Navy Supply:

Intermediate Inventories Can Be Reduced

NSIAD-87-19: Published: Oct 28, 1986. Publicly Released: Oct 28, 1986.

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GAO provided information on the Navy's management of intermediate inventories, specifically whether the Navy needed these inventories for prompt response to customer demands.

GAO noted that, at the end of fiscal year 1985, the Navy maintained intermediate inventories of consumable material in the United States worth an estimated $729 million. GAO found that the Navy could substantially reduce total inventories without increasing supply response times by: (1) eliminating intermediate inventories that duplicate wholesale and consumer inventories; and (2) using average rather than maximum inventory levels to compute intermediate inventory requirements. GAO also found that the Navy could reduce supply response times without increasing inventories by: (1) exerting more control over the requisition priority system; and (2) improving systems for reviewing and processing requisitions and updating inventory records.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: The Navy states the inventory control point resystemization project and ADP replacement project will correct shortcomings in the requirements determination process. Since implementation is sometime in the future, continued followup would be nonproductive. Also, NSIAD/Logistics has an ongoing survey of stock levels at ASO under code 398016.

    Recommendation: The Secretary of the Navy should direct the Commander, Naval Supply Systems Command (NAVSUP), to eliminate intermediate inventories that are collocated with wholesale inventories.

    Agency Affected: Department of Defense: Department of the Navy

  2. Status: Closed - Not Implemented

    Comments: The Navy continues to believe that intermediate inventories are required. A NSIAD/Logistics survey under code 398016 again is looking at the need for several stock levels.

    Recommendation: The Secretary of the Navy should direct the Commander, NAVSUP, to eliminate intermediate inventories maintained for single customers that stock the same items in their consumer inventories.

    Agency Affected: Department of Defense: Department of the Navy

  3. Status: Closed - Implemented

    Comments: Funding provided by NAVSUP to field activities has been reduced by the amount necessary to buy only the average funded investment levels instead of maximum inventory levels. The programming actions necessary to support the revised computations have been completed and appropriate releases made.

    Recommendation: The Secretary of the Navy should direct the Commander, NAVSUP, to base intermediate inventory requirements on average funded investment levels instead of on maximum inventory levels.

    Agency Affected: Department of Defense: Department of the Navy

  4. Status: Closed - Implemented

    Comments: The Chief, Naval Operations, has directed the Systems Commands to include review of assignment of priority designators as part of each future command inspection. Also, the Department of Defense (DOD) is issuing revised policy and procedural guidance (DODINST 4410.6) to strengthen management controls and bring about greater priority discipline.

    Recommendation: The Secretary of the Navy should direct the Commander, NAVSUP, to take steps to ensure that consumer activities and inventory stock points: (1) comply with Navy instructions on assigning high priority requisitions; (2) determine the reasons why some activities substantially exceed percentage guidelines set by the Navy; and (3) take appropriate actions to curb abuses of the issue priority system.

    Agency Affected: Department of Defense: Department of the Navy

  5. Status: Closed - Implemented

    Comments: The Navy is collecting the data necessary to identify activities that exceed time standards and will take action to correct the causes of the delays. The Navy plans to mechanize the data collection report and periodically report the results. Data already has been distributed to major claimants.

    Recommendation: The Secretary of the Navy should direct the Commander, NAVSUP, to require Navy activities to comply with the NAVSUP Publication 437 requirement that they report the date materiel receipts are posted to inventory records and the date they actually receive the materiel. Using this data, as well as other requisition processing data, the Commander, NAVSUP, should identify activities that exceed Defense time standards, ascertain the reasons for delays, and correct the causes of these delays.

    Agency Affected: Department of Defense: Department of the Navy

 

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