LMI History

How it Began

In September 1961, shortly after taking office, Secretary of Defense Robert S. McNamara sent a memorandum to President John F. Kennedy advising that he and the Materiel Assistant Secretaries had identified a “number of highly complex problems of long standing” relating to procurement, logistics, and relations with the Defense industry. “I have concluded,” Secretary McNamara wrote, “that we can achieve major breakthroughs in logistics management where we spend half of the Defense budget by sponsoring the establishment of a special, full-time organization of highly talented business management specialists.” It would be a “nonprofit, fact-finding and research organization, guided by a group of Trustees of national reputation and supported by a contract with the Department of Defense.” President Kennedy returned the memorandum with his handwritten notation of agreement. Three weeks later—October 3, 1961—the Logistics Management Institute was born.

The Early Days

The Certificate of Incorporation established the tenets of the early LMI, including the following:

To engage in, assist and contribute to the support of scientific and educational activities and projects in the field of logistics research and related fields.

 

To foster and encourage the advancement of knowledge concerning logistics in all of its aspects.

 

To perform, engage in and procure research, development, engineering and advisory services exclusively to or for the United States Government or any department thereof or any other Government or Governmental unit or any non-profit corporation or other organization organized and operated exclusively for scientific, educational or charitable purposes.

 

To guide the Institute in choosing the very best talent and concentrating on the highest priority problems, it is desired to assemble a group of seven Trustees representing a broad background of experience.

Charles H. Kellstadt, former Chairman of Sears, Roebuck and Company, was the first Chairman of the Board and worked with a prestigious Board of Trustees that included Peter Drucker, Professor Carlton Pederson of Stanford University, Dean Stanley E. Teele of Harvard University, and Professor Sterling Livingston of the Harvard Business School.

Secretary McNamara believed LMI would produce the “same type of fresh thinking on logistics that is being provided by groups such as Rand on technical and operational matters.”  He summarized the intent as follows:

Solutions to highly complex logistics problems are essential if we are to meet over-all DoD objectives. The magnitude of problems is such that we must use the most experienced, capable and creative business management talent available. DoD personnel are heavily occupied with critical day-to-day operations; therefore, are unable to devote time to redesign modernization. LMI is to be a fact-finding and research organization, designed to seek solutions to these problems.

Becoming an FFRDC

In 1985, the Deputy Secretary of Defense designated LMI a federally funded research and development center, under the following criteria:

Meets a special long-term research or development need which cannot be met as effectively by existing in-house or contractor resources;

 

Enables agencies to use private sector resources to accomplish tasks that are integral to the mission and operation of the sponsoring agency;

 

Conducts business in a manner befitting its special relationship with the Government, to operate in the public interest with objectivity and  independence, to be free from organizational conflicts of interest, and to have full disclosure.

As an FFRDC, LMI was precluded from competing with profit-seeking firms to obtain its work.

Moving from FFRDC to Not-for-Profit

By 1998, LMI had grown substantially and faced compromising limitations as an FFRDC. In particular, the ever-increasing congressional restrictions on FFRDC funding were forcing LMI to turn away long-standing clients that needed research and analysis support on important, high-level projects. Also, the demand was growing to apply LMI knowledge and expertise across both civil and defense agencies. At this time, the Board of Trustees voted to end LMI’s status as an FFRDC and to return the company to a not-for-profit government consulting firm status. This change allowed LMI to maintain the ethics and cultural practices it developed as an FFRDC, but freed it to pursue government consulting without restriction. This step allowed LMI to more vigorously pursue its mission of advancing government management and to provide a more comprehensive level of strategic support.

LMI Today

Today, LMI is still governed by an esteemed Board of Trustees, operates free of commercial and political interest, acts as a unique, trusted advisor to government managers, and brings the best, most creative management and technical minds to bear on solving complex issues. It still operates the world’s most advanced logistics consulting group, but also provides world-class expertise across five other mission areas: acquisition, facilities and asset management, financial management, information and technology, and organizations and human capital. In 2004, the LMI Research Institute, a cutting-edge R&D center dedicated to advancing the science of government management, was established. With over a decade of continuous revenue growth, LMI is expanding its staff of more than 750 to provide the best strategic consulting service to the federal government. Having performed work that spans nine administrations, we recently celebrated our 46th anniversary—and we took this opportunity to review what works and what doesn’t, confirm the urgency to get things done now, validate our belief that the future resides in the decisions of today, and strengthen our resolve to remain at the forefront of invention, innovation, thought leadership, customer service, and world-class resources.