Defense Inventory:

DOD Actions Needed to Ensure Benefits From Supply Depot Consolidation Efforts

NSIAD-92-136: Published: May 29, 1992. Publicly Released: May 29, 1992.

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Pursuant to a congressional request, GAO reviewed the Department of Defense's (DOD) supply depot consolidation program to determine: (1) the validity of DOD-estimated cost savings for the prototype consolidation and for all depots; (2) the validity of actual cost savings at the prototype depots; (3) the impact of consolidation on the depots' performance; and (4) whether impediments exist that could prevent DOD from fully achieving the projected benefits.

GAO found that: (1) consolidation of supply depots under single agency management, if properly combined with other DOD initiatives, could result in more efficient and cost-effective depot operations; (2) DOD savings estimates are questionable because DOD based the estimates on the assumption that the depot work would remain constant; (3) DOD calculated the estimated savings for all depots using flawed data, and the workload at the prototype depots has declined; (4) the portion of savings attributable to the consolidation is not known because the Defense Logistics Agency (DLA) has not separated savings due to consolidation from those due to decreased workload; (5) DLA recognizes that its existing performance measurement system should be improved and is developing a more useful system; (6) the size of the DOD inventory is a principal impediment to achieving the full benefit of depot consolidation; and (7) the latest inventory report from DOD indicates that, as of September 1991, $21.3 billion of the total secondary item inventory of $88.1 billion is excess to DOD requirements.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The Defense Logistics Agency (DLA) has completed a detailed stock-positioning plan that considers the impact of inventory reduction, force reductions, and new distribution practices. In addition, DOD recently increased its inventory reduction goals to decrease its inventory from $73 billion in 1994 to $52 billion in 2001. DOD and BRAC recommended 5 depots for closure in 1995.

    Recommendation: To achieve the full benefits of consolidation, the Secretary of Defense should increase DOD efforts to reduce the amount of stock in the supply depots.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: DLA has selected a standard distribution system for its supply depots and is working on a phased implementation through 1995.

    Recommendation: To achieve the full benefits of consolidation, the Secretary of Defense should accelerate efforts to develop a standard distribution system for the supply depots.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: DLA has completed a detailed stock-positioning plan that considers the impact of inventory reduction, force reductions, and new distribution practices. In addition, DOD recently increased its inventory reduction goals to decrease its inventory from $73 billion in 1994 to $52 billion in 2001. DOD and BRAC recommended 5 depots for closure in 1995.

    Recommendation: The Secretary of Defense should instruct the Director, DLA, to develop a supply depot organization and stock repositioning plan based on reduced DOD inventory.

    Agency Affected: Department of Defense

 

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