DOD's High-Risk Areas:

Progress Made Implementing Supply Chain Management Recommendations, but Full Extent of Improvement Unknown

GAO-07-234: Published: Jan 17, 2007. Publicly Released: Jan 17, 2007.

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Military operations in Iraq and Afghanistan have focused attention on the Department of Defense's (DOD) supply chain management. The supply chain can be critical to determining outcomes on the battlefield, and the investment of resources in DOD's supply chain is substantial. In 2005, with the encouragement of the Office of Management and Budget (OMB), DOD prepared an improvement plan to address some of the systemic weaknesses in supply chain management. GAO was asked to monitor implementation of the plan and DOD's progress toward improving supply chain management. GAO reviewed (1) the integration of supply chain management with broader defense business transformation and strategic logistics planning efforts; and (2) the extent DOD is able to demonstrate progress. In addition, GAO developed a baseline of prior supply chain management recommendations. GAO surveyed supply chain-related reports issued since October 2001, identified common themes, and determined the status of the recommendations.

DOD's success in improving supply chain management is closely linked with its defense business transformation efforts and completion of a comprehensive, integrated logistics strategy. Based on GAO's prior reviews and recommendations, GAO has concluded that progress in DOD's overall approach to business defense transformation is needed to confront problems in other high-risk areas, including supply chain management. DOD has taken several actions intended to advance business transformation, including the establishment of new governance structures and the issuance of an Enterprise Transition Plan aligned with the department's business enterprise architecture. As a separate effort, DOD has been developing a strategy--called the "To Be" logistics roadmap--to guide logistics programs and initiatives across the department. The strategy would identify the scope of logistics problems and capability gaps to be addressed and include specific performance goals, programs, milestones, and metrics. However, DOD has not identified a target date for completion of this effort. According to DOD officials, its completion is pending the results of the department's ongoing test of new concepts for managing logistic capabilities. Without a comprehensive, integrated strategy, decision makers will lack the means to effectively guide logistics efforts, including supply chain management, and the ability to determine if these efforts are achieving desired results. DOD has taken a number of actions to improve supply chain management, but the department is unable to demonstrate at this time the full extent of its progress that may have resulted from its efforts. In addition to implementing audit recommendations, DOD is implementing initiatives in its supply chain management improvement plan. However, it is unclear how much progress its actions have resulted in because the plan generally lacks outcome-focused performance metrics that track progress in the three focus areas and at the initiative level. DOD's plan includes four high-level performance measures, but these measures do not explicitly relate to the focus areas, and they may be affected by many variables, such as disruptions in the distribution process, other than DOD's supply chain initiatives. Further, the plan does not include overall cost metrics that might show efficiencies gained through the efforts. Therefore, it is unclear whether DOD is meeting its stated goal of improving the provision of supplies to the warfighter and improving readiness of equipment while reducing or avoiding costs. Over the last 5 years, audit organizations have made more than 400 recommendations that focused specifically on improving certain aspects of DOD's supply chain management. About two-thirds of the recommendations had been closed at the time GAO conducted its review, and most of these were considered implemented. Of the total recommendations, 41 percent covered the focus areas in DOD's supply chain management improvement plan: requirements forecasting, asset visibility, and materiel distribution. The recommendations addressed five common themes--management oversight, performance tracking, planning, policy, and processes.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In its written comments on a draft of this report, DOD concurred with this recommendation and stated that the strategy is under development and is aligned with other defense business transformation efforts. In July 2008, DOD released it Logistics Roadmap with the intent to develop a more coherent and authoritative framework for guiding, measuring, and tracking logistics improvement efforts. While additional refinements are needed, as indicated by our subsequent work (GAO-09-150), this roadmap meets the intent of our recommendation of completing the development of its strategy.

    Recommendation: To improve DOD's ability to guide logistics programs and initiatives across the department and to demonstrate the effectiveness, efficiency, and impact of its efforts to resolve supply chain management problems, the Secretary of Defense should direct the Under Secretary for Defense Acquisition, Technology, and Logistics to complete the development of a comprehensive, integrated logistics strategy that is aligned with other defense business transformation efforts, including the Enterprise Transition Plan. To facilitate the completion of the strategy, DOD should establish a specific target for its completion. Further, DOD should take steps as appropriate to ensure the supply chain management improvement plan and component-level logistics plans are synchronized with the department's overall logistics strategy.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: In its written comments on a draft of the report, DOD concurred with this recommendation, and in issuing its corrective action plans for the supply chain areas of inventory management, asset visibility, and materiel distribution, DOD has developed, implemented, and monitored outcome-focused performance and cost metrics for supply chain improvement initiatives. Specifically, in 2010, DOD issued the Comprehensive Inventory Management Improvement Plan to serve as its corrective action plan for requirements forecasting to improve inventory management practices to ensure investment in future purchases and repairs, and the costs associated with maintaining its inventory are aligned with customer needs. Also, in 2016, DOD issued its Materiel Distribution Improvement Plan, which guides and directs the department's efforts to improve materiel distribution. Through its improvement plan, in 2017 DOD approved and implemented a suite of distribution performance metrics, including a cost metric to improve efficiency. Additionally, in August 2017, DOD updated its Strategy for Improving DOD Asset Visibility and accompanying implementation plans, which represents DOD's corrective action plan and outlines initiatives intended to improve asset visibility. The August 2017 Strategy includes additional guidance for the military components to develop metrics for each asset visibility initiative and includes current and future implementation costs. The development of outcome-focused performance and cost metrics in DOD's corrective action plans allows DOD to track progress toward meetings its stated goal of improving the provision of supplies to the warfighter and improving readiness of equipment while reducing or avoiding costs through its supply chain initiatives.

    Recommendation: To improve DOD's ability to guide logistics programs and initiatives across the department and to demonstrate the effectiveness, efficiency, and impact of its efforts to resolve supply chain management problems, the Secretary of Defense should direct the Under Secretary for Defense Acquisition, Technology, and Logistics to develop, implement, and monitor outcome-focused performance and cost metrics for all the individual initiatives in the supply chain management improvement plan as well as for the plan's focus areas of requirements forecasting, asset visibility, and materiel distribution.

    Agency Affected: Department of Defense

 

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