Defense Inventory
Improvements Needed in DOD's Implementation of Its Long-Term Strategy for Total Asset Visibility of Its Inventory Gao ID: GAO-05-15 December 6, 2004For more than 30 years, the Department of Defense (DOD) has worked to achieve full visibility over and accessibility to its spare parts inventory. This initiative, called total asset visibility (TAV), aims to provide timely, accurate information on the location, movement, status, and identity of units, personnel, equipment, and supplies. In 1999, GAO examined DOD's TAV implementation approach and recommended that DOD develop a strategic plan to guide its efforts. DOD did not concur and stated it would rely on the components to individually achieve TAV. DOD's current target to achieve TAV is 2010. As requested, GAO examined DOD's progress towards, and impediments to, achieving TAV over its spare parts inventory. GAO also assessed DOD's progress in ensuring that its inventory management systems comply with federal financial management standards.
Although DOD, the military services, and the Defense Logistics Agency (DLA) made varying degrees of progress toward achieving visibility over in-storage assets, DOD did not meet its prior goal to achieve TAV by 2004. In a series of reports issued since March 1999, GAO reported that DOD also lacks visibility and control over items being shipped from one location to another. GAO's most recent work indicates that the military services and DLA generally have inventory management systems that provide visibility over specific segments of their inventories, but existing systems cannot always share data on a near real-time basis within their organizations or across the department. While DOD and the components all have ongoing efforts to modernize their business systems and improve the capability to share data on a near real-time basis, the requirements, time frames, and cost estimates for these additional systems have not been developed. Consequently, DOD's ability to achieve the new TAV goal of 2010 remains uncertain. Three significant impediments hinder the achievement of TAV. First, DOD does not have a clear long-term strategy for achieving TAV. While DOD has identified TAV as a key goal of its departmentwide effort to refine and implement a business enterprise architecture, components' plans and initiatives lack a clear link to the architecture and DOD's long-term business management modernization program. Further, while the logistics community identified TAV as a key element in its logistics transformation efforts, it did not include TAV as a goal within its Future Logistics Enterprise, its mid-term logistics transformation plan. Consequently, the components are pursuing internal initiatives to attain TAV. Second, DOD lacks the systems integration necessary to provide TAV. As GAO recently reported, DOD has made little progress in refining its business enterprise architecture, which leaves DOD without a long-term strategy needed to successfully guide efforts to achieve TAV. Without proper oversight and approval of emerging systems, DOD will continue to deploy systems that do not have the ability to provide TAV. While DOD plans to address GAO's recommendations aimed at improving its institutional oversight of business system investments, DOD has yet to fully implement these recommendations. Third, DOD's inventory management systems have long-standing data accuracy and reliability issues. Without accurate, reliable data from these systems, new systems will also contain suspect data and not provide TAV. Unless DOD overcomes these impediments, it is unlikely that it will meet its goal of achieving TAV by 2010. DOD has made little progress in assuring that its inventory management systems are substantially compliant with federal financial management standards. DOD has recognized the weaknesses within its financial management and feeder systems, and stated in its Performance and Accountability Report for fiscal year 2003 that its systems did not substantially comply. GAO's review of two emerging logistics systems raises concerns regarding DOD's lack of policies and procedures.
RecommendationsOur 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.
Director: Team: Phone:GAO-05-15, Defense Inventory: Improvements Needed in DOD's Implementation of Its Long-Term Strategy for Total Asset Visibility of Its Inventory
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Report to the Chairman, Subcommittee on Defense, Committee on
Appropriations, House of Representatives:
United States Government Accountability Office:
GAO:
December 2004:
Defense Inventory:
Improvements Needed in DOD's Implementation of Its Long-Term Strategy
for Total Asset Visibility of Its Inventory:
GAO-05-15:
GAO Highlights:
Highlights of GAO-05-15, a report to the Chairman, Subcommittee on
Defense, Committee on Appropriations, House of Representatives:
Why GAO Did This Study:
For more than 30 years, the Department of Defense (DOD) has worked to
achieve full visibility over and accessibility to its spare parts
inventory. This initiative, called total asset visibility (TAV), aims
to provide timely, accurate information on the location, movement,
status, and identity of units, personnel, equipment, and supplies. In
1999, GAO examined DOD‘s TAV implementation approach and recommended
that DOD develop a strategic plan to guide its efforts. DOD did not
concur and stated it would rely on the components to individually
achieve TAV. DOD‘s current target to achieve TAV is 2010. As requested,
GAO examined DOD‘s progress towards, and impediments to, achieving TAV
over its spare parts inventory. GAO also assessed DOD‘s progress in
ensuring that its inventory management systems comply with federal
financial management standards.
What GAO Found:
Although DOD, the military services, and the Defense Logistics Agency
(DLA) made varying degrees of progress toward achieving visibility over
in-storage assets, DOD did not meet its prior goal to achieve TAV by
2004. In a series of reports issued since March 1999, GAO reported that
DOD also lacks visibility and control over items being shipped from one
location to another. GAO‘s most recent work indicates that the military
services and DLA generally have inventory management systems that
provide visibility over specific segments of their inventories, but
existing systems cannot always share data on a near real-time basis
within their organizations or across the department. While DOD and the
components all have ongoing efforts to modernize their business systems
and improve the capability to share data on a near real-time basis, the
requirements, time frames, and cost estimates for these additional
systems have not been developed. Consequently, DOD‘s ability to achieve
the new TAV goal of 2010 remains uncertain.
Three significant impediments hinder the achievement of TAV. First, DOD
does not have a clear long-term strategy for achieving TAV. While DOD
has identified TAV as a key goal of its departmentwide effort to refine
and implement a business enterprise architecture, components‘ plans and
initiatives lack a clear link to the architecture and DOD‘s long-term
business management modernization program. Further, while the logistics
community identified TAV as a key element in its logistics
transformation efforts, it did not include TAV as a goal within its
Future Logistics Enterprise, its mid-term logistics transformation
plan. Consequently, the components are pursuing internal initiatives to
attain TAV. Second, DOD lacks the systems integration necessary to
provide TAV. As GAO recently reported, DOD has made little progress in
refining its business enterprise architecture, which leaves DOD without
a long-term strategy needed to successfully guide efforts to achieve
TAV. Without proper oversight and approval of emerging systems, DOD
will continue to deploy systems that do not have the ability to provide
TAV. While DOD plans to address GAO‘s recommendations aimed at
improving its institutional oversight of business system investments,
DOD has yet to fully implement these recommendations. Third, DOD‘s
inventory management systems have long-standing data accuracy and
reliability issues. Without accurate, reliable data from these systems,
new systems will also contain suspect data and not provide TAV. Unless
DOD overcomes these impediments, it is unlikely that it will meet its
goal of achieving TAV by 2010.
DOD has made little progress in assuring that its inventory management
systems are substantially compliant with federal financial management
standards. DOD has recognized the weaknesses within its financial
management and feeder systems, and stated in its Performance and
Accountability Report for fiscal year 2003 that its systems did not
substantially comply. GAO‘s review of two emerging logistics systems
raises concerns regarding DOD‘s lack of policies and procedures to
ensure new systems substantially comply with federal standards.
What GAO Recommends:
GAO recommends that DOD develop a departmentwide strategy to ensure TAV
is achieved, with outcome-oriented goals and performance measures.
While DOD concurred with the intent of our recommendations, it stated
in written comments that it did not plan to change its current
approach. Therefore, GAO has added a matter for congressional
consideration suggesting that the Congress may wish to require DOD to
report annually on TAV implementation.
www.gao.gov/cgi-bin/getrpt?GAO-05-15.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact William M. Solis at (202)
512-8365 or solisw@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
DOD, the Military Services, and DLA Have Not Achieved TAV over Spare
and Repair Parts in Storage:
Significant Impediments Hinder Achievement of TAV:
DOD Has Made Little Progress toward Assuring That Inventory Systems
Comply with Financial Standards:
Conclusions:
Recommendations:
Matter for Congressional Consideration:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Key Programs and Systems:
Appendix III: Comments from the Department of Defense:
Appendix IV: GAO Contacts and Staff Acknowledgments:
Tables:
Table 1: Summary of In-Storage Inventory Management Systems:
Table 2: Reported DOD Logistics Business Systems by Functional Area:
Abbreviations:
CFO: Chief Financial Officers Act of 1990:
DLA: Defense Logistics Agency:
DOD: Department of Defense:
FFMIA: Federal Financial Management Improvement Act of 1996:
GPRA: Government Performance and Results Act of 1993:
JFMIP: Joint Financial Management Improvement Program:
JTAV: Joint Total Asset Visibility:
SGL: Standard General Ledger:
TAV: Total Asset Visibility:
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protection in the United States. It may be reproduced and distributed
in its entirety without further permission from GAO. However, because
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this material separately.
United States Government Accountability Office:
Washington, DC 20548:
December 6, 2004:
The Honorable Jerry Lewis:
Chairman:
Subcommittee on Defense:
Committee on Appropriations:
House of Representatives:
Dear Mr. Chairman:
We have repeatedly reported that the Department of Defense (DOD) does
not have adequate visibility and control over the approximately
$70 billion of inventory, including its spare and repair
parts.[Footnote 1] While DOD has recognized the importance of achieving
total asset visibility (TAV) for more than 30 years, its efforts to
improve its capability have fallen short. DOD defines TAV as the
ability to provide timely and accurate information on the location,
movement, status, and identity of units, personnel, equipment, and
supplies and having the ability to act on that information.[Footnote 2]
In 1999, we reported that DOD's efforts to achieve TAV could be
improved through the development of a strategic plan.[Footnote 3] DOD
responded that the department planned to address TAV in the context of
improved asset management through the business system modernization
efforts of its military services and the Defense Logistics Agency
(DLA). The ability to harness such detailed, near real-time[Footnote 4]
information for spare and repair parts could significantly improve
military readiness by more efficiently and effectively getting needed
items to the operating forces. If the information contained in the
inventory management systems is not accurate, complete, and timely,
ongoing operations could be adversely impacted. Although DOD had
established a goal of achieving TAV by 2004, it recently revised its
estimate for achieving this elusive goal to fiscal year 2010.
This report responds to your request that we review DOD's progress
toward achieving TAV over its spare and repair parts, especially across
the military services at the wholesale and retail levels of
supply.[Footnote 5] As requested, we also discuss the department's
efforts to improve financial management reporting on its inventory. For
TAV purposes, supplies, which include spare and repair parts, are
categorized as "in storage,"[Footnote 6] "in process" (on order or in
repair), or "in transit." Because of the recent designation of the U.S.
Transportation Command as the distribution process owner, the many
problems identified with in-transit visibility in recent years and the
magnitude of the in-storage inventory, we agreed to focus this report
on spare and repair parts in storage. Specifically, we addressed
(1) what progress DOD, the military services, and DLA have made in
implementing TAV and (2) what impediments, if any, DOD, the military
services, and DLA must overcome in order to achieve TAV. In addition,
you requested that we assess the progress that DOD has made in ensuring
that inventory management systems are fully compliant with statutory
requirements for federal financial management systems.
To accomplish these objectives, we obtained and analyzed information on
inventory management practices from DOD, the military services, and
DLA, including DOD's Supply Chain Materiel Management
Regulation.[Footnote 7] In addition, we reviewed previous GAO reports,
other audit agency reports, and appropriate DOD guidance. We also
interviewed knowledgeable officials within the military services and
DLA to enhance our understanding of inventory management practices.
Additionally, we interviewed officials who establish inventory
management policy within the Office of the Secretary of Defense.
Finally, we reviewed documentation on a wide variety of DOD, military
service, and DLA initiatives and programs addressing inventory
management. We conducted this assignment in accordance with generally
accepted government auditing standards. Our scope and methodology are
discussed in further detail in appendix I. Appendix II contains a list
and brief description of key programs and systems that are applicable
to TAV.
Results in Brief:
Although DOD, the military services, and DLA have made varying degrees
of progress toward achieving visibility over in-storage assets, DOD
failed to meet its goal to achieve TAV by 2004. DOD did not achieve its
goal because existing inventory systems continue to lack the ability to
share data on a near real-time basis for all inventory segments. In a
series of reports issued since March 1999, we have reported numerous
weaknesses in DOD's visibility and control over items being shipped
from one location to another. Our most recent work identified that the
military services and DLA generally have inventory management systems
that provide visibility over only specific segments of their
inventories, such as wholesale and retail inventories. They also have
the ability to share data both within their respective organizations
and among the defense components, although this capability does not
always exist on a near real-time basis. The 1998 DOD Logistics
Strategic Plan established a goal for attaining 100 percent visibility
over all assets by 2004. DOD's definition of visibility also includes
the capability to act on the information provided by the information
systems to improve overall logistics operations. While DOD, the
military services, and DLA all have ongoing efforts to modernize the
business systems they use to provide visibility over in-storage assets,
these systems by themselves will not provide TAV because the TAV
capability is dependent on additional systems that have not yet been
developed. In some cases, the requirements, time frames, and cost
estimates for these additional systems have not been developed.
Similarly, the capability to share data both within the respective
organizations and on a departmentwide level is currently evolving.
Consequently, the department's ability to achieve the new TAV goal of
2010 remains uncertain.
DOD, the military services, and DLA must overcome three significant
impediments, which present a number of challenges, in order to achieve
TAV. First, while DOD has identified achieving TAV as one of the
objectives for its ongoing efforts to refine and implement a business
enterprise architecture, it continues to lack a clear long-term
strategy for achieving TAV deparmentwide. In May 2004, we reported that
the architecture did not provide sufficient descriptive content related
to future business operations and supporting technology to permit
effective acquisition of systems solutions and associated operational
changes. In another recent review, we found that DOD component efforts,
including the military services and DLA, were not clearly linked to
DOD's long-term improvement initiative, the business management
modernization program. The department is required to report annually to
the Congress on the progress it is making on refining and implementing
the business enterprise architecture in support of its business
management modernization program.[Footnote 8] Further, the logistics
community has identified TAV as one of the four pillars for its
logistics transformation initiative but did not specifically include it
in its Future Logistics Enterprise--DOD's mid-term strategic plan for
logistics transformation. Because DOD has not developed a clear long-
term strategy, the military services and DLA will be exposed to the
risk of spending billions of dollars on duplicative, stovepiped,
nonintegrated systems that do not support the department's business
transformation goals, including attaining TAV. In fact, DOD's goal for
achieving TAV has slipped from 2004 to 2010 since we reported on this
issue in 1999. Without a clear long-term strategy, DOD lacks a key
management control for ensuring that time frames, results-oriented
performance measures, and accountability mechanisms are established and
monitored to help achieve TAV. In addition, DOD has not achieved the
necessary integration or interoperability among its many inventory
systems to support TAV and, without proper oversight and approval of
emerging systems, DOD and the defense components will likely continue
to deploy systems that do not have the ability to provide TAV. In
addition to deficiencies in DOD's business enterprise architecture that
diminish its utility as a blueprint for guiding TAV efforts, in May
2004 we reported that two emerging systems intended to transform
logistics operations for DLA and the Army did not resolve problems
associated with TAV and integrated systems.[Footnote 9] For example,
the Army system, the Logistics Modernization Program, is dependent on
two additional systems that are under development to attain TAV.
However, neither the time frames nor cost estimates to develop these
systems has been established. Until integration or interoperability is
achieved and processes and controls are improved, DOD will continue to
rely on current processes and procedures that include the use of
multiple data entry points for transactions, which can result in data
entry errors concerning the amount and location of inventory. While DOD
has indicated it plans to address our recent recommendations aimed at
improving DOD's institutional oversight of planned and ongoing business
systems investments--steps we have previously stated that DOD needs to
take in a timely manner--DOD has yet to fully implement these
recommendations. Finally, DOD, the military services, and DLA must
overcome long-standing data accuracy and reliability issues associated
with their numerous legacy systems used to report the quantity,
location, and value of DOD's inventory. Without implementation of
efficient and effective business processes and controls to ensure
accurate, complete, timely, and reliable data, DOD's systems, both
legacy and emerging systems, will fail to provide TAV. Recent audit
reports prepared by the DOD Inspector General and the military
services' audit agencies, for example, have identified more than
$200 million in excess or unrecorded inventory that was not visible to
item managers as well as significant misstatements in the reported
inventory balances. Given that DOD has not developed a departmentwide
long-term strategy to overcome these various impediments, it appears
unlikely that it will achieve TAV by 2010.
DOD, the military services, and DLA have made little progress in
assuring that inventory management systems are substantially compliant
with statutory requirements for federal financial management systems as
defined in the Federal Financial Management Improvement Act (FFMIA) of
1996.[Footnote 10] The department recognizes the weaknesses within its
financial management and feeder systems and stated in its Performance
and Accountability Report for fiscal year 2003 that these systems did
not substantially comply. While DOD is requiring the military services
and DLA to certify that emerging systems are substantially compliant
with federal financial management requirements, we are concerned that
the department lacks adequate policies and procedures to determine
whether compliance has been achieved. For example, we recently reported
weaknesses in the development and testing of systems requirements for
two new systems, the Business Systems Modernization and the Logistics
Modernization Program.[Footnote 11] For example, the Army did not
perform testing on 147 of the systems' requirements because the core
requirements from the software package had previously been certified
through the Joint Financial Management Improvement Program (JFMIP).
Relying on the JFMIP certification does not provide assurance that
federal financial management standards are met because the Army had
modified the commercial software package and did not perform specific
transaction testing to determine if the modified system software
provided the anticipated results. Consequently, although these two
systems were certified as being compliant, the weaknesses identified in
the certification process make it difficult to determine if the systems
do in fact comply with the FFMIA requirements.
We are recommending that DOD develop a comprehensive, long-term
strategy as part of its Business Enterprise Architecture with key
elements such as milestones, to assist the department in achieving TAV
over its spare and repair parts inventory. In commenting on a draft of
this report, DOD concurred with the intent of three of our
recommendations and partially concurred with our final recommendation.
While recognizing the need to improve visibility over spare and repair
parts, DOD believes that its current approach of modernizing logistics
systems and implementing an integrated data approach is the way to
achieve TAV. We continue to believe that DOD needs to place more
specific emphasis on attaining TAV. Therefore, we have added a matter
for congressional consideration suggesting that the Congress may wish
to require having the Secretary of Defense specifically address the
plans and progress the department is making on attaining TAV in his
annual report to the Congress on the refinement and implementation of
the business enterprise architecture pursuant to Sect. 332 of the
fiscal year 2005 national defense authorization act.
Background:
While total asset visibility (TAV) has been a goal of DOD's since the
early 1970s, target completion dates of 1980, 1995, and 2004 have not
been met. In fact, DOD's target date for achieving TAV has slipped by
nearly 30 years, most recently being moved from fiscal year 2004 to
fiscal year 2010. In 1972, DOD launched a Logistics Systems Plan to
meet its TAV needs with a target completion date of 1980. This plan was
created to eliminate unnecessary duplication of inventories and to
establish common use of inventories whenever possible; however, it did
not succeed. Subsequently, in 1992, DOD instituted a second TAV Plan to
provide managers with the capability to access and act on timely and
accurate information regarding the location, quantity, condition,
movement, and status of DOD materiel assets. Once again, the target
date was not achieved. In 1996, DOD developed a third TAV
Implementation Plan, which expanded the scope of the 1992 plan.
However, this plan had no clear completion date and was superceded by
the 1998 DOD Logistics Strategic Plan. The 1998 plan was created to
"—meet total asset tracking requirements established in the DOD
regulation on asset management."[Footnote 12] This plan's target
completion date was 2004.
In 1999, we reported[Footnote 13] on DOD's TAV initiative and noted
significant wartime logistics management problems that had occurred
during Operations Desert Shield and Desert Storm due to the lack of
visibility over spare parts and supplies. In our 1999 report, we
recommended that DOD develop a departmentwide strategic plan and
associated component implementation plans in accordance with specific
outcome-oriented management principles embodied in the Government
Performance and Results Act of 1993 (GPRA)[Footnote 14] and the
Clinger-Cohen Act.[Footnote 15] The department, however, disagreed with
our recommendation that it develop an overarching strategic plan and
stated that TAV could be attained as each of the components proceeds
with its own logistics supply chain modernization efforts.
Subsequent to our 1999 report, TAV continued to be an important goal
within the department. The business support community, under the
direction of the Under Secretary of Defense (Comptroller) and the Chief
Information Officer, recognized the importance of realizing TAV and
included achieving TAV by 2010 as part of its Business Management
Modernization Program. This program is designed to guide the
departmentwide business transformation efforts that are ongoing
throughout the organization through the refinement and implementation
of a business enterprise architecture. This architecture is intended to
serve as a blueprint to guide and constrain investments in systems
related to DOD's business processes and provide a basis for planning,
developing, and implementing business management systems. However, as
we reported in September 2004, DOD components' mid-term implementation
plans were not clearly linked to the long-term improvement initiative
known as the business management modernization program.[Footnote 16]
Within the logistics community, the Deputy Under Secretary of Defense
for Logistics and Materiel Readiness published the Future Logistics
Enterprise document as a mid-term guide for achieving logistics
transformation. Although TAV was not specifically identified within
this document, the End-to-End Distribution initiative contained in the
document incorporated many of the same characteristics as TAV. In the
Focused Logistics Campaign Plan, the Joint Chiefs of Staff also
recognized the importance of TAV and identified it as one of four
pillars upon which logistics transformation must be built. Despite this
focus, we recently reported that DOD experienced logistics management
weaknesses during the build up and early phases of Operation Iraqi
Freedom due to inadequate asset visibility.[Footnote 17] These
weaknesses are similar to those experienced during Operations Desert
Shield and Desert Storm. For example, as Operation Iraqi Freedom began,
a number of asset visibility weaknesses contributed to a $1.2 billion
discrepancy between the material shipped to Army activities in the
Iraqi theater and the material acknowledged as received. While Army
officials believe that this material was received in theater, lapses in
asset visibility, in some instances, resulted in units cannibalizing
major equipment items, submitting duplicate requisitions, and
circumventing the normal supply systems to obtain needed parts.
As we have previously reported, accurately reporting the amount of
inventory, both in terms of the numbers of items on hand and the
valuation of that inventory, has been a continuing struggle for
DOD.[Footnote 18] One of the primary factors contributing to this
struggle is DOD's outdated and ineffective management information
systems. FFMIA[Footnote 19] and other financial management reform
legislation have emphasized the importance of improving financial
management, which necessarily encompasses proper inventory management,
across the federal government. Built upon the foundation laid by the
Chief Financial Officers (CFO) Act of 1990,[Footnote 20] FFMIA
emphasizes the need for agencies to have financial management systems
that can generate timely, accurate, and useful information to make
informed decisions and to ensure accountability on an ongoing basis.
With such information, government leaders will be better positioned to
invest resources, reduce costs, oversee programs, and hold agency
managers accountable for the way they run government programs. FFMIA
requires that financial management systems comply substantially with
federal financial management systems requirements, applicable federal
accounting standards, and the U.S. Government Standard General Ledger
at the transaction level in order to help achieve these goals.
DOD, the Military Services, and DLA Have Not Achieved TAV over Spare
and Repair Parts in Storage:
Although DOD, the military services, and DLA have made varying degrees
of progress toward achieving visibility over in-storage assets, DOD's
most recent goal to achieve TAV by 2004 was not met, and the
department's ability to achieve the new TAV goal of 2010 remains
uncertain. First, while the military services and DLA generally have
inventory management systems that provide visibility over in-storage
assets, they do not have, in all cases, the capability to share data on
a near real-time basis. Second, the inability to share data on a near
real-time basis negatively affects DOD's ability to make efficient and
effective inventory management decisions in support of operating
forces. Consequently, DOD did not reach the goal established in its
1998 Logistics Strategic Plan of achieving 100 percent visibility by
2004. Finally, the ongoing business systems modernization efforts and
other efforts to develop data sharing capability may not be completed
prior to the new goal of achieving TAV in 2010.
Component Inventory Management Systems Provide Some Visibility:
As shown in table 1, each of the military services and DLA has a
variety of inventory management systems that provide visibility over
the assets stored at the various levels of supply throughout the
department. However, these systems do not always have the capability to
share data on a near real time basis.
Table 1: Summary of In-Storage Inventory Management Systems:
Army: New system: Logistics Modernization program.
Wholesale supply level: Legacy systems: commodity command standard
system, and the standard depot system;
Retail intermediate level: Standard Army Retail Supply System;
Retail consumer level: Standard Army Retail Supply System;
Servicewide capability: Total Asset Visibility.
Navy: Wholesale supply level: Uniform Inventory Control Program;
Retail intermediate level: Uniform Automated Data Processing System and
Force Inventory Management Analysis Reporting System;
Retail consumer level: Uniform Automated Data Processing System and
Force Inventory Management Analysis Reporting System;
Servicewide capability: One Touch Support.
Air Force: Wholesale supply level: Stock control system (DO35A);
Retail intermediate level: Stock Control System (DO35K);
Retail consumer level: Standard Base Supply System;
Servicewide capability: Stock Control System.
DLA: Wholesale supply level: New system: business systems
modernization.
DLA: Wholesale supply level: Legacy systems: Standard Automated
Materiel Management System, and the Defense Integrated Subsistence
Management System;
Retail intermediate level: N/A[A];
Retail consumer level: N/A[A];
Servicewide capability: N/A[A].
Source: GAO analysis.
[A] For the purposes of this comparison, we did not consider the
relatively small amount of inventory held at DLA retail facilities.
[End of table]
Table 1 shows the various management tools that the military services
and DLA have developed to enable data sharing among the levels of
supply for which they are responsible. These systems generally provide
visibility over specific segments of inventory, but visibility across
different levels of supply or across services is dependent upon being
able to share data from multiple systems. For example, the Navy's
Uniform Inventory Control Program System provides the Navy with
visibility over assets within its wholesale supply system and its
Uniform Automated Data Processing System and Force Inventory Management
Analysis Reporting System provide visibility over assets within its
retail supply system. While each of the components has the ability to
share data from existing logistics systems throughout its particular
organization, the capability to share data on a near real time basis
does not always exist. Without the ability to share data on a near
real-time basis, DOD, the military services, and DLA cannot be assured
that they are making inventory management decisions with accurate and
timely records.
While the capability to share some information on a departmentwide
basis also exists, this capability is also negatively affected by the
lack of near real-time data sharing. Specifically, at this time the
capability to share data is sometimes achieved by reconstructing data
from other data sources, which can introduce data reliability errors
into the system, or batch processing of data, which can result in
timeliness issues. For example, the Navy's One Touch Support system
provides the Navy with the capability to access logistics information
from a wide variety of Navy data sources as well as from DLA and other
military service systems. Some of these data are provided through near
real-time data links, while other data are shared among the Army, Air
Force, and DLA on a periodic basis through batch processing.
Lateral redistribution also provides the military services and DLA with
some capability to act upon information provided by the various systems
within the department. Lateral redistribution is an automated
capability used to satisfy a requisition through the most efficient and
effective means. Generally speaking, the lateral redistribution process
takes place when no assets are available to satisfy the requisition at
the appropriate wholesale supply source. The item manager uses an
automated query capability to determine if any of the military services
has the item available in their retail systems prior to initiating a
procurement action. Generally, redistribution of assets that exceed an
activity's authorized inventory level occur automatically, while
redistribution of assets that comprise an activity's authorized
inventory level is dependent on a complex matrix of priorities. If an
asset is found within the retail supply systems of any of the military
services, then the lateral redistribution business rules are used to
determine if that asset should be used to satisfy the requisition or
whether the procurement action should proceed.
In a series of reports issued between March 1999 and July 2004, we have
reported numerous weaknesses in DOD's visibility and control over items
being shipped from one location to another. Specifically, we reported
in March 1999 that the Navy had not effectively controlled its in-
transit inventory and placed enormous amounts of inventory at risk of
undetected theft or misplacement.[Footnote 21] For example, we found
that between fiscal years 1996 and 1998, the Navy reported that it had
lost more than $3 billion in in-transit inventory, including some
classified and sensitive items such as aircraft guided-missile
launchers, military night vision devices, and communications equipment.
Similarly, we reported in June 2000 that the Army did not know the
extent to which shipped inventory was lost or stolen because of
weaknesses in its inventory controls and financial management
practices.[Footnote 22] In addition, we reported in July 2002 that the
Air Force and contractor personnel had largely not complied with DOD
and Air Force inventory control procedures designed to safeguard
material shipped to contractors, placing items worth billions of
dollars at risk of fraud, waste, and abuse.[Footnote 23] Most recently,
we reported in July 2004 that the Navy had failed to maintain proper
accountability and visibility over government furnished equipment
shipped to repair contractors.[Footnote 24]
Continuing Systems Development Efforts May Not Achieve TAV by 2010:
Each of the components has ongoing efforts for developing new systems
to improve their inventory management capabilities. For example, both
DLA and the Army are in the process of fielding their next generation
of inventory management systems for use at the wholesale level,
Business Systems Modernization and Logistics Modernization Program,
respectively. In addition, the Air Force and Navy also have similar
ongoing efforts to redesign their logistics systems. While these
efforts may help to attain TAV, we are concerned that DOD's near term
efforts may not be consistent with its long-term strategy--Business
Management Modernization Program. For example, we reported in September
2004 that clear links between mid-range and long-range efforts to
address deficiencies in DOD's business operations were not yet
established.[Footnote 25] Further, recent reviews of two DOD system
efforts have raised concerns regarding aspects of DOD's system
development oversight and monitoring.[Footnote 26] For example, we
recently reported that Army and DLA systems do not provide a corporate
solution for TAV because that solution depends on the successful
development and implementation of other systems for which timeframes
and associated costs have not yet been fully defined. Achieving TAV
within the Army will require the Logistics Modernization Program to be
integrated with other Army systems currently under development--the
Product Lifecycle Management Plus and Global Combat Support System-
Army. As of May 2004, there were no estimates for the cost or time
frames for completing the development and implementation of the Product
Lifecycle Management Plus system. Similarly, although the Army's
capital investment program includes funding of more than $1 billion for
the Global Combat Support System-Army through fiscal year 2009, the
Army stated that the total cost of the program could not be accurately
estimated until all process requirements are defined at some later
date.
From a departmentwide perspective, joint total asset visibility is an
evolving process designed to (1) provide users with information on the
location, movement, status, and identity of units, personnel,
equipment, and supplies and (2) facilitate the capability of users to
act upon the information. Currently, this capability is provided
through the Joint Total Asset Visibility (JTAV) system, which relies on
non-integrated inventory management systems within the military
services and DLA for visibility data. While JTAV is available to users
throughout the department, it does not provide TAV because the system
is constrained by reliance on the availability, accuracy, and
timeliness of information from the military services' and DLA's
information systems. For example, a recent contractor study of
logistics performance in Operation Iraqi Freedom stated that because
JTAV will be replaced at the end of fiscal year 2005 and is only being
funded to support its existing capabilities, little has changed in JTAV
capability since the DOD Inspector General reported shortfalls in the
system's capability in 2002.[Footnote 27] In addition, the contractor
study stated that JTAV was seen by users as being incomplete and
untimely, and therefore, could not be relied upon. Consequently, users
were accessing component information systems separately and integrating
the data from multiple systems manually.
At this time, DLA is leading a departmentwide effort called the
Integrated Data Environment that is intended to provide joint
visibility throughout the department. This new capability is based on
establishing normalized data requirements that will have to be
supported by existing and new business information systems. This
capability is expected to be operational during fiscal year 2005 within
DLA, and is expected to provide DLA logistics data to users throughout
DLA and the department. DLA's capability is expected to serve as the
model for instituting similar data environments in the military
services that can ultimately be linked to provide visibility across the
department. This departmentwide capability is expected to be available
in August 2007. However, because the Integrated Data Environment
utilizes data from the various military service and DLA systems, TAV
will not be achieved through the Integrated Data Environment until the
individual systems are developed and implemented within the military
services and DLA.
Significant Impediments Hinder Achievement of TAV:
A number of significant impediments hinder DOD and the components'
abilities to attain their goals of achieving TAV. First, DOD lacks a
clear long-term strategy to guide its TAV efforts and address key
issues such as systems integration. Second, integration and
interoperability of the numerous information systems used to support
logistics operations and inventory management continue to present
challenges to DOD, the military services, and DLA. Finally, DOD, the
military services, and DLA have long-standing data accuracy and
reliability issues pertaining to their numerous inventory management
systems. Given the lack of an overarching plan to guide TAV efforts,
the continuing integration issues, and the shortcomings of the existing
systems, it seems unlikely that the military services and DLA will meet
the department's target of achieving TAV by 2010.
TAV Hindered by Lack of a Clear Long-Term Strategy:
Because DOD continues to rely on the individual efforts of DLA and the
military services to achieve TAV without a clear link to its long-term
improvement initiative the Business Management Modernization Program,
it is unlikely DOD will achieve TAV by its 2010 target date. When we
examined the status of TAV within DOD in 1999, we recommended that DOD
develop a departmentwide strategic plan or common strategy and
associated components' implementation plans to improve the management
and implementation of TAV. Furthermore, we recommended these plans be
based on the outcome-oriented principles of GPRA. However, DOD
responded that better asset management would be attained by each
component through improvements to their business and inventory systems
and databases. DOD's Business Management Modernization Program is
responsible for oversight and monitoring of the department's business
transformation initiatives. As part of this program, DOD is continuing
its efforts to refine and implement the department's business
enterprise architecture to serve as a blueprint to guide business
transformation efforts and business systems acquisition and
development. One of the objectives of this architecture is to attain
TAV by fiscal year 2010. However, as discussed below, we have
previously reported that weaknesses exist in the design and content of
the most recent version of the architecture. Further, we reported in
September 2004 that there is no clear link between the components'
implementation plans and the long-term objectives of the department's
business transformation program.[Footnote 28] Currently, the
department is required to report annually to Congress by March 15 of
each year on the progress it is making in refining and implementing the
business enterprise architecture in support of its business management
modernization program.
While the logistics community has identified TAV as one of the four
pillars needed as the foundation for its logistics transformation in
its Focused Logistics Campaign, it has not established a long-term
strategy to focus and guide the components' efforts. However, TAV is
not specifically included in the Future Logistics Enterprise--the mid-
term plan for logistics transformation. While the End-to-End
Distribution initiative within the Future Logistics Enterprise
incorporates many of the characteristics of TAV, it does not require
the components to submit supporting plans and does not include some key
elements of a comprehensive plan necessary to achieve TAV. For example,
the department still has not defined a management framework,
established accountability, identified resource requirements, or
established performance measures in regards to TAV.
Even when a plan to improve TAV is developed, problems with
departmentwide implementation still occur. For example, in response to
Program Budget Decision 422, dated December 2001, each of the military
services developed separate plans for implementing the decision, which
reflected a disparity in the extent to which they were willing to
implement the departmentwide policy. While this document called for the
military services to eliminate duplicative retail supply operations by
returning management and ownership of DLA-managed items being held by
the military services to DLA, the services' implementation plans each
interpreted the requirements differently. For example, the Navy plan
called for a small number of pilot sites where DLA would take over the
ownership of the DLA-managed items being stored at the Navy retail
supply activities. The Air Force, on the other hand, did not
participate in any of the pilot projects, and planned only to eliminate
co-located inventory items at the Air Logistics Centers.
Information Systems Integration Challenges Hinder TAV Achievement:
DOD has not achieved the necessary integration or interoperability of
its inventory (business) systems to support TAV. TAV cannot be achieved
unless these multiple business systems provide users such as combatant
commanders, operating units and inventory managers with accurate data
on the quantity, location, condition, and movement of inventory. As
part of its ongoing business systems modernization efforts DOD is
creating a repository of the department's existing business systems. As
of April 2003, this repository contained 210 inventory-related
information systems within the logistics domain, as shown below in
table 2.
Table 2: Reported DOD Logistics Business Systems by Functional Area:
Logistics:
Inventory;
Air Force: 50;
Army: 90;
Navy/Marine Corps: 42;
DFAS[A]: 4;
Other[B]: 24;
Total: 210.
Functional area: Logistics;
Air Force: 57;
Army: 44;
Navy/Marine Corps: 28;
DFAS[A]: 2;
Other[B]: 29;
Total: 160.
Functional area: Transportation;
Air Force: 8;
Army: 11;
Navy/Marine Corps: 2;
DFAS[A]: 0;
Other[B]: 11;
Total: 32.
Functional area: Personal property management;
Air Force: 6;
Army: 5;
Navy/Marine Corps: 5;
DFAS[A]: 0;
Other[B]: 2;
Total: 18.
Functional area: Real property management;
Air Force: 3;
Army: 3;
Navy/Marine Corps: 4;
DFAS[A]: 0;
Other[B]: 0;
Total: 10.
Functional area: National defense property management;
Air Force: 2;
Army: 0;
Navy/Marine Corps: 1;
DFAS[A]: 0;
Other[B]: 0;
Total: 3.
Functional area: Other functions combined;
Air Force: 51;
Army: 30;
Navy/Marine Corps: 21;
DFAS[A]: 5;
Other[B]: 11;
Total: 118.
Functional area: Acquisition;
Air Force: 3;
Army: 8;
Navy/Marine Corps: 1;
DFAS[A]: 0;
Other[B]: 2;
Total: 14.
Functional area: Subtotal;
Air Force: 180;
Army: 191;
Navy/Marine Corps: 104;
DFAS[A]: 11;
Other[B]: 79;
Total: 565.
Source: GAO analysis of BMMP April 2003 Data.
[A] Defense Finance and Accounting Service.
[B] Includes the Defense Logistics Agency systems.
[End of table]
Table 2 clearly shows that there are numerous systems operating
throughout DOD within the logistics domain and the inventory functional
area. As we reported in May 2004, these systems are not integrated and
thus have multiple points of data entry, which can result in data
reliability problems due to data input errors at the various points of
data entry.[Footnote 29]
DOD is refining and implementing a business enterprise architecture as
part of its Business Management Modernization Program in order to
define the common operating environment and data requirements for its
business systems including logistics. Under the incremental approach
adopted by DOD, the target for achieving TAV is fiscal year 2010. In
the long-term, this architecture could serve to guide business systems
investments throughout the department and ensure that new business
systems are designed and built to be integrated. In May 2001, we
advocated the creation of an architecture to guide and constrain
the billions of dollars the department planned to spend to modernize
its business systems.[Footnote 30] We reiterated this recommendation in
September 2003 and further recommended that DOD provide more sufficient
descriptive content related to the future business operations and
supporting technology necessary for refining and implementing a
business enterprise architecture.[Footnote 31] However, as we recently
reported,[Footnote 32] after three years, more than $203 million in
obligations, and disbursements totaling $111 million, there has not
been any significant change in the content of DOD's architecture.
Consequently the architecture continues to lack many of the key
elements such as sufficient descriptive content related to future
business operations and supporting technology to support effective
acquisition and implementation of systems solutions and associated
operational changes. In addition, DOD has not established the necessary
management structure, processes, and controls necessary to refine and
implement the business enterprise architecture. For example, DOD has
not yet (1) assigned accountability and responsibility for directing,
overseeing, and approving the architecture; (2) developed specific
performance measures needed to evaluate the progress made in developing
the architecture; (3) developed either near-term or long-term plans for
developing the architecture that explicitly identify and establish a
baseline for actions to be taken, milestones to be achieved, cost
estimates to be met and targeted outcomes to be achieved; and
(4) established effective management oversight and control over ongoing
business systems modernization investments. Finally, as we reported in
May 2004, DOD has not yet developed the detailed plans that include
performance measures for the quality, content, and utility of the
architecture in support of the incremental approached being used to
develop the business enterprise architecture.
Long-Standing Data Accuracy and Reliability Issues Hamper TAV
Achievement:
Problems with data accuracy and reliability of data pertaining to the
quantity, location, and value of inventory within the numerous
inventory management systems are long-standing issues that hinder the
achievement of TAV. For example, military service audit agencies and
the DOD Inspector General identified various types of inaccurate
inventory data in the military services' information systems. Since
fiscal year 2002, these inaccuracies included more than $200 million of
excess or unrecorded inventory that was not visible to item managers as
well as significant misstatements in the reported inventory balances.
Since these unrecorded inventories were not visible to item managers,
they could not be used to satisfy current operating requirements and
represent an unnecessary cost if additional inventory was purchased
that was not needed. To illustrate this point, the Air Force Audit
Agency identified a $3.3 million overstatement in the procurement and
repair requirements for three aircraft systems that resulted from the
lack of visibility over $10.8 million worth of inventory for these
three systems.
Because DOD does not have integrated systems, methods such as multiple
points of entry, manual reentry of data, and data interpreters are
relied upon to enable data sharing among the various DOD, DLA, and
military service systems. All of these methods introduce the potential
for inaccurate data. For example, in fielding emerging systems such as
the Business Systems Modernization and the Logistics Modernization
Program, numerous interfaces had to be developed with existing systems
to enable data sharing. When some of these interfaces did not work as
intended, manual reentry of transactions was relied upon to enable the
required data transfer. According to DOD officials these, problems were
only a temporary solution until modifications to the interfaces could
be made. This problem was not only costly, but could have also led to
the introduction of inaccurate and unreliable data into emerging
systems.
DOD Has Made Little Progress toward Assuring That Inventory Systems
Comply with Financial Standards:
DOD, the military services, and DLA have made little progress in
assuring that inventory management systems that provide visibility over
spare and repair parts are substantially compliant with the
requirements of the Federal Financial Management Improvement Act
(FFMIA) of 1996. The department recognizes the weaknesses in their
financial management systems in general and stated in DOD's Performance
and Accountability Report for fiscal year 2003 that these systems did
not substantially comply with Federal financial management systems
requirements, generally accepted accounting principles, and the U.S.
Government Standard General Ledger at the transaction level. In
addition, the report stated that DOD's financial management and feeder
systems could not provide adequate evidence to support various material
amounts on the financial statements. Since 1990, we have identified
inventory management as a high-risk area within DOD and specifically
identified DOD's outdated and ineffective management information
systems as a primary factor causing this weakness. Inventory management
system weaknesses hinder DOD's and components' efforts to collect
accurate, reliable, and timely financial information.
While DOD is currently requiring the military services and DLA to
certify that emerging systems are in substantial compliance with
federal financial management requirements, we are concerned that the
department lacks adequate policies and procedures to determine whether
compliance has in fact been achieved. For example, we recently reported
that in developing the Business Systems Modernization and Logistics
Modernization Program, DLA and the Army, respectively, had not fully
defined the capabilities required from these systems or how these
capabilities would be tested to ensure the new systems provided the
capabilities needed, including whether the systems comply with federal
financial management requirements.[Footnote 33] In addition we found,
in both instances, that testing of transactions was not performed to
validate that they would be processed as intended. For example, to test
the Logistics Modernization Program, the Army relied upon Joint
Financial Management Improvement Program (JFMIP)[Footnote 34] testing
of the commercial off the shelf software in fiscal year 1999 to
validate that 147 requirements were satisfied for the Logistics
Modernization Program. We concluded that JFMIP's testing should not be
relied on to validate these requirements because it did not address
entity-specific tests of transactions or systems interfaces. In
addition, because the Army modified the basic commercial software
package, the Army cannot be assured that these 147 requirements will
produce the intended results. Consequently, although these two systems
were certified as being compliant, the weaknesses identified in the
certification process raise concerns regarding the system's compliance
with the FFMIA requirements.
Conclusions:
While considerable efforts were made to increase asset visibility over
spare and repair parts in storage, DOD did not attain TAV by the end of
fiscal year 2004. Further, it remains questionable whether DOD will
achieve TAV by fiscal year 2010. While some efforts have been
undertaken to increase asset visibility, these efforts have been
limited to specific components due to the absence of an effective
departmentwide long-term strategy. As a result, DOD's efforts to
achieve TAV have generally been narrow in scope, uncoordinated with
other components, not integrated with other inventory management
systems, and fail to address long-standing data reliability problems.
Without an effective long-term strategy containing goals, measures,
time frames, and accountability, wartime logistics problems similar to
those encountered in our most recent operations in Iraq are likely to
continue. These problems could negatively impact readiness, could cause
operating units to resort to inefficient practices such as
cannibalization, and could result in the unnecessary expenditure
of millions or even billions of dollars on unneeded inventory or on
systems and initiatives that do not attain TAV. In addition, DOD has
made little progress in assuring that its inventory management systems
comply with federal financial management standards, and we remain
concerned that system tests were not conducted to validate that
relevant data were processed as intended. Until DOD ensures that its
inventory management systems are fully compliant with federal financial
management standards, concerns will remain about the quality of the
financial data reported and its value for making inventory management
decisions related to procurement and distribution of items.
Recommendations:
We continue to believe, as we recommended in April 1999, that DOD
should develop a cohesive, departmentwide plan to ensure that TAV is
achieved. Specifically, we recommend that the Secretary of Defense
develop a departmentwide long-term TAV strategy as part of the Business
Enterprise Architecture that:
* describes the complete management structure and assigns
accountability to specific offices throughout the department, with
milestones and performance measures, for ensuring timely success in
achieving TAV;
* identifies the resource requirements for implementing TAV and
includes related investment analyses that show how the major
information technology investments will support TAV goals;
* identifies how departmentwide systems issues that affect
implementation of TAV will be addressed; and:
* establishes outcome-oriented TAV goals and performance measures for
all relevant components and closely links the measures with timelines
for improvement.
In addition, since 2001, we have made a number of recommendations aimed
at improving DOD's refinement and implementation of the business
management modernization program. Most recently, we identified the need
to have component plans clearly linked to the long-term objectives of
the department's business management modernization program. As they
relate to TAV, we continue to believe that these recommendations are
valid.
Matter for Congressional Consideration:
If the Congress wants a better understanding of the department's plans
and progress for attaining TAV, it may wish to consider having the
Secretary of Defense include a section specifically addressing TAV
implementation in its annual report to the Congress on the progress it
is making in refining and implementing the business enterprise
architecture in support of the business management modernization
program, as required by section 332 of the fiscal year 2005 national
defense authorization act. Specifically, the Congress may wish to
consider requiring the Secretary of Defense to outline in this annual
report the department's plans, milestones, performance measures, and
progress for attaining TAV throughout the department.
Agency Comments and Our Evaluation:
In commenting on a draft of this report, the Acting Deputy Under
Secretary of Defense for Logistics and Materiel Readiness concurred
with the intent of our first three recommendations and partially
concurred with our last recommendation. Specifically, the department
acknowledges the need to improve visibility over spare and repair
parts, but believes that its current strategy of modernizing logistics
systems and implementing an integrated data approach is the way to
achieve TAV. In addition, while DOD's comments also recognized the need
to place increased emphasis on TAV in its modernization program and
ensure that the component efforts link more closely to long-term
objectives like TAV, the comments did not include specific actions the
department plans to take to address its asset visibility weaknesses,
nor did it provide milestones for when it plans to implement all of its
modernization programs. Because DOD does not plan to modify its
approach to implementing TAV, we have added a matter for congressional
consideration suggesting that the Congress may wish to require the
Secretary of Defense to report annually on the Department's plans and
progress for attaining TAV. DOD's comments are reprinted in appendix
III of this report.
In concurring with the intent of our recommendations that the Secretary
of Defense develop a deparmentwide long-term TAV strategy that
(1) describes the complete management structure and assigns
accountability to specific offices throughout the department, with
milestones and performance measures for ensuring timely success in
achieving TAV, (2) identifies the resource requirements for
implementing TAV and includes related investment analyses that show how
the major information technology investments will support TAV goals,
and (3) identifies how departmentwide systems issues that affect
implementation of TAV will be addressed, DOD stated that these issues
would be addressed as part of the ongoing business systems
modernization programs. However, as discussed in this report, these
ongoing efforts may not ensure that DOD will attain TAV. For example,
we reported in May 2004 that DOD had not yet established the necessary
management structure, processes, or controls necessary to refine and
implement the business enterprise architecture, a key component of
DOD's business management modernization program. In addition, component
efforts to modernize business systems will not necessarily provide
solutions to TAV because these efforts rely on the creation of yet more
systems to attain TAV. Without a departmentwide long-tem strategy as
part of the Business Enterprise Architecture that clearly identifies
how business systems modernization programs relate to and address TAV,
DOD may not achieve its TAV goal.
In partially concurring with our recommendation that the Secretary of
Defense develop a departmentwide long-term TAV strategy that
establishes outcome-oriented goals and performance measures for all
relevant components and links the measures with timelines for
improvement, DOD stated that outcome-oriented goals and measures
specific to the end-to-end supply chain, such as customer wait time,
will continue to be monitored. We agree that measures such as customer
wait time should continue to be monitored. Similarly, we agree that
having a viable data strategy as part of the Business Enterprise
Architecture and a sound portfolio management process are also
essential to attaining TAV. However, as we reported in May 2004, DOD
had not yet established an effective management oversight and control
process for ongoing business systems modernization investments. In
addition, the integrated data environment, which could provide the
viable data strategy, is still under development. With business systems
modernization taking place while both the integrated data environment
and business enterprise architecture are still being developed, a
departmentwide long-term strategy becomes even more critical to ensure
that the modernization efforts support the department's objectives such
as TAV.
We are sending copies of this report to Chairman and Ranking Member,
House Appropriations Subcommittee on Defense. We are also sending
copies to the Secretary of Defense; the Director, Office of Management
and Budget; the Secretary of the Army; the Secretary of the Navy; the
Secretary of the Air Force; and the Director, Defense Logistics Agency.
Copies will also be available at no charge on our Web site at http://
www.gao.gov:
If you or your staff have any questions about this report, please
contact me at (202)512-8365 or e-mail me at solisw@gao.gov. GAO
contacts and key contributors to this report are listed in appendix IV.
Sincerely yours,
Signed by:
William M. Solis:
Director, Defense Capabilities and Management:
[End of section]
Appendix I: Scope and Methodology:
To determine what progress has been made in implementing TAV within
DOD, the military services, and the DLA, we obtained and analyzed
information on various initiatives pertaining to improving inventory
management practices. We reviewed these initiatives to identify the
objectives and scope of the initiatives. We also evaluated whether
these initiatives would have any impact on the visibility over assets.
To learn more about the initiatives themselves and what benefits would
be derived from implementing them, we interviewed knowledgeable
officials from the following logistics organizations:
Department of Air Force: Deputy Chief of Staff Installations &
Logistics, Directorate of Logistics Readiness, Material Management
Policy Division; AF/ILFD; Deputy Chief of Staff Installations &
Logistics, Maintenance Management Division; Air Force Material Command;
Department of Army: Supply Policy Division, Headquarters, Office of the
Deputy Chief of Staff, G4; Supply Policy & Logistics Automation Task
Force, Headquarters, Office of the Deputy Chief of Staff, G4;
Transportation, Headquarters Army Material Command; Headquarters,
Office of the Deputy Chief of Staff, G4-LESCO; Headquarters Army
Material Command; DALO-SMP; DALO-TEO; Headquarters, Army Material
Command-Logistics Support Activity;
Department of Navy: Naval Supply Systems Command;
Defense Logistics Agency: DLA/J-333-Supply Chain Integration Division;
and:
The Joint Staff Directorate of Logistics (J-4).
Additionally, we relied on other GAO audit work for information about
some on-going business systems modernization efforts as they related to
inventory management. Finally, we analyzed the findings documented in
audit reports prepared by the DOD Inspector General and the military
service audit agencies dating back to fiscal year 2001 as another means
of gauging the amount of progress being made in implementing TAV.
To identify the impediments that DOD, the military services, and DLA
must overcome in order to achieve TAV, we reviewed previous GAO reports
(including the 1999 report on TAV). We also reviewed DOD Inspector
General reports and military service audit reports pertaining to asset
visibility and inventory management to determine if additional
impediments existed and whether previously identified impediments
continue to be a problem. We also discussed impediments to achieving
TAV with the officials identified above as well as officials from the
Supply Chain Integration Office and the Transportation Policy Office
within the Office of Deputy Under Secretary of Defense Logistics
Materiel Readiness. Also we reviewed policies, rules, and regulations
to determine what departmentwide guidance are provided for achieving
TAV. Lastly, we relied on other GAO audit work for information about
(1) logistics challenges experienced during Operation Iraqi Freedom due
to inadequate asset visibility, (2) the Business Enterprise
Architecture effort underway and its relationship to TAV, and (3) the
relationship between DOD component improvement initiatives and the
departments business management modernization program.
To assess what progress has been made in ensuring that inventory
management systems are fully compliant with statutory requirements for
federal financial management systems, we reviewed the requirements
outlined in the Federal Financial Management Improvement Act of 1996
and the standards prescribed in the Joint Financial Management
Improvement Program. Additionally, we relied on other GAO audit work
for information about how DOD is ensuring compliance of existing and
emerging inventory systems with the federal financial management
systems requirements.
We conducted our work from August 2003 to August 2004 in accordance
with generally accepted government auditing standards.
[End of section]
Appendix II: Key Programs and Systems:
Future Logistics Enterprise--DOD's mid-term vision to accelerate
logistics improvements, enhance support to the warfighter, and align
logistics processes with the operational demands of the 21st century.
The Future Logistics Enterprise builds upon and accelerates specific,
ongoing service and agency initiatives to meet the requirements of the
Quadrennial Defense Review and the National Defense Strategy.
End-to-End Distribution--One of six initiatives contained in the Future
Logistics Enterprise. End-to-End Distribution is designed to streamline
warfighter support by providing materiel, including retrograde and
associated information from the source of supply or point of origin to
the point of use.
Focused Logistics Campaign Plan--A comprehensive, integrated approach
for achieving full spectrum support for the future joint warfighter.
The plan describes how the full potential of focused logistics will be
achieved through revolutionary changes to information systems,
reengineered processes, innovation in organizational structures, and
advances in transportation technology.
Business Management Modernization Program--The Business Management
Modernization Program is the department's business transformation
initiative and encompasses defense policies, processes, people, and
systems that guide, perform, or support all aspects of business
management--including development and implementation of the business
enterprise architecture. The Under Secretary of Defense (Comptroller)
established a program management office called Business Modernization
and Systems Integration (BMSI), to oversee and manage the program.
Business enterprise architecture--The business enterprise architecture
is designed to provide a clear and comprehensive picture of DOD's
business operations across six domains. This picture consists of a
snapshot of the current operational and technical environment and its
target environment, as well as a capital investment roadmap for
transitioning from the current environment to the target environment.
Joint Total Asset Visibility--Joint Total Asset Visibility is the
Defense Department's evolving process designed to track equipment,
personnel, and supplies.
Logistics Modernization Program--The Army Materiel Command system that
will be used to capture logistics data from the wholesale supply
system. It will replace two existing materiel management systems, the
Commodity Command Standard System and the Standard Depot System.
Business systems modernization--The DLA system that will replace two
existing materiel management systems, the Standard Automated Materiel
Management System and the Defense Integrated Subsistence Management
System.
Integrated data environment--This initiative will provide the
capability to integrate DOD logistics information within DLA. The
environment will facilitate the sharing of data across the department.
Global Combat Support System--This is a family of systems that are
designed to provide an information-centric environment thereby allowing
DOD users to access shared data and applications regardless of
location.
Standard General Ledger--The Standard General Ledger provides a uniform
Chart of Accounts and technical guidance to be used in standardizing
Federal agency accounting.
Joint Financial Management Improvement Program--The Joint Financial
Management Improvement Program is a joint and cooperative undertaking
of the Department of the Treasury, the GAO, the Office of Management
and Budget, and the Office of Personnel Management working in
cooperation with each other and other agencies to improve financial
management practices in government. The Program Management Office,
managed by the Executive Director, tests vendor commercial-off-the-
shelf packages and certifies that they meet certain federal financial
management systems requirements for core financial systems.
Virtual Master Stock Inventory Record--The Virtual Master Stock
Inventory Record is a database managed by the Navy that displays stock
availability at the major Navy stock points. The Virtual Master Stock
Inventory Record also provides the capability to view quantity and
location of specific items.
[End of section]
Appendix III: Comments from the Department of Defense:
DEPUTY UNDER SECRETARY OF DEFENSE FOR LOGISTICS AND MATERIEL READINESS:
3500 DEFENSE PENTAGON:
WASHINGTON, DC 20301-3500:
Mr. William Solis:
Director, Defense Capabilities and Management:
U.S. General Accountability Office:
441 G Street, N.W.:
Washington, DC 20548:
OCT 29 2004:
Dear Mr. Solis:
This is the Department of Defense (DoD) response to the GAO draft
report, GAO-05-15, "DEFENSE INVENTORY: Improvements Needed In DoD's
Implementation of Its Long-Term Strategy for Total Asset Visibility of
Its Inventory," dated September 30, 2004 (GAO Code 350420). The
Department concurs with the intent of the recommendation to improve
visibility over spare and repair parts, but we believe that our
strategy of modernizing our logistics systems and implementing an
integrated data approach is the way to achieve that goal.
As acknowledged in the audit, the Department has put considerable
effort into achieving asset visibility over spare and repair parts over
the past several years. Over that time, the Department has made
considerable progress towards enhancing asset visibility by improving
our legacy inventory systems and creating Department-wide policy and
procedures for required asset visibility capability. We also
implemented business rules for lateral redistribution to act upon that
visibility. Through these improvements, we have achieved visibility of
our spare and repair parts for item managers who can act upon that
information. However, fully realizing timely and accurate asset
information requires modernization of our business systems and the
implementation of the integrated data environment (IDE) that is a key
component of that modernization.
TAV is an enabler, not an end to itself. Asset visibility is the by
product of any well designed and enabled end-to-end supply chain. As
the Department continues to modernize through implementation of
commercial off-the-shelf software and integration techniques, timely
and accurate asset visibility will become institutionalized in the
Department's logistic chain. Our logistics systems modernization
programs, along with a viable data strategy and sound portfolio
management process, are the long term solutions to TAV. The Department
continues to stand behind this approach as our long-term TAV strategy.
However, we will place increased emphasis on TAV in our modernization
programs and ensure that the Component efforts link more closely to
long term objectives like TAV.
Should additional information be required, Mrs. Kathy Smith of my staff
is the point of contact. She may be reached at (703) 604-0098x135.
Sincerely,
Signed for:
Bradley Berkson:
Acting:
GAO DRAFT REPORT - DATED SEPTEMBER 30, 2004 GAO CODE 350420/GAO-05-15:
"DEFENSE INVENTORY: Improvements Needed in DoD's Implementation of Its
Long-term strategy for Total Asset Visibility of Its Inventory."
DEPARTMENT OF DEFENSE COMMENTS TO THE RECOMMENDATIONS:
RECOMMENDATION 1: The Secretary of Defense develop a Department-wide
long-term TAV strategy that describes the complete management structure
and assigns accountability to specific offices throughout the
department, with milestones and performance measures, for ensuring
timely success in achieving TAV. (Page 21 /GAO Draft Report):
DOD RESPONSE: Concur with intent. The management structure in place for
the business systems modernization will be used to ensure timely
success in achieving our long-term objectives, to include TAV.
RECOMMENDATION 2: The Secretary of Defense develop a Department-wide
long-term TAV strategy that identifies the resource requirements for
implementing TAV and includes related investment analysis that show how
the major information technology investments will support TAV goals.
(Page 21/GAO Draft Report):
DOD RESPONSE: Concur with intent. The resource requirements in place
for the business systems modernization will focus efforts on long-term
objectives, to include TAV.
RECOMMENDATION 3: The Secretary of Defense develop a Department-wide
long-term TAV strategy that identifies how department wide systems
issues that affect implementation of TAV will be addressed. (Page 21/
GAO Draft Report):
DOD RESPONSE: Concur with intent. The Department-wide approach to
managing the business system modernization will address Department-wide
systems issues, if any.
RECOMMENDATION 4: The Secretary of Defense developed a Department-wide
long-term TAV strategy that establishes outcome-oriented TAV goals and
performance measures for all relevant components and closely links the
measures with timelines for improvement. (Page 21 /GAO Draft Report):
DOD RESPONSE: Partially concur. As carefully pointed out by the GAO in
previous audits, TAV is an output, not an outcome measure. Outcome-
oriented goals and measures specific to the end-to-end supply chain
will continue to be monitored, such as customer wait time.
[End of section]
Appendix IV: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
David Schmitt (757) 552-8124 John Wren (757) 552-8235:
Acknowledgments:
In addition to the individuals named above, key contributors to this
report included Ann DuBois, Shvetal Khanna, Harry Knobler, Katherine
Lenane, and Janine Prybyla.
(350420):
FOOTNOTES
[1] GAO, Defense Inventory: Consumption of Inventory Exceeding Current
Operating Requirements Since September 11, 2001, GAO-04-689
(Washington, D.C.: Aug. 2, 2004).
[2] DOD 4140.1-R, Supply Chain Materiel Management Regulation, May 23,
2003.
[3] GAO, Defense Inventory: DOD Could Improve Total Asset Visibility
Initiative With Results Act Framework, GAO/NSIAD-99-40 (Washington,
D.C.: Apr.12, 1999).
[4] Data or information that has been delayed by the time required for
electronic communication and automatic data processing. This implies
that there are not significant delays.
[5] DOD maintains spare parts at two levels of inventory. Wholesale
level represents inventory managed centrally, while retail level
inventory represents inventory held for use at maintenance activities
or operational units.
[6] "In storage" inventory refers to any items being held for future
use. This includes items held at the wholesale, retail, and unit levels
of supply in anticipation of future needs.
[7] DOD 4140.1-R, Supply Chain Materiel Management Regulation, May 23,
2003.
[8] Ronald W. Reagan National Defense Authorization Act for Fiscal Year
2005, Pub. L. No. 108-375, § 332, 118 Stat. 1811 (Oct. 28, 2004)
[9] GAO, DOD Business Systems Modernization: Billions Continue to Be
Invested with Inadequate Management Oversight and Accountability, GAO-
04-615 (Washington, D.C.: May 27, 2004).
[10] Pub. L. No. 104-208, div. A, §101 (f), title VIII, 110 Stat. 3009,
3009-389 (Sept. 30, 1996).
[11] GAO-04-615.
[12] DOD Regulation 4140.1-R, version dated May 1998, chapter 4, "Asset
Management."
[13] GAO/NSIAD-99-40.
[14] Pub. L. No. 103-62, Aug. 3, 1993.
[15] 40 U.S.C. §§11101-11703
[16] GAO, Financial Management: Further Actions Are Needed to Establish
Framework to Guide Audit Opinion and Business Management Improvement
Efforts at DOD, GAO-04-910R (Washington, D.C.: Sept. 20, 2004).
[17] GAO, Defense Logistics: Preliminary Observations on the
Effectiveness of Logistics Activities during Operation Iraqi Freedom,
GAO-04-305R (Washington, D.C.: Dec. 18, 2003).
[18] GAO/NSIAD-99-40.
[19] Pub. L. No. 104-208, div. A, §101 (f), title VIII, 110 Stat. 3009,
3009-389 (Sept. 30, 1996).
[20] Pub. L. No. 101-576, 104 Stat. 2838, Nov. 15, 1990.
[21] GAO, Defense Inventory: Navy's Procedures for Controlling In-
Transit Items Are Not Being Followed, GAO/NSIAD-99-61 (Washington,
D.C.: Mar. 31, 1999).
[22] GAO, Defense Inventory: Army Needs to Strengthen and Follow
Procedures to Control Shipped Items, GAO/NSIAD-00-109 (Washington,
D.C.: June 23, 2000).
[23] GAO, Defense Inventory: Air Force Needs to Improve Control of
Shipments to Repair Contractors, GAO-02-617 (Washington, D.C.: July 1,
2002).
[24] GAO, Defense Inventory: Navy Needs to Improve the Management Over
Government-Furnished Material Shipped to Its Repair Contractors, GAO-
04-779 (Washington, D.C.: July 23, 2004).
[25] GAO-04-910R.
[26] GAO-04-615.
[27] Science Applications International Corporation, Objective
Assessment of Logistics in Iraq, March 2004.
[28] GAO, Financial Management: Further Actions Are Needed to Establish
Framework to Guide Audit Opinion and Business Management Improvement
Efforts at DOD, GAO-04-910R (Washington, D.C.: Sept. 20, 2004).
[29] GAO-04-615.
[30] GAO, Information Technology: Architecture Needed to Guide
Modernization of DOD's Financial Operations, GAO-01-525 (Washington,
D.C.: May 17, 2001).
[31] GAO, DOD Business Systems Modernization: Important Progress Made
to Develop Business Enterprise Architecture, but Much Work Remains,
GAO-03-1018 (Washington, D.C.: Sept. 19, 2003).
[32] GAO, DOD Business Systems Modernization: Limited Progress in
Development of Business Enterprise Architecture and Oversight of
Information Technology Investments, GAO-04-731R (Washington, D.C.: May
17, 2001).
[33] GAO-04-615.
[34] The Joint Financial Management Improvement Program is a joint and
cooperative undertaking of the Department of the Treasury, the GAO, the
Office of Management and Budget, and the Office of Personnel Management
working in cooperation with each other and other agencies to improve
financial management practices in government. The Program Management
Office, managed by the Executive Director, tests vendor commercial-off-
the-shelf packages and certifies that they meet certain federal
financial management systems requirements for core financial systems.
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