Defense Logistics:

DOD Needs to Take Additional Actions to Address Challenges in Supply Chain Management

GAO-11-569: Published: Jul 28, 2011. Publicly Released: Jul 28, 2011.

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DOD estimated that overall spending on logistics, including supply chain management, was more than $210 billion in fiscal year 2010. Because of long-standing weaknesses in supply chain management, GAO has designated DOD supply chain management as a high-risk area and identified three focus areas for improvement--requirements forecasting, asset visibility, and materiel distribution. GAO reviewed the extent to which DOD has developed and implemented (1) corrective action plans that address challenges in the three focus areas, (2) an effective program for monitoring and validating the effectiveness and sustainability of supply chain management corrective actions, and (3) an ability to demonstrate supply chain management progress. GAO prepared this report to assist Congress in its oversight of DOD's supply chain management. GAO reviewed strategic and improvement plans, reviewed documents detailing the performance management framework, and assessed performance measures.

DOD has developed and begun to implement a corrective action plan for requirements forecasting, one of the three focus areas GAO identified as needing improvement in supply chain management. However, it does not have similar plans for the focus areas of asset visibility or materiel distribution. Such corrective action plans are critical to resolving weaknesses in these two areas. Such plans should (1) define root causes of problems, (2) identify effective solutions, and (3) provide for substantially completing corrective measures in the near-term, including steps necessary to implement solutions. DOD's Comprehensive Inventory Management Improvement Plan, issued in October 2010 in response to a statutory mandate, includes the elements necessary to serve as a corrective action plan for requirements forecasting. DOD's 2010 Logistics Strategic Plan, and other prior logistics-related plans, do not contain all of the elements needed to serve as corrective action plans for either asset visibility or materiel distribution, such as definition of problems or performance information to gauge progress in achieving outcomes. DOD outlined a performance management framework that is designed to provide guidance and oversight of logistics efforts, including supply chain improvement efforts. GAO's prior work has shown that in order for agencies to address challenges, they need to institute a program to monitor and validate the effectiveness and sustainability of corrective actions. The framework, as outlined in the 2010 Logistics Strategic Plan, offers a new management tool that may enable DOD to manage performance in supply chain management. For example, it calls for an ongoing assessment and feedback process that could help to ensure that improvement efforts are effective. However, DOD has not included key elements for instituting its performance management framework, such as implementing guidance to affected stakeholders, a strategy to communicate results internally and to stakeholders such as Congress, or definition of the roles and responsibilities of senior logistics governance bodies and chief management officers. Until the framework is fully instituted, DOD may not be able to effectively use this new management tool to monitor the effectiveness of corrective actions. DOD and its components track many aspects of the supply chain; however, DOD does not have performance measures that assess the overall effectiveness and efficiency of the supply chain across the enterprise. In order to fully address challenges, agencies must be able to demonstrate progress achieved through corrective actions, which is possible through the reporting of performance measures. In the development of its inventory management improvement plan, a collaborative process was used to define existing and needed performance measures for requirements forecasting. A similar collaborative focus on developing enterprisewide performance measures for asset visibility and materiel distribution has not occurred. The department may have difficulty demonstrating progress until enterprisewide performance measures are developed and implemented in all three focus areas for improving its supply chain management. GAO recommends that DOD develop and implement corrective action plans and performance measures for asset visibility and materiel distribution and take steps to fully institute its performance management framework. DOD concurred or partially concurred with two recommendations and did not concur with four, citing ongoing initiatives and existing policy. GAO believes all recommendations remain valid, as further discussed in the report.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: To improve DOD's supply chain management and address challenges in this high-risk area, the Secretary of Defense should clearly define the department's Chief Management Officer's (CMO) and Deputy CMO's roles and responsibilities as they specifically relate (1) the performance management framework for logistics, including the establishment of corrective action plans and related performance measures; (2) existing governance bodies for logistics; and (3) the alignment of supply chain management improvement plans and performance management with those of DOD's other business operations areas.

    Agency Affected: Department of Defense

    Status: Open

    Comments: DOD did not concur with this recommendation and stated that this recommendation is not required because the DCMO roles and responsibilities are documented in the DoDD 5105.82. DOD thus considers this recommendation closed; therefore, it is unlikely that the department will reissue the DCMO directive to more clearly describe the DCMO role in the performance management framework and governance bodies for logistics. However, it is possible that future updates of the Strategic Management Plan, the Logistics Strategic Plan, or focus area plans could more clearly discuss DCMO involvement. Therefore, we will continue to monitor developments in this area.

    Recommendation: To improve DOD's supply chain management and address challenges in this high-risk area, and to institute the performance management framework for guiding and overseeing supply chain management and other logistics improvement efforts, the Secretary of Defense should direct the Under Secretary of Defense for Acquisition, Technology and Logistics to revise the existing charter of the Joint Logistics Board and the draft charter of the Supply Chain Executive Steering Committee to define and describe how the governance bodies will participate in the performance management framework for logistics.

    Agency Affected: Department of Defense

    Status: Open

    Comments: DOD partially concurred and stated that while the performance management framework process is not explicitly described in the existing governance charters, these charters reflect that these forums act as oversight, coordination, and information-sharing bodies for logistics initiatives and issues. According to DOD's comments on the draft report, no change is required to the Joint Logistics Board charter and the Supply Chain Executive Steering Committee charter will be revised to explicitly address reviews that are of performance measures and initiatives designed to drive logistics improvements. DOD now considers this recommendation closed, and it informed the DOD-IG that the Supply Chain Executive Steering Committee charter was updated on October 7, 2011 to explicitly address reviews of performance measures and initiatives designed to drive logistics improvements. DOD has not yet provided a provide us a copy of the revised charter. Upon obtaining and reviewing the charter, we will determine whether the changes that were made meet the intent of this recommendation.

    Recommendation: To improve DOD's supply chain management and address challenges in this high-risk area, and to institute the performance management framework for guiding and overseeing supply chain management and other logistics improvement efforts, the Secretary of Defense should direct the Under Secretary of Defense for Acquisition, Technology and Logistics to develop and implement a communications strategy for documenting and reporting on the results of supply chain management improvement efforts. The strategy should be linked with corrective actions plans, contain performance measurement information, and inform both internal and external stakeholders, including Congress.

    Agency Affected: Department of Defense

    Status: Open

    Comments: DOD did not concur with this recommendation and thus considers this recommendation closed. In an update to the DOD-IG, DOD stated that an additional communications strategy is not required because the Department's senior logistics leadership is continuously engaged in communicating its goals and performance to internal and external stakeholders via governing bodies, public forums, and formal reporting to Congress. The Department will continue to employ monthly in-process reviews of supply chain management improvement efforts as its communications strategy with DOD components. These in-process reviews with component senior logistics leaders address corrective actions and discuss performance management information. DOD has yet to issue an updated Logistics Strategic Plan, the supply chain guide, or plans for the distribution and asset visibility supply chain management focus areas. We will continue to monitor future developments in this area, to include any efforts to develop and implement a communications strategy as recommended.

    Recommendation: To improve DOD's supply chain management and address challenges in this high-risk area, and to institute the performance management framework for guiding and overseeing supply chain management and other logistics improvement efforts, the Secretary of Defense should direct the Under Secretary of Defense for Acquisition, Technology and Logistics to develop and issue detailed guidance to affected stakeholders involved in implementing the performance management framework for logistics.

    Agency Affected: Department of Defense

    Status: Open

    Comments: DOD concurred with this recommendation and initially stated that guidance would be provided by the end of fiscal year 2011. In subsequent updates provided to the DOD-IG, DOD indicated that guidance would be included in the Supply Chain Metrics Reference Guide, which will contain detailed information (definition, business rules, collection procedures, authoritative data sources, etc). According to DOD, the guide is still in development. As of July 2013, DOD had yet to issue guidance or the supply chain guide.

    Recommendation: To improve DOD's supply chain management and address challenges in this high-risk area, and to address remaining challenges in asset visibility and materiel distribution, the Secretary of Defense should direct the Under Secretary for Defense for Acquisition, Technology and Logistics to develop and implement corrective action plans for improving these focus areas. As these two areas are closely interrelated, DOD may wish to consider creating a single comprehensive, integrated plan that addressed both focus areas for improvement. The corrective action plan or plans should (1) identify the scope and root causes of capability gaps and other problems, effective solutions, and actions to be taken to implement the solutions; (2) include the characteristics of effective strategic planning, including a mission statement; goals and related strategies (for example, objectives and activities); performance measures and associated milestones, benchmarks, and targets for improvement; resources and investments required for implementation; key external factors that could affect the achievement of goals; and the involvement of all key stakeholders in a collaborative process to develop and implement the plan; and (3) document how the department will integrate these plans with its other decision-making processes; delineate organizational roles and responsibilities; and support departmentwide priorities identified in higher-level strategic guidance (such as the "Strategic Management Plan and Logistics Strategic Plan").

    Agency Affected: Department of Defense

    Status: Open

    Comments: DOD did not concur, and thus considers this recommendation closed. In comments provided to the DOD-IG, DOD stated that a single plan was not necessary as it engaged in major efforts to improve asset visibility and materiel distribution (e.g., Distribution Strategic Opportunities, Distribution Network Optimization, and the Comprehensive Inventory Management Plan), and each effort has specific goals, milestones, targets, and involves key stakeholders GAO found in February 2013 that DOD had developed a draft asset visibility strategy that was to be issued in June 2013. However, according to a DOD supply chain official, this draft strategy has yet to be finalized as of July 2013 and a final strategy was expected by the end of fiscal year 2013. Regarding distribution, GAO found in August 2012 that DOD had made improvements to its distribution network through several initiatives. However, some initiatives were still in development and none of the key initiatives utilized by DOD address tactical movement of supplies and equipment within theaters of operation, such as Afghanistan. We will continue to monitor DOD efforts to issue and execute its asset visibility strategy and to address needed distribution improvements.

    Recommendation: To improve DOD's supply chain management and address challenges in this high-risk area, the Secretary of Defense should direct the Under Secretary of Defense for Acquisition, Technology and Logistics to use a collaborative process, involving all key stakeholders, to identify, develop, and implement enterprisewide performance measures needed to demonstrate progress in the focus areas of asset visibility and materiel distribution. These measures should be incorporated into corrective action plans and the performance management framework.

    Agency Affected: Department of Defense

    Status: Open

    Comments: DOD did not concur and considers this recommendation closed. DOD stated that no additional action is required because enterprise-wide performance measures have been and continue to be developed using a collaborative process involving all stakeholders. According to DOD's comments on the draft report, the Department is following this process in a collaborative fashion involving all key stakeholders in the identification, development, and implementation of enterprise-wide performance measures to demonstrate progress in key areas, including asset visibility and materiel distribution. DOD further stated that ongoing efforts to improve asset visibility and materiel distribution (e.g., Distribution Strategic Opportunities, Distribution Network Optimization, and the Comprehensive Inventory Management Improvement Plan) leverage the collaborative processes with DOD components in identifying problems, solutions, performance measures, corrective actions and targeted improvements in theater operations, forward positioning of materiel, and forecast/demand planning. However, DOD has not yet finalized its asset visibility strategy; upon issuance, we will review it to determine the extent to which enterprise-wide performance measures are included. Further, DOD stated that is was developing a supply chain guide that would clearly identify all supply chain performance measures. We will continue to monitor efforts in this area.

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