DOD Inventory Management:

Revised Policies Needed

NSIAD-88-75: Published: Jan 14, 1988. Publicly Released: Jan 14, 1988.

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GAO provided information on the Department of Defense's (DOD) inventory management system.

GAO found that DOD: (1) had inventory management problems throughout its supply systems; (2) lacked the necessary data to assess the problems facing it; (3) failed to identify and address the causes of its inventory inaccuracies; and (4) did not always correct the errors it found.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: DOD agrees that inventory variances, once identified and validated, should result in posting an adjustment to the inventory records as soon as possible, and requires components to do this.

    Recommendation: The Secretary of Defense should require adjustments to inventory records as soon as they are identified through physical inventories or other methods.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: DOD stated that it has comprehensive policies for inventory control (DOD 4000.25-2-M). DOD does not concur with eliminating reversals, but has clarified its reversal procedures to prevent their use to improve performance statistics. Also, DOD is improving its ICE reporting criteria.

    Recommendation: The Secretary of Defense should develop a comprehensive policy on inventory management and measuring inventory accuracy, addressing such areas as: (1) the adequacy of the Inventory Control Effectiveness (ICE) Report for management oversight; and (2) eliminating the practice of reversing prior inventory adjustments.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: DOD has revised procedures in chapter 7 of MILSTRAP to require that all variances identified in the annual statistical sample will be subjected to causative research, regardless of the variance and results reported in the ICE report.

    Recommendation: The Secretary of Defense should reemphasize the need for effective causative research that identifies inventory variances and analyzes them to identify systemic problems. Variances currently under the monetary criteria for causative research should be sampled as further input to identifying systemic problems.

    Agency Affected: Department of Defense

 

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