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GAO-11-240R 1 (2011-01-07)

handle is hein.gao/gaobaanwa0001 and id is 1 raw text is: i ~G A 0 . A~couintabilty I Integrity * Reliability United States Government Accountability Office Washington, DC 20548 January 7, 2011 Congressional Committees Subject: DOD's 2010 Comprehensive Inventory Management Improvement Plan Addressed Statutory Requirements, But Faces Implementation Challenges The Department of Defense (DOD) spends billions of dollars to purchase, manage, store, track, and deliver spare parts and other supplies needed to keep military equipment ready and operating. Given the need to support ongoing U.S. military operations, DOD reported that it currently manages more than 4 million secondary inventory items valued at more than $91 billion as of September 2009.' However, DOD reported that $10.3 billion (11 percent) of its secondary inventory has been designated as 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.2 Since 1990, we have identified DOD supply chain management as a high-risk area due in part to ineffective and inefficient inventory management practices and procedures, weaknesses in accurately forecasting demand for spare parts, and challenges in achieving widespread implementation of key technologies aimed at improving asset visibility. These factors have contributed to the accumulation of billions of dollars in spare parts that are excess to current requirements. Moreover, we have recently '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). 2The approved acquisition objective incorporates both materiel needed to meet the requirements objective and materiel needed to meet 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. 3GAO, High-Risk Series: An Update, GAO-09-271 (Washington, D.C.: January 2009); High-Risk Series: An Update, GAO-07-310 (Washington, D.C.: January 2007); and High Risk-Series: An Update, GAO-05- 207 (Washington, D.C.: January 2005). GAO-11-240R DOD's Inventory Management Improvement Plan Page 1

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