DOD Medical Inventory: Reductions Are Possible Through the Use of Commercial Practices

GAO discussed the Department of Defense's (DOD) medical supply practices, focusing on practices DOD could adopt from progressive civilian hospitals and the Department of Veterans Affairs (VA) to reduce its medical logistics costs. GAO noted that: (1) civilian and military inventory management practices were significantly different in such areas as supply storage and the use of depot systems; (2) the DOD depot system currently holds inventory dating from 1945; (3) DOD frequently stores duplicative medical supplies in hospital wards, hospital storerooms, and separate warehouses; (4) the civilian hospitals GAO visited reduced inventory costs and achieved large savings by reducing inventories, standardizing supplies, eliminating bulk storage locations, removing exchange cart systems, improving inventory information systems, and relying on vendors to deliver supplies; (5) the Defense Logistics Agency currently holds approximately $490 million of inventory to support peacetime requirements and an additional $50 million of war reserve materiel; (6) DOD took such actions to improve its medical logistics as increasing its use of electronic supply ordering and evaluating its medical logistics systems; and (7) since 1988, VA has relied on vendors to deliver their supplies, and as a result, expects to save approximately $75 million over a 5-year period.