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United States Government Accountability Office: 
GAO: 

Report to Congressional Committees: 

July 2011: 

Defense Logistics: 

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

GAO-11-569: 

GAO Highlights: 

Highlights of GAO-11-569, a report to congressional committees. 

Why GAO Did This Study: 

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. 

What GAO Found: 

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. 

What GAO Recommends: 

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. 

View [hyperlink, http://www.gao.gov/products/GAO-11-569] or key 
components. For more information, contact Jack E. Edwards at (202) 512-
8246 or edwardsj@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

DOD Has Developed and Is Implementing a Corrective Action Plan for One 
of Three High-Risk Focus Areas Needing Improvement: 

DOD Has Outlined a Framework for Guiding and Overseeing Improvement 
Efforts but Has Not Provided Implementation Plans: 

DOD Continues to Have Gaps in Its Ability to Measure Performance in 
Supply Chain Management: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Scope and Methodology: 

Appendix II: Comments from the Department of Defense: 

Appendix III: GAO Contact and Staff Acknowledgments: 

Related GAO Products: 

Tables: 

Table 1: Extent to Which DOD's Comprehensive Inventory Management 
Improvement Plan Addresses the Elements of a Corrective Action Plan to 
Resolve High-Risk Challenges within the Requirements Forecasting Focus 
Area: 

Table 2: Six-Step Performance Management Framework in DOD's 2010 
Logistics Strategic Plan: 

Abbreviations: 

CMO: Chief Management Officer: 

DLA: Defense Logistics Agency: 

DOD: Department of Defense: 

TRANSCOM: U.S. Transportation Command: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

July 28, 2011: 

Congressional Committees: 

One of the most complex and vital tasks facing the Department of 
Defense (DOD) is managing its supply chain to effectively and 
efficiently provide spare parts, food, fuel, and other critical 
supplies in support of U.S. military forces. In short, DOD's goal and 
challenge are to deliver the right items to the right place at the 
right time, and at the right cost. Supply chain management encompasses 
the processes and systems for accomplishing this goal, and many DOD 
organizations have important roles and responsibilities, including the 
Office of the Secretary of Defense, the military services, Defense 
Logistics Agency (DLA), U.S. Transportation Command (TRANSCOM), and 
the geographic combatant commands. DOD's investment in its supply 
chains is substantial; DOD estimated that overall spending on 
logistics, including supply chain management, amounted to more than 
$210 billion in fiscal year 2010. 

Because of long-standing weaknesses in supply chain management, we 
have designated DOD supply chain management as a high-risk area 
needing management attention and improvement.[Footnote 1] We 
identified three focus areas for improvement--requirements 
forecasting, asset visibility, and materiel distribution. 

* Requirements forecasting. DOD defines requirements as the need or 
demand for personnel, equipment, facilities, other resources, or 
services in specified quantities for specific periods of time or at a 
specified time. Accurately forecasted supply requirements are a key 
first step in efficiently buying, storing, positioning, and shipping 
items that the warfighter needs. Matching supply inventories to 
requirements has been a continuing challenge for the department. As a 
result, the services and DLA have had inventory levels that are higher 
than needed to meet current requirements. DOD reported that it manages 
more than 4 million secondary inventory items valued at more than $91 
billion as of September 2009.[Footnote 2] However, DOD reported that 
$10.3 billion (11 percent) of its secondary inventory has been 
designated as potential excess and categorized for potential reuse or 
disposal. According to DOD, another $15.2 billion (17 percent) of its 
secondary inventory exceeds the approved acquisition objective and is 
being retained because it was determined to be more economical to 
retain than to dispose of it or it might be needed in the future. 
[Footnote 3] Our prior reviews of spare parts inventory management at 
DLA and the Army, Navy, and Air Force[Footnote 4] found that problems 
with accurately forecasting demand for spare parts were a major factor 
contributing to mismatches between inventory levels and requirements. 
[Footnote 5] 

* Asset visibility. DOD describes this focus area as the ability to 
provide timely and accurate information on the location, quantity, 
condition, movement, and status of supplies and the ability to act on 
that information. Limitations in asset visibility make it difficult to 
obtain timely and accurate information on the assets that are present 
in the theater of operations. DOD faces asset visibility challenges 
due, in part, to a lack of interoperability among information 
technology systems, problems with the management of shipping 
containers, and challenges in instituting new technologies for 
tracking assets.[Footnote 6] 

* Materiel distribution. This focus area is the process for 
synchronizing all elements of the logistics system to deliver needed 
supplies to support the deployed warfighter. DOD has faced difficult 
distribution challenges in Afghanistan due to limited cargo-processing 
and cargo-receiving capabilities, a lack of full visibility over 
supply and equipment movements into and around Afghanistan, and a lack 
of coordination and competing logistics priorities in a coalition 
environment, along with several other challenges. During operations in 
Iraq, DOD faced challenges in coordinating and consolidating 
distribution and supply support, such as establishing an effective 
mechanism that would enable a joint force commander to exercise 
appropriate command and control over transportation and other 
logistics assets in the theater. Such distribution and supply support 
challenges impeded the timely delivery of supplies and contributed to 
shortages of items critical to the warfighter.[Footnote 7] 

Under our criteria for removing a high-risk designation, agencies with 
such programs must, among other things, develop and implement detailed 
corrective action plans and have an effective approach for managing 
performance, which includes a program to monitor and validate the 
effectiveness and sustainability of corrective actions and the ability 
to demonstrate progress. As we have discussed in prior reports and 
testimonies, DOD has taken steps toward addressing supply chain 
management weaknesses over the last several years and has made some 
progress.[Footnote 8] In 2010, DOD issued its Logistics Strategic 
Plan,[Footnote 9] which represents the department's most recent high- 
level strategy for continuing to address supply chain management, as 
well as other logistics issues. 

This report addresses DOD's efforts to improve supply chain management 
under its 2010 Logistics Strategic Plan. It was prepared under the 
authority of the Comptroller General to conduct evaluations at his own 
initiative and is being addressed to the committees of jurisdiction 
and to others who have expressed interest in tracking DOD's efforts to 
improve supply chain management. Specifically, this report addresses 
the extent to which DOD has developed and implemented (1) corrective 
action plans that address challenges in the three focus areas we 
identified for improvement, (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. The Related GAO Products section at 
the end of this report provides additional information on our prior 
relevant work. 

To assess the extent to which DOD has developed and implemented 
corrective action plans that address high-risk challenges in the three 
focus areas, we identified existing plans for logistics, supply chain 
management, and the three focus areas. We assessed the extent to which 
such plans provided a comprehensive, integrated strategy for improving 
one or more of the focus areas and included the key elements of a 
corrective action plan that we have previously identified. We also met 
with officials from the Office of the Deputy Assistant Secretary of 
Defense for Supply Chain Integration to determine the status of DOD's 
planning efforts. To assess the extent to which DOD has an effective 
program for monitoring and validating the effectiveness and 
sustainability of corrective actions, we reviewed the performance 
management framework identified in DOD's 2010 Logistics Strategic 
Plan. We reviewed the features of the framework, its implementation 
status, and the extent the framework included key elements as 
identified, for example, in results-oriented management best 
practices. We also met with DOD officials to understand the logistics 
governance processes and structure. To assess the extent to which DOD 
has an ability to demonstrate supply chain management progress, we 
reviewed performance measures discussed in the Logistics Strategic 
Plan, as well as any existing or planned performance measures for the 
three focus areas. As a basis for evaluating these measures, we 
reviewed DOD policy, federal standards, and our prior findings and 
recommendations on this issue. We also reviewed ongoing performance 
measurement initiatives and met with officials from the Office of the 
Secretary of Defense and military services who are involved with those 
initiatives. We spoke with DOD officials, including officials from 
various agencies and offices, to determine what performance measures 
they tracked and monitored. Additional information on our scope and 
methodology is provided in appendix I. 

We conducted this performance audit from February 2010 to July 2011 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evident to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our finding 
and conclusions based on our audit objectives. 

Background: 

DOD defines its logistics mission, including supply chain management, 
as supporting the projection and sustainment of a ready, capable force 
through globally responsive, operationally precise, and cost-effective 
joint logistics support for America's warfighters. Supply chain 
management is the operation of a continuous and comprehensive 
logistics process, from initial customer order for materiel or 
services to the ultimate satisfaction of the customer's requirements. 
It is DOD's goal to have an effective and efficient supply chain, and 
the department's current improvement efforts are aimed at improving 
supply chain processes, synchronizing the supply chain from end to 
end, and adopting challenging but achievable standards for each 
element of the supply chain. 

Many DOD Organizations Have Important Roles and Responsibilities for 
Supply Chain Management: 

Many organizations within DOD have important roles and 
responsibilities for supply chain management, and these 
responsibilities are spread across multiple components with separate 
funding and management of logistics resources and systems. The Office 
of the Under Secretary of Defense for Acquisition, Technology and 
Logistics serves as the principal staff assistant and advisor to the 
Secretary of Defense for all matters relating to defense logistics, 
among other duties. The Secretary of Defense also designated the Under 
Secretary of Defense for Acquisition, Technology and Logistics as the 
department's Defense Logistics Executive with overall responsibility 
for improving and maintaining the defense logistics and supply chain 
system. The Assistant Secretary of Defense for Logistics and Materiel 
Readiness, under the authority, direction, and control of the Under 
Secretary of Defense for Acquisition, Technology and Logistics, serves 
as the principal logistics official within the senior management of 
the department. Within the Office of the Assistant Secretary for 
Logistics and Materiel Readiness, the Deputy Assistant Secretary of 
Defense for Supply Chain Integration improves the integration of the 
DOD supply chain through policy development and facilitates component 
implementation of supply chain management practices, among other 
duties. 

Each of the military departments is separately organized under its own 
Secretary. Subject to the authority, direction, and control of the 
Secretary of Defense, the Secretaries of the military departments are 
responsible for, among other things, organizing, training, and 
equipping their forces. Additionally, according to a DOD directive, 
each military department Secretary is responsible for preparing and 
submitting budgets for their respective department, justifying 
approved budget requests[Footnote 10] before Congress, and 
administering the funds made available for maintaining, equipping, and 
training their forces.[Footnote 11] Another important organization in 
supply chain management is DLA, which purchases and provides nearly 
all of the consumable items[Footnote 12] needed by the military, 
including a majority of the spare parts needed to maintain weapon 
systems and other equipment. 

During joint military operations, J-4 is the principal joint staff 
organization responsible for integrating logistics planning and 
execution in support of joint operations. In carrying out this 
responsibility, the J-4 relies on various DOD components, including 
the military services, DLA, and TRANSCOM, to provide the logistics 
resources and systems needed to support U.S. forces. Specifically, 
DOD's doctrine governing logistics in joint operations states that DLA 
and the military services share responsibilities as the suppliers of 
equipment and supplies to the joint force needed for sustained 
logistic readiness.[Footnote 13] It further states that as the 
suppliers, they are responsible for delivering the right forces and 
materiel, at the right place and time, to give the components of the 
joint force what they require, when they need it. TRANSCOM, in 
addition to its responsibilities for transporting equipment and 
supplies in support of military operations, is designated as the 
distribution process owner for DOD. The role of the distribution 
process owner is to, among other things, oversee the overall 
effectiveness, efficiency, and alignment of departmentwide 
distribution activities, including force projection, sustainment, and 
redeployment/retrograde operations. 

DOD also has two senior-level governance bodies for logistics and 
supply chain management--the Joint Logistics Board and the Supply 
Chain Executive Steering Committee. The Joint Logistics Board reviews 
the status of the logistics portfolio and the effectiveness of the 
defensewide logistics chain in providing support to the warfighter. 
The Joint Logistics Board is co-chaired by the Assistant Secretary of 
Defense for Logistics and Materiel Readiness and the Joint Staff 
Director of Logistics, and has senior-level participants from the 
military services, combatant commands, and DLA.[Footnote 14] DOD 
officials stated that the Supply Chain Executive Steering Committee is 
another important executive-level governance body for oversight of 
improvement efforts. The Executive Steering Committee is chaired by 
the Deputy Assistant Secretary of Defense for Supply Chain Integration 
and has participants from many of the same DOD organizations as the 
Joint Logistics Board. 

The department's Chief Management Officer (CMO) and Deputy CMO are 
senior-level officials with broad oversight responsibilities across 
defense business operations, which include supply chain 
management.[Footnote 15] They have responsibilities related to the 
improvement of the efficiency and effectiveness of these business 
operations. For example, they oversee the development and 
implementation of DOD's Strategic Management Plan, which includes 
supply chain management and other business operations areas such as 
business system modernization and financial management. 

GAO Has Designated DOD Supply Chain Management as a High-Risk Area: 

DOD maintains military forces with unparalleled combat and support 
capabilities; however, it also continues to confront long-standing 
management problems related to its business operations that support 
these forces. These business operations include--in addition to supply 
chain management--financial management, business system modernization, 
and overall defense business transformation, among others. We have 
identified DOD supply chain management as a high-risk area due to 
weaknesses both in the management of supply inventories and 
responsiveness to warfighter requirements.[Footnote 16] Inventory 
management problems have included (1) high levels of inventory beyond 
that needed to support current requirements and future demands and (2) 
ineffective and inefficient inventory management practices. In 
addition, we have reported on shortages of critical items and other 
supply support problems during the early operations in Iraq, as well 
as on the numerous logistics challenges that DOD faces in supporting 
forces in Afghanistan.[Footnote 17] 

We initiated our high-risk list and biennial updates to focus 
attention on government operations that we identified as being at high 
risk due to their greater vulnerabilities to fraud, waste, abuse, and 
mismanagement, as well as areas that have a need for broad-based 
transformations to address major economic, efficiency, or 
effectiveness challenges. The high-risk list serves to identify 
serious weaknesses in areas involving substantial resources and 
provide critical services to the public. Solutions to high-risk 
problems offer the potential to save billions of dollars, improve 
service to the public, and strengthen the performance and 
accountability of the U.S. government. 

Removal of a high-risk designation may be considered when legislative 
and agency actions result in significant and sustainable progress 
toward resolving a high-risk problem. Over time, we have removed the 
high-risk designations of 21 programs or operations.[Footnote 18] When 
we review an agency's actions taken to address high-risk challenges, 
we assess the actions against five criteria: (1) a demonstrated strong 
commitment to and top leadership support for addressing problems, (2) 
the capacity to address problems, (3) a corrective action plan that 
provides for substantially completing corrective measures in the near 
term, (4) a program to monitor and independently validate the 
effectiveness and sustainability of corrective measures, and (5) 
demonstrated progress in implementing corrective measures.[Footnote 
19] With respect to supply chain management, we found in our most 
recent update of the high-risk series that DOD generally met the first 
two criteria. That is, DOD demonstrated top leadership support for 
addressing its supply chain management weaknesses, and it has the 
people and resources necessary to do so. We found that DOD partially 
met the other three criteria.[Footnote 20] 

Prior and Current Strategic Planning for DOD Supply Chain Management: 

On the basis of our prior work, we have recommended that DOD develop 
an integrated, comprehensive plan for improving logistics, to include 
supply chain management.[Footnote 21] Our prior work has shown that 
strategic planning is the foundation for defining what an agency seeks 
to accomplish, identifying the strategies it will use to achieve 
desired results, determining how well it succeeds in reaching results- 
oriented goals, and achieving objectives. Combined with effective 
leadership, strategic planning provides decision makers with a 
framework to guide program efforts and the means to determine if these 
efforts are achieving the desired results. Characteristics of an 
effective strategic plan should include a comprehensive mission 
statement; problem definition, scope, and methodology; goals and 
objectives; activities, milestones, and performance measures; 
resources and investments; organizational roles, responsibilities, and 
coordination; and key external factors that could affect the 
achievement of goals.[Footnote 22] 

Over the last several years, DOD has issued a series of strategic 
planning documents for logistics and supply chain management. For 
example, DOD issued the first iteration of its Supply Chain Management 
Improvement Plan in 2005 to address some of the systemic weaknesses 
highlighted in our reports. DOD subsequently updated that plan on a 
periodic basis. Also in 2005, DOD produced its Focused Logistics 
Roadmap, which catalogued current efforts and initiatives. In 2008, 
DOD released its Logistics Roadmap with the intent of providing a more 
coherent and authoritative framework for logistics improvement 
efforts, including supply chain management. While these plans have 
differed in scope and focus, they have typically included a number of 
high-level goals and related initiatives addressing aspects of supply 
chain management. 

These prior plans represented positive steps toward resolving 
weaknesses in supply chain management. However, our reviews of the 
plans found that they fell short of providing an integrated, 
comprehensive strategy for improving logistics, including supply chain 
management.[Footnote 23] The plans, for example, had some deficiencies 
that reduced their usefulness for guiding and overseeing improvements. 
Among other things, the plans did not identify the scope of logistics 
problems or the capability gaps they sought to address, provide a 
basis for determining funding priorities among various initiatives, or 
clearly link to logistics decision-making processes. 

Most recently, DOD issued its 2010 Logistics Strategic Plan and 
indicated a commitment to update this plan annually. The plan, which 
supersedes the prior plans issued by the department, identifies four 
overarching logistics goals, including one goal that specifically 
addresses supply chain management.[Footnote 24] We testified on this 
plan in July 2010 and identified some of the same deficiencies found 
in previous plans.[Footnote 25] 

DOD Has Developed and Is Implementing a Corrective Action Plan for One 
of Three High-Risk Focus Areas Needing Improvement: 

DOD Has a Corrective Action Plan for Inventory Management That 
Addresses the Requirements Forecasting Focus Area: 

DOD has developed and begun to implement a corrective action plan for 
requirements forecasting, one of the three major focus areas we 
identified as needing improvement in supply chain management. 
Specifically, DOD's Comprehensive Inventory Management Improvement 
Plan, issued in October 2010 in response to a statutory mandate, 
[Footnote 26] includes developing more accurate demand forecasting as 
a key improvement effort for the department. On the basis of our 
analysis, we believe this document can serve as a corrective action 
plan for the requirements forecasting focus area.[Footnote 27] 
Corrective action plans are critical to resolving weaknesses in high-
risk 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.[Footnote 28] 

DOD's inventory management improvement plan is aimed at reducing 
excess inventory and contains nine individual sub-plans that address a 
range of inventory management problems.[Footnote 29] One sub-plan 
focuses on improving demand forecasting accuracy and the setting of 
inventory levels across the department. We have previously reported 
that the mismatch between inventory levels and requirements is due 
largely to inaccurate demand forecasts,[Footnote 30] and DOD 
acknowledged in its 2010 Logistics Strategic Plan that inaccurate 
requirements forecasting continues to be a weakness within its supply 
chain. The Comprehensive Inventory Management Improvement Plan 
addresses all three of the general elements of a corrective action 
plan (see table 1). The plan defines the root causes of problems in 
demand forecasting, identifies solutions to improve its demand 
forecasting processes and procedures, and provides steps to achieve 
these solutions. 

Table 1: Extent to Which DOD's Comprehensive Inventory Management 
Improvement Plan Addresses the Elements of a Corrective Action Plan to 
Resolve High-Risk Challenges within the Requirements Forecasting Focus 
Area: 

Element: Defines root causes for challenges; 
Extent to which plan addresses element: Addresses: The plan identifies 
problems and describes current practices for inventory management 
overall and specifically for key issues of requirements forecasting, 
such as demand forecasting. The plan details the amount of inventory 
excesses. 

Element: Identifies effective solutions; 
Extent to which plan addresses element: Addresses: The plan identifies 
desired outcomes for each aspect of inventory management addressed by 
the plan. Specifically for requirements forecasting, the plan includes 
five actions, or solutions, to improve the prediction of future demand 
so that inventory requirements more accurately reflect actual needs. 

Element: Provides steps to implement solutions; 
Extent to which plan addresses element: Addresses: The plan identifies 
actions for near-term implementation for each aspect of inventory 
management addressed by the plan. Specifically for requirements 
forecasting, the plan identifies five departmentwide actions to 
improve demand forecasting with targeted dates for completion through 
2013. Each action is comprised of subordinate key milestones, and the 
plan identifies an office(s) with primary responsibility and targeted 
date for completion for each key milestone. 

Source: GAO analysis of plan. 

[End of table] 

As we noted earlier, effective strategic planning guides program 
improvement efforts and provides the means to determine if these 
efforts are achieving the desired results. Characteristics of 
effective strategic planning include a comprehensive mission 
statement; problem definition, scope, and methodology; goals and 
objectives; activities, milestones, and performance measures; 
resources and investments; organizational roles, responsibilities, and 
coordination; and key external factors that could affect the 
achievement of goals. We reported in January 2011 that DOD's 
Comprehensive Inventory Management Improvement Plan addresses or 
partially addresses all of these characteristics and that it 
represents an important step for DOD in its efforts to improve its 
inventory management practices.[Footnote 31] Further, the plan 
contains an appendix that details how other DOD strategies, plans, or 
efforts relate to its various sub-plans. Additionally, it describes 
the process that will be used to implement the plan and monitor 
progress against performance targets. While this inventory management 
improvement plan contains both the elements of a corrective action 
plan and characteristics of effective strategic planning, effective 
implementation will be critical for achieving expected outcomes. 
Implementation will be challenged by several issues, such as 
aggressive time lines and benchmarks and implementation of certain 
automated business systems. 

DOD Does Not Have Detailed Corrective Action Plans for the Asset 
Visibility and Materiel Distribution Focus Areas: 

DOD has not developed corrective action plans for two other supply 
chain management focus areas: asset visibility and materiel 
distribution. DOD has plans that address aspects of these two focus 
areas,[Footnote 32] but officials could not identify plans for either 
area that address key problems and solutions in a comprehensive, 
integrated manner. Challenges within these two focus areas are often 
interrelated and result in impacts on warfighter support. For example, 
difficulties or inaccuracies in the visibility over assets can cause 
delays in the distribution of supplies to the warfighter. Until the 
department develops and implements corrective action plans for these 
remaining two focus areas, DOD may have difficulty resolving long- 
standing weaknesses in supply chain management. 

Recent reviews and audits have pointed to continuing problems with 
asset visibility and materiel distribution that have affected supply 
support to the warfighter. In a recent internal DOD review of joint 
supply issues in theater, the department acknowledged it had 
insufficient visibility of assets in theater, which can result in 
potential inventory sources being overlooked due to lack of visibility 
or service ownership,[Footnote 33] as well as limited visibility of 
assets while in-transit. In addition, a December 2010 Army Audit 
Agency report found that despite having policies and procedures in 
place for identifying, inspecting, and repairing containers, personnel 
in Iraq sometimes did not comply with the policies and failed to 
correctly inspect the condition of containers or update this 
information in computer systems.[Footnote 34] As a result, the Army 
did not have an accurate accounting of containers that were in good 
condition for supporting the ongoing drawdown in Iraq and meeting time 
frames for that withdrawal. In a prior review of supply support in 
Afghanistan, we reported that DOD has been challenged by several 
materiel distribution issues, such as the transportation of cargo 
through neighboring countries and around Afghanistan, limited airfield 
infrastructure, limited storage capacity at logistics hubs, and 
difficulties in synchronizing the arrival of units and equipment. DOD 
had undertaken some efforts to mitigate these challenges, such as the 
expanding cargo areas at some distribution hubs. Later this year we 
will report on the extent to which DOD continues to experience 
challenges with asset visibility and materiel distribution in 
Afghanistan. 

The 2010 Logistics Strategic Plan indicates that improving asset 
visibility and materiel distribution remain priorities for the 
department; however, the plan does not, by itself, constitute a 
corrective action plan to resolve supply chain management weaknesses 
because it lacks detailed information needed to guide and oversee 
improvement efforts.[Footnote 35] Regarding asset visibility, the 
Logistics Strategic Plan indicates that two priorities for the 
department are implementing a global container management policy and 
implementing radio frequency identification.[Footnote 36] Similarly, 
the Logistics Strategic Plan includes improvement initiatives for 
materiel distribution. However, the plan does not discuss the root 
causes for either asset visibility or materiel distribution 
weaknesses, identify the extent to which the weaknesses are present, 
detail steps for implementing improvement initiatives and thus 
achieving solutions, or contain information (such as milestones, 
performance information, benchmarks, and targets) necessary to gauge 
the department's progress in implementing these initiatives and 
achieving outcomes. 

DOD has not developed corrective actions plans for asset visibility 
and materiel distribution because senior-level officials considered 
prior strategic plans and initiatives sufficient to address high-risk 
challenges in these areas. However, there is some indication that DOD 
may place more emphasis on developing more comprehensive, integrated 
plans in the future. In our review of DOD's Comprehensive Inventory 
Management Plan, we noted that officials from the Office of the 
Secretary of Defense and DOD components provided considerable 
management focus and coordination across stakeholder organizations to 
develop that plan. In addition, during the course of our current 
review, a senior DOD logistics official stated that the department 
began an effort in January 2011 to more comprehensively review the 
current state of asset visibility and to develop a plan to guide 
future improvements in this focus area. This official expects that the 
asset visibility plan would be developed with the same collaborative 
approach as was used in the development of the inventory management 
plan and that the two plans would be similar in their degree of 
detail. Further, the senior official stated that there were ongoing 
initiatives in the department that could provide the foundation for a 
similar plan for addressing weaknesses in materiel distribution, but 
that such an effort had progressed less than the one for asset 
visibility in terms of developing a plan for guiding improvements. 

Recent actions by the Secretary of Defense indicate that the 
department intends to take additional steps aimed at achieving cost 
efficiencies in these two focus areas. In a March 14, 2010 memorandum, 
the Secretary outlined the steps that DOD plans to take to reduce 
inefficiencies and eliminate duplication with respect to in-transit 
asset visibility. The memorandum required TRANSCOM to prepare an 
implementation plan for approval by the Chairman of the Joint Chiefs 
of Staff that, among other things, would designate TRANSCOM as the 
department's lead for improving in-transit asset visibility by 
synchronizing ongoing improvement initiatives and eliminating 
duplication and nonstandard practices among DOD components. The same 
memorandum indicated TRANSCOM should also prepare an implementation 
plan that, if approved, would require the military services to 
coordinate more closely with distribution partners on decisions 
regarding distribution. Specifically, the memorandum noted that the 
implementation plan would require the services to use the distribution 
process owner governance structure to coordinate decisions that impact 
distribution and deployment capabilities. 

DOD Has Outlined a Framework for Guiding and Overseeing Improvement 
Efforts but Has Not Provided Implementation Plans: 

DOD Has Outlined a Performance Management Framework for Guiding and 
Overseeing Improvement Efforts: 

In its 2010 Logistics Strategic Plan, DOD outlined a performance 
management framework to provide guidance and oversight of logistics 
improvement efforts, including supply chain improvement efforts. The 
plan states that the framework will be used to measure, track, and 
report progress in its improvement efforts. Our prior work has shown 
that in order for agencies to address high-risk challenges, they need 
to institute a program to monitor and validate the effectiveness and 
sustainability of corrective actions. 

DOD's framework consists of a six-step process (see table 2) and 
offers a new management tool that may enable DOD to manage performance 
in supply chain management. For example, the framework refers to 
developing measures and targets that are tied to goals and 
initiatives, and it calls for an ongoing assessment and feedback 
process that could help to ensure that improvement efforts are 
effective and staying on track. Furthermore, the first step of the 
framework is consistent with the development of corrective action 
plans for high-risk areas, as discussed in the previous section of 
this report. In addition, the framework replicates the performance 
management framework described in the department's overarching 
Strategic Management Plan for business operations.[Footnote 37] DOD 
senior officials within the Supply Chain Integration Office expect the 
confluence between the two plans to have a positive, behavior-shaping 
influence on DOD organizations. 

Table 2: Six-Step Performance Management Framework in DOD's 2010 
Logistics Strategic Plan: 

Step: 1. Plan; 
Associated actions: Develop a set of integrated goals, measures and 
targets, and key initiatives that address performance issues of 
importance to all targets. Key initiatives are selected based on their 
probability of overcoming significant management challenges, ability 
to drive needed change, or importance to improving support to 
combatant commanders. 

Step: 2. Set targets; 
Associated actions: Establish performance targets through a 
collaborative process for each measure to define what the department 
expects to achieve. They will be tracked and assessed routinely 
throughout the year of execution. 

Step: 3. Cascade measures; 
Associated actions: Review respective organizational strategic plans, 
goals, measures, and targets by each DOD component after updates of 
the Logistics Strategic Plan to revise them as needed to reflect the 
broader priorities set forth in the Logistics Strategic Plan and 
Strategic Management Plan. 

Step: 4. Align processes; 
Associated actions: Realign operations or organizational structures as 
necessary to better integrate functional activities with larger, 
defensewide end-to-end processes based on cascaded goals, measures, 
and targets. 

Step: 5. Assess and report; 
Associated actions: Assess the Logistics Strategic Plan through a 
collaborative and continuous assessment and feedback process overseen 
by the Assistant Secretary of Defense for Logistics and Materiel 
Readiness, and document results in a DOD Logistics Strategic 
Management Report. 

Step: 6. Correct; 
Associated actions: Identify and implement corrective actions by 
accountable individuals when flat or negative trends appear. 

Source: DOD's 2010 Logistics Strategic Plan. 

[End of table] 

Although DOD outlined a performance management framework for 
logistics, it has not instituted this framework across the logistics 
enterprise. We did not find evidence during our review that DOD was 
using its logistics framework yet to guide and oversee improvement 
efforts. 

DOD Has Not Included Key Elements for Instituting Its Performance 
Management Framework: 

The department has not instituted the framework because key elements 
have not been fully defined and developed. Specifically, DOD has not 
(1) developed and issued implementation guidance; (2) carried out a 
strategy for communicating information about supply chain improvement 
efforts, performance, and progress; or (3) clearly defined the roles 
and responsibilities of senior-level logistics governance bodies and 
chief management officials. We have found some of these same 
weaknesses with DOD's overarching performance management framework 
identified in the Strategic Management Plan for business operations. 
[Footnote 38] Until these elements are fully defined and developed, 
DOD may not be in a position to effectively use this new management 
tool to monitor and validate the effectiveness and sustainability of 
corrective actions. 

DOD Has Not Issued Implementation Guidance: 

Other than the general outline of the performance management framework 
provided in the 2010 Logistics Strategic Plan, DOD has not developed 
and issued detailed implementation guidance to affected stakeholders. 
DOD and its components commonly issue directives, instructions, 
regulations, and other guidance to direct the implementation of new 
policies and programs. DOD officials from the Office of Supply Chain 
Integration stated that guidance on the performance management 
framework will be issued as necessary based on the results of initial 
assessments. However, no guidance has been issued to date, and 
procedures do not exist for implementing each of the six steps in the 
framework. For example, no guidance exists on the process by which 
stakeholders will reach consensus on setting performance targets, 
aligning efforts, and assessing and reporting results. The Logistics 
Strategic Plan states that strategic planning is a collaborative 
effort among the Office of the Secretary of Defense, DOD components, 
and other stakeholders. However, the plan does not provide detail 
describing how or when this collaboration will occur. 

Questions about how DOD intended to implement the Logistics Strategic 
Plan were raised during a July 2010 congressional hearing.[Footnote 
39] In questions for the record submitted to DOD, a senior logistics 
official was asked to explain how the department intends to translate 
the general discussion in the Logistics Strategic Plan into specific 
guidance for the service and agency components.[Footnote 40] The 
official responded that the components' strategic plans will align to 
departmentwide priorities, and top-level policy changes will cascade 
into component-level processes. However, the response did not discuss 
how or when that process will occur. 

DOD Has Not Carried Out a Strategy for Communicating Implementation 
Plans and Results: 

Reporting on performance and progress is identified as a step within 
the performance management framework; however, DOD has not carried out 
a strategy for communicating its implementation plans and results of 
its supply chain improvement efforts. For example, DOD does not have a 
communications strategy in place to inform internal and external 
stakeholders of current efforts, progress made, remaining problems, 
and next steps needed for further progress. Our prior work has shown 
that a communication strategy that creates shared expectations and 
reports progress is important for results-oriented management and 
transformation. 

According to the 2010 Logistics Strategic Plan, DOD will develop a 
management report to document the department's assessments of 
implementation of its general plan. However, a management report has 
not yet been issued, and it is unclear what types of information DOD 
intends to include in this management report or how information in the 
report will be used by decision makers as part of the performance 
management framework. In addition, DOD officials stated that the 
management report would be used informally among internal stakeholders 
and that they did not plan on sharing the performance report with 
external stakeholders such as Congress. 

DOD Has Not Defined Key Roles and Responsibilities: 

DOD has not clearly defined the supply chain management improvement- 
related roles and responsibilities of senior-level logistics 
governance bodies, CMO, and Deputy CMO in the performance management 
framework for logistics. Our prior work on results-oriented management 
and organizational transformation cites the importance of establishing 
clearly defined roles and responsibilities, and we previously 
testified that it was unclear how the 2010 Logistics Strategic Plan 
will be used within the existing decision-making and governance 
structure for logistics to assist decision makers and influence 
resource decisions and priorities. 

The Logistics Strategic Plan calls for senior-level logistics 
governance bodies, including the Joint Logistics Board and Supply 
Chain Executive Steering Committee, to oversee implementation of 
improvements under the new performance management framework. However, 
the exact roles and responsibilities of these bodies are not defined 
in the plan. DOD issued a charter for the Joint Logistics Board in 
2010 that broadly defines the roles and responsibilities of the board, 
and a draft charter exists for the Supply Chain Executive Steering 
Committee. However, neither charter specifically defines or describes 
the participation of those bodies in the performance management 
framework for logistics. For example, the charters do not clarify how 
the governance bodies will provide oversight of the key initiatives in 
the Logistics Strategic Plan. Moreover, it is not clear how the bodies 
will play a role in implementing individual steps in the framework 
such as setting targets and monitoring performance against those 
targets. Both bodies appear to provide oversight primarily by periodic 
briefings, as opposed to systematic monitoring of performance measures 
and improvement initiatives. For example, we found that the Joint 
Logistics Board provides some oversight of issues such as the 
development of a new joint supply support concept, ongoing and new 
joint logistics initiatives, and activities of joint groups and 
commands. The Supply Chain Executive Steering Committee maintains 
visibility over issues such as the development of performance metrics 
and some supply chain management initiatives. Although both bodies 
have met regularly, our review of records from these meetings indicate 
that neither body has exercised comprehensive and systematic oversight 
across all key improvement initiatives for supply chain management. 
Specifically, our review of the Joint Logistics Board's 2010 meeting 
minutes showed that the board discussed and received status briefings 
on 4 of the 12 supply chain improvement initiatives identified as key 
priorities in the 2010 Logistics Strategic Plan. Similarly, the 
agendas of the Supply Chain Executive Steering Committee highlight 
that the committee received status briefing on 3 key supply chain 
improvement initiatives. 

The CMO and Deputy CMO are in a unique position to coordinate 
improvement efforts across various business operations, ensure that 
business-related plans are aligned, and monitor progress in 
implementing these plans, but their roles and responsibilities as they 
specifically relate to participation in the performance management 
framework for logistics have not been clearly defined. DOD officials 
have stated that logistics governance bodies are to oversee 
improvement efforts within the logistics enterprise, but DOD 
Directives provide that the CMO and Deputy CMO also have 
responsibilities related to the improvement of the efficiency and 
effectiveness of the department's business operations.[Footnote 41] 
However, it is unclear what roles and responsibilities the CMO and 
Deputy CMO should have as part of the performance management framework 
for logistics in ensuring that key logistics or supply chain 
management initiatives that are deemed priorities for the department 
realize their intended effectiveness and efficiency improvements. We 
have previously reported that additional opportunities exist for the 
CMO, assisted by the Deputy CMO, to provide the leadership needed to 
achieve business-related goals, including supply chain management 
goals.[Footnote 42] For example, the Deputy CMO stated that she was 
not involved in developing or reviewing the Comprehensive Inventory 
Management Improvement Plan. Although she did review the Logistics 
Strategic Plan, this plan lacked clear performance measurement 
information and other detailed information, as noted earlier in this 
report. Moreover, successful resolution of weaknesses in supply chain 
management depends on improvements in some of DOD's other business 
operations, such as business systems modernization and financial 
management. We have previously recommended that DOD more clearly 
define how the CMO, Deputy CMO, and the military departments will 
reach consensus on business priorities, coordinate review and approval 
of updates to plans, synchronize the development of plans with the 
budget process, monitor implementation of reform initiatives, and 
report on progress, on a periodic basis, towards achieving established 
goals. 

DOD Continues to Have Gaps in Its Ability to Measure Performance in 
Supply Chain Management: 

Effective Performance Measures Are Important for Demonstrating 
Progress in Programs and Activities: 

Federal government standards and best practices highlight the 
importance of tracking and demonstrating progress in programs and 
activities through the development and implementation of performance 
measures. Among other things, those standards indicate the importance 
of establishing and monitoring performance measures to improve program 
effectiveness and accountability for results.[Footnote 43] 
Incorporating outcome-based performance measures is also a best 
practice for effective strategic planning, and performance measures 
enable an agency to assess accomplishments, strike a balance among 
competing priorities, and make decisions to improve program 
performance, realign processes, and assign accountability.[Footnote 
44] Further, our prior work has shown that in order to fully address 
high-risk challenges, agencies must be able to demonstrate progress 
achieved through corrective actions, which is possible through the 
reporting of performance measures.[Footnote 45] Characteristics of 
effective performance measures include having baseline or trend data 
for performance assessments, setting measurable targets for future 
performance, and establishing time frames for the achievement of goals. 

DOD logistics plans and policies also acknowledge an important role 
for performance measures. The 2010 Logistics Strategic Plan emphasizes 
performance management, and the need for performance measures is 
embedded in the performance management framework that is outlined in 
the plan. In addition, DOD's supply chain regulation requires that 
components use metrics to evaluate the performance and cost of their 
supply chain operations; lay out requirements for those metrics; and 
direct that metrics address the enterprise, functional, and program or 
process level of supply chain operations.[Footnote 46] The regulation 
also directs DOD components to develop data collection capabilities 
that support supply chain metrics. 

With respect to DOD's prior logistics strategic planning efforts that 
have covered supply chain management and other areas, such as the 
Logistics Roadmap, we have recommended that the Under Secretary of 
Defense for Acquisition, Technology and Logistics develop, implement, 
and monitor outcome-oriented performance measures to assess progress 
toward achieving the objectives and goals identified in these plans. 
[Footnote 47] We have also recommended that DOD develop and implement 
outcome-oriented performance measures that address each of the three 
focus areas for supply chain improvement.[Footnote 48] DOD agreed with 
these recommendations, but performance measurement has continued to 
challenge DOD's supply chain management, as discussed below. 

Developing Enterprisewide Performance Measures for Supply Chain 
Management Has Challenged DOD: 

DOD and its components track many aspects of supply chain performance, 
but DOD does not have performance measures that assess the overall 
effectiveness and efficiency of the supply chain across the 
enterprise. DOD components individually track aspects of their own 
operations using certain performance measures. For example, TRANSCOM 
uses logistics response time to measure the time that passes between 
submission of a requisition for an item and the delivery of the item 
to the supply support activity. DLA uses a perfect order fulfillment 
metric to measure how well the end-to-end supply chain delivers the 
right part to the customer on time, in the correct quantity, and with 
no material deficiencies. The department consistently tracks one 
enterprisewide supply chain metric, customer wait time.[Footnote 49] 
DOD logistics officials stated that as of December 2010, they 
increased the amount of performance information they regularly submit 
to the Deputy CMO for inclusion in the department's performance 
budget. These measures include customer wait time by military service, 
perfect order fulfillment for DLA, and two measures related to 
inventory management. However, our prior work has found, and DOD has 
acknowledged, that additional measures are needed. 

In an effort to develop enterprisewide performance measures, DOD began 
an initiative in 2007 called the Joint Supply Chain Architecture to 
identify a hierarchy of performance measures to track overall 
effectiveness and efficiency of the supply chain and to identify areas 
for improvement based on industry standards. Led by the Deputy 
Assistant Secretary of Defense for Supply Chain Integration and the 
Director of the Joint Chiefs of Staff Logistics Directorate, the Joint 
Supply Chain Architecture effort is identified in the 2010 Logistics 
Strategic Plan as a key initiative intended to promote process 
standardization, facilitate process integration, and define the 
enterprise framework. The Joint Supply Chain Architecture is based on 
the Supply Chain Operations Reference model, a process model that is a 
long-established best practice for commercial supply chains and that 
provides a method to evaluate and improve supply chains. We found DOD 
has made progress with the initiative. The progress includes 
clarifying some common concepts across the various DOD supply chains 
and organizations. For instance, it details the types of performance 
information that will feed into higher-level measures and identifies 
three possible enterprisewide measures--customer wait time, perfect 
order fulfillment, and total supply chain management cost. The 
measures focus on speed, reliability, and efficiency of the supply 
chain, respectively. 

Two of these three measures, customer wait time and perfect order 
fulfillment, are not new and predate the Joint Supply Chain 
Architecture. DOD directed the implementation of the customer wait 
time metric as early as 2000 in a DOD instruction.[Footnote 50] 
Perfect order fulfillment is used by DLA, as noted above, but it is 
not used by any other DOD components or at the enterprisewide level. A 
total supply chain management cost metric is far from completion, and 
various officials stated that the meaningfulness of this measure is 
uncertain. Time lines for completion of a total supply chain 
management cost metric or an enterprisewide perfect order fulfillment 
metric have not been established. DOD officials stated that the 
current focus of the Joint Supply Chain Architecture effort was to 
identify and validate the many data sources from across the supply 
chain needed to support the development of enterprisewide metrics. 

DOD Used a Collaborative Process to Identify Performance Measures for 
the Requirements Forecasting Focus Area: 

In developing the Comprehensive Inventory Management Improvement Plan, 
DOD made considerable progress in identifying departmentwide 
performance measures, including measures within the requirement 
forecasting focus area, by using a collaborative process involving 
stakeholders representing key DOD components. As part of its plan, DOD 
established a metrics working group responsible for developing needed 
measures that do not exist and set time frames for their use. The plan 
identifies two to-be-developed metrics necessary to increase demand 
accuracy and reduce the percentage of over-forecasting bias. The two 
are to be developed by the end of fiscal year 2012. 

A similar collaborative process for defining performance measurement 
for asset visibility and materiel distribution has not yet occurred. 
For example, implementation of radio frequency identification 
technology has been identified as a priority for the department in 
various strategic planning documents. However, DOD has not established 
performance measures to assess the impact of its implementation, 
despite the significant initial investment of resources required to 
use the technology. When asked to detail the progress made in passive 
radio frequency identification[Footnote 51] implementation in a recent 
congressional hearing on supply chain management, the response of the 
Principal Deputy Assistant Secretary of Defense for Logistics and 
Materiel Readiness included two examples of improvements, such as a 
reduction in time to perform inventory at Tinker Air Force Base. 
However, DOD has not developed comprehensive, enterprisewide measures 
of implementation or results achieved. 

Data quality and a shared approach to performance measurement across 
organizations present challenges to DOD's efforts to establish 
enterprisewide performance measures for all three focus areas of 
supply chain management. Ongoing efforts to modernize or replace DOD 
business information systems, including systems supporting supply 
chain management, are intended to improve data quality and data 
sharing within DOD components. However, we have found that data-
quality problems persist, and these systems are not designed to 
routinely share data across organization boundaries, such as among 
military departments. Further, DOD's information system modernization 
efforts have experienced significant delays and cost increases while 
projected benefits have not yet been achieved.[Footnote 52] Our recent 
review of DOD's Comprehensive Inventory Management Improvement Plan 
revealed concerns about data reliability and availability that could 
affect the department's efforts in implementing the plan, including 
delays in implementing business system modernization. The department 
is further challenged because it does not have a common approach to 
developing and implementing performance measures that include common 
definitions, data sources, and agreement regarding how to measure 
attributes of the supply chain across the enterprise. For example, we 
found that it could be difficult for the services and DLA to measure 
demand forecasting as they all differ in their current approach. These 
factors have likewise been a challenge for the Joint Supply Chain 
Architecture initiative. For example, one weapons system official 
explained that customer wait time may be ambiguous because it can be 
calculated differently and with different definitions. Until DOD 
overcomes such challenges and establishes enterprisewide performance 
measures for assessing supply chain performance in the three focus 
areas for improvement identified in our high-risk series, the 
department may have difficulty in demonstrating progress resulting 
from its corrective actions. 

Conclusions: 

DOD has demonstrated two key ingredients for making further 
improvements in supply chain management--namely, top leadership 
support and access to the necessary people and resources. 
Additionally, DOD through its new inventory management improvement 
plan has taken an important step toward improving requirements 
forecasting, one of the three focus areas where we have documented 
supply chain management weaknesses. Although implementation challenges 
remain to be addressed, the plan provides a path forward to improve 
DOD's inventory management practices. The lack of corrective action 
plans for asset visibility and materiel distribution results in 
additional uncertainties regarding how promptly, effectively, and 
efficiently DOD will be able to address its systemic problems in 
supply chain management. 

The new performance management framework outlined in the 2010 
Logistics Strategic Plan could be an effective management tool if it 
is instituted across the logistics enterprise. However, DOD has not 
taken action to provide implementation guidance, an effective 
communications strategy that provides transparency and accountability 
for improvement efforts, or well-defined and documented roles and 
responsibilities of key governance bodies and certain senior positions 
within its performance management framework for logistics. The 
participation of the Joint Logistics Board and the Supply Chain 
Executive Steering Committee in the framework and how these two bodies 
will provide effective oversight to all key initiatives for supply 
chain management is unclear. Further, the roles and responsibilities 
of the department's CMO and Deputy CMO, as they relate to the 
performance management framework for logistics and existing logistics 
governance bodies, are similarly unclear. Moreover, the department has 
not defined how the CMO and Deputy CMO will ensure alignment of supply 
chain management improvement plans and performance management with 
plans and performance management of other defense business operations. 
Without these additional actions, DOD may not be able to fully 
implement the framework and use it effectively as a tool for managing 
performance. 

Performance information is critical for developing and implementing 
both effective corrective action plans and the performance management 
framework, and DOD has demonstrated an ability to plan for developing 
and enhancing performance measurement in the inventory management 
area. Developing meaningful, appropriate enterprisewide measures is a 
difficult task, especially for an organization the size and scope of 
DOD. Continued progress in defining needed performance measures for 
the requirement forecasting focus area, combined with the 
identification, development, and implementation of performance 
measures in the asset visibility and materiel distribution focus areas 
could highlight progress and needed management focus in order to 
address problems in those areas that span the supply chain enterprise. 
In the absence of effective performance measures, DOD cannot be 
assured that corrective actions are achieving intended results. 
Further, without these measures, it will be difficult for DOD to 
demonstrate progress to external stakeholders, such as Congress, and 
show that resources are invested efficiently. 

Recommendations for Executive Action: 

We recommend the Secretary of Defense take the following six actions 
to improve DOD's supply chain management and address challenges in 
this high-risk area. 

To address remaining challenges in asset visibility and materiel 
distribution, we recommend that the Secretary of Defense 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). 

To institute the performance management framework for guiding and 
overseeing supply chain management and other logistics improvement 
efforts, we recommend that the Secretary of Defense direct the Under 
Secretary of Defense for Acquisition, Technology and Logistics to take 
the following three actions: 

* Develop and issue detailed guidance to affected stakeholders 
involved in implementing the performance management framework for 
logistics. 

* 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. 

* 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. 

We also recommend that the Secretary of Defense clearly define the 
CMO's and Deputy CMO's roles and responsibilities as they specifically 
relate to (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. 

We recommend that the Secretary of Defense 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 Comments and Our Evaluation: 

In written comments on a draft of this report, DOD stated that it 
concurred with the overall intent of the report and specifically 
concurred or partially concurred with two of our six recommendations. 
However, the department did not concur with four of our 
recommendations. The Principal Deputy Assistant Secretary of Defense 
for Logistics and Materiel Readiness stated that DOD did not concur 
with three of our recommendations based on its ongoing major 
initiatives and did not concur with one recommendation that the 
department stated was addressed in existing policy. 

DOD concurred with our recommendation to issue guidance to all 
affected stakeholders involved in implementing the new performance 
management framework for logistics that was outlined in the 2010 
Logistics Strategic Plan. DOD stated that guidance will be provided to 
components and applicable defense agencies in the last quarter of 
fiscal year 2011. DOD did not elaborate regarding the nature and scope 
of information to be included in this guidance. 

DOD partially concurred with our recommendation to revise the charters 
of the Joint Logistics Board and the Supply Chain Executive Steering 
Committee to define and describe how these governance bodies will 
participate in the performance management framework for logistics. DOD 
stated that the performance management framework is not explicitly 
described in the charters, but that the charters reflect that these 
bodies are to provide oversight, coordination, and information-sharing 
for logistics initiatives and issues. DOD stated its view that no 
change is required for the Joint Logistics Board charter, but the 
draft charter for the Supply Chain Executive Steering Committee will 
be revised to address reviews that are of performance measures and 
initiatives designed to drive logistics improvements. We continue to 
believe that effective implementation of DOD's new performance 
management framework for logistics will require departmentwide 
direction and oversight from its governance bodies to ensure 
initiatives are staying on track and that progress toward goals is 
being made consistently throughout the department. As we discussed in 
our report, we found that neither of the two governance bodies has 
exercised comprehensive and systematic oversight across all the key 
improvement initiatives for supply chain management that were outlined 
in the 2010 Logistics Strategic Plan. Since DOD does not intend to 
revise their charters in order to define and describe how these bodies 
will participate in the department's new performance management 
framework, then it will be even more important that their roles and 
responsibilities be made clear and explicit in the implementation 
guidance that DOD says it plans to issue for the performance 
management framework. 

In disagreeing with our other four recommendations, DOD indicates that 
its ongoing involvement in major improvement initiatives, as well as 
existing policy, is sufficient for addressing supply chain management 
problems. We disagree based on the findings discussed in this report. 
Problems in supply chain management, including the three focus areas 
of requirements forecasting, asset visibility, and materiel 
distribution, are long-standing and complex. Identifying root causes 
and implementing effective solutions will require the involvement and 
coordination of multiple stakeholders across the department, as well 
as a strong effort to monitor, evaluate, and oversee improvements. Our 
recommendations are intended to promote a systemic, integrated, and 
enterprisewide approach to resolving problems in supply chain 
management. In addition, the recommendations are closely linked with 
criteria and steps that agencies need to take to successfully 
institute changes across an enterprise and to have an area removed 
from GAO's high-risk list. As noted in our report, with the issuance 
of the Comprehensive Inventory Management Improvement Plan in 2010, 
DOD took important initial positive steps to address challenges in the 
requirements forecasting focus area, as well as other areas of 
inventory management. We believe that a similar approach could also be 
effective in addressing challenges in asset visibility and materiel 
distribution challenges. Our evaluation of DOD's comments with regard 
to each of these four recommendations follows. 

DOD disagreed with our recommendation to develop and implement 
corrective action plans for the focus areas of asset visibility and 
materiel distribution. DOD stated that it did not agree with our 
recommendation because the department is already engaged in major 
efforts to improve asset visibility and materiel distribution. While 
DOD for many years has had improvement initiatives for certain 
challenges within these areas, we continue to believe that developing 
and implementing a corrective action plan for each of the remaining 
focus areas--or a single, integrated plan covering both areas--is 
critical to resolving supply chain management problems with a 
systemic, integrated, and enterprisewide approach. GAO's criteria for 
removing the high-risk designation--for supply chain management and 
other programs--specifically calls for corrective actions plans that 
identify the root causes of problems, solutions to these problems, and 
steps to achieve these solutions. Moreover, an effective strategic 
planning process that results in a high-quality corrective action plan 
can provide clear direction to addressing DOD's weaknesses in supply 
chain management. 

DOD commented that its involvement in major efforts to improve asset 
visibility and materiel distribution negates the need for a corrective 
action plan. DOD specifically refers to three efforts--(1) the 
Distribution Strategic Opportunities initiative, (2) the Distribution 
Network Optimization initiative, and (3) the Comprehensive Inventory 
Management Improvement Plan. DOD states that each of these efforts has 
specific goals, milestones, and targets, and involves key 
stakeholders. It is unclear why DOD, in its written comments, focuses 
on the first two efforts to the exclusion of other ongoing initiatives 
for improving distribution. During our review, DOD officials did not 
highlight these efforts as paramount, nor does the 2010 Logistics 
Strategic Plan characterize these as DOD's most critical key 
initiatives. On the contrary, the 2010 Logistics Strategic Plan 
briefly describes the Distribution Strategic Opportunities initiative 
as an effort "to improve distribution across the enterprise" and 
includes it among several other initiatives the department has to 
improve supply chain processes. The Logistics Strategic Plan provides 
no other explanation of this initiative; provides no goals, 
milestones, or targets associated with the initiative; and does not 
show how this initiative will enable it to achieve high-level outcomes 
such as operating supply chains more effectively and efficiently. The 
plan, moreover, makes no specific mention of the second effort--the 
Distribution Network Optimization initiative--although information 
provided separately by the department indicates it is a sub-initiative 
under the Distribution Strategic Opportunities initiative. 

Furthermore, without a strategic planning process that examines root 
problems and capability gaps and results in a corrective action plan, 
it is unclear that these initiatives alone are sufficient for 
addressing all major challenges in the asset visibility and materiel 
distribution focus areas. For example, it is unclear to what extent 
these initiatives address challenges in managing supply support in a 
joint theater of operations. It is also unclear whether the 
initiatives are intended to focus on improving asset visibility. As 
mentioned above, DOD has demonstrated an ability to carry out a 
collaborative strategic planning process resulting in the issuance of 
its Comprehensive Inventory Management Improvement Plan. That plan 
identifies corrective actions that could, when implemented, 
effectively address the requirements forecasting focus area and other 
aspects of inventory management. We continue to believe that following 
a similar collaborative approach that results in a corrective action 
plan or plans for the focus areas of asset visibility and materiel 
distribution would result in significant progress in addressing 
remaining challenges in the supply chain management high-risk area. 

DOD did not concur with our recommendation to develop and implement a 
communications strategy for documenting and reporting on the results 
of supply chain management improvement efforts. DOD stated that an 
additional strategy of documenting and reporting its progress 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. Further, DOD stated that it 
will continue to use monthly in-progress reviews of supply chain 
management improvement efforts as the communications strategy with the 
components. We continue to believe that DOD needs to report on the 
results and progress of its logistics and supply chain management 
improvement efforts. Such reporting can enhance accountability, help 
ensure that all stakeholders are aware of progress being made and 
areas needing further attention, and convey consistent directions 
throughout the department for follow-on actions. Communication 
regarding goals and performance are key steps that DOD identifies as 
part of the performance management framework for logistics outlined in 
the Logistics Strategic Plan. Further, DOD stated in this plan its 
commitment to issue a DOD Logistics Strategic Management Report to 
document the results of the assessments performed as part of the 
performance management framework. Given DOD's response to our 
recommendation, it is unclear how the department plans to implement 
these aspects of its performance management framework. As discussed in 
this report, a management report has not yet been issued, and it is 
unclear what types of information DOD intends to include in this 
report and how the information in the report will be used as part of 
the performance management framework. Further, DOD officials stated 
that the report would be used among internal stakeholders and they did 
not plan on sharing the report with Congress. 

DOD did not concur with our recommendation to clearly define the CMO's 
and Deputy CMO's roles and responsibilities as they specifically 
relate to (1) the performance management framework for logistics, (2) 
existing governance bodies for logistics, and (3) the alignment of 
supply chain management improvement efforts with those of DOD's other 
business operations areas. DOD stated that this recommendation is not 
required because the Deputy CMO's roles and responsibilities are 
sufficiently documented in DOD guidance. We stated in our report that 
the CMO and Deputy CMO have broad responsibilities related to the 
improvement of the efficiency and effectiveness of DOD's business 
operations. However, we have previously reported that additional 
opportunities exist for the CMO and Deputy CMO to achieve business-
related goals, including supply chain management goals. For example, 
we reported that the Deputy CMO was not involved in developing or 
reviewing the Comprehensive Inventory Management Improvement Plan. 
This plan was described in DOD's comments on this draft report as one 
of the three major ongoing efforts to improve supply chain management. 
Further, neither the CMO nor Deputy CMO attends meetings of the Joint 
Logistics Board or Supply Chain Executive Steering Committee. Among 
the responsibilities of the Deputy CMO are to participate as a member 
of senior governance councils, and participation in senior logistics 
governance bodies therefore may provide more opportunities for closer 
collaboration and involvement of the Deputy CMO in addressing 
challenges in supply chain management, especially those challenges 
that span business areas. DOD additionally stated in its comments that 
it did not concur with our recommendation because the logistics 
enterprise reports to the Under Secretary of Defense for Acquisition, 
Technology and Logistics, who has oversight and management 
responsibility for logistics. Our recommendation does not imply that 
oversight and management responsibility for logistics should be 
shifted to the CMO and Deputy CMO; however, these individuals are in a 
unique position to coordinate improvement efforts across all defense 
business areas. Therefore, these individuals need to have a clearly 
defined role, consistent with their overarching responsibilities in 
each business area, including logistics and supply chain management. 

DOD did not concur with our recommendation to use a collaborative 
approach to identify, develop, and implement enterprisewide 
performance measures needed to demonstrate progress in the focus areas 
of asset visibility and materiel distribution. DOD stated that no 
additional actions are required because enterprisewide performance 
measures have been and continue to be developed using a collaborative 
process involving all stakeholders. Further, DOD stated that the 
performance management framework is a process rather than a document 
of performance management. The department's comments noted that it is 
following this process in a collaborative fashion involving all 
stakeholders in the identification, development, and implementation of 
enterprisewide performance measures to demonstrate progress in key 
areas, including asset visibility and materiel distribution. As noted 
in our report, DOD used a collaborative process to define existing and 
needed performance measures as part of the development of its 
Comprehensive Inventory Management Improvement Plan. We continue to 
believe that DOD should follow a similar, collaborative approach for 
the focus areas of asset visibility and materiel distribution. Our 
work has shown that, at this time, enterprisewide measures for these 
focus areas do not yet exist. DOD began an initiative in 2007 called 
the Joint Supply Chain Architecture to identify a hierarchy of 
performance measures. However, the only enterprisewide performance 
measure used across the department, customer wait time, predates this 
Joint Supply Chain Architecture initiative. Other enterprisewide 
measures identified by the initiative are not fully developed and may 
be some time from full implementation. We agree with DOD that the 
performance management framework is a process and not a document. Our 
report does not suggest otherwise. We recommended that once key 
performance measures for these focus areas are defined and 
implemented, they be incorporated as part of the process for managing 
improvement efforts within the performance management framework. 

DOD's comments are reprinted in their entirety in appendix II. The 
department also provided technical comments that we have incorporated 
into this report where applicable. 

We are sending copies of this report to the appropriate congressional 
committees. We are also sending copies to the Secretary of Defense; 
the Deputy Secretary of Defense; and the Under Secretary of Defense 
for Acquisition, Technology and Logistics. This report will also be 
available at no charge on our Web site at [hyperlink, 
http://www.gao.gov]. Should you or your staff have any questions 
concerning this report, please contact me at (202) 512-8246 or 
edwardsj@gao.gov. Contact points for our Offices of Congressional 
Relations and Public Affairs may be found on the last page of this 
report. Staff who are major contributors to this report are listed in 
appendix III. 

Signed by: 

Jack E. Edwards: 
Director, Defense Capabilities and Management: 

List of Committees: 

The Honorable Carl Levin: 
Chairman: 
The Honorable John McCain: 
Ranking Member: 
Committee on Armed Services: 
United States Senate: 

The Honorable Daniel K. Inouye: 
Chairman: 
The Honorable Thad Cochran: 
Ranking Member: 
Subcommittee on Defense: 
Committee on Appropriations: 
United States Senate: 

The Honorable Howard P. McKeon: 
Chairman: 
The Honorable Adam Smith: 
Ranking Member: 
Committee on Armed Services: 
House of Representatives: 

[End of section] 

Appendix I: Scope and Methodology: 

To determine the extent to which the Department of Defense (DOD) has 
developed and implemented detailed corrective action plans that 
address high-risk challenges in the three focus areas we identified 
for improvement, we identified existing plans for logistics, supply 
chain management, and the three focus areas: requirements forecasting, 
asset visibility, and materiel distribution. We assessed the extent to 
which such plans provide a comprehensive, integrated strategy for 
improving one or more of the focus areas and include the key elements 
of a corrective action plan that we have previously identified. 
Specifically, we evaluated DOD's October 2010 Comprehensive Inventory 
Management Improvement Plan and determined its applicability as a 
corrective action plan for inventory management and the requirements 
forecasting focus area by comparing the plan and its elements to 
criteria from our prior reports on corrective action plans and 
effective strategic planning. Specific criteria on corrective action 
plans and the elements of effective strategic planning are discussed 
in the report. Using these same criteria, we evaluated the 2010 
Logistics Strategic Plan and determined the extent to which it could 
serve as a corrective action plan for the areas of asset visibility 
and materiel distribution. We met with officials from the Office of 
the Deputy Assistant Secretary of Defense for Supply Chain Integration 
to discuss features of the 2010 Logistics Strategic Plan and any 
ongoing and possible future strategic planning efforts. We reviewed 
DOD's testimony before Congress and written responses to questions for 
the record on the plan. We also reviewed prior GAO reports and 
testimonies pertaining to DOD supply chain management, including prior 
strategic planning efforts. 

To assess the extent to which DOD has an effective program for 
monitoring and validating the effectiveness and sustainability of 
corrective actions, we reviewed the performance management framework 
identified in DOD's 2010 Logistics Strategic Plan. We reviewed the 
features of the framework that are aimed at helping DOD to guide and 
oversee improvement efforts, and we also determined the implementation 
status of the framework. In addition, we assessed the extent that DOD 
has included elements needed for instituting the framework across the 
department. We based this assessment, in part, on a body of work that 
sets forth criteria for results-oriented management and best practices 
for organizations that are transforming their management practices and 
structures.[Footnote 53] We also reviewed DOD's 2009 Strategic 
Management Plan and our recently released report on the plan. We 
compared the performance management frameworks of the two DOD plans to 
determine the degree of congruence between the frameworks. We met with 
officials from the Office for Supply Chain Integration to discuss the 
performance management framework and oversight structure (including 
senior-level logistics governance bodies) and obtain additional 
insight and supporting documentation (e.g., agendas and meeting 
minutes of these bodies) on the purpose and implementation of the 
framework. We reviewed DOD's recent congressional testimony on the 
2010 Logistics Strategic Plan and written responses to related 
questions for the record to determine DOD's approach and perspective 
on implementing the plan, including the performance management 
framework. In addition, we reviewed legislation, DOD policies, and 
other documentation regarding the chief management officials, 
including the DOD Chief Management Officer, the Deputy Chief 
Management Officer, and military departments' Chief Management 
Officers; and our prior work on performance management.[Footnote 54] 

To determine the extent to which DOD has an ability to demonstrate 
supply chain management progress, we reviewed how DOD uses, or plans 
to use, performance measures discussed in the 2010 Logistics Strategic 
Plan. We also reviewed DOD's existing or planned performance measures 
for the three focus areas of improvement, including measures discussed 
in the Comprehensive Inventory Management Improvement Plan. As a basis 
for evaluating these measures, we reviewed DOD's supply chain 
management regulation,[Footnote 55] federal standards and best 
practices,[Footnote 56] and our prior findings and recommendations on 
this issue.[Footnote 57] We discussed existing and planned measures 
with officials from the Office for Supply Chain Integration and other 
DOD components. We also obtained information from these officials on 
the development of the Joint Supply Chain Architecture since a major 
effort of the initiative is to define enterprisewide performance 
measures to track efficiency, effectiveness, and reliability of the 
supply chains. We met with officials from the following weapons 
systems program offices involved in implementing Joint Supply Chain 
Architecture case study programs: Integrated Materiel Management 
Center, U.S. Army Aviation and Missile Life Cycle Management Command, 
Redstone Arsenal, Alabama; PEO Integrated Warfare Systems, Washington 
Navy Yard, Washington, D.C.; Warner Robins Air Logistics Center, 
Robins Air Force Base, Georgia; Naval Inventory Control Point, U.S. 
Naval Supply Systems Command, Mechanicsburg and Philadelphia, 
Pennsylvania. We discussed performance measures used by these case 
study programs as well as DOD efforts to develop enterprisewide 
performance measures. 

We conducted a site visit to the U.S. Transportation Command, Scott 
Air Force Base, Illinois, to obtain information and perspectives on 
distribution-related initiatives to discuss supply chain improvement 
efforts and performance management. In addition, we contacted 
officials from the following agencies and offices to obtain 
information and perspectives on the 2010 Logistics Strategic Plan, 
supply chain improvement initiatives and efforts, and their use of 
performance measures: 

* U.S. Joint Forces Command: Operations, Plans, Logistics and 
Engineering Directorate, J4 Division, Norfolk, Virginia; 

* Defense Logistics Agency, Ft. Belvoir, Virginia; 

* U.S. Army: Office of the Deputy Chief of Staff of the Army, G-4 
Logistics, Pentagon, Washington, D.C.; 

* U.S. Navy: Deputy Assistant Secretary of the Navy, Acquisition and 
Logistics Management, Logistics Division, Pentagon, Washington, D.C.; 
Chief of Naval Operations Supply, Ordnance and Logistics Operations, 
Arlington, Virginia; 

* U.S. Air Force: Air Staff, Logistics Directorate, Rosslyn, Virginia; 
and the Global Logistics Support Center, Scott Air Force Base, 
Illinois. 

We also met with representatives from the Institute for Supply 
Management and the Center for Advanced Purchasing Studies Research, 
Tempe, Arizona; and the University of Alabama Office for Enterprise 
Innovation and Sustainability, Huntsville, Alabama, to obtain industry 
and academia's views and documentation on the Supply Chain Operation 
Reference model, industry standards for supply chain management, and 
how application of those standards are unique to DOD. 

We conducted this performance audit from February 2010 to July 2011 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evident to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our finding 
and conclusions based on our audit objectives. 

[End of section] 

Appendix II: Comments from the Department of Defense: 

Office Of The Assistant Secretary Of Defense: 
Logistics And Materiel Readiness: 
3500 Defense Pentagon: 
Washington, DC 20301-3500: 

June 16, 2011: 

Mr. Jack Edwards: 
Director, Defense Capabilities and Management: 
U.S. Government Accountability Office: 
441 G Street, N.W. 
Washington, DC 20548: 

Dear Mr. Edwards: 

This is the Department of Defense (DoD) response to the GAO draft 
report, GAO-11-569, "Defense Logistics: DoD Needs to Take Additional 
Actions to Address Challenges in Supply Chain Management," dated May 
24, 2011 (GAO Code 351434). Detailed comments on the report 
recommendations are enclosed. 

The Department concurs with the overall intent of the report and 
specifically concurs with the recommendation to issue guidance on the 
performance management framework and partially concurs with the 
recommendation to revise governance charters. However, the Department 
non-concurs with three of the recommendations based on its engagement 
in major efforts to improve supply chain management, and with one 
recommendation that is addressed in existing policy. 

The DoD looks forward to your final report, and thanks the GAO for the 
opportunity to review and comment on the draft report. 

Sincerely, 

Signed by: 
Alan F. Estevez: 
Principal Deputy: 

[End of letter] 

GAO Draft Report Dated May 24, 2011: 
GAO-11-569 (GAO Code 351434): 

"Defense Logistics: DOD Needs To Take Additional Actions To
Address Challenges In Supply Chain Management" 

Department Of Defense Comments To The GAO Recommendations: 

Recommendation 1: The GAO recommends that the Secretary of Defense 
direct the Under Secretary of Defense for Acquisition, Technology and 
Logistics to develop and implement corrective action plans for 
improving asset visibility and materiel distribution. 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; support 
department wide priorities identified in higher-level strategic 
guidance (such as the Strategic Management Plan and Logistics 
Strategic Plan). 

DoD Response: Non-concur. A single comprehensive, integrated plan is 
not required because the Department is currently engaged in major 
efforts to improve asset visibility and materiel distribution (i.e., 
Distribution Strategic Opportunities, Distribution Network
Optimization, and the Comprehensive Inventory Management Plan). Each 
effort has specific goals, milestones, targets, and involves key 
stakeholders. 

Recommendation 2: The GAO recommends that the Secretary of Defense 
direct the Under Secretary of Defense for Acquisition, Technology and 
Logistics take action to develop and issue detailed guidance to 
affected stakeholders involved in implementing the performance 
management framework for logistics. 

DoD Response: Concur. Guidance on the performance management framework 
will be provided to Components and applicable Defense Agencies in 
fourth quarter FY 2011. 

Recommendation 3: The GAO recommends that the Secretary of Defense 
direct the Under Secretary of Defense for Acquisition, Technology and 
Logistics take action 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. 

DoD Response: Non-concur. 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 the communications strategy with the 
Components. These in-process reviews with Component senior logistics 
leaders address corrective actions and discuss performance management 
information. 

Recommendation 4: The GAO recommends that the Secretary of Defense 
direct the Under Secretary of Defense for Acquisition, Technology and 
Logistics to take action 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. 

DoD Response: Partially concur. 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. Therefore, no change is required to the Joint 
Logistics Board charter. 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. 

Recommendation 5: The GAO recommends that the Secretary of Defense 
clearly define the CMO's and Deputy CMO's roles and responsibilities 
as they specifically relate to (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. 

DoD Response: Non-concur. This recommendation is not required because 
the DCMO roles and responsibilities are documented in the DoDD 
5105.82. Specifically, the DCMO 1) addresses integration and 
coordination of department wide business operations, develops and 
maintains the Strategic Management Plan that is developed with the 
participation of the Services, Agencies, and OSD offices, 2) 
participates as a member of senior governance councils, and 3) assures 
alignment of business operations through its advisement on the 
Department wide performance goals and assesses progress against those 
goals,. This directive defines business operations as the policies, 
processes, information, and systems relating to the end to end 
financial, logistics, facility management, human capital, acquisition, 
administrative, and other such functions of the DoD that support the 
warfighter. In addition, the DoD logistics enterprise reports to the 
Under Secretary of Defense for Acquisition, Technology and Logistics 
who has oversight and management responsibility for DoD logistics. 

Recommendation 6: The GAO recommends that the Secretary of Defense 
direct the Under Secretary of Defense for Acquisition, Technology and 
Logistics to use collaborative process, involving all key 
stakeholders, to identify, develop, and implement enterprise wide 
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. 

DoD Response: Non-concur. No additional action is required because 
enterprise-wide performance measures have been and continue to be 
developed using a collaborative process involving all stakeholders. 
The performance management framework is a process rather than a 
document of performance management. 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. The Department is 
currently engaged in major efforts to improve asset visibility and 
materiel distribution (i.e., Distribution Strategic Opportunities, 
Distribution Network Optimization, and the Comprehensive Inventory
Management Improvement Plan). These efforts leverage the collaborative 
processes with the Components in identifying problems, solutions, 
performance measures, corrective actions and targeted improvements in 
theatre operations, forward positioning of materiel, and 
forecast/demand planning. 

[End of section] 

Appendix III: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Jack E. Edwards, (202) 512-8246 or edwardsj@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, Thomas Gosling, Assistant 
Director; Jeffrey Heit; Suzanne Perkins; and Pauline Reaves made key 
contributions to this report. 

[End of section] 

Related GAO Products: 

High-Risk Series: An Update. [hyperlink, 
http://www.gao.gov/products/GAO-11-278]. Washington, D.C.: February 
2011. 

Defense Business Transformation: DOD Needs to Take Additional Actions 
to Further Define Key Management Roles, Develop Measurable Goals, and 
Align Planning Efforts. [hyperlink, 
http://www.gao.gov/products/GAO-11-181R]. Washington, D.C.: January 
26, 2011. 

DOD's 2010 Comprehensive Inventory Management Improvement Plan 
Addressed Statutory Requirements, But Faces Implementation Challenges. 
[hyperlink, http://www.gao.gov/products/GAO-11-240R]. Washington, 
D.C.: January 7, 2011. 

Defense Logistics: Additional Oversight and Reporting for the Army 
Logistics Modernization Program Are Needed. [hyperlink, 
http://www.gao.gov/products/GAO-11-139]. Washington, D.C. November 18, 
2010. 

DOD's High-Risk Areas: Observations on DOD's Progress and Challenges 
in Strategic Planning for Supply Chain Management. [hyperlink, 
http://www.gao.gov/products/GAO-10-929T]. Washington, D.C.: July 27, 
2010. 

Warfighter Support: Preliminary Observations on DOD's Progress and 
Challenges in Distributing Supplies and Equipment to Afghanistan. 
[hyperlink, http://www.gao.gov/products/GAO-10-842T]. Washington, 
D.C.: June 25, 2010. 

Defense Inventory: Defense Logistics Agency Needs to Expand on Efforts 
to More Effectively Manage Spare Parts. [hyperlink, 
http://www.gao.gov/products/GAO-10-469]. Washington, D.C.: May 11, 
2010. 

Defense Logistics: Lack of Key Information May Impede DOD's Ability to 
Improve Supply Chain Management. [hyperlink, 
http://www.gao.gov/products/GAO-09-150]. Washington, D.C.: January 12, 
2009. 

[End of section] 

Footnotes: 

[1] GAO, High-Risk Series: An Update, [hyperlink, 
http://www.gao.gov/products/GAO-11-278] (Washington, D.C.: February 
2011). 

[2] DOD defines secondary inventory items to include reparable 
components, subsystems, and assemblies other than major end items 
(e.g., ships, aircraft, and helicopters), consumable repair parts, 
bulk items and materiel, subsistence, and expendable end items (e.g., 
clothing and other personal gear). 

[3] The approved acquisition objective incorporates both materiel 
needed to meet the requirements objective and materiel needed to meet 
an additional 2 years of estimated future demand. The requirements 
objective is (for wholesale inventory replenishment) the maximum 
authorized quantity of stock for an item. It consists of the sum of 
stock represented by the economic order quantity, the safety level, 
the repair-cycle level, and the authorized additive levels. While 
inventory held for economical reasons or future use is not part of the 
approved acquisition objective, DOD states that retention of this 
inventory is necessary for the military mission. 

[4] GAO, Defense Inventory: Defense Logistics Agency Needs to Expand 
on Efforts to More Effectively Manage Spare Parts, [hyperlink, 
http://www.gao.gov/products/GAO-10-469] (Washington, D.C.: May 11, 
2010); Defense Inventory: Army Needs to Evaluate Impact of Recent 
Actions to Improve Demand Forecasts for Spare Parts, [hyperlink, 
http://www.gao.gov/products/GAO-09-199] (Washington, D.C.: Jan. 12, 
2009); Defense Inventory: Management Actions Needed to Improve the 
Cost Efficiency of Navy's Spare Parts Inventory, [hyperlink, 
http://www.gao.gov/products/GAO-09-103] (Washington, D.C.: Dec. 12, 
2008); and Defense Inventory: Opportunities Exist to Save Billions by 
Reducing Air Force's Unneeded Spare Parts Inventory, [hyperlink, 
http://www.gao.gov/products/GAO-07-232] (Washington, D.C.: Apr. 27, 
2007). 

[5] Demand forecasting is the prediction of future customer demands so 
inventory managers can develop inventory requirements to satisfy 
demands when they occur. Inaccurate demand forecasts may lead to 
either excess inventory or shortfalls. 

[6] GAO, Defense Logistics: Lack of Key Information May Impede DOD's 
Ability to Improve Supply Chain Management, [hyperlink, 
http://www.gao.gov/products/GAO-09-150] (Washington, D.C.: Jan. 12, 
2009); and Defense Logistics: Efforts to Improve Distribution and 
Supply Support for Joint Military Operations Could Benefit from a 
Coordinated Management Approach, [hyperlink, 
http://www.gao.gov/products/GAO-07-807] (Washington, D.C.: June 29, 
2007). 

[7] GAO, Warfighter Support: Preliminary Observations on DOD's 
Progress and Challenges in Distributing Supplies and Equipment to 
Afghanistan, [hyperlink, http://www.gao.gov/products/GAO-10-842T] 
(Washington, D.C.: June 25, 2010); DOD's High-Risk Areas: Efforts to 
Improve Supply Chain Can Be Enhanced by Linkage to Outcomes, Progress 
in Transforming Business Operations, and Reexamination of Logistics 
Governance and Strategy, [hyperlink, 
http://www.gao.gov/products/GAO-07-1064T] (Washington, D.C.: July 10, 
2007); and Defense Logistics: Actions Needed to Improve the 
Availability of Critical Items during Current and Future Operations, 
[hyperlink, http://www.gao.gov/products/GAO-05-275] (Washington, D.C.: 
Apr. 8, 2005). 

[8] GAO, DOD's High-Risk Areas: Observations on DOD's Progress and 
Challenges in Strategic Planning for Supply Chain Management, 
[hyperlink, http://www.gao.gov/products/GAO-10-929T] (Washington, 
D.C.: July 27, 2010); 
[hyperlink, http://www.gao.gov/products/GAO-10-842T]; and [hyperlink, 
http://www.gao.gov/products/GAO-09-150]. 

[9] DOD, Office of the Secretary of Defense, Principal Deputy 
Assistant Secretary of Defense for Logistics and Materiel Readiness, 
Department of Defense Logistics Strategic Plan (July 2010). 

[10] The budget requests of the military departments are reviewed and 
revised by the Office of the Secretary of Defense and the Office of 
Management and Budget before being incorporated into the President's 
budget. 

[11] DOD Directive 5100.01, Functions of the Department of Defense and 
Its Major Components (Dec. 21, 2002). 

[12] Consumable items include commodities such as subsistence (food), 
fuels, medical supplies, clothing, construction equipment, and spare 
parts that are normally expended or intended to be used up beyond 
recovery or repair. 

[13] Joint Chiefs of Staff, Joint Publication 4-0, Joint Logistics 
(July 18, 2008). 

[14] The Principal Deputy Assistant Secretary of Defense for Logistics 
and Materiel Readiness currently serves as the co-chair as the 
Assistant Secretary of Defense for Logistics and Materiel Readiness 
position is vacant. 

[15] The CMO is responsible for ensuring that DOD's core business 
missions are optimally aligned to support the warfighting mission and 
establishing performance goals and measures for improving and 
evaluating overall economy, efficiency, and effectiveness; and 
monitoring and measuring progress of the department, among other 
duties. See Department of Defense Directive 5105.02, Deputy Secretary 
of Defense (Feb. 18, 2009). The Deputy CMO's responsibilities include 
making recommendations to the CMO on the methodologies and measurement 
criteria to improve business operations; advising the Secretary of 
Defense on performance goals and measures, and assessing progress 
against those goals; and assisting department officials in ensuring 
that strategic plans, performance goals, and measures are aligned 
with, and provide accountability for, DOD strategic goals, among other 
duties See Department of Defense Directive 5105.82, Deputy Chief 
Management Officer (DCMO) of the Department of Defense (Oct. 17, 2008). 

[16] The title of this high-risk area was initially "DOD inventory 
management." Subsequently, our work demonstrated that the problems 
adversely affecting support to the warfighter extended beyond DOD's 
inventory management system to involve the entire supply chain. As a 
result, we subsequently modified the title to "DOD supply chain 
management." 

[17] [hyperlink, http://www.gao.gov/products/GAO-10-842T] and 
[hyperlink, http://www.gao.gov/products/GAO-05-275]. 

[18] In the most recent update, we removed DOD's personnel security 
clearance program's high-risk designation because of the department's 
progress in improving the timeliness of clearance investigations and 
developing tools and metrics to assess quality. 

[19] GAO, Determining Performance and Accountability Challenges and 
High Risks, [hyperlink, http://www.gao.gov/products/GAO-01-159SP] 
(Washington, D.C.: November 2000). 

[20] [hyperlink, http://www.gao.gov/products/GAO-11-278]. 

[21] GAO, DOD's High-Risk Areas: Progress Made Implementing Supply 
Chain Management, but Full Extent of Improvement Unknown, [hyperlink, 
http://www.gao.gov/products/GAO-07-234] (Washington, D.C.: Jan. 17, 
2007). 

[22] GAO, Managing for Results: Critical Issues for Improving Federal 
Agencies' Strategic Plans, [hyperlink, 
http://www.gao.gov/products/GAO/GGD-97-180] (Washington, D.C.: Sept. 
16, 1997). For an example showing how these individual elements of a 
strategic plan have been addressed, see GAO, Depot Maintenance: 
Improved Strategic Planning Needed to Ensure That Navy Depots Can Meet 
Future Maintenance Requirements, [hyperlink, 
http://www.gao.gov/products/GAO-10-585] (Washington, D.C.: June 11, 
2010). 

[23] [hyperlink, http://www.gao.gov/products/GAO-09-150], [hyperlink, 
http://www.gao.gov/products/GAO-07-1064T], and DOD's High-Risk Areas: 
Challenges Remain to Achieving and Demonstrating Progress in Supply 
Chain Management, [hyperlink, http://www.gao.gov/products/GAO-06-983T] 
(Washington, D.C.: July 25, 2006). 

[24] Other goals in the plan also have aspects relating to supply 
chain management, including (1) provide logistics support in 
accordance with warfighters' requirements and (2) ensure 
supportability, maintainability, and costs are considered throughout 
the acquisition cycle. 

[25] [hyperlink, http://www.gao.gov/products/GAO-10-929T]. 

[26] National Defense Authorization Act for Fiscal Year 2010, Pub. L. 
No. 111-84, § 328 (2009). 

[27] As noted earlier, demand forecasting is a factor in establishing 
inventory requirements. 

[28] [hyperlink, http://www.gao.gov/products/GAO-11-278] and 
[hyperlink, http://www.gao.gov/products/GAO-01-159SP]. 

[29] For our analysis of this plan, see GAO, DOD's 2010 Comprehensive 
Inventory Management Improvement Plan Addressed Statutory 
Requirements, But Faces Implementation Challenges, [hyperlink, 
http://www.gao.gov/products/GAO-11-240R] (Washington, D.C.: Jan. 7, 
2011). 

[30] [hyperlink, http://www.gao.gov/products/GAO-10-469], [hyperlink, 
http://www.gao.gov/products/GAO-09-199], [hyperlink, 
http://www.gao.gov/products/GAO-09-103], and [hyperlink, 
http://www.gao.gov/products/GAO-07-232]. 

[31] [hyperlink, http://www.gao.gov/products/GAO-11-240R]. 

[32] We noted, for example, that a sub-plan of DOD's Comprehensive 
Inventory Management Improvement Plan is aimed at improving total 
asset visibility. The focus of this sub-plan, however, is on the 
inventory management aspects of asset visibility (such as improving 
modeling used to adjust inventory levels) and does not address other 
challenges such as providing in-transit asset visibility or asset 
visibility within a theater of operations. 

[33] DOD, Joint Supply Joint Integrating Concept (Mar. 31, 2010). 

[34] U.S. Army Audit Agency, Container Management in Iraq, Condition 
and Contents A-2011-0047-ALL (Dec. 22, 2010). 

[35] [hyperlink, http://www.gao.gov/products/GAO-10-929T]. 

[36] Radio frequency identification is a type of technology that 
enables electronic identification and tracking of equipment and 
supplies and that DOD expects will improve its asset visibility. 

[37] DOD, Office of the Deputy Chief Management Officer, Department of 
Defense Strategic Management Plan (July 31, 2009). 

[38] We recently reported that the 2009 Strategic Management Plan has 
some weaknesses affecting its performance management framework that 
should be addressed. Among these weaknesses, some of the roles and 
responsibilities for senior positions in improving business operations 
across the department have yet to be fully defined and DOD has not 
established mechanisms to guide efforts to monitor progress and take 
corrective action. See GAO, Defense Business Transformation: DOD Needs 
to Take Additional Actions to Further Define Key Management Roles, 
Develop Measurable Goals, and Align Planning Efforts, GAO-11-181R 
(Washington, D.C.: Jan. 26, 2011). DOD issued an updated Strategic 
Management Plan on December 30, 2010, which covers fiscal year 2011. 
We plan to evaluate the updated plan to assess whether it contains key 
elements, such as measurable goals, funding priorities, and resource 
needs. 

[39] High-Risk Logistics Planning: Progress on Improving Department of 
Defense Supply Chain Management, Hearing before the Subcommittee on 
Oversight of Government Management, the Federal Workforce, and the 
District of Columbia, Senate Committee on Homeland Security and 
Governmental Affairs (Jul. 27 2010). 

[40] The senior DOD official was the Principal Deputy Assistant 
Secretary of Defense for Logistics and Materiel Readiness. 

[41] See Department of Defense Directive 5105.02, Deputy Secretary of 
Defense (Feb. 18, 2009) and Department of Defense Directive 5105.82, 
Deputy Chief Management Officer (DCMO) of the Department of Defense 
(Oct. 17, 2008). 

[42] [hyperlink, http://www.gao.gov/products/GAO-11-181R]. 

[43] Federal standards include those found in GAO, Standards for 
Internal Control in the Federal Government, [hyperlink, 
http://www.gao.gov/products/GAO/AIMD-00-21.3.1] (Washington, D.C.: 
November 1999). 

[44] See, for example, [hyperlink, http://www.gao.gov/products/GAO-09-
150 and GAO, The Results Act: An Evaluator's Guide to Assessing Agency 
Annual Performance Plans, [hyperlink, 
http://www.gao.gov/products/GAO/GGD-10.1.20 (Washington, D.C.: April 
1998). 

[45] [hyperlink, http://www.gao.gov/products/GAO-01-159SP] and 
[hyperlink, http://www.gao.gov/products/GAO-11-278]. 

[47] DOD Regulation 4140.1-R, DOD Supply Chain Materiel Management 
Regulation (May 23, 2003). 

[48] [hyperlink, http://www.gao.gov/products/GAO-09-150]. 

[48] [hyperlink, http://www.gao.gov/products/GAO-07-234]. 

[49] Customer wait time is a measure of the number of days from the 
issuance of a customer order to satisfaction of that order. We have 
previously noted that one weakness of customer wait time as a measure 
for tracking supply chain performance is that it could fail to 
accurately measure the impact of supply chain management improvement 
initiatives as it is influenced by many external factors. 

[50] DOD Instruction 4160.61, Customer Wait Time and Time Definite 
Delivery (Dec. 14, 2000). 

[51] Passive radio frequency identification is one type of this 
technology that DOD uses. 

[52] GAO, DOD Business Transformation: Improved Management Oversight 
of Business System Modernization Efforts Needed, [hyperlink, 
http://www.gao.gov/products/GAO-11-53] (Washington, D.C.: Oct. 7, 
2010). 

[53] See [hyperlink, http://www.gao.gov/products/GAO-11-240R]; GAO, 
Combating Terrorism: Evaluation of Selected Characteristics in 
National Strategies Related to Terrorism, [hyperlink, 
http://www.gao.gov/products/GAO-04-408T] (Washington, D.C.: Feb. 3, 
2004); Depot Maintenance: Improved Strategic Planning Needed to Ensure 
that Air Force Depots Can Meet Future Maintenance Requirements, 
[hyperlink, http://www.gao.gov/products/GAO-10-526] (Washington, D.C.: 
May 14, 2010); and Depot Maintenance: Improved Strategic Planning 
Needed to Ensure that Navy Depots Can Meet Future Maintenance 
Requirements, [hyperlink, http://www.gao.gov/products/GAO-10-585] 
(Washington, D.C.: June 11, 2010). 

[54] See, for example, DOD Directive 5105.02, Deputy Secretary of 
Defense (Sept. 18, 2007) and DOD Directive 5105.82, Deputy Chief 
Management Officer (DCMO) of the Department of Defense (Oct. 17, 2008). 

[55] DOD Regulation 4140.1-R, DOD Supply Chain Materiel Management 
Regulation (May 23, 2003). 

[56] These include the Standards for Internal Control in the Federal 
Government. 

[57] [hyperlink, http://www.gao.gov/products/GAO-09-150]. 

[End of section] 

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