Defense Inventory

Continuing Challenges in Managing Inventories and Avoiding Adverse Operational Effects Gao ID: T-NSIAD-99-83 February 25, 1999

This testimony focuses on the Defense Department's (DOD) logistics capabilities and shortfalls. GAO discusses (1) the status of DOD's secondary inventory, such as spare parts, clothing, and medical supplies; (2) difficulties one military service continue to have in obtaining spare parts to keep its combat aircraft mission capable; (3) the adequacy of DOD's controls over inventory in transit; (4) implementation of DOD's efforts to have greater visibility over its logistical assets through its Total Asset Visibility Program; and (5) the continuing need to apply best private sector management practices to military inventory management.

GAO noted that: (1) DOD continues to show weaknesses in inventory management practices that are detrimental to the economy and efficiency of operations and cause operational problems for DOD; (2) DOD continues to maintain large inventories that may be as much as 60 percent in excess of current needs; (3) although DOD has made progress in reducing its inventories, further reductions are needed; (4) additionally, other action is needed to avoid unnecessary new purchases; (5) while new purchases may be initiated to meet justified requirements, those requirements frequently change after items are ordered, but affected orders are not always cancelled; (6) GAO found that as of September 30, 1997, DOD did not need about $1.5 billion, or 18 percent, of the inventory it had ordered to meet current requirements; (7) not cancelling these orders further exacerbates DOD's excess inventory condition and also prohibits spending on other priority needs; (8) in GAO's review of Air Force supply management, it found that shortages in aircraft spare parts caused a degradation in mission capable rates for key aircraft; (9) shortages of spare parts occurred because of inaccurate forecasting of inventory requirements, and other management weaknesses; (10) the vulnerability of in-transit inventory to waste, fraud, and abuse is another area of concern; (11) in examining in-transit issues in the Navy, GAO found that weaknesses continue to exist in exercising control over inventory in transit; (12) over the last 3 years, the Navy wrote off as lost over $3 billion in inventory in transit, including some classified and sensitive items such as aircraft guided-missile launchers, military night vision devices, and communications equipment; (13) for many years, DOD has had difficulties in obtaining timely and accurate information on the location, movement, status, and identity of units, personnel, equipment, and supplies and the capability to better manage those assets using that information; (14) DOD must take both a short- and long-term approach to solving inventory management problems, consistent with the requirements of the Government Performance and Results Act; (15) in the short term, DOD still needs to emphasize the efficient operation of existing inventory systems; (16) in the long term, DOD must establish goals, objectives, and milestones for changing its culture and adopting new management tools and practices; and (17) DOD has recognized the need for improvements in the inventory management area and addressed the issue in implementing requirements of the Results Act.

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