The Army Can Save Millions Annually by Properly Considering Serviceable Returns in Its Requirements Computations

A review was undertaken of the way the Army removes invalid demands, representing unsuccessful attempts by customers to cancel orders, from its demand database. Currently, the Army's wholesale supply system's procedures reduce demands in the database by crediting the amount of serviceable materiel customers return. However, the automated system at each inventory control point can be set to limit or prevent serviceable returns from initiating demand reductions in the system's database. Moreover, the U.S. Army Materiel Development and Readiness Command (DARCOM) has given the inventory control points blanket authority to use these limitations without prior notice or approval.

On the basis of an analysis of 115,000 returns of serviceable materiel from the field to DARCOM inventory control points, GAO estimated that in 1978 the Army wholesale inventory managers received $106.2 million of serviceable returns for demand-supported items. However, because four of the five inventory control points imposed limitations on the use of serviceable returns to offset demands, serviceable returns worth millions of dollars were not used to reduce the demand base. Moreover, if the returned materiel had been used to offset past demands the Army could have avoided inventory procurement and repair costs estimated at tens of millions of dollars.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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