Department of Defense Inventory Growth and Management Problems Continue

T-NSIAD-88-14: Published: Mar 15, 1988. Publicly Released: Mar 15, 1988.

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GAO discussed inventory growth and management problems in the Department of Defense (DOD), specifically the: (1) accuracy of inventory records; (2) effectiveness of research to identify the causes of inventory discrepancies; and (3) physical security of DOD inventories. GAO found that: (1) the DOD inventory of secondary items, such as spare parts and supplies, grew almost 200 percent, from $48 billion in 1981 to over $95 billion in 1987, with excesses totalling $29.5 billion; (2) many of the excesses resulted from the early purchase of spare and repair parts for weapon systems; (3) although DOD indicated that depot efficiency and productivity suffer if its warehouses are filled above 85 percent, as of June 1987, the fill level was 92 percent; (4) DOD established a program to allow its customers to return items they did not need, at a cost of $3.35 billion over the past 11 years; (5) the services tended to reorder 19 percent of items they returned within 1 year; and (6) inventory increases resulted from over-procurement of items from sole-source manufacturers, on-order excesses, increased procurement lead time, and safety-level requirements. GAO also found that DOD inventory data were inaccurate, since: (1) DOD policies allowed nonreporting of some inaccuracies; (2) the services reported improved inventory management without taking any actions; and (3) DOD tended to investigate problems rather than overall inventory conditions. In addition, GAO found that: (1) causative research did not always identify the causes of variances; and (2) security deficiencies included inadequate and improper storage, inoperative detection devices, poorly equipped and trained guards, and poor accountability over sensitive items. GAO believes that DOD needs to determine: (1) how it can better manage its inventories without degrading the military forces' readiness; (2) why unneeded inventory has grown and how to minimize it; and (3) how it can use inventory accuracy and other management information to monitor inventory performance.

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