Commercial Practices:

DOD Could Save Millions by Reducing Maintenance and Repair Inventories

NSIAD-93-155: Published: Jun 7, 1993. Publicly Released: Jul 22, 1993.

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Pursuant to a congressional request, GAO reviewed: (1) the Department of Defense's (DOD) construction, general, and industrial logistics practices; and (2) commercial practices that DOD could adopt to improve its operations and reduce inventory costs.

GAO found that: (1) DOD retains large quantities of excess inventories because of duplicative purchasing and inventory retention practices among the military services, the Defense Logistics Agency (DLA), and DOD maintenance personnel; (2) DLA contract administration, technical support, material handling and packing, and inventory maintenance increase DOD inventory management costs; (3) DOD is developing new inventory management practices to balance suppliers' and users' needs, use vendors as intermediaries, and increase delivery and service; (4) private-industry management practices to reduce inventory and storage costs include consolidating supplier activities, establishing programs to reduce obsolete inventories, using new computer software to better monitor inventories, standardizing inventories, and using electronic systems to link users with vendors; (5) DLA has had limited success in implementing commercial inventory management practices; (6) DOD initiatives to improve logistics operations include establishing long-term contracts, implementing direct delivery systems, using prime vendors for supplies, and developing electronic ordering systems; and (7) although the military services have incorporated commercial inventory management practices at some installations, the programs have not been implemented on a servicewide basis.

Recommendations for Executive Action

  1. Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Defense should direct DLA and the military services to develop test programs that will determine the applicability of commercial practices to military industrial centers. These efforts should include facilities from the Army, the Navy, and the Air Force, encompass all aspects of inventory management, and quantify the costs and benefits of the changes. Among the practices that should be included are: (1) reducing unnecessary inventory requirements at each center; (2) establishing electronic ordering, invoicing, and bill-paying functions between vendors and DOD facilities; (3) using supplier parks near DOD maintenance facilities (such as air logistics centers) that use the supplies; and (4) eliminating the need to store supplies in the DLA depot system.

    Agency Affected: Department of Defense

  2. Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: After the practices have been tested, the military services should tailor the changes required at their facilities to apply the successful results of the test programs. Under this flexible approach, DOD could work around special situations, such as the unavailability of commercial distribution systems and overseas operations, and at the same time improve its logistics system and save money.

    Agency Affected: Department of Defense: Department of the Air Force

  3. Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: After the practices have been tested, the military services should tailor the changes required at their facilities to apply the successful results of the test programs. Under this flexible approach, DOD could work around special situations, such as the unavailability of commercial distribution systems and overseas operations, and at the same time improve its logistics system and save money.

    Agency Affected: Department of Defense: Department of the Navy

  4. Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: After the practices have been tested, the military services should tailor the changes required at their facilities to apply the successful results of the test programs. Under this flexible approach, DOD could work around special situations, such as the unavailability of commercial distribution systems and overseas operations, and at the same time improve its logistics system and save money.

    Agency Affected: Department of Defense

 

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