Inventory Management:

The Army Could Reduce Logistics Costs for Aviation Parts by Adopting Best Practices

NSIAD-97-82: Published: Apr 15, 1997. Publicly Released: Apr 15, 1997.

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Pursuant to a congressional request, GAO reviewed the Army's logistics system for aviation parts, focusing on: (1) the current performance of the Army's logistics system; (2) the Army's efforts to improve the logistics system and reduce costs; and (3) opportunities where best practices could be incorporated into the Army's logistics operations. GAO did not test or otherwise validate the Army's data.

GAO noted that: (1) the Army's efforts to improve its logistics pipeline for aviation parts and reduce logistics costs could be enhanced by incorporating best practices GAO has identified in the private sector; (2) the Army's current repair pipeline, characterized by a $2.6-billion investment in aviation parts, is slow and inefficient; and (3) several factors contribute to the long pipeline time, including: (a) broken reparable parts move slowly between field units and a repair depot; (b) reparable parts are stored in warehouses for several months before and after they are repaired; (c) repair depots are inefficiently organized; and (d) consumable parts are not available to mechanics when needed; (4) the Army has recognized that it must improve its logistics systems; (5) under a recently established program called "Velocity Management," the Army plans to focus on and improve repair of components, order and shipment of parts, inventory levels, and financial management; (6) the program is in the initial stages of development and has had limited success in actual Army-wide process improvements to date; (7) best practices used in the airline industry provide opportunities to build on the Army's efforts to improve its logistics pipeline; (8) GAO identified key best practices to address each of the four factors contributing to the Army's long pipeline time: (a) third-party logistics services can assume warehousing and distribution functions, and provide rapid delivery of parts and state-of-the-art information systems that would speed the shipment of parts between depots and field locations; (b) eliminating excess inventory and quickly initiating repair actions can reduce the amount of time parts are stored, improve the visibility of production backlogs, and reduce the need for large inventory to cover operations while parts are out of service; (c) cellular manufacturing techniques can improve repair shop efficiency by bringing all the resources needed to complete repairs to one location, thereby minimizing the current time-consuming exercise of routing parts to different workshops located hundreds of yards apart; and (d) innovative supplier partnerships can increase the availability of consumable parts, minimize the time it takes to deliver parts to mechanics, and delay the purchase of parts until they are needed to complete repairs; and (9) although GAO cannot say that these practices can be successfully integrated into the Army's system, GAO believes they are compatible with many aspects of the Army's operations and the Velocity Management Program.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The US Army Materiel Command selected Anniston Army depot as the depot repair location for testing the prime vendor and integrated supplier concepts. In addition, the Army selected Fort Riley as the test site for an operating base repair activity. DLA, in coordination with the services, has developed an approach that will be used to assess the costs and benefits for testing the prime vendor and integrated supplier concepts.

    Recommendation: As part of the Army's current efforts to improve the logistics system's responsiveness and reduce its complexity, the Secretary of Defense should direct the Secretary of the Army, working with the Defense Logistics Agency (DLA), to develop a demonstration project to determine the extent to which the Army can apply best practices to its logistics operations.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: The Commanding General of the Army Material Command has been designated as the "change agent."

    Recommendation: The Secretary of the Army should appoint an accountable "change agent" for this program who will periodically report back to the Secretary on the progress of the demonstration project.

    Agency Affected: Department of Defense: Department of the Army

  3. Status: Closed - Implemented

    Comments: The US Army Materiel Command selected Anniston Army depot as the depot repair location for testing the prime vendor and integrated supplier concepts. In addition, the Army selected Fort Riley as the test site for an operating base repair activity. DLA, in coordination with the services, has developed an approach that will be used to assess the costs and benefits for testing the prime vendor and integrated supplier concepts.

    Recommendation: The Secretary of the Army should identify the Army facilities that will participate in this project, establish specific test program milestones, and identify the performance measures that will be used to quantify process improvements and reductions in the overall pipeline time. The practices should be tested in an integrated manner, where feasible, to maximize the interrelationships many of these practices have with one another. The specific practices that should be considered, where feasible, are: (a) eliminating excess inventory and inducting parts at repair depots soon after they break, consistent with repair requirements, to prevent parts from sitting idle; (b) using the cellular concept to reduce the time it takes to repair parts; (c) establishing innovative supplier partnerships to increase the availability of parts needed to complete repairs at the depot, such as local distribution centers and integrated supplier programs; and (d) using third-party logistics providers to store and distribute spare parts between the depot and end users to improve delivery times. GAO recommends that this project be used to quantify the costs and benefits of these practices and to serve as a means to identify and alleviate barriers or obstacles that may inhibit the expansion of these practices.

    Agency Affected: Department of Defense: Department of the Army

  4. Status: Closed - Implemented

    Comments: The US Army Materiel Command selected Anniston Army depot as the depot repair location for testing the prime vendor and integrated supplier concepts. In addition, the Army selected Fort Riley as the test site for an operating base repair activity. DLA, in coordination with the services, has developed an approach that will be used to assess the costs and benefits for testing the prime vendor and integrated supplier concepts.

    Recommendation: After these practices have been tested, the Army should consider expanding and tailoring the use of these practices, where feasible, so they can be applied to other locations.

    Agency Affected: Department of Defense: Department of the Army

 

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