Defense Inventory

Spare and Repair Parts Inventory Costs Can Be Reduced Gao ID: NSIAD-97-47 January 17, 1997

The Army, the Navy, and the Air Force could save an estimated $380 million in storage and acquisition costs if they eliminated rarely used items from their inventory of spare and repair parts that they maintain at hundreds of smaller storage facilities across the country. GAO found that more than 53 percent of the items stored in these locations were in quantities of three or less, while only 25 percent were in quantities of 11 or more. This inventory, however, is valued at more than $8.3 billion. The need for many of these items is questionable. Maintaining inventory that is not needed is expensive and does not contribute to an effective, efficient, and responsive supply system.

GAO found that: (1) most of the services' inventory items stored at nonmajor locations are in small quantities; (2) over 53 percent of the items were in quantities of 3 or less, while only 25 percent were in quantities of 11 or more; (3) however, the inventory at the nonmajor locations is valued at over $8.3 billion; (4) the need for many of the items stored at nonmajor locations is questionable; (5) of the $8.3 billion of inventory at the nonmajor locations, $2.7 billion of it was not needed to meet the services' current operating and war reserve requirements; (6) GAO's analysis also showed that many of the Army items were infrequently issued over the 2-year period ending August 1996; (7) over 53 percent of the items at nonmajor storage locations had no issues and an additional 33 percent of the items had less than five issues during the same 2-year period; (8) maintaining inventory that is not needed is expensive and does not contribute to an effective, efficient, and responsive supply system; and (9) based on GAO's analysis, GAO estimates the services could save about $382 million annually in inventory holding costs by eliminating inventory at nonmajor locations that is not needed to meet current operating and war reserve 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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