Defense Logistics:

DOD Needs to Take Additional Actions to Address Challenges in Supply Chain Management

GAO-11-569: Published: Jul 28, 2011. Publicly Released: Jul 28, 2011.

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DOD estimated that overall spending on logistics, including supply chain management, was more than $210 billion in fiscal year 2010. Because of long-standing weaknesses in supply chain management, GAO has designated DOD supply chain management as a high-risk area and identified three focus areas for improvement--requirements forecasting, asset visibility, and materiel distribution. GAO reviewed the extent to which DOD has developed and implemented (1) corrective action plans that address challenges in the three focus areas, (2) an effective program for monitoring and validating the effectiveness and sustainability of supply chain management corrective actions, and (3) an ability to demonstrate supply chain management progress. GAO prepared this report to assist Congress in its oversight of DOD's supply chain management. GAO reviewed strategic and improvement plans, reviewed documents detailing the performance management framework, and assessed performance measures.

DOD has developed and begun to implement a corrective action plan for requirements forecasting, one of the three focus areas GAO identified as needing improvement in supply chain management. However, it does not have similar plans for the focus areas of asset visibility or materiel distribution. Such corrective action plans are critical to resolving weaknesses in these two areas. Such plans should (1) define root causes of problems, (2) identify effective solutions, and (3) provide for substantially completing corrective measures in the near-term, including steps necessary to implement solutions. DOD's Comprehensive Inventory Management Improvement Plan, issued in October 2010 in response to a statutory mandate, includes the elements necessary to serve as a corrective action plan for requirements forecasting. DOD's 2010 Logistics Strategic Plan, and other prior logistics-related plans, do not contain all of the elements needed to serve as corrective action plans for either asset visibility or materiel distribution, such as definition of problems or performance information to gauge progress in achieving outcomes. DOD outlined a performance management framework that is designed to provide guidance and oversight of logistics efforts, including supply chain improvement efforts. GAO's prior work has shown that in order for agencies to address challenges, they need to institute a program to monitor and validate the effectiveness and sustainability of corrective actions. The framework, as outlined in the 2010 Logistics Strategic Plan, offers a new management tool that may enable DOD to manage performance in supply chain management. For example, it calls for an ongoing assessment and feedback process that could help to ensure that improvement efforts are effective. However, DOD has not included key elements for instituting its performance management framework, such as implementing guidance to affected stakeholders, a strategy to communicate results internally and to stakeholders such as Congress, or definition of the roles and responsibilities of senior logistics governance bodies and chief management officers. Until the framework is fully instituted, DOD may not be able to effectively use this new management tool to monitor the effectiveness of corrective actions. DOD and its components track many aspects of the supply chain; however, DOD does not have performance measures that assess the overall effectiveness and efficiency of the supply chain across the enterprise. In order to fully address challenges, agencies must be able to demonstrate progress achieved through corrective actions, which is possible through the reporting of performance measures. In the development of its inventory management improvement plan, a collaborative process was used to define existing and needed performance measures for requirements forecasting. A similar collaborative focus on developing enterprisewide performance measures for asset visibility and materiel distribution has not occurred. The department may have difficulty demonstrating progress until enterprisewide performance measures are developed and implemented in all three focus areas for improving its supply chain management. GAO recommends that DOD develop and implement corrective action plans and performance measures for asset visibility and materiel distribution and take steps to fully institute its performance management framework. DOD concurred or partially concurred with two recommendations and did not concur with four, citing ongoing initiatives and existing policy. GAO believes all recommendations remain valid, as further discussed in the report.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: As part of its efforts to address supply chain management challenges, DOD developed the Strategy for Improving DOD Asset Visibility (Strategy) in 2014, with subsequent updates in 2015 and 2017, and the Materiel Distribution Improvement Plan (MDIP) in 2016. Both plans include corrective actions that identify the scope and root causes of capability gaps, including actions to be taken to implement solutions. In addition, both plans include characteristics of strategic planning, such as a mission statement, goals, and performance measures, among other things. Further, the Strategy and the MDIP also document how improvement efforts will integrate with DOD's other decision-making processes, delineate organization roles, and support DOD-wide priorities. The development and implementation of these corrective action plans help to improve DOD's supply chain management and address challenges in asset visibility and materiel distribution.

    Recommendation: To improve DOD's supply chain management and address challenges in this high-risk area, and to address remaining challenges in asset visibility and materiel distribution, the Secretary of Defense should direct the Under Secretary for Defense for Acquisition, Technology and Logistics to develop and implement corrective action plans for improving these focus areas. As these two areas are closely interrelated, DOD may wish to consider creating a single comprehensive, integrated plan that addressed both focus areas for improvement. The corrective action plan or plans should (1) identify the scope and root causes of capability gaps and other problems, effective solutions, and actions to be taken to implement the solutions; (2) include the characteristics of effective strategic planning, including a mission statement; goals and related strategies (for example, objectives and activities); performance measures and associated milestones, benchmarks, and targets for improvement; resources and investments required for implementation; key external factors that could affect the achievement of goals; and the involvement of all key stakeholders in a collaborative process to develop and implement the plan; and (3) document how the department will integrate these plans with its other decision-making processes; delineate organizational roles and responsibilities; and support departmentwide priorities identified in higher-level strategic guidance (such as the "Strategic Management Plan and Logistics Strategic Plan").

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: DOD concurred with our recommendation and included detailed implementation guidance in the Strategy for Improving DOD Asset Visibility (Strategy), issued in 2014, with subsequent updates in 2015 and 2017; and the Materiel Distribution Improvement Plan (MDIP), issued in 2016. The 2017 Strategy and accompanying implementation plans are intended to improve asset visibility and provide detailed guidance to affected stakeholders involved in implementing the performance management framework for logistics. For example, the components are designated as the offices of primary responsibility to ensure the successful execution of their initiatives, including developing cost estimates and collecting performance data. The 2017 Strategy provided additional guidance related to performance measures, recommending that components consider the key attributes of successful performance measures during metric development. The MDIP also provides detailed guidance to stakeholders throughout the distribution enterprise. In July 2018, DOD closed three action items by adjusting DOD policy clarifying the roles and responsibilities of DOD's distribution stakeholders. For example, DOD revised Instruction 4500.57, Transportation and Traffic Management, to require U.S. Transportation Command to routinely share performance metrics, including cost data, to distribution stakeholders. As a result of these updated guidance, DOD has taken steps to institute a performance management framework for guiding and overseeing asset visibility and materiel distribution.

    Recommendation: To improve DOD's supply chain management and address challenges in this high-risk area, and to institute the performance management framework for guiding and overseeing supply chain management and other logistics improvement efforts, the Secretary of Defense should direct the Under Secretary of Defense for Acquisition, Technology and Logistics to develop and issue detailed guidance to affected stakeholders involved in implementing the performance management framework for logistics.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: As part of its efforts for addressing supply chain management challenges, DOD developed a communications strategy in issuing the Strategy for Improving DOD Asset Visibility (Strategy) in 2014, with subsequent updates in 2015 and 2017, and the Materiel Distribution Improvement Plan (MDIP) in 2016. The Strategies and MDIP are linked with corrective action plans, contain performance measurement information, and inform both internal and external stakeholders. The 2017 Strategy identified eight improvement initiatives developed by the components intended to improve asset visibility and included additional guidance related to performance measures. When an initiative is complete, the Asset Visibility Working Group files an after-action report that includes information related to performance measures used to assess the success of the initiative, and informs both internal and external stakeholders. The MDIP guides and directs DOD efforts to improve materiel distribution by recommending corrective action items to close identified performance gaps. Throughout fiscal years 2017 and 2018, the distribution governance bodies and stakeholders have met quarterly to review progress made on the MDIP's corrective actions and refine interim milestones and tasks, and include information sharing and reporting requirements. The MDIP included a corrective action for DOD to develop a suite of performance metrics designed to identify performance challenges and capability gaps across the distribution enterprise, which was approved by DOD officials in 2017. As a result of these efforts, DOD has taken steps to institute a performance management framework for guiding and overseeing asset visibility and materiel distribution improvement efforts.

    Recommendation: To improve DOD's supply chain management and address challenges in this high-risk area, and to institute the performance management framework for guiding and overseeing supply chain management and other logistics improvement efforts, the Secretary of Defense should direct the Under Secretary of Defense for Acquisition, Technology and Logistics to develop and implement a communications strategy for documenting and reporting on the results of supply chain management improvement efforts. The strategy should be linked with corrective actions plans, contain performance measurement information, and inform both internal and external stakeholders, including Congress.

    Agency Affected: Department of Defense

  4. Status: Closed - Implemented

    Comments: To define or clarify the roles and responsibilities of the supply chain governing bodies, DOD issued the charter for the Supply Chain Executive Steering Committee (SCESC) in October 2011 and developed the Charter for the Joint Deployment and Distribution Enterprise (JDDE) Governance, which replaced the Joint Logistics Board, in January 2013. The SCESC charter states that the SCESC will review performance measures and provide oversight on the implementation of initiatives designed to drive logistics improvements and will provide direction to strengthen the capabilities of DOD's supply chain. Also, the SCESC charter defines roles and responsibilities of the chair/co-chairs, members, and the secretariat as it pertains to these efforts. Additionally, the charter for JDDE Governance identifies the JDDE Community of Interest as the body that shall oversee the prioritization of distribution capabilities, gaps, process improvement initiatives, and information technology solutions to enhance enterprise-wide efficiency and effectiveness. Further, the JDDE charter also specifies the roles and responsibilities of its chair and members and advisors. As a result of revising existing charters, DOD has implemented the management framework for guiding and overseeing its supply chain improvement efforts.

    Recommendation: To improve DOD's supply chain management and address challenges in this high-risk area, and to institute the performance management framework for guiding and overseeing supply chain management and other logistics improvement efforts, the Secretary of Defense should direct the Under Secretary of Defense for Acquisition, Technology and Logistics to revise the existing charter of the Joint Logistics Board and the draft charter of the Supply Chain Executive Steering Committee to define and describe how the governance bodies will participate in the performance management framework for logistics.

    Agency Affected: Department of Defense

  5. Status: Closed - Not Implemented

    Comments: This recommendation was not implemented due to changes in DOD's approach to strategic planning. Although DOD stated that it would update its 2010 Logistics Strategic Plan, implement a performance management framework, and produce annual logistics performance reports, it did not take these steps. In addition, DOD plans to replace its overarching business transformation strategy, the Strategic Management Plan, with a new strategy. The 2010 Logistics Strategic Plan had been developed in part to support the Strategic Management Plan. Despite these changes in DOD's strategic planning approach, DOD has made progress in addressing supply chain management problems. This progress is discussed in GAO's 2015 High-Risk Update.

    Recommendation: To improve DOD's supply chain management and address challenges in this high-risk area, the Secretary of Defense should clearly define the department's Chief Management Officer's (CMO) and Deputy CMO's roles and responsibilities as they specifically relate (1) the performance management framework for logistics, including the establishment of corrective action plans and related performance measures; (2) existing governance bodies for logistics; and (3) the alignment of supply chain management improvement plans and performance management with those of DOD's other business operations areas.

    Agency Affected: Department of Defense

  6. Status: Closed - Implemented

    Comments: As part of its efforts for addressing supply chain management challenges, DOD issued the Strategy for Improving DOD Asset Visibility (Strategy) in 2014, with subsequent updates in 2015 and 2017, and the Materiel Distribution Improvement Plan (MDIP) in 2016. The Strategies and MDIP use a collaborative process, involving all key stakeholders, to identify, develop, and implement enterprise-wide performance measures needed to demonstrate progress in asset visibility and materiel distribution. These measures were incorporated into corrective action plans and the performance management framework. For example, the 2017 Strategy details components' initiatives intended to improve asset visibility, includes both milestones and performance measures for monitoring their implementation, and includes additional guidance related to performance measures for components to consider the key attributes (i.e., clarity, measurable target, objectivity, reliability, baseline and trend data, and linkage) of successful performance measures during metric development to improve DOD's efforts to monitor asset visibility initiatives. In addition, in 2017, DOD approved a suite of five metrics to measure performance across the materiel distribution enterprise. As a result of these efforts, DOD has demonstrated the progress it has made in managing asset visibility and materiel distribution.

    Recommendation: To improve DOD's supply chain management and address challenges in this high-risk area, the Secretary of Defense should direct the Under Secretary of Defense for Acquisition, Technology and Logistics to use a collaborative process, involving all key stakeholders, to identify, develop, and implement enterprisewide performance measures needed to demonstrate progress in the focus areas of asset visibility and materiel distribution. These measures should be incorporated into corrective action plans and the performance management framework.

    Agency Affected: Department of Defense

 

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