DOD's High-Risk Areas
Observations on DOD's Progress and Challenges in Strategic Planning for Supply Chain Management Gao ID: GAO-10-929T July 27, 2010The Department of Defense's (DOD) management of its supply chain network is critical to supporting military forces in Iraq, Afghanistan, and elsewhere and also represents a substantial investment of resources. As a result of weaknesses in DOD's management of supply inventories and responsiveness to warfighter requirements, supply chain management is on GAO's list of high-risk federal government programs and operations. In July 2010, DOD issued a new Logistics Strategic Plan that represents the department's current vision and direction for supply chain management and other logistics areas. Today's testimony draws from GAO's prior related work and observations from an ongoing review of DOD supply chain management, and, as requested, will (1) describe DOD's prior strategic planning efforts in the area of logistics, (2) highlight key elements in the new Logistics Strategic Plan, and (3) discuss opportunities for improvement in future iterations of this plan. In conducting its ongoing audit work, GAO reviewed the Logistics Strategic Plan, compared elements in the plan with effective strategic planning practices, and met with cognizant officials from DOD, the military services, and other DOD components as appropriate.
Prior to the publication of its new Logistics Strategic Plan, DOD issued a series of strategic planning documents for logistics over a period of several years. In 2008, DOD released its Logistics Roadmap to provide a more coherent and authoritative framework for logistics improvement efforts, including supply chain management. While the roadmap discussed numerous ongoing initiatives and programs that were organized around goals and joint capabilities, it fell short of providing a comprehensive, integrated strategy for logistics. GAO found, for example, that the roadmap did not identify gaps in logistics capabilities and that DOD had not clearly stated how the roadmap was integrated into DOD's logistics decision-making processes. GAO's prior work has shown that strategic planning is the foundation for defining what an agency seeks to accomplish, identifying the strategies it will use to achieve desired results, and then determining how well it succeeds in reaching results-oriented goals and achieving objectives. DOD said that it would remedy some of the weaknesses GAO identified in the roadmap. The July 2010 Logistics Strategic Plan, which updates the roadmap, is DOD's most recent effort to provide high-level strategic direction for future logistics improvement efforts, including those in the area of supply chain management. The plan provides unifying themes for improvement efforts, for example, by including a logistics mission statement and vision for the department, and it presents four goals for improvement efforts with supporting success indicators, key initiatives, and general performance measures. One goal focuses specifically on supply chain processes. The plan is aligned to and reiterates high-level departmentwide goals drawn from both the 2010 Quadrennial Defense Review and the 2009 Strategic Management Plan for business operations. Key initiatives in the plan appear to focus on issues that GAO has identified as needing management attention. While the Logistics Strategic Plan contains some of the elements necessary for strategic planning, it lacks some detailed information that would benefit decision makers and guide DOD's logistics and supply chain improvement efforts. The plan lacks specific and clear performance measurement information (such as baseline or trend data for past performance, measurable target-level information, or time frames for the achievement of goals or completion of initiatives), definition of key concepts, identification of problems and capability gaps, and discussion of resources needed to achieve goals. Further, linkages to other plans and some key related activities under way within logistics are unclear, and it is similarly unclear how the plan will be used within the existing governance framework for logistics. Without more specific information in the Logistics Strategic Plan, it will be difficult for DOD to demonstrate progress in addressing supply chain management problems and provide Congress with assurance that the DOD supply chain is fulfilling the department's goal of providing cost-effective joint logistics support for the warfighter.
GAO-10-929T, DOD's High-Risk Areas: Observations on DOD's Progress and Challenges in Strategic Planning for Supply Chain Management
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Testimony before the Subcommittee on Oversight of Government
Management, the Federal Workforce, and the District of Columbia,
Committee on Homeland Security and Governmental Affairs, U.S. Senate:
United States Government Accountability Office:
GAO:
For Release on Delivery:
Expected at 2:30 p.m. EDT:
Tuesday, July 27, 2010:
DOD's High-Risk Areas:
Observations on DOD's Progress and Challenges in Strategic Planning
for Supply Chain Management:
Statement of Jack E. Edwards, Director:
Defense Capabilities and Management:
Statement of William M. Solis, Director:
Defense Capabilities and Management:
GAO-10-929T:
GAO Highlights:
Highlights of GAO-10-929T, a testimony before the Subcommittee on
Oversight of Government Management, the Federal Workforce, and the
District of Columbia, Committee on Homeland Security and Governmental
Affairs, U.S. Senate.
Why GAO Did This Study:
The Department of Defense‘s (DOD) management of its supply chain
network is critical to supporting military forces in Iraq,
Afghanistan, and elsewhere and also represents a substantial
investment of resources. As a result of weaknesses in DOD‘s management
of supply inventories and responsiveness to warfighter requirements,
supply chain management is on GAO‘s list of high-risk federal
government programs and operations. In July 2010, DOD issued a new
Logistics Strategic Plan that represents the department‘s current
vision and direction for supply chain management and other logistics
areas.
Today‘s testimony draws from GAO‘s prior related work and observations
from an ongoing review of DOD supply chain management, and, as
requested, will (1) describe DOD‘s prior strategic planning efforts in
the area of logistics, (2) highlight key elements in the new Logistics
Strategic Plan, and (3) discuss opportunities for improvement in
future iterations of this plan. In conducting its ongoing audit work,
GAO reviewed the Logistics Strategic Plan, compared elements in the
plan with effective strategic planning practices, and met with
cognizant officials from DOD, the military services, and other DOD
components as appropriate.
What GAO Found:
Prior to the publication of its new Logistics Strategic Plan, DOD
issued a series of strategic planning documents for logistics over a
period of several years. In 2008, DOD released its Logistics Roadmap
to provide a more coherent and authoritative framework for logistics
improvement efforts, including supply chain management. While the
roadmap discussed numerous ongoing initiatives and programs that were
organized around goals and joint capabilities, it fell short of
providing a comprehensive, integrated strategy for logistics. GAO
found, for example, that the roadmap did not identify gaps in
logistics capabilities and that DOD had not clearly stated how the
roadmap was integrated into DOD‘s logistics decision-making processes.
GAO‘s prior work has shown that strategic planning is the foundation
for defining what an agency seeks to accomplish, identifying the
strategies it will use to achieve desired results, and then
determining how well it succeeds in reaching results-oriented goals
and achieving objectives. DOD said that it would remedy some of the
weaknesses GAO identified in the roadmap.
The July 2010 Logistics Strategic Plan, which updates the roadmap, is
DOD‘s most recent effort to provide high-level strategic direction for
future logistics improvement efforts, including those in the area of
supply chain management. The plan provides unifying themes for
improvement efforts, for example, by including a logistics mission
statement and vision for the department, and it presents four goals
for improvement efforts with supporting success indicators, key
initiatives, and general performance measures. One goal focuses
specifically on supply chain processes. The plan is aligned to and
reiterates high-level departmentwide goals drawn from both the 2010
Quadrennial Defense Review and the 2009 Strategic Management Plan for
business operations. Key initiatives in the plan appear to focus on
issues that GAO has identified as needing management attention.
While the Logistics Strategic Plan contains some of the elements
necessary for strategic planning, it lacks some detailed information
that would benefit decision makers and guide DOD‘s logistics and
supply chain improvement efforts. The plan lacks specific and clear
performance measurement information (such as baseline or trend data
for past performance, measurable target-level information, or time
frames for the achievement of goals or completion of initiatives),
definition of key concepts, identification of problems and capability
gaps, and discussion of resources needed to achieve goals. Further,
linkages to other plans and some key related activities under way
within logistics are unclear, and it is similarly unclear how the plan
will be used within the existing governance framework for logistics.
Without more specific information in the Logistics Strategic Plan, it
will be difficult for DOD to demonstrate progress in addressing supply
chain management problems and provide Congress with assurance that the
DOD supply chain is fulfilling the department‘s goal of providing cost-
effective joint logistics support for the warfighter.
View [hyperlink, http://www.gao.gov/products/GAO-10-929T] or key
components. For more information, contact Jack E. Edwards at (202) 512-
8246 or edwardsj@gao.gov or William M. Solis at (202) 512-8365 or
solisw@gao.gov.
[End of section]
Mr. Chairman and Members of the Subcommittee:
We are pleased to be here today to discuss the Department of Defense's
(DOD) progress and challenges in developing a strategic plan to
resolve long-standing problems with supply chain management. DOD
manages a vast and complex supply chain network--providing everything
from spare parts and base support items to food and fuel--that is
vital to supporting operations and maintaining readiness. As you are
aware, supply chain management is critical to supporting military
forces in Iraq, Afghanistan, and elsewhere, and it also represents a
substantial investment of resources. While there are many aspects to
supply chain management, at its essence it is the operation of a
continuous and comprehensive logistics process, from the initial
customer order of materials or services to the ultimate satisfaction
of the customer's requirements. DOD's goal is to provide effective and
efficient supply chain management and to deliver the right items to
the right place at the right time.
As a result of weaknesses in DOD's management of supply inventories
and responsiveness to warfighter requirements, supply chain management
has been on our list of high-risk federal government programs and
operations since 1990. We initially focused on inventory management
and later determined that concerns extended to other aspects of the
supply chain, including requirements forecasting, asset visibility,
and materiel distribution.[Footnote 1] For many years, DOD has
recognized a need to improve logistics support and supply chain
management, and has issued a series of planning documents, including
strategies, vision statements, and roadmaps. Earlier this month, the
Office of the Secretary of Defense (OSD) issued DOD's new Logistics
Strategic Plan that represents the department's current vision and
direction for supply chain management and other logistics areas.
[Footnote 2] DOD intends to update this plan annually.
In our statement today, we will (1) describe DOD's prior logistics-
related strategic planning efforts, (2) highlight key elements in
DOD's new Logistics Strategic Plan, and (3) discuss opportunities for
improvement in future iterations of this plan. Our statement is based
both on previous GAO work and observations from our ongoing review of
DOD's efforts to improve supply chain management. In our ongoing
review, which is being performed under the authority of the
Comptroller General to conduct evaluations on his own initiative, we
interviewed DOD and component officials to discuss the development of
the Logistics Strategic Plan and reviewed relevant documents, such as
current DOD-wide and service-level plans and strategies. We also
compared elements in the plan to practices found in effective
strategic planning that we have identified in previous work. This work
is being performed in accordance with generally accepted government
auditing standards.[Footnote 3]
Background:
Before addressing these issues in detail, we would like to review two
primary reasons why effective and efficient supply chain management is
important for DOD. First, supply support to the warfighter affects
readiness and military operations. In fact, the supply chain is a
critical link in determining outcomes on the battlefield and can
affect the military's ability to meet national security goals. We
previously reported on problems with supply distribution support in
Iraq, including shortages of critical supply items and weaknesses in
requirements forecasting, asset visibility, and distribution. DOD took
steps to address such issues, for example, by establishing a joint
deployment and distribution operations center to coordinate the flow
of materiel into the theater. Second, given the high demand for goods
and services to support ongoing U.S. military operations, the
investment of resources in the supply chain is substantial. DOD spends
billions of dollars to purchase, manage, store, track, and deliver
supplies. It is particularly important that these substantial
resources are effectively and efficiently invested in light of the
nation's current fiscal environment. In fact, the Secretary of Defense
has recently stated that given the nation's difficult economic
circumstances and fiscal condition, DOD will need to reduce overhead
costs and transfer those savings to force structure and modernization
priorities.[Footnote 4]
Congressional interest has likewise focused attention on areas within
DOD's logistics portfolio that are in need of improvement. One such
area is inventory management. The Fiscal Year 2010 National Defense
Authorization Act requires DOD to prepare a comprehensive plan for
improving the inventory management systems of the military departments
and the Defense Logistics Agency (DLA), with the objective of reducing
the acquisition and storage of secondary inventory that is excess to
requirements. We understand that DOD is finalizing the development of
its comprehensive plan and expects to release that plan later this
year.
As noted earlier, DOD supply chain management has been designated by
GAO as a high-risk area. GAO's high-risk designation is intended to
place special focus on programs and functions that need sustained
management attention in order to resolve identified problems. We have
reported that in order to successfully resolve supply chain management
problems, DOD needs to sustain top leadership commitment and long-term
institutional support for its strategic planning efforts for supply
chain management, obtain necessary commitments for its initiatives
from the military services and other DOD components, make substantial
progress in implementing improvement initiatives and programs across
the department, and demonstrate progress in achieving the objectives
identified in supply chain management-related strategic planning
documents. We have also encouraged DOD to develop an integrated,
comprehensive plan for improving logistics. While we have previously
noted progress DOD has made toward improving some aspects of supply
chain management, demonstrating sustained improvement has been a
continuing challenge due in part to a lack of outcome-oriented
performance measures that are consistent across the department and
that are linked to focus areas, such as requirements forecasting,
asset visibility, and materiel distribution, and related initiatives.
[Footnote 5]
In addition, successful resolution of weaknesses in supply chain
management depends on improvements in some of DOD's other high-risk
areas. For example, modernized business systems and the related
investments in needed information technology are essential to the
department's effort to achieve total asset visibility, an important
supply chain management issue. Regarding financial management, we have
repeatedly reported that weaknesses in business management systems,
processes, and internal controls not only adversely affect the
reliability of reported financial data but also the management of DOD
operations. Such weaknesses have adversely affected the ability of DOD
to control costs, ensure basic accountability, anticipate future costs
and claims on the budget, measure performance, maintain funds control,
and prevent fraud.
DOD's new Logistics Strategic Plan is intended to support other recent
strategic planning efforts in the department, including the completion
of the 2010 Quadrennial Defense Review and the publication of the 2009
Strategic Management Plan.[Footnote 6] The Quadrennial Defense Review
is a congressionally mandated report that provides a comprehensive
examination of the national defense strategy, force structure, force
modernization plans, infrastructure, budget plan, and other elements
of defense programs and policies. The review is to occur every 4
years, with a view toward determining and expressing the nation's
defense strategy and establishing a defense program for the next 20
years. Also in response to legislative requirements, DOD issued the
Strategic Management Plan in 2008 and updated it in 2009. The
Strategic Management Plan serves as DOD's strategy for improving its
business operations, and describes the steps DOD will take to better
integrate business with the department's strategic planning and
decision processes in order to manage performance.
Prior DOD Logistics Planning Efforts Identified Goals and Initiatives
but Fell Short of Providing a Comprehensive, Integrated Strategy:
Sound Strategic Planning Is Critical to an Agency's Results-Oriented
Management:
A key starting point in developing and implementing an effective
results-oriented management framework is an agency's strategic
planning effort. Our prior work has shown that strategic planning is
the foundation for defining what the agency seeks to accomplish,
identifying the strategies it will use to achieve desired results, and
then determining how well it succeeds in reaching results-oriented
goals and achieving objectives. Developing a strategic plan can help
clarify organizational priorities and unify the agency's staff in the
pursuit of shared goals. If done well, strategic planning is
continuous, provides the foundation for the most important things the
organization does each day, and fosters informed communication between
the organization and its stakeholders. Combined with effective
leadership, strategic planning provides decision makers with a
framework to guide program efforts and the means to determine if these
efforts are achieving the desired results.
The Government Performance and Results Act (GPRA) and associated
guidance from the Office of Management and Budget (OMB)[Footnote 7]
require, among other things, that government agencies periodically
develop agencywide strategic plans that contain certain necessary
elements to be used by the agency and external stakeholders in
decision making. Furthermore, recent OMB guidance concerning GPRA-
related strategic plans stated that such a strategic plan should also
provide sufficient context to explain why specific goals and
strategies were chosen.[Footnote 8] The strategic planning
requirements of GPRA and its implementation guidance generally only
apply to agencywide strategic plans.[Footnote 9]
While GPRA does not apply to DOD's Logistics Strategic Plan, our prior
work has identified many of GPRA's requirements as the foundation for
effective strategic planning. Our prior work has shown that
organizations conducting strategic planning need to develop a
comprehensive, results-oriented management framework to provide an
approach whereby program effectiveness is measured in terms of
outcomes or impact, rather than outputs, such as activities or
processes. Such a framework includes critical elements such as a
comprehensive mission statement, long-term goals, strategies to
achieve the goals, use of measures to gauge progress, identification
of key external factors that could affect the achievement of goals, a
description of how program evaluations will be used, and stakeholder
involvement in developing the plan. DOD internally has recognized the
importance of these critical elements. For example, the Office of the
Assistant Secretary of Defense for Logistics and Materiel Readiness
directed each of the services to conduct strategic planning for depot
maintenance and to submit plans that focus on achieving DOD's
strategy. The services were directed to include in their depot
maintenance plans many of the same strategic planning elements just
mentioned.[Footnote 10] In addition, we have reported that a strategic
planning process should align lower-level goals and measures with
departmentwide goals and measures, assign accountability for achieving
results, be able to demonstrate results and provide a comprehensive
view of performance, and link resource needs to performance. Further,
such a strategic planning process and the resulting plan should set
strategic direction, prioritize initiatives and resources, establish
investment priorities and guide key resource decisions, and monitor
progress through the establishment of performance goals and measures.
Finally, we found in previous work that DOD's prior strategic planning
efforts for logistics lacked information necessary to be more useful
tools for senior leaders, such as the inclusion of identified
logistics problems, performance measures, and a method for integrating
plans into existing decision-making processes.
DOD Has Issued Prior Strategic Plans on Logistics and Supply Chain
Management:
Over a number of years prior to the publication of its Logistics
Strategic Plan, DOD issued a series of strategic planning documents
for logistics and the management of its supply chain. These plans have
differed in scope and focus, although they have typically included a
number of high-level goals and related initiatives. For example, for a
period of several years beginning in the mid-1990s, DOD issued a
series of strategic plans for logistics. Later, the 2004 DOD Logistics
Transformation Strategy attempted to reconcile several of DOD's
ongoing logistics approaches, namely focused logistics, force-centric
logistics enterprise, and sense and respond logistics.[Footnote 11] In
2005, DOD issued the first iteration of its Supply Chain Management
Improvement Plan to address some of the systemic weaknesses that were
highlighted in our reports. That same year, DOD produced its Focused
Logistics Roadmap, which catalogued current ("as is") efforts and
initiatives.
Building on the "as is" Focused Logistics Roadmap, DOD recognized the
need for a comprehensive, integrated strategy for transforming
logistics and released its Logistics Roadmap in July 2008 to provide a
more coherent and authoritative framework for logistics improvement
efforts, including supply chain management.[Footnote 12] DOD indicated
that the roadmap would be a "living" document and that future updates
would incorporate new initiatives and programs, report progress toward
achieving logistics capability performance targets, and help connect
capability performance targets to current and planned logistics
investment for an overarching view of DOD's progress toward
transforming logistics.
The roadmap documented numerous initiatives and programs that were
then under way and organized these around goals, joint capabilities,
and objectives. However, we found that the roadmap was missing
information that would make it more useful for DOD's senior leaders.
[Footnote 13] First, it did not identify the scope of DOD's logistics
problems or gaps in logistics capabilities. Second, it lacked outcome-
based performance measures that would enable DOD to assess and track
progress toward meeting stated goals and objectives. Third, DOD had
not clearly stated how it intended to integrate the roadmap into DOD's
logistics decision-making processes or who within the department was
responsible for this integration. A comprehensive, integrated strategy
that includes these three elements is critical, in part, because of
the diffuse organization of DOD logistics, which is spread across
multiple DOD components with separate funding and management of
logistics resources and systems. Moreover, we stated that without
these elements, the roadmap would likely be of limited use to senior
DOD decision makers as they sought to improve supply chain management
and that DOD would have difficulty fully tracking progress toward
meeting its goals.
To address these weaknesses, we recommended that DOD include in future
updates of its Logistics Roadmap the elements necessary to have a
comprehensive, integrated strategy for improving logistics and to
clearly state how this strategy would be used within existing decision-
making processes. Specifically we recommended that DOD:
* identify the scope of logistics problems and capability gaps to be
addressed through the roadmap and associated efforts;
* develop, implement, and monitor outcome-focused performance measures
to assess progress toward achieving the roadmap's objectives and
goals; and:
* document specifically how the roadmap will be used within the
department's decision-making processes used to govern and fund
logistics and who will be responsible for its implementation.
DOD officials concurred with our recommendations and stated that they
planned to remedy some of these weaknesses in their follow-on efforts
to the roadmap. DOD officials subsequently stated that they had begun
a series of assessments of the objectives included in the roadmap in
order to identify capability gaps, shortfalls, and redundancies and to
recommend solutions. As part of this assessment process, DOD officials
stated that supply, maintenance, deployment, and distribution managers
had been tasked with determining which specific outcome-oriented
performance metrics could be linked to each of the objectives and
goals within the roadmap in order to assess progress toward achieving
desired results. DOD officials said that the results of these
assessments would be included in the next version of the roadmap,
which was scheduled for release in 2009. DOD further stated that a
joint Executive Advisory Committee made up of senior leaders
responsible for implementing logistics programs and initiatives had
been established to guide the roadmap process to ensure that it is a
useful tool in decision making.
DOD's 2010 Logistics Strategic Plan Provides High-Level Strategic
Direction:
The 2010 Logistics Strategic Plan is DOD's most recent effort to
provide high-level strategic direction for future logistics
improvement efforts, including those in the area of supply chain
management. According to DOD officials, the plan serves as an update
to the 2008 Logistics Roadmap. They further explained that the plan is
an effort to identify the enduring and ongoing logistics efforts
within the department and provide a good balance between the need for
specificity and generality, without the level of detail included in
the prior roadmap and with a broader scope than that provided in the
Supply Chain Management Improvement Plan.
The Logistics Strategic Plan articulates the department's logistics
mission and vision.[Footnote 14] The plan further states that to
continue improving logistics support to the warfighter, it is
essential that all elements of DOD's logistics community take steps to
better integrate logistics with strategic planning and decision
processes and to manage logistics performance. To drive the
department's logistics enterprise toward that end, the plan includes
goals, key initiatives, and some information on how DOD plans to track
progress, including general performance measures. Through the
inclusion of these elements, the plan provides unifying themes for
improvement efforts.
The Logistics Strategic Plan reiterates high-level department goals
drawn from both the Quadrennial Defense Review and the Strategic
Management Plan. For example, the Logistics Strategic Plan
incorporates two of the Strategic Management Plan's business
priorities: support contingency business operations to enhance support
to the deployed warfighter and reform the department's acquisition and
support processes. In addition, the Logistics Strategic Plan contains
four logistics goals:
Goal 1: Provide logistics support in accordance with warfighter
requirements.
Goal 2: Institutionalize operational contract support.
Goal 3: Ensure supportability, maintainability, and costs are
considered throughout the acquisition cycle.
Goal 4: Improve supply chain processes, synchronizing from end-to-end
and adopting challenging but achievable standards for each element of
the supply chain.
The plan lists 30 key initiatives related to the four logistics goals.
According to a senior DOD official, the initiatives were selected
based on the determination of officials within the Office of Assistant
Secretary of Defense for Logistics and Materiel Readiness and were
subsequently provided to the military services for review. In our
review of the plan, we noted that key initiatives appear to focus on
issues that we have identified as needing management attention. For
example, our prior work on warfighter and logistics support in Iraq
and Afghanistan has identified issues that directly relate to
initiatives that support Goal 1--provide logistics support in
accordance with warfighter requirements. We recently testified that
DOD has taken steps to improve distribution of materiel to deployed
forces in Afghanistan; however, we found several challenges that
included difficulties with transporting cargo through neighboring
countries and around Afghanistan, limited airfield infrastructure, and
lack of full visibility over cargo movements.[Footnote 15] The
Logistics Strategic Plan contains an initiative to facilitate
logistics support for Afghanistan, including interagency coordination
and development of transportation and distribution alternatives, as
needed. In addition, our work has also raised concerns about the lack
of risk assessments conducted for DOD's Civil Reserve Air Fleet
program, and DOD's management of the program has not provided air
carrier participants with a clear understanding of some critical areas
of the program. DOD's Logistics Strategic Plan includes a related
initiative.[Footnote 16]
With regard to Goal 2--institutionalize operational contract support--
we have issued reports over a period of many years on progress and
problems with contract support during contingency operations. We
testified in March 2010 that DOD had taken steps to institutionalize
operational contract support by appointing a focal point to lead
efforts, issuing guidance, and beginning to determine its reliance on
contractors; but we also identified ongoing challenges associated with
contractor support. These challenges include inadequate oversight and
management of contractors, providing training on how to work
effectively with contractors during operations, ensuring proper
screening of local and third-country nationals, compiling reliable
data on the number of contractors supporting U.S. forces in
contingencies, and identifying contractor requirements.[Footnote 17]
Our prior work related to Goal 3--ensure supportability,
maintainability, and costs are considered throughout the acquisition
cycle--includes reviews of weapon system life cycle management, depot
maintenance, and sustainment costs. For example, while we have noted
that DOD has placed increased emphasis on life cycle management, we
reported recently that DOD lacks key information on weapon system
operating and support costs and therefore may not be well-equipped to
analyze, manage, and ultimately reduce these costs.[Footnote 18]
Although all four goals of the Logistics Strategic Plan have aspects
relating to supply chain management, Goal 4 explicitly addresses the
need to improve supply chain processes. DOD identifies four success
indicators and three performance measures for this goal. The success
indicators address both the efficiency and effectiveness of DOD's
supply chain management. For example, one success indicator states
that enterprisewide solutions for the management of inventories and
services will optimize total supply chain costs, and another states
that effective demand planning will increase forecast accuracy and
reduce costs. The performance measures, which are listed separately
from the success indicators, include the percent of negotiated time
definite delivery standards met globally (by combatant command), the
percent of actual demand compared to forecasted demand,[Footnote 19]
and number of days of customer wait time (time from submission of
order to receipt of order) by lift area. The Logistics Strategic Plan
lists 12 key initiatives that support Goal 4. The key initiatives
focus on, among others issues, life cycle forecasting, the
distribution process, automatic identification technology, and the
department's human capital strategy for logistics personnel. We have
reported on some of these issues. For example, we reported in 2009
that DOD has taken steps to implement automatic identification
technologies, such as item unique identification and passive radio
frequency identification, to identify and track equipment and
supplies, but has experienced difficulty in fully demonstrating return
on investment to the military services responsible for implementation.
[Footnote 20]
The Logistics Strategic Plan also includes some information on how DOD
plans to track progress. The plan lists success indicators and
performance measures under each goal, and it states that the plan will
be implemented by following the performance management framework found
in the Strategic Management Plan. This framework contains six steps:
plan, set targets, cascade measures, align processes, assess and
report, and correct. By modeling the performance management framework
of the Logistics Strategic Plan after that of the broader Strategic
Management Plan, DOD officials expect that this alignment will
naturally have a complementary, behavior-shaping influence on
organizations subject to both plans.
Logistics Strategic Plan Lacks Specificity Regarding Strategies and
Time Frames:
Plan Lacks Detailed Information in Several Areas:
Although the Logistics Strategic Plan contains some key elements of an
effective strategic plan and provides unifying themes for improvement
efforts, it lacks detailed information regarding strategies and time
frames that would help to specify how and when goals will be achieved.
In our review of Goal 4, which focuses on supply chain processes, we
found that detailed information was lacking in several areas, which
may limit the plan's usefulness as a tool for decision makers,
including:
* Performance measurement information. While the plan presents three
performance measures associated with Goal 4, it lacks baseline or
trend data for past performance, measurable target-level information,
or time frames for the achievement of goals or completion of
initiatives. These are among the characteristics of successful
performance measures that we have identified in our prior work.
[Footnote 21] Such elements are needed to monitor the progress of
implementation efforts and to determine how far DOD and its components
must go to achieve success. In addition, there is not a clear linkage
between the three measures and the success indicators or key
initiatives under Goal 4. A senior DOD official stated that the
performance measures in Goal 4 were included to present information
about the overall functioning of the supply chain rather than specific
improvement efforts.
* Key concepts. Some concepts in the plan express broad, positive
ideas but are not fully defined. For example, Goal 4 states that
processes should be "synchronized end-to-end," and a success indicator
states that supply chain costs should be "optimized." The plan,
however, does not define what aspects of the supply chain need further
synchronization, how costs should be further optimized, or how DOD
will gauge progress in these efforts.
* Problems and capability gaps. The plan does not include a discussion
about overall departmentwide or DOD component-specific logistics
problems or challenges, nor does it indicate the extent or severity of
any identified capability gaps. Such information is necessary to
establish a clear and common understanding of what problems and gaps
the plan is trying to address. For example, the plan does not discuss
logistics problems encountered during operations in Iraq and
Afghanistan. We raised a similar concern about the 2008 Logistics
Roadmap.
* Resource needs. The plan does not discuss resources needed to
implement improvement efforts. As noted, an effective strategic
planning process should be able to link resource needs to performance,
prioritize initiatives and resources, establish investment priorities,
and guide key resource decisions.
In the absence of more detailed information in these areas, the
usefulness of the Logistics Strategic Plan for decision making may be
limited. Measuring performance, for example, allows for tracking
progress toward goals and gives managers crucial information on which
to base their decisions. In addition, if the plan included information
on problems, capability gaps, and resource needs, managers could use
the plan as a basis for establishing priorities for formulating,
funding, and implementing corrective actions. DOD has recognized the
need to include some of this information, and the plan states DOD's
intent to establish baseline performance and then measure that
performance against interim targets through an annual assessment
process.
Plan Does Not Show Explicit Links with Related Supply Chain Management
Plans and Activities:
Although the Logistics Strategic Plan is linked to some broader
strategic plans, it does not show explicit links with other strategic
plans of supply chain or logistics defense components, and the link
between that plan and some major logistics activities is not clear.
These plans and activities could have a major role in shaping future
logistics capabilities and functions. Some DOD components have issued
their own strategic plans, but the linkages between the logistics-
related issues in those plans and the Logistics Strategic Plan are not
transparent. DOD states in the Logistics Strategic Plan that the
combatant commands, military departments, and defense agencies should
review and revise their respective strategic plans and associated
goals, objectives, measures, and targets to reflect the Logistics
Strategic Plan's broader priorities. Moreover, DOD indicates that
logistics leaders at the component level may find it necessary to
realign operations and organizational structures to better integrate
functional activities with larger end-to-end processes. However, the
mechanism for ensuring that needed changes are made is not specified.
Further, the plan does not reflect some activities and information
that could affect supply chain management. For example, the military
services have ongoing supply chain management improvement efforts
under way; however, there is no explicit mention of these service-
level efforts or goals, initiatives, or measures, even though the
services have important responsibilities for carrying out logistics
and supply chain functions. In addition, officials from various
components stated that the Joint Supply Joint Integrating Concept, co-
led by the Joint Staff and DLA, is a major ongoing effort. However,
this concept is not discussed in the Logistics Strategic Plan. The
purpose of this concept is to guide development and employment of
future joint supply capabilities.
It is not clear how the Logistics Strategic Plan will be used within
the existing logistics governance framework to assist decision makers
and influence resource decisions and priorities. For example, the plan
states that the Joint Logistics Board and executive-level functional
logistics governance bodies play critical roles in providing oversight
and guidance to implementation of the Logistics Strategic Plan. While
the Joint Logistics Board and other bodies may play critical roles in
DOD's supply chain management improvement efforts, their roles are not
defined in the plan. In addition, the organizations responsible for
key initiatives included in the plan are not identified.
Similarly, the plan does not clearly define how oversight of plan
implementation will occur. The plan briefly mentions the development
of a Logistics Strategic Management Report that, along with a
management dashboard of measures maintained by the Under Secretary of
Defense for Acquisition, Technology and Logistics, will be used to
report progress. However, the specific process or responsibilities for
ensuring that corrective actions are taken in response to
underperformance are not detailed in the plan. DOD officials stated
that corrective actions are the responsibility of process or activity
owners, while the responsibilities defined in the Logistics Strategic
Plan include "implement corrective actions" as a responsibility of the
Assistant Secretary of Defense for Logistics and Materiel Readiness.
In its description of performance management, the plan states that
accountable individuals will identify and implement corrections.
Lastly, budget development is an important aspect of the existing
governance framework, yet DOD has not shown how the plan will be used
to help shape logistics budgets developed departmentwide or by
individual components.
In conclusion, strategic plans need to remain at a high enough level
to provide a clear vision and direction for improvement, but without
more specific information in the Logistics Strategic Plan, it will be
difficult for DOD to demonstrate progress in addressing supply chain
management problems and provide Congress with assurance that the DOD
supply chain is fulfilling the department's goal of providing cost-
effective joint logistics support for the warfighter.
Mr. Chairman, this concludes our prepared remarks. We would be happy
to answer any questions you or other Members of the Subcommittee may
have at this time.
Contacts and Acknowledgments:
For further information regarding this testimony, please contact Jack
E. Edwards at (202) 512-8246 or edwardsj@gao.gov or William M. Solis
at (202) 512-8365 or solisw@gao.gov. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last
page of this statement. Individuals making contributions to this
testimony include Tom Gosling, Assistant Director; Jeffrey Heit;
Suzanne Perkins; Pauline Reaves; and William Varettoni.
[End of section]
Footnotes:
[1] GAO, High-Risk Series: An Update, [hyperlink,
http://www.gao.gov/products/GAO-09-271] (Washington, D.C.: January
2009); High-Risk Series: An Update, [hyperlink,
http://www.gao.gov/products/GAO-07-310] (Washington, D.C.: January
2007); and High-Risk Series: An Update, [hyperlink,
http://www.gao.gov/products/GAO-05-207] (Washington, D.C.: January
2005).
[2] Department of Defense, Office of the Secretary of Defense,
Principal Deputy Assistant Secretary of Defense for Logistics and
Materiel Readiness, Department of Defense Logistics Strategic Plan,
July 2010.
[3] Those standards require that we plan and perform the audit to
obtain sufficient, appropriate evidence to provide a reasonable basis
for our findings and conclusions based on our audit objectives. We
believe that the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives.
[4] Remarks delivered by Secretary of Defense Robert M. Gates in
Abilene, Kansas (May 8, 2010).
[5] For our prior statements on supply chain management, see GAO,
DOD's High-Risk Areas: Efforts to Improve Supply Chain Can Be Enhanced
by Linkage to Outcomes, Progress in Transforming Business Operations,
and Reexamination of Logistics Governance and Strategy, [hyperlink,
http://www.gao.gov/products/GAO-07-1064T] (Washington, D.C.: July 10,
2007); DOD's High-Risk Areas: Challenges Remain to Achieving and
Demonstrating Progress in Supply Chain Management, [hyperlink,
http://www.gao.gov/products/GAO-06-983T] (Washington, D.C.: July 25,
2006); and DOD's High-Risk Areas: High-Level Commitment and Oversight
Needed for DOD Supply Chain Plan to Succeed, [hyperlink,
http://www.gao.gov/products/GAO-06-113T] (Washington, D.C.: Oct. 6,
2005).
[6] Office of the Secretary of Defense, Quadrennial Defense Review
Report (February 2010), and Office of the Deputy Chief Management
Officer, Strategic Management Plan (July 31, 2009).
[7] Government Performance and Results Act of 1993, Pub. L. No 103-62
(1993), and OMB Circular No. A-11, Preparation, Submission and
Execution of the Budget (Aug. 7, 2009).
[8] OMB Memorandum M-10-24, Performance Improvement Guidance:
Management Responsibilities and Government Performance and Results Act
Documents (June 25, 2010).
[9] DOD views the Quadrennial Defense Review as fulfilling the
requirement for an agency strategic plan.
[10] See, for example, GAO, Depot Maintenance: Improved Strategic
Planning Needed to Ensure That Air Force Depots Can Meet Future
Maintenance Requirements, [hyperlink,
http://www.gao.gov/products/GAO-10-526] (Washington, D.C.: May 14,
2010).
[11] Focused logistics was a concept for force transformation
developed by the Joint Chiefs of Staff that identified logistics
challenges and capabilities needed to meet the challenges. Force-
centric logistics enterprise was an OSD concept for enhancing support
to the warfighter that encompassed six initiatives. Sense and respond
logistics was a future logistics concept developed by the department's
Office of Force Transformation that envisioned a networked logistics
system that would provide joint strategic and tactical operations with
predictive, precise, and agile support.
[12] Office of the Secretary of Defense, Deputy Under Secretary of
Defense for Logistics and Materiel Readiness, Department of Defense
Logistics Roadmap, July 2008.
[13] GAO, Defense Logistics: Lack of Key Information May Impede DOD's
Ability to Improve Supply Chain Management, [hyperlink,
http://www.gao.gov/products/GAO-09-150] (Washington, D.C.: Jan. 12,
2009).
[14] According to the plan, DOD's logistics mission is to provide
globally responsive, operationally precise, and cost-effective joint
logistics support for the projection and sustainment of America's
warfighters. The logistics vision is to have a logistics enterprise
ready to support any combination of combat, security, engagement, and
relief and reconstruction operations.
[15] GAO, Warfighter Support: Preliminary Observations on DOD's
Progress and Challenges in Distributing Supplies and Equipment to
Afghanistan, [hyperlink, http://www.gao.gov/products/GAO-10-842T]
(Washington, D.C.: June 25, 2010).
[16] GAO, Military Airlift: DOD Should Take Steps to Strengthen
Management of the Civil Reserve Air Fleet Program, [hyperlink,
http://www.gao.gov/products/GAO-09-625] (Washington, D.C.: Sept. 30,
2009).
[17] GAO, Warfighter Support: Continued Actions Needed by DOD to
Improve and Institutionalize Contractor Support in Contingency
Operations, [hyperlink, http://www.gao.gov/products/GAO-10-551T]
(Washington, D.C.: Mar. 17, 2010).
[18] GAO, Defense Management: DOD Needs Better Information and
Guidance to More Effectively Manage and Reduce Operating and Support
Costs of Major Weapon Systems, [hyperlink,
http://www.gao.gov/products/GAO-10-717] (Washington, D.C.: July 20,
2010).
[19] Although not noted as such in the Logistics Strategic Plan, the
performance measure for the percent of actual demand compared to
forecasted demand is described as under development in the Strategic
Management Plan.
[20] [hyperlink, http://www.gao.gov/products/GAO-09-150].
[21] GAO, Agency Performance Plans: Examples of Practices That Can
Improve Usefulness to Decisionmakers, [hyperlink,
http://www.gao.gov/products/GAO/GGD/AIMD-99-69] (Washington, D.C.:
Feb. 26, 1999), and Tax Administration: IRS Needs to Further Refine
Its Tax Filing Season Performance Measures, [hyperlink,
http://www.gao.gov/products/GAO-03-143] (Washington, D.C.: Nov. 22,
2002).
[End of section]
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