DOCO5UENT RESUME 00093 - [A0751103] Defense Inactive Ites Program Could Be More Effective. LCD-77-204; B-133118. January 26, 1977. 5 pp. Report to Secretary, Department of Defense; by Fred J. Shafer, Director, Logistics and Communications Div. Issue Area: Facilities and Haterial Management (700). Contact: Logistics and Communications Div. Budget Function: National Defense: Department of Defense - military (except procurement & contracts) (051); General Government: General Property and Records Management (804). organization Concerned: Defense Supply Agency. Congressional BRlevance: House Committee on Armed Services; Senate Committee on Armed Services. A review of DOD's program for eliminating unneeded inactive items in its supply system was found to be ineffective in many respects. The Defense Supply Agency (DSA) maintains these inactive items amounting to about 17X of supplies at a cost of S46 million annually. Findings/Conclusicns: The Defense Inactive Itea Program, designed to eliminate unneeded items :hat occupy space, time, and computer capacity has not been ,ujccessful in %eeting its objectives. The lack of progress resulted from technical difficulties in merging the program with the overall computer system, delays in identifying organizations which used supplies, and the absence of systems for keeping supply centers informed and for verifying reasons for keeping inactive items. Recommendations: The Department of Defense should reemphasize benefits of the inactive item program and periodically review its status. The DSA should be required to improve its computer program to provide pronbe and complete user information, including statistical informaticn on items eliminated. A system should be established tc verify reasons given by military services for keeping inactive items. HT#) .,) C) ..,' -7..'? i ·' a UNITED STA TES GENERAL ACCO UNTING OFFICE Defense Inactive Item Program Could Be More Effective Defense Supply Agency The Department of Defense's program to eliminate unneeded inactive items from the supply system has not been effective. The Department should: -- Ree..;-hasize the benefits of the in- active item program to all its com- ponents and periodically review the program's status. --Require the Defense Supply Agency to improve its computer program to pro- vide (1) prompt and complete user information and (2) stastical inforrra- tion on items eliminated as a result of the inactive item program. --Establish a system for independently verifying the reasons the military ser- vices give for retaining inactive items. LCD-77-204 JAN. 26. 1977 UNITED STATES GENERAL ACCOUNTING OFFICE WASHINGTON, D.C. 20548 LOGISTICS AND COMMUNICATIONS DIVISION B-133118 The Honorable The Secretay of Defense Dear Mr. Secretary: This report discusses our review of the Department of Defense's Inactive Item Procram to eliminate unneeded in- active items in its supp.y system. We found that the pro- gram, as implemented by the Defense Supply Agency has not been fully effective. This report contains recommendations to you on page 5. As you know, section 236 of the Legislative Reorganization Act of 1970 reauires the head of a Federal agency to submit a written statement on actions taken on our recommendations to tr:e House and Senate Committees on Government Operations not later than ,0 days after the date of the report and to the House and senate Ccmmittees on Appropriations with the agency's first request for appropriations made wore than 60 days after the date of the report. We are sending copies of this report to the Director, Office of Management and Budget; the Secretaries of the Army, Navy, and Air Force; the Director, Defense Supply Agency; and the Chairmen and ranking minority members of the House and Senate Committees on Armed Services and Government Operations. Sincerely yours, Fred J. Shafer Director C o n t e n t s Page DIGEST i CHAPTER 1 INTRODUCTION 2 LIMITED PROGRESS IN ELIMINATING INACTIVE ITEMS 2 How the program works 2 Technical difficulties halted program 3 Problems in acquiring and con- trolling user information 3 Inactive items retained without verification of future reauire- ments 4 3 CONCLUSIONS AND RECOMMENDATIONS 5 Conclusions 5 Recommendations 5 ABBREVIATIONS DOD Department of Defense DSA Defense Supply Agency GAO General Accounting Office GENERAL ACCOUNTING OFFICE DEFENSE INACTIVE ITEM PROGRAM REPORT TO THE COULD BE MORE EFFECTTVE SECRETARY OF DEFENSE Defense Supply Agency D I GEST The Defense Supply Agency manages about 1.9 million different items, or about percent of the items in the Department 55 of Defense's supply system. Agency offi- cials estimate that as many as 319,00C, or 17 percent, of these items may be sidered as inactive items during the con- year. It costs the Agency about $46 next lion annually to maintain this number mil- inactive items in the supply system. of (See pp. 1 and 2.) The Agency operates the Defense Inactive Item Program to eliminate from the supply system unneeded items which use warehouse space, personnel time, and computer process- ing time. However, in spite of the program, the Agency has not eliminated such items from the system. (See pp. 1 and 2.) The program has not been fully effective because of -- technical difficulties in merging the inactive item program with the overall computerized system, -- delays in identifying the organizations which used the supplies and lack of a mechanism to inform the supply centers when they had received information on all inactive items, and -- absence of a system to independently verify the reasons the military cited for keeping inactive items. (See p. 2.) The Secretary of Defense should: -- Reemphasize the benefits of the inactive item program to all Department of Defense components and periodically review the program's status. Ta·r ht.. . Upon removal, the report cover date should be noted hereon. LCD- -20 -- Require the Defense Supply Agency to improve its computer program to provide (1) prompt and complete user information and (2) statistical information on items eliminated as a result of the program. -- Establish a system for independently verifying the reasons the military serv- ices give for keeping inactive items. (See p. 5.) ii CHAITER 1 INTRODUCTION The Defense Supply Agency (DSA) manages about 1.9 million different supply items, or about 50 percent of the items in the Department of Defense's (DOD'e) supply system. Our past reports 1/ have pointed out that many items in the supply system are inactive and that savings could be realized if such items were eliminated. DOD officials have generally agreed with our findings and have cited a number of existing or planned programs in- tended to reduce the number of unneeded inactive items in their inventories. One such program designed by DSA, the Defense Inactive Item Program, was adopted DOD-wide in July 1968. Its basic objective is to eliminate from the supply system Lnneeded inactive items which use warehouse space, personnel time, and computer processing time. We studied DOD's program as implemented by DSA to determine if it was effectively eliminating inactive items. Our survey was done at (1) the Office of the Assistant Sec- retary of Defense (Installatiuns and Logistics), (2) DSA headquarters, (3) the DSA Defense Construction Supply Center, (4) the U.S. Army General Materiel and Petroleum Activity, (5) the U.S. Navy Fleet Materiel Support Office, and (6) the U.S. Navy Ships Parts Control Center. We reviewed regula- tions, reports, and other records on the inactive item elim- ination program and discussed the program's policies, proce- dures, and criteria with agency officials. 1/"Substantial Savings Available by Eliminating Low-Cost, Low-Demand Spare Parts From Defense Supply System," (B-133118, Oct. 31, 1967); "Need To Remove More Low-Cost, Low-Usage Items From Inventories," (B-133118, Mar. 31, 1971); and "Greater Use of Commercial Distribution Systems for Minor, Low-Use Supply Items Can Reduce Defense Logis- tics Costs," (B-133118, Aug. 9, 1976). CHAPTER 2 LIMITED PROGRESS IN ELIMINATING INACTIVE ITEMS Defense Supply Agency officials estimate that as many as 319,000 items, or about 17 percent of the items they man- age, will be considered as inactive items during the next year. Based on DSA's estimate of the cost of managing supply items ($165 for stocked items and $125 for nonstocked items), we estimate that it costs $46 million annually to maintain these inactive items. Despite the Department of Defense's desire to eliminate unneeded inactive items, the Defense Inactive Item Program has not been completely successful. Program effectiveness has been reduced because of -- technical difficulties in merging the inactive item program with DSA's computerized material management system, -- delays in identifying the organizations which used the supplies and lack of a feedback mechanism to inform the supply centers when they had received user information on all inactive items, and -- absence of a system for independently verifying the reasons the military cited for keeping inactive items. HOW THE PROGRAM WORKS DSA's inactive item program is a computerized system that is integrated with DSA's overall computerized material manage- ment system. DSA's system to identify inactive items involves several steps. First, each DSA supply center identifies those items it manages which meet the criteria for an inactive clas- sification (in the supply system 7 years and no demands for the past 2 years). Second, the supply centers auery DSA's in- tegrated data system for the names of all DOD organizations that use the item. Third, the supply centers forward the in- active item data to a focal point within each military service which distributes the data to the users. Fourth, the users decide whether to retain or eliminate items by evaluating technical data as well as demand and requirements data and send their decisions back to the focal point. The focal point then forwards the retain/delete decisions to the DSA supply center. 2 It all users decide to delete an item, its stock is eliminated from the supply system and the supply number centers dispose of all stock on hand. If one or more users decide to ietain an item, the item is kept in the system. If i user either decides the iter, is not needed or does not the supply center's inauiry withi:n 6 months, the respond to is removed from the DSA catalog records for that user's name item. TECHNICAL DIFFICULTIES HALTED PROGRAM DfA's inactive item program was suspended for most of 1973 and 1974 because of computer programing and nical difficulties in merging the program with itsother tech- overall material management system. In the fall of 1974, the systems, and in January 1975 it referred about DSA merged 255,000 inactive items to the military services for retain/delete decisions. The inactive item program was suspended again in March 1975 while DSA phased in a new integrated data system. In November 1975 the program resumed and another 60,000 in- active items were referred to the military services. could not tell us how many items were eliminated DSA because integrated data system did not provide this information. the Without such data DSA cannot evaluate the program's tiveness. effec- PROBLEMS IN ACQUIRING AND CONTROLLING USER ITNFORMATION Although DSA is again using the inactive item program, the system is not as effective as it should be because -- there have been delays in obtaining user information from DSA's integrated data system and -- the computer is not programed to tell DSA's supply centers when they hfve received user information all of the inactive items included in the Query. on Before inactive items can be referred to the military services for review. the supply centers must identify organizations from DSA's integrated data system. user Although DSA's goal is to furnish this information-to the centers within 3 days of the request, the system supply is not meeting this goal. For example, on recent recuests the De- fense Construction SuPPly Center has waited more than 3 weeks for user information. Thus, the entire system is delayed. 3 The computer program for DSA's overall material manage- ment system was not designed to include a mechanism to tell the supply center when user information on all items in their query has been provided. Consequently, items for which no user information has been supplied are excluded from the in- active item listing forwarded to the military services for review. Since the inactive item elimination program is run semiannually, the review of inactive items misted in one query is delayed for 6 months. In October 1975 the Defense Construction Supply Center told DSA headquarters of this problem. The Center asked headquarters to develop a control system to inform the supply centers when all replies have been received from the inte- grated data system. In April 1976 DSA approved a computer programing change to correct the problem; however, the change had not been implemented during our study. INACTIVE ITEMS RETAINED WITHOUT VERIFICATION OF FUTURE REQUIREMENTS A military service may keep an inactive item provided it certifies that the item is needed. In March 1971 we re- ported that DSA supply centers were not effectively elimi- nating unneeded inactive items because the program did not provide for periodic independent verification of the mili- tary services' reasons for retaining the items. DOD still has not developed a verification system and inactive items may have been needlessly retained. For ex- ample, we selected 20 inactive items that the Defense Con- struction Supply Center sent to the Army focal point (Gen- eral Matericl and Petroleum Activity) for review in November 1975 and asked focal point officials why they decided to re- tain the items. Although none of the users of 12 of the 20 items responded to the focal point's retain/delete inquiries, the focal point nevertheless forwarded retain decisions to the DSA center so the users' names would not be deleted from catalog records. In most cases the Army was the only recorded user of the item. Such unvalidated retain decisions could result in items being unnecessarily retained in the system. Army officials said the above action had been necessary because the .ser organizations had become confused by :ecent changes in the format of the inactive item data transmitted between the DSA supply centers, the Army focal point, and the Army users during the item review process. 4 CHAPTER 3 CONCLUSIONS AND RECOMMENDATIONS CONCLUSIONS The Defense Inactive Item Program provides a means of reducing supply management costs through identifying and eliminating inactive items which are needlessly using ware- house space, personnel time, and computer processing time. Unfortunately, the program has not completely succeeded in eliminating unneeded inactive items from the Defense Sup- ply Agency's system. Failure to do so has contributed to a 9-percent growth in the number of items managed by DSA and an increase in its supply management costs. RECOMMENDATIONS We recommend that the Secretary of Defense: -- Reemphasize the benefits of the inactive item program to all DOD components ard agencies and periodically review tne program's status. -- Require DSA to improve its computer program to provide (1) prompt and complete u or information and (2) sta- tistical information on items eliminated as a result of the inactive item program. -- Establish a system for independently verifying the reasons the military services give for retaining in- active items. 5
Defense Inactive Item Program Could Be More Effective
Published by the Government Accountability Office on 1977-01-26.
Below is a raw (and likely hideous) rendition of the original report. (PDF)