Skip to main content

Defense Inventory: Actions Needed to Improve Inventory Retention Management

GAO-06-512 Published: May 25, 2006. Publicly Released: May 25, 2006.
Jump To:
Skip to Highlights

Highlights

Maintaining the right amount and types of items in its inventory--a key aspect of supply chain management--has been a long-standing challenge for the Department of Defense (DOD) and has been on GAO's list of high-risk areas since 1990. DOD retains inventory above its normal operating requirements for various reasons including for contingency purposes or because it is more economical to keep items than dispose and repurchase them later. DOD's inventory levels have grown in recent years to almost $80 billion in fiscal year 2005. GAO was asked to assess the management of contingency retention inventory to determine whether (1) the Army, Air Force, Navy, and Defense Logistics Agency have followed inventory guidance and (2) DOD is providing oversight of inventory across these components. Also, GAO provided an update on the progress DOD has made in implementing GAO's past recommendations on the components' management of economic retention inventory.

Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Defense To ensure DOD inventory management centers properly assign codes to categorize the reasons to retain items in contingency retention inventory, the Secretary of Defense should direct the Under Secretary of Defense for Acquisition, Technology, and Logistics to direct the Secretary of the Army to instruct the Army Materiel Command to modify the Commodity Command Standard System so it will properly categorize the reasons for holding items in contingency retention inventory.
Closed – Implemented
The Commodity Command Standard System (CCSS) is a legacy system. Currently, no systems changes are being made to the legacy systems, so that resources may be applied to implementing the Logistics Modernization Program (LMP). The recommended change will be included in LMP when it is implemented. In the interim, AMC Life Cycle Management Centers (LCMCs) will manually record the appropriate and standardized contingency retention code for each item with a valid retention requirement as part of their management processed for each item. This meets the intent of the recommendation.
Department of Defense To ensure DOD inventory management centers properly assign codes to categorize the reasons to retain items in contingency retention inventory, the Secretary of Defense should direct the Under Secretary of Defense for Acquisition, Technology, and Logistics to direct the Secretary of the Air Force to instruct the Air Force Materiel Command to correct the Application Programs, Indenture system's deficiency to ensure it properly categorizes the reasons for holding items in contingency retention inventory.
Closed – Implemented
The Air Force Material Command submitted an Information Systems Request on 1/10/2006 to correct the system's deficiency by removing all remaining system deferred disposal codes from the application tables.
Department of Defense To ensure that the DOD inventory management centers retain contingency retention inventory that will meet current and future operational requirements, the Secretary of Defense should direct the Under Secretary of Defense for Acquisition, Technology, and Logistics to direct the Secretary of the Army to instruct the Army Materiel Command to require the Aviation and Missile Command to identify items that no longer support operational needs and determine whether the items need to be removed from the inventory. The Army Materiel Command should also determine whether its other two inventory commands, the Communications-Electronics Command and Tank-automotive and Armaments Command, are also holding obsolete items, and if so, direct those commands to determine whether the disposal of those items is warranted.
Closed – Implemented
In 2006, the U.S. Army Materiel Command revised its Secondary Item Retention policy and directed the Life Cycle Management Commands to review retained inventory to ensure the material was properly coded. The reviews will be conducted annually. This meets the intent of the recommendation.
Department of Defense To ensure that DOD inventory management centers conduct annual reviews of contingency retention inventory as required by DOD's Supply Chain Materiel Management Regulation, the Secretary of Defense should direct the Under Secretary of Defense for Acquisition, Technology, and Logistics to direct the Director of the Defense Logistics Agency to require the Defense Supply Center Richmond to conduct annual reviews of contingency retention inventory. The Defense Logistics Agency should also determine whether its other two centers, the Defense Supply Center Columbus and the Defense Supply Center Philadelphia, are conducting annual reviews, and if not, direct them to conduct the reviews so they can ensure the reasons for retaining the contingency retention inventory are valid.
Closed – Implemented
A coordinated review of contingency retention policy and of assets identified as contingency retention was conducted at each of the Defense Logistics Agency Defense Supply Centers in 2006. The comprehensive review included coordination with the military services.
Department of Defense To ensure that DOD inventory management centers conduct annual reviews of contingency retention inventory as required by DOD's Supply Chain Materiel Management Regulation, the Secretary of Defense should direct the Under Secretary of Defense for Acquisition, Technology, and Logistics to direct the Secretary of the Navy to instruct the Naval Inventory Control Point Mechanicsburg to conduct annual reviews of contingency retention inventory. The Naval Inventory Control Point should also determine if its other organization, Naval Inventory Control Point Philadelphia, is conducting annual reviews and if not, direct the activity to conduct the reviews so it can ensure the reasons for retaining the contingency retention inventory are valid.
Closed – Implemented
Naval Inventory Control Point (NAVICP) Mechanicsburg revised policy for NAVICP weapon systems program managers to conduct annual reviews of contingency retention inventory. The NAVICP Mechanicsburg policy revision was implemented in September 2005, as a result of the GAO review.
Department of Defense To ensure that DOD inventory management centers conduct annual reviews of contingency retention inventory as required by DOD's Supply Chain Materiel Management Regulation, the Secretary of Defense should direct the Under Secretary of Defense for Acquisition, Technology, and Logistics to direct the Secretary of the Army to instruct the Army Materiel Command to require the Aviation and Missile Command to conduct annual reviews of contingency retention inventory. The Army Materiel Command should also determine if its other two inventory commands, the Communications-Electronics Command and Tank-automotive and Armaments Command, are conducting annual reviews and if not, direct the commands to conduct the reviews so they can ensure the reasons for retaining the contingency retention inventory are valid.
Closed – Implemented
The direction from the Army Deputy Chief of Staff was not necessary because the Army took action based on conducting annual reviews and issuing policy that required annual reviews. The intent of the recommendation was implemented.
Department of Defense To ensure that DOD inventory management centers implement departmentwide policies and procedures for conducting annual reviews of contingency retention inventories, the Secretary of Defense should direct the Office of the Deputy Under Secretary of Defense for Logistics and Materiel Readiness to revise the DOD's Supply Chain Materiel Management Regulation to make clear who is responsible for providing recurring oversight to ensure the inventory management centers conduct the annual reviews of contingency retention inventory.
Closed – Implemented
Since February 2007, DOD has shown efforts to revise DOD's Supply Chain Management Regulation DOD 4140.1R to reflect changes that the military services and the Defense Logistics Agency headquarters are responsible for ensuring that the inventory management centers conduct reviews of contingency retention inventory. However, the final update was expected to be completed by December 2009. Based on the DOD's continuation actions, the department has shown the intent to implement the recommendation.

Full Report

Office of Public Affairs

Topics

Inventory controlInventory control systemsMilitary inventoriesSupply chain managementMilitary policiesProperty and supply managementU.S. ArmyU.S. Air ForceLogisticsInventory