Defense Inventory:

Status of Inventory and Purchases and Their Relationship to Current Needs

NSIAD-99-60: Published: Apr 16, 1999. Publicly Released: Apr 16, 1999.

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David R. Warren
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Pursuant to a congressional request, GAO provided information on the Department of Defense's (DOD) on-hand and on-order inventory, focusing on whether DOD: (1) had on-hand inventory exceeding current requirements as of September 30, 1996, and 1997; and (2) was buying inventory for which it had no current requirements as of those same dates.

GAO noted that: (1) DOD reported reducing the secondary inventory GAO analyzed from about $69.7 billion as of September 30, 1996, to $65.8 billion as of September 30, 1997; (2) about $39.4 billion of this inventory exceeded DOD's requirements and represented about 60 percent of DOD's total on-hand inventory; (3) the percentage of inventory that exceeded current requirements remained about the same for the two periods GAO analyzed and was about the same as of September 30, 1995; (4) DOD could potentially reduce inventory that exceeded current requirements when it is economical to do so; (5) DOD had no demand for about $11 billion, or 29 percent, of $37 billion of the inventory that exceeded requirements as of September 30, 1997, but did have customer demands for the remaining $26 billion; (6) assuming customer demands remain unchanged, $3.4 billion of this inventory would last 20 or more years and $658 million would last more than 100 years; (7) some portion of this inventory is more economical to retain than to dispose of and possibly repurchase; (8) however, to the extent it is economical to dispose of the inventory, DOD's cost of operations could be reduced; (9) DOD must continue to purchase additional inventory to replenish supply shortages; (10) however, DOD also ordered inventory that, if received, would add to the amount that exceeded requirements as defined by DOD and GAO; (11) as of September 30, 1997, DOD did not need about $1.5 billion, or 18 percent, of the inventory it had ordered to meet requirements; (12) the requirements for these inventories frequently change after the items are ordered; and (13) however, while the services cancel some of the on-order inventory that is not needed, they miss many opportunities to cancel additional orders.

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