Defense Inventory: Opportunities Exist to Save Billions by Reducing Air Force's Unneeded Spare Parts Inventory

In April 2008, the Air Force reported that AFMC constantly reviews and updates its policy to ensure that on-order excess is reviewed and proper actions are taken. The Air Force stated that it believes that its current policies are adequate to support effective reduction of an on-order inventory not needed as long as the management of the Air Logistics Centers enforces the policies. The Air Force also suggested that an effective way for ALC management to enforce policy would be to add review of an order excess to position description and base appraisal of personnel on timely review of an order excess. Later, in August 2008, the Air Force reported that quarterly reviews of the on-order excess measure are and will continue to be utilized to determine if required actions are being taken to prevent the delivery of on-order material in excess to known requirements. This information is now being reviewed quarterly via telecom meetings between AFMC and Air Force headquarters inventory requirements officials as evidence that on-order excess terminations are important and are being monitored by senior Air Force leadership. Additionally, position descriptions have been reviewed and contain adequate language to ensure Item Management performance can be rated. In response to a statutory mandate, DOD in 2010 developed its Comprehensive Inventory Management Improvement Plan with a goal of reducing excess inventory managed by the Air Force and other components.

In April 2008, the Air Force reported evaluating its inventory requirements to ensure the right levels of the right items are available at the right place when required. As part of that evaluation, the Air Force stated that its current stockage retention policies and procedures will be reviewed and modified as required. Later, in August 2008, the Air Force reported that it requirements based leveling system, which is used to ensure the right levels of the right items are available in the right place, has been validated. Additionally, after reviewing its stockage retention policies and procedures, the Air Force changed its sections of its manual, AFMCMAN 23-1, which prescribes guidance and procedural instructions for computing secondary item requirements. Specifically, the signature level for using deferred disposal codes to retain assets in contingency retention was increased, and weapon system wide deferred disposal codes now require approval from Air Force headquarters inventory management officials, AF/A4RM. Additionally, justification for the item deferred disposal codes was changed and now requires more detail, to include cubic footage of the items retained and yearly storage costs. In addition to these policy changes, Air Force headquarters inventory management officials, AF/A4R, now requires HQ AFMC/A4 to provide monthly briefings on disposals. In addition, DOD's Comprehensive Inventory Management Improvement Plan, issued in October 2010, addresses retention actions as one of its sub-issues. The overall goal of the plan is to reduce both on-order and on-hand excess inventory.

In April 2008, the Air Force stated that the distinctions in how GAO computes inventory not needed to support requirements and DOD's policy for computing not needed inventory has yielded to very different results. Based on our methodology, we reported that more than half of the Air Force inventory on hand is not needed to support requirements. However, the Air Force reported that it analyzed the items with no recurring demand cited in our report, and found that these items constitute less than 17% of the total inventory dollar value, and less than 20% of the inventory?s assets. Nevertheless, the Air Force reported that it does experience changes in demand levels attributable to reasons such as a change in AF missions, reliability/technology improvements, and modifications. To address our recommendation, the Air Force stated that it will review the computation forecasting model and make any changes required to help ensure future requirements reflect actual demands. Later, in August 2008, the Air Force stated that it has completed the review of the computation forecasting model. According to the Air Force, the forecasting model has a variety of forecasting methods that can be used by the equipment specialists; and thus it was not deemed necessary to change the forecasting model itself. However, AFMC has developed forecasting analysis comparison tools, which provide feedback to the personnel at the Air Logistics Centers concerning the accuracy of their forecasts. DOD's Comprehensive Inventory Management Improvement Plan, issued in October 2010, contains a sub-plan aimed at improving demand forecasting for the Air Force and other components that manage inventory. DOD is in the process of executing its plan.

In April 2008, The Air Force reported that it incorporates requirement changes, resulting in decreased demands, into the computation as soon as those changes are known. According to the Air Force, t it does experience changes in demand levels attributable to reasons such as a change in AF missions, reliability/technology improvements, and modifications; but the key is to define the changes soon enough to prevent or terminate buys which may not be needed. The Air Force stated that the goals, actions, and deliverables will be monitored as a part of its computation forecasting model review. Later, in August 2008, the Air Force stated that it has completed the review and found that it was not deemed necessary to change the forecasting model itself. However, AFMC has developed forecasting analysis comparison tools, which provide feedback to the personnel at the Air Logistics Centers concerning the accuracy of their forecasts. DOD's Comprehensive Inventory Management Improvement Plan, issued in October 2010, contains a sub-plan aimed at improving demand forecasting for the Air Force and other components that manage inventory. DOD is in the process of executing its plan.