oversight

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)

                         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#)
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      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