Defense Logistics:

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

GAO-11-569: Published: Jul 28, 2011. Publicly Released: Jul 28, 2011.

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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.

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. 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.

Recommendations for Executive Action

  1. Status: Open

    Comments: DOD did not concur with this recommendation. DOD, however, subsequently issued an asset visibility stategy, and we will monitor DOD's execution of this strategy as well as its approach to improving distribution.

    Recommendation: To improve DOD's supply chain management and address challenges in this high-risk area, and to address remaining challenges in asset visibility and materiel distribution, the Secretary of Defense should 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").

    Agency Affected: Department of Defense

  2. Status: Open

    Comments: DOD concurred with this recommendation and subsequently stated that such guidance would be part of its planned Supply Chain Metrics Reference Guide. As of July 2014, the Guide was not yet finalized, according to an official in the Office of the Deputy Assistant Secretary of Defense for Supply Chain Integration.

    Recommendation: To improve DOD's supply chain management and address challenges in this high-risk area, and to institute the performance management framework for guiding and overseeing supply chain management and other logistics improvement efforts, the Secretary of Defense should direct the Under Secretary of Defense for Acquisition, Technology and Logistics to develop and issue detailed guidance to affected stakeholders involved in implementing the performance management framework for logistics.

    Agency Affected: Department of Defense

  3. Status: Open

    Comments: DOD did not concur with this recommendation. However, we will continue to monitor future developments in this area, to include any efforts to develop and implement a communications strategy as recommended.

    Recommendation: To improve DOD's supply chain management and address challenges in this high-risk area, and to institute the performance management framework for guiding and overseeing supply chain management and other logistics improvement efforts, the Secretary of Defense should direct the Under Secretary of Defense for Acquisition, Technology and Logistics 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.

    Agency Affected: Department of Defense

  4. Status: Open

    Comments: DOD partially concurred with this recommendation. DOD indicated that the existing charter for the Joint Logistics Board was sufficient to meet the intent of the recommendation. The charter for the Supply Chain Executive Steering Committee was signed by the then-Deputy Assistant Secretary of Defense for Supply Chain Integration in October 2011. The charter states that the Committee will review performance measures and provide oversight on the implementation of initiatives designed to drive logistics improvements. However, it does not explicitly define and describe how this governance body will participate in the performance management framework for logistics.

    Recommendation: To improve DOD's supply chain management and address challenges in this high-risk area, and to institute the performance management framework for guiding and overseeing supply chain management and other logistics improvement efforts, the Secretary of Defense should direct the Under Secretary of Defense for Acquisition, Technology and Logistics 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.

    Agency Affected: Department of Defense

  5. Status: Open

    Comments: DOD did not concur with this recommendation. Through our ongoing and future work on defense business transformation and supply chain management we will monitor what actions, if any, DOD takes to clarify the roles and responsibilities of the CMO and DCMO with respect to supply chain management.

    Recommendation: To improve DOD's supply chain management and address challenges in this high-risk area, the Secretary of Defense should clearly define the department's Chief Management Officer's (CMO) and Deputy CMO's roles and responsibilities as they specifically relate (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.

    Agency Affected: Department of Defense

  6. Status: Open

    Comments: DOD did not concur with this recommendation. However, we will continue to monitor efforts by DOD to develop and implement enterprisewide performance measures to improve supply chain management. For example, DOD continues to develop a Supply Chain Metrics Reference Guide. As of July 2014, the Guide was not yet finalized, according to an official in the Office of the Deputy Assistant Secretary of Defense for Supply Chain Integration.

    Recommendation: To improve DOD's supply chain management and address challenges in this high-risk area, the Secretary of Defense should 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 Affected: Department of Defense

 

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