Army Inventory

Changes to Stock Funding Reparables Would Save Operations and Maintenance Funds Gao ID: NSIAD-94-131 May 31, 1994

This report reviews the Army's implementation of a Pentagon requirement to fund the procurement of reparable items through a stock fund, called stock funding of depot level reparables. GAO found that the Army's switch to the fund has helped reduce demand for reparable items about 55 percent--from $8.3 billion in fiscal year 1991 to $3.7 billion at the end of fiscal year 1993. The decreased demand allowed the wholesale system to reduce its procurement of reparables by about 75 percent, from $1.8 billion to $443 million during the same period. This report also discusses how the switch has affected management of maintenance and inventory activities and use of operation and maintenance funds at the unit level.

GAO found that: (1) in fiscal year 1993, the Army's implementation of SFDLR reduced demand for reparable items by 55 percent and the wholesale supply system's procurement of reparables by about 75 percent; (2) Army units increased their O&M purchasing power by $201 million because the retail stock fund granted credit to O&M customers for items that the wholesale level did not need; (3) the Army credit policy is contrary to the SFDLR implementation plan; (4) Army units at the installation level are spending O&M funds to repair items that are in long supply at the wholesale level because it is cheaper for the units to repair the items than buy new ones; (5) Army initiatives to address its reparables inventory include establishing a single stock fund to eliminate the retail stock fund and link the amount of credits received and given, offering some items in long supply at reduced prices, and developing an integrated sustainment maintenance concept where the wholesale level determines what items to repair; and (6) barriers to the initiatives include units' resistance to eliminating the retail stock fund, too few long-supply items being offered at reduced prices, and repair decisions being made at the local level rather than at the wholesale level.

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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