forward with that GAO study.

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