Inventory Management

This is the 10th in a series of GAO reports comparing the Defense Department's (DOD) logistics practices with those of the private sector. GAO is continuously examining the military's inventory management practices to identify areas in which costs can be reduced and problems avoided if DOD adopts leading-edge practices from the private sector. This report focuses on the Army's logistics system for aviation parts. GAO discusses the potential application of best practices to the Army's operations. GAO (1) examines the current performance of the Army's logistics system, (2) reviews the Army's efforts to improve the logistics system and reduce costs, and (3) identifies opportunities where best practices could be incorporated into the Army's logistics operations.

GAO noted that: (1) the Army's efforts to improve its logistics pipeline for aviation parts and reduce logistics costs could be enhanced by incorporating best practices GAO has identified in the private sector; (2) the Army's current repair pipeline, characterized by a $2.6-billion investment in aviation parts, is slow and inefficient; and (3) several factors contribute to the long pipeline time, including: (a) broken reparable parts move slowly between field units and a repair depot; (b) reparable parts are stored in warehouses for several months before and after they are repaired; (c) repair depots are inefficiently organized; and (d) consumable parts are not available to mechanics when needed; (4) the Army has recognized that it must improve its logistics systems; (5) under a recently established program called "Velocity Management," the Army plans to focus on and improve repair of components, order and shipment of parts, inventory levels, and financial management; (6) the program is in the initial stages of development and has had limited success in actual Army-wide process improvements to date; (7) best practices used in the airline industry provide opportunities to build on the Army's efforts to improve its logistics pipeline; (8) GAO identified key best practices to address each of the four factors contributing to the Army's long pipeline time: (a) third-party logistics services can assume warehousing and distribution functions, and provide rapid delivery of parts and state-of-the-art information systems that would speed the shipment of parts between depots and field locations; (b) eliminating excess inventory and quickly initiating repair actions can reduce the amount of time parts are stored, improve the visibility of production backlogs, and reduce the need for large inventory to cover operations while parts are out of service; (c) cellular manufacturing techniques can improve repair shop efficiency by bringing all the resources needed to complete repairs to one location, thereby minimizing the current time-consuming exercise of routing parts to different workshops located hundreds of yards apart; and (d) innovative supplier partnerships can increase the availability of consumable parts, minimize the time it takes to deliver parts to mechanics, and delay the purchase of parts until they are needed to complete repairs; and (9) although GAO cannot say that these practices can be successfully integrated into the Army's system, GAO believes they are compatible with many aspects of the Army's operations and the Velocity Management Program.

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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