Logistics and transportation companies doing business with the government and military will face significant challenges in 2013. The Department of Defense will continue to seek ways to reduce costs and increase buying power. On Nov. 13, the undersecretary of defense published a Memo Subject ‑ Better Buying Power 2.0: Continuing the Pursuit for Greater Efficiency and Productivity in Defense Spending – that outlines 36 initiatives for improving the way the department does business.
This year also marks the start of the department’s initiatives to reduce the defense budget by $500 billion over 10 years. Potential exists for even larger cuts. The drawdown in Afghanistan, a smaller force structure, reductions in major acquisition programs and fewer or smaller service contracts will mean fewer business opportunities, and those service contracts available will likely be less in value.
The reductions in defense spending combined with a weak economy, an uncertain regulatory environment and an almost certain increase in taxes, result in a challenging business environment. Although the Defense Department champions the desire to maintain commercial capability and readiness, the reductions in business opportunities and the uncertain environment will make it difficult to achieve the goal.
The government business opportunities are shrinking. Those dependent on government business should resize their capabilities in anticipation of reduced requirements. Successful companies will leverage technology, seek operating efficiencies, explore partnerships, innovate and seek new business opportunities. As the government’s focus shifts to the Pacific region, government logistics and transportation providers should examine the published U.S. strategy to identify potential opportunities.
These opportunities may include the restationing of forces, support of more military exercises or the forward positioning of materiel. Known opportunities for 2013 include the return of troops and materiel from Afghanistan, the stationing/rotation of marine forces in Australia, the sustainment of forces in the U.S. and those forces deployed in Europe and Asia.