Defense Inventory:

Spare and Repair Parts Inventory Costs Can Be Reduced

NSIAD-97-47: Published: Jan 17, 1997. Publicly Released: Jan 17, 1997.

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GAO reviewed how the military services can reduce their spare and repair parts storage and holding costs by consolidating or disposing of inventory that is not needed to meet current operating and war reserve requirements or is requested infrequently.

GAO found that: (1) most of the services' inventory items stored at nonmajor locations are in small quantities; (2) over 53 percent of the items were in quantities of 3 or less, while only 25 percent were in quantities of 11 or more; (3) however, the inventory at the nonmajor locations is valued at over $8.3 billion; (4) the need for many of the items stored at nonmajor locations is questionable; (5) of the $8.3 billion of inventory at the nonmajor locations, $2.7 billion of it was not needed to meet the services' current operating and war reserve requirements; (6) GAO's analysis also showed that many of the Army items were infrequently issued over the 2-year period ending August 1996; (7) over 53 percent of the items at nonmajor storage locations had no issues and an additional 33 percent of the items had less than five issues during the same 2-year period; (8) maintaining inventory that is not needed is expensive and does not contribute to an effective, efficient, and responsive supply system; and (9) based on GAO's analysis, GAO estimates the services could save about $382 million annually in inventory holding costs by eliminating inventory at nonmajor locations that is not needed to meet current operating and war reserve requirements.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The military services consolidated items to reduce warehousing requirements and make it possible to reduce excess capacity.

    Recommendation: The Secretary of Defense should direct the service secretaries to begin to consolidate the warehousing of identical items that are not needed or infrequently issued at fewer storage locations. This can be accomplished over time by filling item requests by depleting the stock at a particular location or locations, disposing of unneeded items, and not restocking the items at those locations.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: After consolidating items, the Department of Defense identified excess warehouse space and initiated action to reduce it.

    Recommendation: The Secretary of Defense should direct the service secretaries to, after consolidating the warehousing of items not needed or infrequently requested, determine whether all storage facilities are needed. If facilities are no longer needed, the Secretary should take actions to close them.

    Agency Affected: Department of Defense

 

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