Defense Inventory: Applying Commercial Purchasing Practices Should Help Reduce Supply Costs
NSIAD-93-112
Published: Aug 06, 1993. Publicly Released: Aug 06, 1993.
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Highlights
Pursuant to a congressional request, GAO reviewed the Department of Defense's (DOD) inventory decisions for secondary items, focusing on: (1) cost considerations; (2) use of the DOD replenishment formula; and (3) private-sector methods for making purchasing decisions.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Defense | Due to the many and long-standing difficulties associated with the DOD replenishment formula and the success of some private-sector companies in replacing this type of formula with newer replenishment strategies, the Secretary of Defense should consider, for common items such as medical supplies which have an extensive commercial manufacturing base, using quick response commercial purchasing processes similar to those being used by private-sector companies to maintain a constant flow of inventory without maintaining large inventories. |
Closed – Implemented
DOD said that its components are actively pursuing the use of direct delivery contracts and other commercial inventory practices. DOD also said that it recently issued new directives providing additional guidance on expanding the use of commercial inventory practices.
|
| Department of Defense | Due to the many and long-standing difficulties associated with the DOD replenishment formula and the success of some private-sector companies in replacing this type of formula with newer replenishment strategies, the Secretary of Defense should consider, for other items such as military-unique items, using alternative economic order quantity-based replenishment strategies reflecting the variability of demand. |
Closed – Implemented
According to DOD, its components are actively pursuing alternatives such as direct delivery and other commercial inventory practices.
|
| Department of Defense | The Secretary of Defense should continue to emphasize to the services and DLA the importance of implementing other proven, innovative commercial inventory practices. These practices include, but are not limited to: (1) close monitoring of stock levels, using such tools as the inventory turnover rate; (2) programs to improve the performance of vendors and manufacturers that evaluate estimated product arrival time, quality, service, and ability to meet a sudden increase in demand, such as a national security emergency; (3) programs to improve the performance of employees that evaluate their performance in managing inventories efficiently, eliminating wasteful practices, and achieving cost savings; and (4) awards, incentives, promotions, and training on commercial inventory practices to foster better management of inventories. |
Closed – Implemented
In addition to new guidance on using commercial practices, DOD said that its practices are currently in place: (1) each component closely monitors stock levels using a variety of inventory stratification tools and measures; (2) the Navy has achieved significant procurement leadtime reductions as part of the Inventory Reduction Plan; and (3) the Air Force Blue Ribbon Contractor Program is used to identify contractors who meet program performance standards.
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Topics
Accounting proceduresDefense cost controlFederal supply systemsInventory control systemsMilitary inventoriesMilitary materielMilitary procurementPrivate sector practicesProcurement practicesProperty and supply managementSpare parts