Defense Inventory: Further Improvements Needed in Management of Spare Parts and Other Secondary Items

GAO discussed Department of Defense (DOD) inventory management issues, focusing on DOD: (1) inventory reporting; and (2) efforts to reduce its total inventory, including its known excess. GAO noted that: (1) DOD reported that its fiscal year (FY) 1990 spare parts and secondary item inventory was $7.6 billion less than its FY 1989 inventory; (2) the inventory value would have been about the same for both years if DOD reported its 1990 inventory on a basis consistent with 1989; (3) the DOD on-hand inventory supply report included centrally controlled items but did not include billions of dollars of locally held inventory; (4) DOD requires an excessive number of on-hand supplies, increasing the risk for obsolete or unnecessary materiel; (5) the DOD supply report does not reveal excessive inventory levels; (6) DOD and the Air Force disagreed with a previous GAO recommendation that the Air Force stop routinely initiating purchase requests; (7) DOD believed that its efforts to change the organizational culture's mind-set for buying substantially more materiel than was needed would result in improved inventory management; and (8) DOD-identified objectives for reducing inventories included minimizing the entry of new items, reducing the number of inventoried items, reducing the quantities of materiel stocked, pursuing commercial alternatives to materiel stockage, and improving control and visibility. GAO believes that: (1) there is a potential for $2 billion to $4 billion in reductions for secondary items; and (2) DOD excessive inventory is far greater than shown in its inventory reports.