DOD Food Inventory:

Using Private Sector Practices Can Reduce Costs and Eliminate Problems

NSIAD-93-110: Published: Jun 4, 1993. Publicly Released: Jun 4, 1993.

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Pursuant to a congressional request, GAO reviewed the U.S. military food supply system, focusing on: (1) the Department of Defense's (DOD) and private food industry's inventory management practices to supply food to the services; and (2) whether DOD could adopt any practices that might reduce its logistics costs.

GAO found that: (1) while food inventories at DOD depots and warehouses are extensive and retained over long periods because of an inefficient, multilayered, and redundant supply system, private industry food inventories are streamlined, competitive, efficient, and maintained at low inventory levels; (2) DOD could avoid unnecessary operational costs and increase its operational efficiency and quality of service by increasing its use of private-sector distributors; (3) reliable DOD operational cost estimates are not available because DOD does not maintain food cost data on warehouse activities; (4) DOD has been able to reduce costs and improve food quality and customer service through its limited use of private-sector distributors; (5) DOD inventory reduction and food supply system modification efforts include eliminating some depot storage functions, increasing the frequency of depot deliveries, adopting industry-type contracting methods, implementing direct delivery programs, consolidating local item procurements, and developing automated systems to enhance communications between depots, warehouses, and distributors; and (6) DOD does not have immediate plans to expand its use of distributors or eliminate its existing food supply system because commercial distributors are often precluded from supplying items because of military packaging and ingredient specifications, government-unique contract requirements, and uncertainties regarding distributors' ability to deliver items to ships and other end-users.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: On August 16, 1993, DOD tasked the services and the Defense Logistics Agency to conduct a demonstration project on an expanded use of distributors for peacetime troop feeding. The project began in early 1994 and will end by October 1995.

    Recommendation: The Secretary of Defense should direct all four services and the Defense Logistics Agency to conduct a demonstration project of an expanded use of distributors for peacetime troop feeding within the continental United States. This project should involve a variety of installations and end-users and should test distribution of food items directly to end-users where feasible. It should also address identified concerns, such as those of some small businesses.

    Agency Affected: Department of Defense

  2. Status: Closed - Not Implemented

    Comments: As part of a test begun in January 1995 to expand the food prime vendor program to dining facilities in the southeastern United States, DOD will measure the monetary cost and benefits, customer satisfaction, and distributor performance by comparing the traditional military food supply system to the prime vendor method. This action is in line with the intent of this recommendation, and no further followup is required.

    Recommendation: The Secretary of Defense should ensure that DOD collects accurate information about its food distribution costs, including ordering and inventory holding costs, operating costs of base warehouse activities, and distribution costs of end-users receiving food items from base warehouse activities.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: The intent of this recommendation has been achieved. In 1994, DLA began testing the use of prime vendors to supply food to military dining facilities. By the end of 1997, DLA plans to have prime vendors supporting all military dining halls in the continental United States. Since 1994, DLA has reduced peacetime inventories by over 40 percent. In a test of the prime vendor concept in a four-state area, DOD estimated it saved about $17 million in food inventory reductions and related costs. As a result, service officials said that they have been able to vacate warehouses that had been required to store food items.

    Recommendation: The Secretary of Defense should ensure that DOD eliminates base warehouse activities that are close to one another and have redundant functions.

    Agency Affected: Department of Defense


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