Inventory Management

In a series of five recent reports, GAO discussed the Defense Department's (DOD) efforts to adopt modern logistics practices to better manage its $22 billion in inventory of consumable items, such as food, clothing, and industrial supplies. As of September 1994, consumable items accounted for only 29 percent of DOD's $74 billion in secondary inventory value, but for 88 percent of the total items. This report discusses (1) the extent to which DOD has adopted to specific practices GAO recommended for consumable items, (2) the savings and benefits being achieved through the use of these practices, and (3) DOD's overall progress in improving consumable item management.

GAO found that: (1) the Defense Logistics Agency (DLA) has taken steps to improve its logistics practices and reduce consumable inventories, although it could make further improvements with items such as bolts, valves, and fuses that cost millions of dollars to manage and store; (2) DLA inventories are expected to decrease only 20 percent by 1997, but these inventories could last over two years; (3) DLA has not tested the most innovative commercial practices of using supplier parks and other techniques that give established distribution networks the responsibility to manage, store, and distribute inventory on a frequent basis directly to end users; (4) DLA use of best inventory practices is exemplified for personnel items where prime vendors are used to supply personnel items directly to military facilities; (5) DLA expects to reduce the 1992 personnel item inventory by 53 percent in 1997; and (6) DOD hospitals still hold larger inventories than those civilian hospitals that have reduced inventories through effective partnering arrangements with prime vendors.

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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