Defense Inventory

DOD Actions Needed to Ensure Benefits From Supply Depot Consolidation Efforts Gao ID: NSIAD-92-136 May 29, 1992

The Defense Logistics Agency estimated in July 1991 that consolidating the 30 military supply depots in the United States under a single manager would save $1.2 billion during fiscal years 1991-97. In March 1990, it projected that consolidating the five San Francisco Bay area depots as a prototype would save about $128 million during fiscal years 1991-95. This report explores (1) the validity of the Defense Department's (DOD) estimated cost savings for the prototype consolidation and for all depots, (2) the validity of actual cost savings at the prototype depots, (3) the impact of consolidation on the depots' performance, and (4) whether impediments exist that could prevent DOD from achieving its projected benefits.

GAO found that: (1) consolidation of supply depots under single agency management, if properly combined with other DOD initiatives, could result in more efficient and cost-effective depot operations; (2) DOD savings estimates are questionable because DOD based the estimates on the assumption that the depot work would remain constant; (3) DOD calculated the estimated savings for all depots using flawed data, and the workload at the prototype depots has declined; (4) the portion of savings attributable to the consolidation is not known because the Defense Logistics Agency (DLA) has not separated savings due to consolidation from those due to decreased workload; (5) DLA recognizes that its existing performance measurement system should be improved and is developing a more useful system; (6) the size of the DOD inventory is a principal impediment to achieving the full benefit of depot consolidation; and (7) the latest inventory report from DOD indicates that, as of September 1991, $21.3 billion of the total secondary item inventory of $88.1 billion is excess to DOD requirements.

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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