Defense Inventory: Process for Canceling Inventory Orders Needs Improvement

NSIAD-00-160 Published: Jun 30, 2000. Publicly Released: Jun 30, 2000.
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Highlights

Pursuant to a congressional request, GAO provided information on the Department of Defense's (DOD) inventory management, focusing on the: (1) extent to which orders exceeded requirements when the orders were placed; and (2) processes for cancelling orders that exceeded requirements.

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Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Defense Because of the difficulties the services and DLA face in identifying and cancelling excess inventory on order, the Secretary of Defense, in conjunction with the Secretaries of the Army, Navy, and Air Force, and the Director, DLA, should review and improve their processes, focusing on areas such as the accuracy of inventory management records.
Closed – Implemented
The Deputy Under Secretary of Defense (Logistics) requested on June 26, 2000, that the Military Departments and Defense Logistics Agency review their processes for identifying and reducing or canceling orders when requirements for secondary items decrease, and implement improvements where appropriate. Responses were received from each of the services. The military components all took some corrective actions; however, the components are in the process of implementing new inventory management systems that will further improve data accuracy. The systems will be operational in the 2005 through 2009 timeframe.
Defense Logistics Agency Because of the difficulties the services and DLA face in identifying and cancelling excess inventory on order, the Secretary of Defense, in conjunction with the Secretaries of the Army, Navy, and Air Force, and the Director, DLA, should review and improve their processes, focusing on areas such as the accuracy of inventory management records.
Closed – Implemented
The Deputy Under Secretary of Defense (Logistics) requested on June 26, 2000, that the Military Departments and Defense Logistics Agency review their processes for identifying and reducing or canceling orders when requirements for secondary items decrease, and implement improvements where appropriate. DLA's response did not specifically address inventory record accuracy; however, DLA is fielding a new inventory management system that will further improve record accuracy.
Department of the Air Force Because of the difficulties the services and DLA face in identifying and cancelling excess inventory on order, the Secretary of Defense, in conjunction with the Secretaries of the Army, Navy, and Air Force, and the Director, DLA, should review and improve their processes, focusing on areas such as the accuracy of inventory management records.
Closed – Implemented
The Deputy Under Secretary of Defense (Logistics) requested on June 26, 2000, that the Military Departments and Defense Logistics Agency review their processes for identifying and reducing or canceling orders when requirements for secondary items decrease, and implement improvements where appropriate. The Air Force responded to DOD that its overall processes for canceling orders will be improved as part of a replacement system for tracking on hand inventory. As of August 18, 2004, the replacement system was not operational; however, an Air Force official said that it would be operational later this year.
Department of the Navy Because of the difficulties the services and DLA face in identifying and cancelling excess inventory on order, the Secretary of Defense, in conjunction with the Secretaries of the Army, Navy, and Air Force, and the Director, DLA, should review and improve their processes, focusing on areas such as the accuracy of inventory management records.
Closed – Implemented
The Deputy Under Secretary of Defense (Logistics) requested on June 26, 2000, that the Military Departments and Defense Logistics Agency review their processes for identifying and reducing or canceling orders when requirements for secondary items decrease, and implement improvements where appropriate. The Navy responded to DOD that it had reviewed its system and established monitoring goals for accuracy.
Department of the Army Because of the difficulties the services and DLA face in identifying and cancelling excess inventory on order, the Secretary of Defense, in conjunction with the Secretaries of the Army, Navy, and Air Force, and the Director, DLA, should review and improve their processes, focusing on areas such as the accuracy of inventory management records.
Closed – Implemented
The Deputy Under Secretary of Defense (Logistics) requested on June 26, 2000, that the Military Departments and Defense Logistics Agency review their processes for identifying and reducing or canceling orders when requirements for secondary items decrease, and implement improvements where appropriate. The Army reported to DOD on March 6, 2001, that it had completed its review of processes for canceling excess orders and made improvements where appropriate. The Army is in the process of implementing a new inventory management system which would further affect this recommendation.
Department of Defense Because of the difficulties the services and DLA face in identifying and cancelling excess inventory on order, the Secretary of Defense, in conjunction with the Secretaries of the Army, Navy, and Air Force, and the Director, DLA, should review and improve their processes, focusing on areas such as the level at which the services and DLA identify excess inventory on order that is subject to cancellation review, including low-dollar excess inventory on order that is excluded from cancellation review.
Closed – Implemented
The Deputy Under Secretary of Defense (Logistics) requested on June 26, 2000, that the Military Departments and Defense Logistics Agency review their processes for identifying and reducing or canceling orders when requirements for secondary items decrease, and implement improvements where appropriate.
Defense Logistics Agency Because of the difficulties the services and DLA face in identifying and cancelling excess inventory on order, the Secretary of Defense, in conjunction with the Secretaries of the Army, Navy, and Air Force, and the Director, DLA, should review and improve their processes, focusing on areas such as the level at which the services and DLA identify excess inventory on order that is subject to cancellation review, including low-dollar excess inventory on order that is excluded from cancellation review.
Closed – Implemented
The Deputy Under Secretary of Defense (Logistics) requested on June 26, 2000, that the Military Departments and Defense Logistics Agency review their processes for identifying and reducing or canceling orders when requirements for secondary items decrease, and implement improvements where appropriate. DLA reviewed its thresholds to ensure that they were appropriately set.
Department of the Air Force Because of the difficulties the services and DLA face in identifying and cancelling excess inventory on order, the Secretary of Defense, in conjunction with the Secretaries of the Army, Navy, and Air Force, and the Director, DLA, should review and improve their processes, focusing on areas such as the level at which the services and DLA identify excess inventory on order that is subject to cancellation review, including low-dollar excess inventory on order that is excluded from cancellation review.
Closed – Implemented
The Deputy Under Secretary of Defense (Logistics) requested on June 26, 2000, that the Military Departments and Defense Logistics Agency review their processes for identifying and reducing or canceling orders when requirements for secondary items decrease, and implement improvements where appropriate. The Air Force reviewed its processes and took actions to make improvements.
Department of the Navy Because of the difficulties the services and DLA face in identifying and cancelling excess inventory on order, the Secretary of Defense, in conjunction with the Secretaries of the Army, Navy, and Air Force, and the Director, DLA, should review and improve their processes, focusing on areas such as the level at which the services and DLA identify excess inventory on order that is subject to cancellation review, including low-dollar excess inventory on order that is excluded from cancellation review.
Closed – Not Implemented
The Deputy Under Secretary of Defense (Logistics) requested on June 26, 2000, that the Military Departments and Defense Logistics Agency review their processes for identifying and reducing or canceling orders when requirements for secondary items decrease, and implement improvements where appropriate. The Navy's response on its corrective actions did not address this recommendation. Followup work showed that the Navy had not changed it process for identifying orders for cancellation.
Department of the Army Because of the difficulties the services and DLA face in identifying and cancelling excess inventory on order, the Secretary of Defense, in conjunction with the Secretaries of the Army, Navy, and Air Force, and the Director, DLA, should review and improve their processes, focusing on areas such as the level at which the services and DLA identify excess inventory on order that is subject to cancellation review, including low-dollar excess inventory on order that is excluded from cancellation review.
Closed – Implemented
The Deputy Under Secretary of Defense (Logistics) requested on June 26, 2000, that the Military Departments and Defense Logistics Agency review their processes for identifying and reducing or canceling orders when requirements for secondary items decrease, and implement improvements where appropriate. The Army responded to DOD that it completed its review of processes for canceling orders and made some improvements.
Department of Defense Because of the difficulties the services and DLA face in identifying and cancelling excess inventory on order, the Secretary of Defense, in conjunction with the Secretaries of the Army, Navy, and the Air Force, and the Director, DLA, should review and improve their processes, focusing on areas such as the timeliness and frequency of reviews for identifying excess items on order.
Closed – Implemented
The Deputy Under Secretary of Defense (Logistics) requested on June 26, 2000, that the Military Departments and Defense Logistics Agency review their processes for identifying and reducing or canceling orders when requirements for secondary items decrease, and implement improvements where appropriate. Some of the services have actions in process. The Army, for example, did make major subordinate commands responsible for determining the frequency of review.
Defense Logistics Agency Because of the difficulties the services and DLA face in identifying and cancelling excess inventory on order, the Secretary of Defense, in conjunction with the Secretaries of the Army, Navy, and the Air Force, and the Director, DLA, should review and improve their processes, focusing on areas such as the timeliness and frequency of reviews for identifying excess items on order.
Closed – Implemented
The Deputy Under Secretary of Defense (Logistics) requested on June 26, 2000, that the Military Departments and Defense Logistics Agency review their processes for identifying and reducing or canceling orders when requirements for secondary items decrease, and implement improvements where appropriate. DLA reviewed its processes and responded that it reviews its excess on order semi-annually, which GAO identified as part of the problem.
Department of the Air Force Because of the difficulties the services and DLA face in identifying and cancelling excess inventory on order, the Secretary of Defense, in conjunction with the Secretaries of the Army, Navy, and the Air Force, and the Director, DLA, should review and improve their processes, focusing on areas such as the timeliness and frequency of reviews for identifying excess items on order.
Closed – Implemented
The Deputy Under Secretary of Defense (Logistics) requested on June 26, 2000, that the Military Departments and Defense Logistics Agency review their processes for identifying and reducing or canceling orders when requirements for secondary items decrease, and implement improvements where appropriate. The Air Force reviewed its processes and took actions where it felt appropriate.
Department of the Navy Because of the difficulties the services and DLA face in identifying and cancelling excess inventory on order, the Secretary of Defense, in conjunction with the Secretaries of the Army, Navy, and the Air Force, and the Director, DLA, should review and improve their processes, focusing on areas such as the timeliness and frequency of reviews for identifying excess items on order.
Closed – Not Implemented
The Deputy Under Secretary of Defense (Logistics) requested on June 26, 2000, that the Military Departments and Defense Logistics Agency review their processes for identifying and reducing or canceling orders when requirements for secondary items decrease, and implement improvements where appropriate. The Navy did not adequately address corrective action for this recommendation. Followup work showed that the Navy had made no changes in this area.
Department of the Army Because of the difficulties the services and DLA face in identifying and cancelling excess inventory on order, the Secretary of Defense, in conjunction with the Secretaries of the Army, Navy, and the Air Force, and the Director, DLA, should review and improve their processes, focusing on areas such as the timeliness and frequency of reviews for identifying excess items on order.
Closed – Implemented
The Deputy Under Secretary of Defense (Logistics) requested on June 26, 2000, that the Military Departments and Defense Logistics Agency review their processes for identifying and reducing or canceling orders when requirements for secondary items decrease, and implement improvements where appropriate. The Army responded that it reviewed its processes and took corrective actions where appropriate. Followup work determined that the Army made major subordinate commands responsible for determining the frequency of review. No work was done to assess the impact of this action.
Department of Defense Because of the difficulties the services and DLA face in identifying and cancelling excess inventory on order, the Secretary of Defense, in conjunction with the Secretaries of the Army, Navy, and Air Force, and the Director, DLA, should review and improve their processes, focusing on areas such as the validity and use of the military components' termination models in making economic analyses.
Closed – Implemented
The Office of the Secretary of Defense requested on June 30, 2000, that the Military Departments and Defense Logistics Agency review their processes for identifying and reducing or canceling orders when requirements for secondary items decrease, and implement improvements where appropriate. The military components reviewed their processes and took some corrective actions.
Defense Logistics Agency Because of the difficulties the services and DLA face in identifying and cancelling excess inventory on order, the Secretary of Defense, in conjunction with the Secretaries of the Army, Navy, and Air Force, and the Director, DLA, should review and improve their processes, focusing on areas such as the validity and use of the military components' termination models in making economic analyses.
Closed – Implemented
The Deputy Under Secretary of Defense (Logistics) requested on June 26, 2000, that the Military Departments and Defense Logistics Agency take action to identify inventory on orders that exceed both the requirements objective and the approved acquisition objective. DLA reviewed its processes and followup work showed that DLA had updated the factors used in its model. The followup work did not assess the impact of this change.
Department of the Air Force Because of the difficulties the services and DLA face in identifying and cancelling excess inventory on order, the Secretary of Defense, in conjunction with the Secretaries of the Army, Navy, and Air Force, and the Director, DLA, should review and improve their processes, focusing on areas such as the validity and use of the military components' termination models in making economic analyses.
Closed – Implemented
The Deputy Under Secretary of Defense (Logistics) requested on June 26, 2000, that the Military Departments and Defense Logistics Agency take action to identify inventory on orders that exceed both the requirements objective and the approved acquisition objective. The Air Force reviewed its processes and responded that the Air Force Audit Agency will review the termination model. The Air Force Audit Agency was in the process of reviewing the termination model at the time of GAO's followup work in 2001. No further follow up was conducted.
Department of the Navy Because of the difficulties the services and DLA face in identifying and cancelling excess inventory on order, the Secretary of Defense, in conjunction with the Secretaries of the Army, Navy, and Air Force, and the Director, DLA, should review and improve their processes, focusing on areas such as the validity and use of the military components' termination models in making economic analyses.
Closed – Not Implemented
The Deputy Under Secretary of Defense (Logistics) requested on June 26, 2000, that the Military Departments and Defense Logistics Agency take action to identify inventory on orders that exceed both the requirements objective and the approved acquisition objective. The Navy response described its termination procedure, but did not show if and how it would be improved. Followup work showed that the Navy continued not to use a termination model.
Department of the Army Because of the difficulties the services and DLA face in identifying and cancelling excess inventory on order, the Secretary of Defense, in conjunction with the Secretaries of the Army, Navy, and Air Force, and the Director, DLA, should review and improve their processes, focusing on areas such as the validity and use of the military components' termination models in making economic analyses.
Closed – Not Implemented
The Deputy Under Secretary of Defense (Logistics) requested on June 26, 2000, that the Military Departments and Defense Logistics Agency take action to identify inventory on orders that exceed both the requirements objective and the approved acquisition objective. Followup work showed that the Army made no changes to its termination model.
Department of Defense In addition, to improve DOD's oversight of excess inventory on order, the Secretary of Defense should require the services and DLA to report on the amount of all excess inventory on order, identifying inventory on order that exceeds both the requirements objective and the approved acquisition objective.
Closed – Implemented
The Deputy Under Secretary of Defense (Logistics) requested on June 26, 2000, that the Military Departments and Defense Logistics Agency take action to identify inventory on orders that exceed both the requirements objective and the approved acquisition objective. DOD's response showed that Army is reporting by requirements objective and approved acquisition objective. It is silent on other services. Followup work showed that the services and DLA were collecting the data as recommended, but that the data was not being provided to DOD for program oversight.

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