Opening Statement to the Public Accounts Committee on the 2020 Spring Reports of the Auditor General of Canada: Report 3—Supplying the Canadian Armed Forces

Remarks for Deputy Minister of National Defence Jody Thomas

19 November 2020 (Please check against delivery.)

Introduction

Good morning,

Thank you for inviting us to discuss the findings of the Auditor General's report:Supplying the Canadian Armed Forces.

I would like to thank the Auditor General for looking into the issue, and for her three recommendations. National Defence agrees with all of them.

Supplying our troops is a Defence Team effort and today I am joined by:

• Major-General Trevor Cadieu, Director of Staff for the Strategic Joint Staff; and
• Mr. Troy Crosby, Assistant Deputy Minister (Materiel) for the Department of National Defence.

Strong, Secure, Engaged

A fundamental part of our defence policy, Strong, Secure, Engaged, is ensuring our people in uniform have the right equipment to do the challenging work our country asks of them.

A strong supply chain is critical to that outcome.

And as COVID-19 has reinforced for all of us, a robust, effective supply chain is a strategic enabler for the Government of Canada and—in a national crisis—is a critical lifeline. The lack of one is a strategic risk.

More than that, a strong supply chain needs continuous oversight and evaluation, as does any critical capability across all military environments of land, air, sea and cyber.

Improved Governance

That is why in 2019, the Chief of Defence Staff and I gave joint direction to establish a strategic supply chain governance committee within National Defence. It is overseen Mr. Crosby and MGen Cadieu, ensuring a collaborative and fully engaged approach.

The committee also ensures that National Defence has oversight and accountability for the over-arching direction of supply chain management.

It's important to understand that the updates I am giving today fit firmly within a much larger strategic approach to supply chain management currently underway within DND/CAF.

Not a Quick Fix

As the committee is well aware, supply chain challenges have been a matter that National Defence has been wrestling with for many years. And there's been progress.

In fact, since we tabled our inventory management action plan in 2016, the Auditor General has positively highlighted our progress in implementing the progress on time, every year, as part of the public accounts audit.

We have a lot more work to do. Meaningful change takes time, particularly when addressing deficiencies that have built up over decades.

And while the challenges identified are real, you can be confident that we always, always ensure that our CAF members in active operations have what they need to do their jobs.

Addressing the Report

To the report itself, we agree National Defence must have the right material in place at the right time, and appropriate metrics in place to monitor whether stock levels are sufficient.

We began two comprehensive reviews this summer to help address our materiel planning and forecasting challenges.

One review will look at improving our inventory availability benchmarks. Doing so will give us a better indication of the health of our supply chain operating environment.

The second review is a more sizeable project.

At a high level, the end-goal is to create standardized processes and leverage advanced tools in support of material planning and forecasting across the Materiel Group.

Both reviews will be completed by June 2022 and will include an implementation plan.

High Priority Requests and Communicating Transportation Costs

We are also in the process of ensuring that high-priority requests are only made when necessary, and that these classifications are justified.

First, we are reinforcing policy guidelines on how to properly classify requests with responsible personnel at our wings, bases, and commands.

Changing behaviour is as difficult as changing systems. This is an area of specific focus.

At the same time, we have begun a thorough assessment of how to reimagine the freight distribution system to improve efficiency and optimize costs.

In February 2020, National Defence awarded a contract to Price Waterhouse Coopers Canada to identify potential options to modernize our supply chain network design. I note that a review of this scale has not been undertaken since early 2000.

We are currently evaluating their initial recommendations.

As we gain an understanding of how we can improve our systems, we will revise and clearly communicate guidance on costs and selecting shipping methods to our personnel.

Our goal is that improvements to the distribution system will be complete by April 2024, paying particular attention to performance measurement and oversight.

Conclusion

This entire effort will be a multi-year process, but we are committed to getting it right so that our system is efficient and ready to support the Canadian Armed Forces.

Thank you, and we would be very pleased to take your questions.

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