Opportunities Still Exist for the Army To Save Millions Annually Through Improved Retail Inventory Management

LCD-81-16: Published: Jan 19, 1981. Publicly Released: Jan 19, 1981.

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In 1975, GAO reported to the Secretary of Defense that the Army could save tens of millions of dollars annually through improved management of inventories at installations and divisions. The Department of Defense (DOD) agreed and advised GAO of a number of corrective actions that the Army would take to bring about the desired improvements. A review was conducted to determine the effectiveness of actions taken by the Army and to determine whether additional opportunities for savings existed.

GAO found that the Army has made little progress in resolving the previously disclosed retail inventory management problems and that opportunities for savings of $126 million exist. GAO found that: (1) Army retail supply activities continue to hold for prolonged periods tens of millions of dollars of stock excesses which are critically needed elsewhere; (2) Army installation, division, and corps supply activities annually lose visibility and, thus, control over the prompt recovery of tens of millions of dollars of inoperable but economically reparable items; and (3) Army installation, division, and corps supply activities overstate stock requirements and inflate budget requests for procurement funds and spending authority by millions of dollars annually because of inaccuracies in ordershiptime, inventory record, and materiel demand data used in requirements computations. These problems continue to exist because prescribed policies and procedures are either inadequate, or are not being observed, and because of inadequacies in computerized logistics systems.

Recommendations for Executive Action

  1. Status: Closed

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

    Recommendation: The Secretary of Defense should direct the Army to have major commands reemphasize to their installation, corps, and division supply activities the importance of adhering to the prescribed policy and procedures for periodically identifying and canceling or redistributing onhand and onorder stock excesses. Also, have major commands and the Army Audit Agency monitor compliance with prescribed policy and procedures as part of their periodic supply reviews.

    Agency Affected: Department of Defense

  2. Status: Closed

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

    Recommendation: The Secretary of Defense should direct the Army to reemphasize to installation and corps supply activities the importance of strict adherence to the prescribed procedures for taking prompt action to correct item stock records reflecting negative balances.

    Agency Affected: Department of Defense

  3. Status: Closed

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

    Recommendation: The Secretary of Defense should direct the Army to revise policy to require that the maximum ordershiptime constraint programed in installation and corps automated logistics system be consistent with the latest 6-month average actual ordershiptime experienced for routine, nonbackordered receipts.

    Agency Affected: Department of Defense

  4. Status: Closed

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

    Recommendation: The Secretary of Defense should direct the Army to give priority to correcting longstanding problems, inherent in the standard automated installation and corps logistics system, which hinder accomplishment of prescribed physical inventories and related attainment of acceptable levels of inventory record accuracy.

    Agency Affected: Department of Defense

  5. Status: Closed

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

    Recommendation: The Secretary of Defense should direct the Army to reprogram the standard automated installation and corps logistics system to (1) prevent erroneous inclusion of ordershiptime materiel requirements associated with nonreplenishable one-time item needs for mobilization and provisioning stocks in quarterly inventory stratification reports and (2) consider only routine, nonbackordered receipts in averaging actual item ordershiptime days.

    Agency Affected: Department of Defense

  6. Status: Closed

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

    Recommendation: The Secretary of Defense should direct the Army to (1) strengthen prescribed policy and procedures for controlling and accounting for the recovery of inoperable, reparable items by having supply activities (a) follow up every 15 days to account for the disposition of outstanding turn-ins, (b) suspend further issues of recoverable items to customers with outstanding turn-ins of identical inoperable items over 30 days old, and (c) require retail supply activities to validate, on a sampling basis, validity of turn-in documents cited and certifications for later turn-ins or other disposition; and (2) have major commands establish a feedback system for monitoring the performance of retail supply activities in controlling and accounting for the prompt turn-ins of inoperable, recoverable items.

    Agency Affected: Department of Defense

  7. Status: Closed

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

    Recommendation: The Secretary of Defense should direct the Army to reprogram the standard automated division logistics system to accumulate and periodically update average actual ordershiptime for routine, nonbackordered requisitions by individual items or classes of items. In the interim, require divisions to use, in requirements computations, their latest 6-month average actual ordershiptime for routine receipts as shown in the monthly unit ordershiptime report.

    Agency Affected: Department of Defense

  8. Status: Closed

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

    Recommendation: The Secretary of Defense should direct the Army to (1) require installation, corps, and division supply activities to report the results of their periodic physical inventories and followup causative research of inventory errors valued at $500 or more to their major commands; (2) have major commands monitor the extent to which retail supply activities are achieving desired quantitative and dollar inventory record accuracy standards; and (3) have major commands monitor the effectiveness of actions taken by retail supply activities to correct underlying causes of recurring errors revealed by causative research.

    Agency Affected: Department of Defense

  9. Status: Closed

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

    Recommendation: The Secretary of Defense should (1) direct the Army to direct the Fort Carson Installation Supply Activity to promptly process physical inventory stock record adjustments before performing causative research; and (2) revise Army policy to require that physical inventory adjustments to stock records be made within 30 days of completion of the physical inventory.

    Agency Affected: Department of Defense

  10. Status: Closed

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

    Recommendation: The Secretary of Defense should direct the Army to give priority to eliminating the division logistics system automated capability of erroneously changing demand codes on orders from nonrecurring to recurring when the orders cannot be filled at the division level and are passed to the wholesale level.

    Agency Affected: Department of Defense

  11. Status: Closed

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

    Recommendation: The Secretary of Defense should direct the Army to revise retail supply policy to require installation and corps supply activities to apply item serviceable materiel return rates to reduce item demand rates in forecasting requirements. Also, have the implementation and continued application of this revised policy monitored as a part of the Army's periodic compliance reviews.

    Agency Affected: Department of Defense

  12. Status: Closed

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

    Recommendation: The Secretary of Defense should direct the Army to strengthen policy and controls to prevent Army installations from purchasing nonstocked items for which there are no funded orders from supported units.

    Agency Affected: Department of Defense

  13. Status: Closed

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

    Recommendation: The Secretary of Defense should direct the Army to reprogram installation and corps logistics systems to provide for automated monthly identification, reporting, and return of stocks of wholesale-level, intensively managed items exceeding requisitioning objectives.

    Agency Affected: Department of Defense

 

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