Best Management Practices

Redesign of the Air Force's $33 billion reparable parts inventory could benefit from adopting leading-edge practices used by the commercial airline industry to reduce costs and improve services. However, success hinges on the Air Force's ability to overcome major barriers, such as organizational resistance to change and poor inventory data. Some commercial manufacturers are providing aircraft parts to their customers on a just-in-time basis, and suppliers are assuming inventory management responsibilities for airlines and manufacturers. One airline has reengineered its entire logistics system in an integrated fashion by examining all aspects of its logistics operations to pinpoint and remove inefficient processes and functions. The Air Force is beginning to test private-sector management practices, such as removing unnecessary inventory layers, repairing parts as they break, and rapidly transporting parts between the end user and the repair facility. GAO also recommends establishing a top-level Defense Department position to champion change, using third-party logistics services more often, building closer partnerships with suppliers, encouraging suppliers to use local distribution centers, centralizing repair functions, and modifying repair facilities to accommodate these new practices.

GAO found that: (1) the commercial airline industry, including certain manufacturers, suppliers, and airlines, are using leading-edge practices to improve logistics operations and reduce costs; (2) in recognition of increasing budgetary pressures, the changing global threat, and the need for radical improvements in its logistics system, the Air Force has begun a reengineering program aimed at redesigning its logistics operations; (3) GAO has urged these changes and supports them, and has identified additional private-sector practices that may result in even greater savings; (4) there are several major barriers to bringing about change that must be addressed and resolved if the Air Force is to reengineer its logistics system and save billions of dollars; (5) the Air Force reengineering effort addresses inherent problems with its logistics system, but additional steps can be taken to maximize potential improvements; (6) additional steps GAO identified that could enhance this program include establishing a top-level DOD champion of change to support the Air Force initiatives, greater use of third-party logistics services, closer partnerships with suppliers, encouraging suppliers to use local distribution centers, centralizing repair functions, and modifying repair facilities to accommodate these new practices; (7) the success of the Air Force in achieving a quantum leap in system improvements hinges on its ability to address and overcome certain barriers, such as inherent organizational resistance to change; (8) top-level DOD officials must be supportive of and engaged in Air Force reengineering efforts to remove these barriers and drive success; (9) information systems do not always provide Air Force managers and employees with accurate, real-time data on the cost, amount, location, condition, and usage of inventory; and (10) without the support of top-level DOD management and accurate, real-time inventory information, the expansion of the Air Force's reengineering efforts could be seriously impaired.

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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