The story
Roots
For more than 100 years before the post exchange system was created, traveling merchants known as sutlers provided American soldiers with goods and services during times of war. Sutlers served troops at Army camps as far back as the French and Indian and Revolutionary wars.
Complaints of sutlers charging premiums for substandard merchandise were widespread during the Civil War, and in 1867, the War Department created the post trader system. While intended to prevent the unscrupulous practices of sutlers, the post trader system still subjected troops to over-inflated prices and was rife with bribery and corruption.
On 29 November 1880, Col. Henry A. Morrow, seeking to quell disciplinary problems resulting from troops visiting disreputable places of amusement in nearby towns, established the first American military canteen at Vancouver Barracks. There, troops were provided newspapers and magazines, played billiards and cards, and could obtain light food and drink without leaving post.
The idea was so successful that other posts began establishing canteens across the frontier, providing troops with not only a place to socialize but obtain daily necessities at affordable prices. In 1889, the War Department issued General Orders No. 10, authorizing commanding generals to establish canteens at army posts. Like the modern-day exchange system, these canteens were largely financially self-sustaining.
In February 1892, the secretary of war ordered that canteens be henceforth referred to as "post exchanges." This change was due to the popular association of the word "canteen" with the bawdy, immoral behavior alleged to occur in the canteens of foreign armies. By 1895, post traders had been almost entirely replaced on Army posts by post exchanges.
Early developments
On 25 July 1895, the War Department issued General Orders No. 46, directing commanders at every post to establish a post exchange "wherever practicable." Post exchanges served two missions: first, "to supply the troops at reasonable prices with the articles of ordinary use, wear, and consumption, not supplied by the Government, and to afford them a means of rational recreation and amusement," and second, "provide the means for improving the masses" through exchange profits.
For the first 45 years of the exchange system, exchanges operated independently under the direction of each post's commanding officer, meaning there was little uniformity between exchange locations. While the War Department did not centrally control exchange operations, it did hold commanding officers accountable for their financial assets. Exchanges were also subject to annual checks by the Inspector General's office.
With the outbreak of World War I and subsequent expansion of the U.S. Army, it became clear that the existing post exchange system was not equipped to accommodate such a large-scale effort. Gen. John J. Pershing enlisted the help of civilian service organizations to provide canteen service overseas, though they proved to lack the equipment and experience necessary to fully meet the needs of downrange troops.
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Centralization
During the mobilization efforts leading up to World War II, the War Department increasingly looked for ways to upgrade its antiquated post exchange system. After completing a review of existing exchanges, Lt. Col. J. Edwin Grose concluded that the Army would need to "become the operator of an extensive chain store system with world wide [sic] branches" to sufficiently meet the demands of a large-scale war effort. In April 1941, an advisory committee of five prominent retail executives affirmed this notion, recommending the creation of a central organization to oversee exchange operations.
On 6 June 1941, the Army Exchange Service (AES) was created. On 26 July 1948, AES was renamed the Army & Air Force Exchange Service (AAFES), continuing its service to the Air Force, which became a separate service branch the previous September.
Since its establishment, the Exchange has been involved in 14 major military operations (to include World War II, Korea, Vietnam, Grenada, Panama, the Balkans, and Operations Enduring and Iraqi Freedom) as well as several dozen humanitarian and disaster relief contingencies.
From Wikipedia’s article on Army & Air Force Exchange Service, shared under CC BY-SA 4.0.5