Better Investment Decisions Can Save Money at GSA and FAA

PLRD-81-30: Published: Jun 5, 1981. Publicly Released: Jun 5, 1981.

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An effective and efficient logistics system is one which maintains sufficient, but not excessive, stocks on hand to meet users' needs. Logistics managers must decide when to buy and how much to buy. In order to make these decisions, managers need current and valid cost, demand, leadtime, and safety level data. GAO reviewed how the General Services Administration (GSA) and the Federal Aviation Administration (FAA) managers make these purchasing decisions.

GAO found that even though GSA and FAA were generally achieving their fill rate goals and had adequate stock turnover rates, the agencies could improve the effectiveness and efficiency of the supply systems by refining existing operating procedures and employing alternative management strategies. By doing so, the system would be more responsive to user needs and inventory management costs could be reduced. GAO identified several areas where improvements were needed and believes that: using updated data would reduce inventory management costs; recognizing and responding more rapidly to demand trends in the GSA demand forecasting would reduce purchases; using more accurate leadtime data would reduce requirements; and revising the method for computing safety level stocks would reduce the safety level investment without adversely affecting supply responsiveness. If FAA used an economic order quantity model that considered shortage costs and demand variability in addition to carrying and procurement costs, it would save money. GSA demand forecasting does not give more weight to the more recent months' demand data, therefore, it is less responsive to sudden demand changes. Safety level stocks are maintained in addition to operating needs to protect against unanticipated demands; however, safety levels could be reduced if GSA calculated them on a system-wide basis rather than on a depot-by-depot basis. The need for safety levels on many items was questionable given their low demand and replenishment infrequencies.

Recommendations for Executive Action

  1. Status: Closed

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

    Recommendation: The Administrator of FAA should implement the recently revised cost factors and to take advantage of opportunities offered by recent economic order quantity modeling developments to optimize inventory levels and reduce inventory management costs.

    Agency Affected: Department of Transportation: Federal Aviation Administration

  2. Status: Closed

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

    Recommendation: The Administrator of GSA should direct the Commissioner of the Federal Supply Service to reevaluate its forecasting technique with a view toward changing the weighting factors to give greater weight to the more recent demand data.

    Agency Affected: General Services Administration

  3. Status: Closed

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

    Recommendation: The Administrator of GSA should direct the Commissioner of the Federal Supply Service to eliminate the delays between receipt of items at the depot and their posting to the records.

    Agency Affected: General Services Administration

  4. Status: Closed

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

    Recommendation: The Administrator of GSA should direct the Commissioner of the Federal Supply Service to exclude leadtime attributable to the period that deliveries are deferred at the agency's request from the item's leadtime history.

    Agency Affected: General Services Administration

  5. Status: Closed

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

    Recommendation: The Administrator of FAA should use an item's actual leadtime rather than the leadtime adjusted by a rounding factor to compute requirements.

    Agency Affected: Department of Transportation: Federal Aviation Administration

  6. Status: Closed

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

    Recommendation: The Administrator of GSA should direct the Commissioner of the Federal Supply Service to establish a separate leadtime database for Small Business Administration section 8A contractors and include section 8A due-ins in the requirements determination process.

    Agency Affected: General Services Administration

  7. Status: Closed

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

    Recommendation: The Administrator of GSA should direct the Commissioner of the Federal Supply Service to develop a system which relates the need for and amount of safety level to item essentiality.

    Agency Affected: General Services Administration

  8. Status: Closed

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

    Recommendation: The Administrator of GSA should direct the Commissioner of the Federal Supply Service to use leadtime variation, rather than the length of leadtime, in the computation of safety level requirements.

    Agency Affected: General Services Administration

  9. Status: Closed

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

    Recommendation: The Administrator of GSA should direct the Commissioner of the Federal Supply Service to compute an item's safety level requirement on a systemwide basis, rather than on a depot-by-depot basis.

    Agency Affected: General Services Administration

  10. Status: Closed

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

    Recommendation: The Administrator of FAA should adopt a variable safety level concept which considers the individual characteristics of an item--including item essentiality and demand and leadtime variations--in determining safety level requirements.

    Agency Affected: Department of Transportation: Federal Aviation Administration

  11. Status: Closed

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

    Recommendation: The Administrator of FAA should emphasize the need for timely processing of received items into the warehouse.

    Agency Affected: Department of Transportation: Federal Aviation Administration

  12. Status: Closed

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

    Recommendation: The Administrator of GSA should direct the Commissioner of the Federal Supply Service and the Secretary of Transportation to direct the Administrator of FAA to implement the recently revised cost factors and to take advantage of opportunities offered by recent economic order quantity modeling developments to optimize inventory levels and reduce inventory management costs.

    Agency Affected: General Services Administration

 

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