Defense Supply

Acquisition Leadtime Requirements Can Be Significantly Reduced Gao ID: NSIAD-95-2 December 20, 1994

Acquisition leadtime is used in inventory management to determine the quantity of items needed to meet demand while stocks are being replenished. Overstated leadtimes can swell inventories unnecessarily. During the 1980s, the Defense Department's (DOD) acquisition leadtime requirements grew by $13 billion. DOD has made only limited progress in reducing acquisition leadtime because its leadtime reduction initiatives have been unevenly implemented by the military services and by the Defense Logistics Agency. GAO also found opportunities to reduce leadtime that were overlooked by DOD. GAO believes that DOD can cut acquisition leadtime days by at least 25 percent during a four-year period at a savings of about $1 billion. This reduction can be achieved by reemphasizing prompt implementation of DOD's 1990 initiatives, periodically validating and updating old leadtime data for long leadtime items, and considering leadtime reductions in deciding whether to continue buying spare parts from the prime contractor or from the manufacturer.

GAO found that: (1) DOD has made only limited progress in reducing its acquisition leadtimes because the military services and the Defense Logistics Agency (DLA) have unevenly implemented the leadtime reduction initiatives; (2) no DOD agency has fully implemented the 1990 initiatives or the 1993 policy guidance for reducing leadtimes; (3) the Navy has been the most successful and the Air Force the least successful in reducing acquisition leadtimes; (4) additional leadtime reductions can be achieved by prompt implementation of DOD initiatives, periodic validation and updating of leadtime data, and purchasing spare parts directly from the original manufacturer; and (5) DOD could reduce costs by $1 billion over a 4-year period by reducing acquisition 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.

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