Army Inventory:

Fewer Items Should Be Stocked at the Division Level

NSIAD-91-218: Published: Jul 24, 1991. Publicly Released: Jul 24, 1991.

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Pursuant to a congressional request, GAO examined whether the Army was taking full advantage of opportunities to streamline its logistics system, focusing on whether the Army: (1) needed to buy and maintain all of the items it stocked at the division level; and (2) could reduce its investment in divisions' inventories without adversely affecting supply responsiveness.

GAO found that: (1) the Army could reduce its stateside inventory of spare and repair items by stocking only demand-based items, and by doing so it could reduce its investment in inventory without adversely affecting readiness; (2) at the four divisions GAO studied, non-demand-based items accounted for 42 percent of the total authorized inventory items and 53 percent of the total value of the authorized inventory; (3) 76 percent of the non-demand-based items had received fewer than three demands during the recent 12 months, and 61 percent of those items were not requested at all; (4) the Army has tested and begun to implement processes that will replace the current system with a single supply system; (5) enhancements in communications, distribution, and inventory management techniques have made it possible to respond to supply needs with less stock at the divisions; and (6) although the Army has taken action to improve its inventory levels, additional opportunities exist for it to decrease inventory levels.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The Army has agreed to implement the Department of Defense Reduction Inventory Plan which will generally store non-demand based items at area-oriented depots. The Army has also placed constraints on the number of non-demand based items which can be retained to 5 percent of demand based items.

    Recommendation: The Secretary of the Army should direct that divisions in the United States not stock non-demand-based items that do not meet the retain criterion of at least three demands in a 360-day period. Until the items qualify for stocking at the divisions based on the add criterion of nine demands in a 360-day period, the items should be stored at the wholesale-level depots and issued to the divisions when needed.

    Agency Affected: Department of Defense: Department of the Army

  2. Status: Closed - Implemented

    Comments: The Army is evaluating several alternatives for reducing demand-based inventories at the division level to include elimination of safety levels and placing greater reliance on direct deliveries from vendors. On April 4, 1992, the Army created a task force to facilitate implementation of inventory reduction tasks to include direct vendor deliveries.

    Recommendation: The Secretary of the Army should direct inventory managers to pursue opportunities for reducing inventory investment by: (1) maximizing the use of alternatives such as direct vendor deliveries and expedited deliveries from the depots; and (2) evaluating the inventory management lessons learned during Operations Desert Shield and Desert Storm. This should include the continuing emphasis on evaluating the requirements factors used in determining stock levels for demand-based items to ensure that they reflect improved technologies in communications, transportation, and inventory distribution methods.

    Agency Affected: Department of Defense: Department of the Army

 

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