Defense Infrastructure:

Commissary Reorganization Should Produce Savings but Opportunities May Exist for More

GAO-01-473: Published: Apr 26, 2001. Publicly Released: Apr 26, 2001.

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In July 2000, the Defense Commissary Agency proposed changes to its regional management structure that it expects will generate savings, improve efficiencies, and provide more effective management of commissary operations. The plan calls for eliminating the two area offices within the Eastern Region and consolidating most of the Eastern Region's operations at the region's headquarters at Virginia Beach, Virginia. Although the agency has not fully refined its cost and savings estimates, it appears that these proposed changes will yield savings and improve operations. However, with the implementation of the plan comes a loss of operational expertise in the closing offices that could potentially disrupt operations and customer service. Whether the proposed regional reorganization is the best approach for achieving efficiencies is unclear because the agency did not assess alternative structural approaches to improving regional operations and creating efficiencies. The plan is limited because it considers only the Eastern Region and not the overall regional structure, which is to be considered in the agency's follow-on study of the current reorganization plan. Although the closure of the area offices is likely to improve efficiency, the planned study to determine the optimum number of stores for the agency's regions provides an additional opportunity for streamlining and improved regional operations and efficiencies. Experiences from the private-sector may provide useful lessons into how best to shape the agency's future regional structure.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: DOD concurred with the recommendation, stating that the Defense Commissary Agency would solicit views on structuring regional operations and efficiency from commercial food retail firms. The Commissary Agency subsequently visited three major food retail firms during the summer 2001 to discuss business organizational structures and practices in managing for efficiency. The Commissary Agency staff stated the meetings were extremely beneficial, especially with respect to the commercial use of zone managers in overseeing store operations. Agency personnel intend to continue soliciting retail firms' views as the Agency considers further restructuring in the future.

    Recommendation: As part of the Agency's upcoming study of what is the optimum number of stores in each of its regions, the Under Secretary of Defense (Personnel and Readiness), in consultation with the Chairman, Commissary Operating Board, should require that the Director, Defense Commissary Agency, solicit commercial food retail firms' views on structuring regional operations for improved operations and efficiency.

    Agency Affected: Department of Defense: Office of the Under Secretary for Personnel and Readiness

  2. Status: Closed - Implemented

    Comments: DOD concurred with the recommendation, stating that the Defense Commissary Agency would analyze various region alternatives as well as the potential impact on quality and service provided to commissary patrons. The Commissary Agency has subsequently conducted a staff study on further regional streamlining, including consideration of a two-region operation within the United States. The study results were forwarded to the Commissary Operating Board in August 2001 for their consideration in deciding whether further restructuring should be undertaken.

    Recommendation: As part of the Agency's upcoming study of what is the optimum number of stores in each of its regions, the Under Secretary of Defense (Personnel and Readiness), in consultation with the Chairman, Commissary Operating Board, should require that the Director, Defense Commissary Agency, assess whether other restructuring alternatives, such as the consolidation of the three continental U.S. regions to two regions--an Eastern and Western/Pacific Region--would generate additional savings without sacrificing quality service to its customers.

    Agency Affected: Department of Defense: Office of the Under Secretary for Personnel and Readiness

  3. Status: Closed - Implemented

    Comments: DOD concurred with the recommendation, stating that it would use all available strategies to mitigate adverse impact on the workforce. DOD subsequently acted on the recommendation. With the closure of the Eastern Region area offices, the Eastern Region headquarters assumed operational responsibility for the missions of the former area offices. Some personnel from the closing offices and the Defense Commissary Agency headquarters transferred to the Eastern Region headquarters, thus minimizing the loss of operational expertise and sustaining operations.

    Recommendation: If the proposed reorganization plan is approved for implementation the Under Secretary of Defense (Personnel and Readiness), in consultation with the Chairman, Commissary Operating Board, should require that the Director, Defense Commissary Agency, include steps in the Agency's transition plans to minimize the potential disruption of regional operations caused by the loss of operational expertise from its closing offices.

    Agency Affected: Department of Defense: Office of the Under Secretary for Personnel and Readiness

 

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