Best Management Practices:

Reengineering the Air Force's Logistics System Can Yield Substantial Savings

NSIAD-96-5: Published: Feb 21, 1996. Publicly Released: Feb 21, 1996.

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Pursuant to a congressional request, GAO reviewed the Air Force's management of its reparable parts inventory, focusing on: (1) commercial airline industry practices to streamline logistics operations and improve customer service; (2) Air Force reengineering efforts to improve its logistics system and reduce costs; and (3) barriers to the Air Force's reengineering efforts.

GAO found that: (1) the commercial airline industry, including certain manufacturers, suppliers, and airlines, are using leading-edge practices to improve logistics operations and reduce costs; (2) in recognition of increasing budgetary pressures, the changing global threat, and the need for radical improvements in its logistics system, the Air Force has begun a reengineering program aimed at redesigning its logistics operations; (3) GAO has urged these changes and supports them, and has identified additional private-sector practices that may result in even greater savings; (4) there are several major barriers to bringing about change that must be addressed and resolved if the Air Force is to reengineer its logistics system and save billions of dollars; (5) the Air Force reengineering effort addresses inherent problems with its logistics system, but additional steps can be taken to maximize potential improvements; (6) additional steps GAO identified that could enhance this program include establishing a top-level DOD champion of change to support the Air Force initiatives, greater use of third-party logistics services, closer partnerships with suppliers, encouraging suppliers to use local distribution centers, centralizing repair functions, and modifying repair facilities to accommodate these new practices; (7) the success of the Air Force in achieving a quantum leap in system improvements hinges on its ability to address and overcome certain barriers, such as inherent organizational resistance to change; (8) top-level DOD officials must be supportive of and engaged in Air Force reengineering efforts to remove these barriers and drive success; (9) information systems do not always provide Air Force managers and employees with accurate, real-time data on the cost, amount, location, condition, and usage of inventory; and (10) without the support of top-level DOD management and accurate, real-time inventory information, the expansion of the Air Force's reengineering efforts could be seriously impaired.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In his April 8, 1996 response to the report, the Deputy Under Secretary of Defense (Logistics) stated that: (1) the Air Force had been asked to provide a report to the Secretary of Defense; (2) the Secretary of Defense would address obstacles identified in the Air Force report; and (3) the Air Force would take steps to institutionalize reengineering efforts.

    Recommendation: To build on the existing Air Force reengineering efforts and achieve major logistics system improvements, the Secretary of Defense should commit and engage top-level Department of Defense (DOD) managers to support and lead Air Force reengineering efforts to ensure its success.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: The Air Force is applying concepts GAO recommended in the Aircraft Repair Enhancement Program and Depot Repair Enhancement Program. In addition, the overall focus of these programs is to reduce the cycle time associated with aircraft maintenance and component overhaul. This meets the intent of the recommendations. One of the key initiatives being tested by the Air Force is the virtual prime vendor program, which may significantly improve supply system effectiveness and reduce inventory levels of hardware items.

    Recommendation: The Secretary of Defense should direct the Secretary of the Air Force to incorporate additional leading-edge logistics concepts into the existing Lean Logistics program, where feasible. Specific concepts that have been proven to be successful and should be considered, but have not been incorporated in the current Air Force program include: (1) installing information systems that are commercially available to track inventory amounts, location, condition, and requirements; (2) counting existing inventory once new systems are in place to ensure accuracy of the data; (3) establishing closer relationships with suppliers; (4) encouraging suppliers to establish local distribution centers near major repair depots for quick shipment of parts; (5) using integrated supplier programs to shift to suppliers the responsibility for managing certain types of inventory; (6) using third-party logistics services to manage the storage and distribution of reparable parts and minimize DOD information technology requirements; (7) reorganizing workshops, using the cellular concept where appropriate, to reduce the time it takes to repair parts; and (8) integrating successful reengineered processes and flexible, team-oriented employees in new facilities (like the green-field sites) to maximize productivity improvements, as new facilities are warranted to meet changes in the types and quantities of aircraft.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: On September 16, 1996, the Air Force reported on the strategy to include GAO-recommended practices in the Lean Logistics program. Senior Air Force officials have detailed the Air Force response to GAO's recommendations, which fall under several Air Force-wide programs. These initiatives are intended to significantly improve the Air Force logistics systems, and involve six primary principles. These principles are: customer-driven repair, demand-driven supply, consolidated inventories, tightened repair and manufacturing processes, innovations in contracting, and rapid transportation. In addition, the Air Force developed a training course taught at the highest levels of AFMC and throughout the command at all levels, which emphasized the need for change to a lean environment. Prototype demonstration projects were set up in all five Air Logistics Centers to demonstrate new "Lean Logistics" concepts. These initiatives embrace the concepts recommended in the report.

    Recommendation: The Secretary of the Air Force should prepare a report to the Secretary of Defense that defines its strategy to adopt these leading practices and expand the reengineering program Air Force-wide.

    Agency Affected: Department of Defense: Department of the Air Force

  4. Status: Closed - Implemented

    Comments: In a December 30, 1996 status report on reengineering initiatives, the Air Force detailed current initiatives status, milestones, obstacles and investment requirements. This meets the intent of the recommendation.

    Recommendation: The Secretary of the Air Force should establish milestones for the report's preparation and issuance and identify at a minimum the: (1) barriers or obstacles that would hinder the Air Force from adopting these concepts; (2) investments (people, skills, and funding) required to begin testing these concepts and the projected total costs to implement them Air Force-wide; (3) potential savings that could be realized; and (4) Air Force and other DOD components whose support will be needed to fully test these new concepts.

    Agency Affected: Department of Defense: Department of the Air Force

  5. Status: Closed - Implemented

    Comments: The Air Force report did not identify obstacles or resource requirements that required OSD intervention.

    Recommendation: The Secretary of Defense should use the Air Force's report to set forth the actions and milestones to alleviate any barriers or obstacles (such as overcoming resistance to organizational change and improving outdated inventory information systems), provide the appropriate resources, and ensure that collaboration between the Air Force and other DOD components that would enable the Air Force to achieve an integrated approach to reengineering its processes.

    Agency Affected: Department of Defense

  6. Status: Closed - Implemented

    Comments: The Air Force has established training programs to communicate the need for operating using new business practices, resulting in a leaner environment. In addition, the Air Force is reorganizing its workforce to support the DREP process and developing new position descriptions. With these efforts, the Air Force is meeting the intent of the recommendations.

    Recommendation: Once these steps are taken, the Secretary of Defense should direct the Secretary of the Air Force to institutionalize a reengineering effort that is consistent with successful private-sector reengineering efforts. These efforts include: (1) communicating reengineering goals and explaining them to all levels of the organization; (2) training in skills to enable employees to work across functions and modifying this training as necessary to support the reengineering process; and (3) tailoring rewards and incentives to encourage and reinforce desired behaviors.

    Agency Affected: Department of Defense


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