Air Force Uses Inaccurate Production Leadtime To Compute Spare Parts Requirements

Gao ID: PLRD-83-85 June 16, 1983

GAO analyzed a random sample of items being managed at two Air Force logistics centers to determine whether the Air Force is using current and accurate production leadtimes to compute requirements for consumable items and whether long leadtimes can be reduced.

GAO found that the two logistics centers have overstated their requirements for many consumable parts by an estimated $137.5 million and have understated requirements for others by about $12 million. In addition, they were unnecessarily stocking an estimated $16.7 million worth of parts with annual holding costs of $2.9 million. GAO believes that the primary reason for invalid requirements determinations are the use of outdated leadtime data in computing the requirements. The centers are not using up-to-date leadtimes because: (1) regulations do not require them to periodically obtain timely leadtime data from contractors; and (2) management practices encourage the use of long leadtimes as a buffer to avoid shortages. Although the centers recognize that long leadtimes can result in additional inventory investment and readiness problems, only limited efforts have been made to reduce leadtimes. Furthermore, GAO found that several contractors provided the Air Force with inaccurate data by: (1) including in their proposed leadtimes inappropriate standards and contingency factors; and (2) not recognizing that many raw materials were already on hand or on order. GAO does not believe that the Air Force has made sufficient use of government representatives who are familiar with contractor operations and conditions which affect production leadtimes.

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.

Director: Harry R. Finley Team: General Accounting Office: National Security and International Affairs Division Phone: (202) 512-5187


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