Defense Inventory: Opportunities Exist to Improve the Management of DOD's Acquisition Lead Times for Spare Parts

GAO-07-281 Published: Mar 02, 2007. Publicly Released: Mar 02, 2007.
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Highlights

GAO has identified the Department of Defense's (DOD) management of its inventory as a high-risk area since 1990 due to ineffective and inefficient inventory systems and practices. Management of inventory acquisition lead times is important in maintaining cost-effective inventories, budgeting, and having material available when needed, as lead times are DOD's best estimate of when an item will be received. Under the Comptroller General's authority to conduct evaluations on his own initiative, GAO analyzed the extent to which (1) DOD's estimated lead times varied from actual lead times, and (2) current management actions and initiatives have reduced lead times as compared to past years. To address these objectives, GAO computed the difference between the components' actual and estimated lead times, and compared component initiatives to reduce lead times for 1994-2002 to 2002-2005.

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Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Defense To improve the military components' accuracy in setting acquisition lead time values, the Secretary of Defense should direct the Secretary of the Army to have the Commanding General, Army Materiel Command, direct the Aviation and Missile Life Cycle Management Command to establish clear guidelines for item managers to know when to review and how to determine whether deliveries should be considered representative and thus used to update lead times.
Closed - Implemented
The Army Materiel Command issued policy that established clear guidelines on when to review and how to determine whether deliveries of items should be considered representative and thus used to update lead times. These guidelines were issued in November 2007 through the Army Material Command's update of the Material Management Policy Book. These guidelines are applicable to item managers working in the Aviation and Missile Life Cycle Management Command, which functions under the Army Materiel Command.
Department of Defense To improve the military components' accuracy in setting acquisition lead time values, the Secretary of Defense should direct the Secretary of the Army to have the Commanding General, Army Materiel Command, direct the Life Cycle Management Commands to reemphasize the importance of periodically reviewing and validating their recorded lead time data to detect and correct data input errors and other inaccurate information.
Closed - Implemented
Through implementation of its Logistics Modernization Program (LMP), the Army Materiel Command has taken steps to institutionalize periodic reviews and validation of lead time data. By replacing separate legacy systems at the Army's life cycle management commands and maintenance depots, LMP will eliminate many input errors and other inaccurate information caused by manually typing data from one system to another. In addition, the new system improves visibility for managers to see issues and impacts of data quality.
Department of Defense To improve the military components' accuracy in setting acquisition lead time values, the Secretary of Defense should direct the Secretary of the Army to have the Commanding General, Army Materiel Command, direct Communications-Electronics Life Cycle Management Command to maintain and update automated lead time data within its Logistics Modernization Program computer system.
Closed - Implemented
The Army's implementation of the Logistics Modernization Program (LMP) enhances its visibility over lead time data and its ability to improve data quality. Although LMP does not provide fully automated updates of lead times, the use of LMP at all life cycle management commands and maintenance deports ensures that the Army will have one set of lead time data (as opposed to, in the past, when lead time data sometimes differed between systems). Because legacy systems have been eliminated, data from these systems is no longer being manual input into LMP.
Department of Defense To improve the military components' accuracy in setting acquisition lead time values, the Secretary of Defense should direct the Director of DLA to have its supply centers review the methodology and inputs used to compute its lead time estimates and revise them to incorporate recent improvements in DLA actual lead times.
Closed - Not Implemented
DOD did not concur with the recommendation, nor did it not provide evidence that it had taken actions to implement the recommendation.
Department of Defense To improve the military components' accuracy in setting acquisition lead time values, the Secretary of Defense should direct the Secretary of the Air Force to have the Commander, Air Force Materiel Command, direct its air logistic centers to use better sources of lead time information, such as supplier estimates, if available, rather than default values for items that have not been ordered in the last 5 years.
Closed - Implemented
According to information gathered by the DOD Inspector General, the Air Force Materiel Command has directed its air logistics centers to use better sources of lead time data.
Department of Defense To improve the military components' accuracy in setting acquisition lead time values, the Secretary of Defense should direct the Secretary of the Navy to direct the Commander, Naval Inventory Control Point, to reemphasize the importance of having its inventory control points periodically review and validate their recorded lead time data to detect and correct data input errors or other inaccurate information.
Closed - Implemented
The Navy Inventory Control Point issued a policy re-emphasizing the importance of reviewing and validating its lead times regularly, and correcting data input errors and other inaccurate information. In addition, the Navy issued guidance to inventory managers in December 2007 instructing them to review and re-validate lead time information. Guidance has been issued twice yearly requiring a similar review and validation of lead time data.
Department of Defense To strengthen DOD's and the military components' management of acquisition lead times, the Secretary of Defense should direct the Under Secretary of Defense for Acquisition, Technology, and Logistics to establish component lead time reduction goals over a 5-year period from October 2007-2012.
Closed - Not Implemented
DOD did not establish lead time reduction goals for the 5-year time frame from 2007 to 2012.
Department of Defense To strengthen DOD's and the military components' management of acquisition lead times, the Secretary of Defense should direct the Under Secretary of Defense for Acquisition, Technology, and Logistics to develop metrics to measure components' progress toward meeting lead time reduction goals and require the periodic reporting of these metrics.
Closed - Implemented
DOD has developed eight metrics that have been reported monthly by DLA since fiscal year 2008. Once DOD establishes lead time reduction goals for the components, progress in meeting the goals can be tracked through such metrics. GAO plans to continue monitoring DOD's efforts to improve inventory management, including its progress in establishing, tracking, and meeting lead times reduction goals.
Department of Defense To strengthen DOD's and the military components' management of acquisition lead times, the Secretary of Defense should direct the Under Secretary of Defense for Acquisition, Technology, and Logistics to develop a general estimate of the financial impact of lead time reductions, and use that as a metric to help components weigh the importance of lead time reductions.
Closed - Not Implemented
Although DOD studied the financial impact of lead time reductions and developed estimates for some items, it has not developed a general estimate of the financial impact or a metric based on financial impact.
Department of Defense To strengthen DOD's and the military components' management of acquisition lead times, the Secretary of Defense should direct the Under Secretary of Defense for Acquisition, Technology, and Logistics to direct the components to collect data, establish metrics, and measure and report the impact of individual lead time reduction initiatives, to include the cost of each initiative and its estimated cost savings.
Closed - Not Implemented
DOD did not provide evidence that it had directed the components to collect data, establish metrics, and measure and report the impact of individual lead time reduction initiatives.
Department of Defense To strengthen DOD's and the military components' management of acquisition lead times, the Secretary of Defense should direct the Under Secretary of Defense for Acquisition, Technology, and Logistics to work closely with the Army and Navy to develop joint strategic relationships with suppliers that would be beneficial in reducing lead times.
Closed - Not Implemented
DOD did not concur with this recommendation and did not provide evidence that it had taken steps to implement the recommendation. The Navy reported that it had made some progress in builidng strategic relationships with suppliers through the implementation of performance based logistics agreements. The Army is also pursuing an effort to develop long-term relationships with suppliers.

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