DOD's High-Risk Areas:
Progress Made Implementing Supply Chain Management Recommendations, but Full Extent of Improvement Unknown
GAO-07-234: Published: Jan 17, 2007. Publicly Released: Jan 17, 2007.
Military operations in Iraq and Afghanistan have focused attention on the Department of Defense's (DOD) supply chain management. The supply chain can be critical to determining outcomes on the battlefield, and the investment of resources in DOD's supply chain is substantial. In 2005, with the encouragement of the Office of Management and Budget (OMB), DOD prepared an improvement plan to address some of the systemic weaknesses in supply chain management. GAO was asked to monitor implementation of the plan and DOD's progress toward improving supply chain management. GAO reviewed (1) the integration of supply chain management with broader defense business transformation and strategic logistics planning efforts; and (2) the extent DOD is able to demonstrate progress. In addition, GAO developed a baseline of prior supply chain management recommendations. GAO surveyed supply chain-related reports issued since October 2001, identified common themes, and determined the status of the recommendations.
DOD's success in improving supply chain management is closely linked with its defense business transformation efforts and completion of a comprehensive, integrated logistics strategy. Based on GAO's prior reviews and recommendations, GAO has concluded that progress in DOD's overall approach to business defense transformation is needed to confront problems in other high-risk areas, including supply chain management. DOD has taken several actions intended to advance business transformation, including the establishment of new governance structures and the issuance of an Enterprise Transition Plan aligned with the department's business enterprise architecture. As a separate effort, DOD has been developing a strategy--called the "To Be" logistics roadmap--to guide logistics programs and initiatives across the department. The strategy would identify the scope of logistics problems and capability gaps to be addressed and include specific performance goals, programs, milestones, and metrics. However, DOD has not identified a target date for completion of this effort. According to DOD officials, its completion is pending the results of the department's ongoing test of new concepts for managing logistic capabilities. Without a comprehensive, integrated strategy, decision makers will lack the means to effectively guide logistics efforts, including supply chain management, and the ability to determine if these efforts are achieving desired results. DOD has taken a number of actions to improve supply chain management, but the department is unable to demonstrate at this time the full extent of its progress that may have resulted from its efforts. In addition to implementing audit recommendations, DOD is implementing initiatives in its supply chain management improvement plan. However, it is unclear how much progress its actions have resulted in because the plan generally lacks outcome-focused performance metrics that track progress in the three focus areas and at the initiative level. DOD's plan includes four high-level performance measures, but these measures do not explicitly relate to the focus areas, and they may be affected by many variables, such as disruptions in the distribution process, other than DOD's supply chain initiatives. Further, the plan does not include overall cost metrics that might show efficiencies gained through the efforts. Therefore, it is unclear whether DOD is meeting its stated goal of improving the provision of supplies to the warfighter and improving readiness of equipment while reducing or avoiding costs. Over the last 5 years, audit organizations have made more than 400 recommendations that focused specifically on improving certain aspects of DOD's supply chain management. About two-thirds of the recommendations had been closed at the time GAO conducted its review, and most of these were considered implemented. Of the total recommendations, 41 percent covered the focus areas in DOD's supply chain management improvement plan: requirements forecasting, asset visibility, and materiel distribution. The recommendations addressed five common themes--management oversight, performance tracking, planning, policy, and processes.
Recommendations for Executive Action
Status: Closed - Implemented
Comments: In its written comments on a draft of this report, DOD concurred with this recommendation and stated that the strategy is under development and is aligned with other defense business transformation efforts. In July 2008, DOD released it Logistics Roadmap with the intent to develop a more coherent and authoritative framework for guiding, measuring, and tracking logistics improvement efforts. While additional refinements are needed, as indicated by our subsequent work (GAO-09-150), this roadmap meets the intent of our recommendation of completing the development of its strategy.
Recommendation: To improve DOD's ability to guide logistics programs and initiatives across the department and to demonstrate the effectiveness, efficiency, and impact of its efforts to resolve supply chain management problems, the Secretary of Defense should direct the Under Secretary for Defense Acquisition, Technology, and Logistics to complete the development of a comprehensive, integrated logistics strategy that is aligned with other defense business transformation efforts, including the Enterprise Transition Plan. To facilitate the completion of the strategy, DOD should establish a specific target for its completion. Further, DOD should take steps as appropriate to ensure the supply chain management improvement plan and component-level logistics plans are synchronized with the department's overall logistics strategy.
Agency Affected: Department of Defense
Status: Closed - Not Implemented
Comments: In its written comments on a draft of the report, DOD concurred with this recommendation. However, our subsequent work indicated that although DOD issued new logistics plans, including the 2008 Logistics Roadmap and the 2010 Logistics Strategic Plan, that addressed supply chain management and specific initiatives, it had not developed outcome-focused and cost metrics for its key initiatives. In 2009, for example, we reported that although DOD had undertaken initial implementation efforts of two initiatives focused on improving asset visibility--item unique identification (IUID) and passive radio frequency identification (passive RFID), it was not collecting data on implementation costs or performance-based outcome measures that would enable the department to quantify the return on investment associated with these initiatives. In the 2011 update to GAO's High-Risk Series, we stated that key to DOD's ability to demonstrate progress in addressing supply chain management challenges was the development and implementation of outcome-based performance measures. DOD had identified some performance measures in both the 2010 Logistics Strategic Plan and its Comprehensive Inventory Management Improvement Plan, also issued in 2010; however other needed measures have yet to be defined. As of 2011, DOD also had an ongoing effort to develop supply chain management metrics based on a private sector model.
Recommendation: To improve DOD's ability to guide logistics programs and initiatives across the department and to demonstrate the effectiveness, efficiency, and impact of its efforts to resolve supply chain management problems, the Secretary of Defense should direct the Under Secretary for Defense Acquisition, Technology, and Logistics to develop, implement, and monitor outcome-focused performance and cost metrics for all the individual initiatives in the supply chain management improvement plan as well as for the plan's focus areas of requirements forecasting, asset visibility, and materiel distribution.
Agency Affected: Department of Defense