DOD Medical Inventory

The Defense Department's (DOD) health care system can save millions of dollars by increased use of inventory management practices pioneered by leading civilian hospitals. Military medical facilities and warehouses GAO visited hold layers of supplies to satisfy peacetime requirements and also provide initial supplies for wartime. The warehouses GAO visited held additional inventory that would last for 36 to 95 days. Finally, the Defense Logistics Agency stores additional supplies that would last about 250 days. In contrast, very progressive civilian hospitals maintain much smaller levels and fewer layers of supplies and have no depot system. These hospitals, through improved ordering systems, standardization of supplies, and better communication with vendors, have greatly reduced supply inventories and have vendors deliver supplies where and when they are needed. Both DOD and the Department of Veterans Affairs are trying to improve their medical logistics. GAO summarized this report in testimony before Congress; see: DOD Medical Inventory: Reductions Are Possible Through the Use of Commercial Practices, by Donna M. Heivilin, Director of Logistics Issues, before the Subcommittee on Oversight of Government Management, Senate Committee on Governmental Affairs. GAO/T-NSIAD-92-6, Dec. 5, 1991 (13 pages).

GAO found that: (1) the DOD health care system could save millions of dollars by increasing its use of inventory management practices pioneered by leading civilian hospitals, such as the standardization of supplies, electronic ordering, and just-in-time and stockless delivery programs; (2) DOD warehouses hold inventory that would last for 36 to 95 days, and the Defense Logistics Agency (DLA), through its depot system, stores another layer of supplies that would last approximately 250 days; (3) progressive civilian hospitals maintain much smaller levels and fewer layers of supplies, have no depot system, have reduced or eliminated the need for outside warehouses and central supply rooms, and have reduced the volume of work on loading docks; (4) since 1988, VA has relied on vendors to deliver certain intraveneous solutions and related supplies directly to its hospitals, and, as a result, expects this program to save approximately $75 million over a 5-year period; (5) VA implemented a pilot at 32 of its hospitals that should eliminate the need to store some of its pharmaceuticals in its warehouse system; and (6) according to a DOD evaluation of business practices associated with its medical logistics systems, changes that may be called for include revising military regulations, policies, and procedures and changing the DLA role to contracting and paying for, but not storing, military supplies.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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