Army Inventory

Army divisions in the United States are maintaining demand-based items in excess of the needs of their customers. The Army could cut the number and quantity of such items at the divisions without affecting military capability. The six divisions GAO reviewed kept about $29 million worth of items considered demand-based--about 18 percent of the total authorized inventory--even though the items had been requested fewer than three times during a recent 12-month period. Furthermore, $21 million worth was for items that the Army had no requests for. The Army is testing an inventory concept called "sparing to availability," the objective of which is to optimize the number of spare parts to meet specified weapon system performance targets. Although test results indicate that "sparing to availability" has been successful, the test results are misleading, and the concept may conflict with other ongoing inventory management objectives. Consequently, questions exist about whether "sparing to availability" can achieve its objective.

GAO found that: (1) $28.8 million of demand-based items do not meet retention criteria; (2) the Army's annual assessment of internal controls did not identify as a material weakness the issue of retaining items that did not meet the criteria for demand-based inventory; (3) demand-based items represent a relatively large percentage of total inventory but a relatively small percentage of the inventory issued to the divisions' customers; (4) the Army does not have a policy regarding inventory turnover rates; (5) few demand-based items were requisitioned on a priority basis, which would indicate equipment was inoperable or a unit was unable to perform its mission due to a lack of parts; (6) in the absence of a single supply system, retail-level activities were stocking unneeded items and not reporting all excess inventory to the wholesale level for possible redistribution, and Army managers at the wholesale level were buying items that were excess at the retail level; (7) the Army is in the process of implementing a system which will provide superior responsiveness to the supply system customer at reduced costs and enable the single supply system item manager to direct the redistribution of assets among retail activities; (8) the sparing to availability (STA) concept would increase the number of authorized inventory items; and (9) STA would increase the discretion of the unit commander at the retail level for determining the composition of the authorized inventory.

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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