TVA Needs To Improve Management of Power Stores Inventories

LCD-80-32: Published: Jan 25, 1980. Publicly Released: Jan 25, 1980.

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GAO identified ways that the Tennessee Valley Authority (TVA) could better manage the material inventories it maintains to support the production and distribution of electrical power.

The material inventories of the TVA have rapidly incresed. Material worth approximately $51 million exceeded the corporation's near-future needs. GAO found that stockage objectives were being determined by plant superintendents rather than being based on past usage. Excess stocks were not systematically identified and redistributed to locations needing the material to avoid new purchases. Inactive items were not regularly reviewed and removed from inventory to reduce carrying costs and the risk of obsolescence. Material was incorrectly classified as standby stock resulting in the retention of larger quantities than needed to satisfy demand. TVA management has recognized the need for strengthening controls over its material and was completing development of a modern automated material management system. However, it had not developed the organizational structure and material management policies necessary for effective operation of the system.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Chairman of the Board of Directors of the TVA should require that an organizational entity be established in the Office of Power with responsibility and authority to develop standard material management policies and procedures and direct their application throughout the power stores system. The policies and procedures should be designed to ensure that: (1) stockage objectives are established at reasonable levels in accordance with an acceptable standard demand-based formula; (2) the power stores system is screened for excess stocks on a regular basis and the excess stock is redistributed to those activities with a requirement for the material; (3) a program is established to regularly and systematically identify inactive items and remove them from inventory; and (4) standby stock is properly defined and the definition is consistently applied throughout the power stores system.

    Agency Affected:

 

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