Summary
Under Section 395 of the National Defense Authorization Act for Fiscal Year 1998, the Defense Logistics Agency is required to submit to Congress a schedule for implementing "best practices" for the acquisition and distribution of certain types of consumable supplies and equipment. Best practices are defined in the act as techniques that will reduce inventory levels and costs and improve the responsiveness of the logistics systems to user needs. This report discusses (1) private sector practices that streamline logistics operations, (2) Defense Department initiatives to improve its logistics systems, and (3) best practices that can be used to improve the military's aircraft reparable parts pipeline.
GAO noted that: (1) it is feasible for the list of items covered by section 395 to be expanded to include reparable parts; (2) in fact, all of the services and the Defense Logistics Agency (DLA) have initiatives under way designed to improve their logistics operations by adopting best practices; (3) however, if section 395 were expanded to include reparable parts, the responsibility for the development and submission of a schedule to implement best practices would also have to be expanded to include the military services, since responsibility for service-managed reparable parts is beyond the purview of the Director of DLA; (4) private-sector companies have developed new business strategies and practices that have cut costs and improved customer service by streamlining logistics operations; (5) the most successful improvement efforts included a combination of practices that are focused on improving the entire logistics pipeline--an approach known as supply-chain management; (6) the combination of practices that GAO has observed includes the use of highly accurate information systems, various methods to speed the flow of parts through the pipeline, and the shifting of certain logistics functions to suppliers and third parties; (7) DOD recognizes that it needs to make substantial improvements to its logistics systems; (8) the Army's Velocity Management program, the Navy's regionalization and direct delivery programs, and the Air Force's Lean Logistics initiative are designed to improve logistics operations and make logistics processes faster and more flexible; (9) although these initiatives have achieved some limited success, significant opportunities for improvement remain; (10) GAO's work indicates that best practices developed by private-sector companies are compatible with DOD improvement initiatives; and (11) however, GAO recognizes the use of these best practices must be accomplished within the existing legislative framework and regulatory requirements relating to defense logistics activities, such as the Office of Management and Budget Circular A-76.
Recommendations
Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
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Matters for Congressional Consideration
Recommendation: If Congress decides it wants to expand the provisions of section 395 to include reparable parts, it may wish to consider: (1) broadening the responsibility for responding to this legislation to include the military services; and (2) developing provisions, similar to those in section 395, to encourage DOD to test combinations of best practices using a supply-chain management approach.
Status: Closed - implemented
Comments: The Strom Thurmond National Defense Authorization Act for Fiscal Year 1999 required that the secretary of each military department submit a schedule for implementing best commercial practices for the acquisition and distribution of secondary inventory items. The act required that these initiatives be completed no later than 5 years after enactment of the act. On June 14, June 16, and July 19, the Army, Navy, and Air Force, respectively, submitted best practice implementation schedules to Congress. In total, these schedules list 60 initiatives designed to improve inventory management within each of the military departments.
