oversight

Defense Inventory: Improved Management Framework Needed to Guide Air Force Best Practice Initiatives

Published by the Government Accountability Office on 1999-11-18.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                 United States General Accounting Office

GAO              Report to Congressional Committees




November 1999
                 DEFENSE
                 INVENTORY

                 Improved
                 Management
                 Framework Needed to
                 Guide Air Force Best
                 Practice Initiatives




GAO/NSIAD-00-2
Contents



Letter                                                                                           3


Appendixes             Appendix I:    Summary of Air Force Initiatives                          14
                       Appendix II:   Comments From the Department of Defense                   20
                       Appendix III: GAO Contacts and Staff Acknowledgments                     22


Related GAO Products                                                                            24


Tables                 Table 1: Air Force Initiatives and Projected Completion Dates             7




                       Abbreviations

                       CREP       Contract Repair Enhancement Program
                       DOD        Department of Defense
                       DREP       Depot Repair Enhancement Program




                       Page 1                                      GAO/NSIAD-00-2 Defense Inventory
Page 2   GAO/NSIAD-00-2 Defense Inventory
United States General Accounting Office                                                         National Security and
Washington, D.C. 20548                                                                   International Affairs Division



                                    B-281460                                                                                    Leter




                                    November 18, 1999

                                    Congressional Committees

                                    Section 347 of the Strom Thurmond National Defense Authorization Act for
                                    Fiscal Year 1999 requires the secretary of each military department to
                                    submit to the Congress a schedule for implementing best commercial
                                    inventory practices for the acquisition and distribution of secondary
                                    inventory items.1 Best commercial practices are defined as practices that
                                    enable the Department to reduce inventory levels while improving the
                                    responsiveness of the supply system to user needs. Section 347 further
                                    requires that the schedule provide for implementation of such best
                                    practices to be completed within 5 years of its enactment, or by October 17,
                                    2003. The act also requires us to evaluate the extent to which the secretary
                                    of each military department has complied with the act’s requirements.

                                    In this report, we discuss our evaluation of the Air Force’s best practices
                                    implementation schedule for the acquisition and distribution of secondary
                                    inventory items, which the Secretary of the Air Force submitted to the
                                    Congress on July 19, 1999.2 Specifically, we (1) determined the extent to
                                    which the schedule responds to the provisions of the act and (2) identified
                                    specific elements of a management framework needed for effective
                                    implementation and oversight of the Air Force’s best practice initiatives.



Results in Brief                    The Air Force’s schedule is generally responsive to the act. It describes 17
                                    initiatives that address the acquisition and distribution of secondary items
                                    that the Air Force manages, and with one exception, provides for
                                    implementation of these initiatives to be completed within 5 years.3 The
                                    initiatives are aimed at reducing the Air Force’s infrastructure and



                                    1
                                    Secondary inventory includes spare parts, clothing, and medical supplies to support
                                    Department of Defense (DOD) forces worldwide.
                                    2
                                     We are providing separate reports on the Army, Air Force, and Navy best practice
                                    implementation schedule.
                                    3
                                     The Pipeline Tracking Analysis and Metrics initiative is planned to be completed between
                                    2004 and 2006.




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             improving the maintenance, information management, and acquisition
             processes.

             Though generally responsive to the act’s requirements, the Air Force’s
             schedule provides a management framework that lacks an overall strategy
             and specific elements needed to assess implementation progress, measure
             success, and identify needed changes. While the schedule’s initiatives are
             linked to higher level Air Force logistics goals and objectives, there is no
             strategy that ensures the efforts are coordinated, nor are specific
             performance goals and baselines established to measure the overall results
             of the initiatives. In prior work,4 we noted that the lack of a detailed
             management framework contributed to DOD’s difficulty in implementing
             new initiatives. The Government Performance and Results Act offers a
             model for developing an effective management framework through the use
             of strategic plans and establishment of performance measures to assess the
             results of the initiatives and improve the likelihood of successful
             implementation.

             So that progress and results information is available to the Congress and
             DOD managers, we are recommending that the Secretary of the Air Force
             develop a management framework for implementing these initiatives that
             would include a comprehensive strategy and performance plans.



Background   To provide reparable parts to support its operations, the Air Force uses an
             extensive logistics system that is based on procedures and concepts that
             have evolved over time. Reparable parts are expensive items, such as
             hydraulic pumps, navigational computers, wing sections, and landing gear,
             that can be fixed and used again. The Air Force’s logistics system, often
             referred to as a logistics pipeline or supply chain, consists of a number of
             interrelated activities that provide parts where and when they are needed.5
             These activities include the purchase, storage, repair, and distribution of
             parts, which together require billions of dollars of investments in


             4
             Defense Inventory: DOD Could Improve Total Asset Visibility Initiative With Results Act
             Framework (GAO/NSIAD-99-40, Apr. 12, 1999).
             5
              The Air Force also relies on this pipeline for consumable parts that are not intended for
             repair, such as screws, fuses, clothing, and food. Some of these are used extensively to fix
             reparable parts and aircraft. The Defense Logistics Agency provides most of the consumable
             parts that Air Force repair activities use and handles a large portion of the warehousing and
             distribution of reparable parts.




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personnel, equipment, facilities, and inventory. In 1998, DOD reported that
the Air Force’s secondary inventory was valued at $25.9 billion, or
42 percent of DOD’s total secondary inventory.6

Since 1990, we have identified DOD’s management of secondary
inventories as a high-risk area because levels of inventory were too high
and management systems and procedures were ineffective.7 In addition,
our financial statement audits have identified continuing significant
problems with the integrity of DOD’s inventory data. For example, we
reported that inaccurate inventory data resulted from weaknesses in DOD’s
procedures relied on to maintain visibility over, and conduct physical
counts of, on-hand inventories. Until these problems are effectively
resolved, DOD’s ability to reliably measure and assess performance will
continue to be impaired.8 While DOD has made some improvements, these
general conditions still exist, and this area remains on our high-risk list.9
We have reported that adopting best business practices in inventory
management and improving the reliability of financial management
information are key steps toward solving these problems.

The Congress has recently taken specific actions to encourage DOD to
adopt best commercial practices to improve its inventory management.
The National Defense Authorization Act for Fiscal Year 1998 required the
Director of the Defense Logistics Agency to develop and submit to the
Congress a schedule for implementing best commercial practices for the
acquisition and distribution of nine categories of consumable-type


6
 Inventory value reported in the Department of Defense Supply System Inventory Report,
Sept. 30, 1998. The Air Force Working Capitol Fund financial statements report this
inventory value at $19.8 billion.
7
 In 1990, we began a special effort to review and report on the federal program areas that we
identified as high risk because of vulnerabilities to waste, fraud, abuse, and
mismanagement. This effort, which was supported by the Senate Committee on
Government Affairs and the House Committee on Government Reform, brought a
much-needed focus to problems that were costing the government billions of dollars.
8
 Results Act: DOD’s Annual Performance Plan for Fiscal Year 1999 (GAO/NSIAD-98-188R,
June 5, 1998), DOD Financial Management: More Reliable Information Key to Assuring
Accountability and Managing Defense Operations More Efficiently
(GAO/T-AIMD/NSIAD-99-145, Apr. 14, 1999), and Department of Defense: Status of Financial
Management Weaknesses and Actions Needed to Correct Continuing Challenges
(GAO/T-AIMD/NSIAD-99-171, May 4, 1999).
9
 Major Management Challenges and Program Risks: Department of Defense
(GAO/OCG-99-4, January 1999).




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                         supplies. The Strom Thurmond National Defense Authorization Act for
                         Fiscal Year 1999 placed a similar requirement on the secretary of each
                         military department, with implementation to be completed by October 17,
                         2003.

                         DOD is working to adopt best practices in its operations. In November
                         1997, the Secretary of Defense issued the Defense Reform Initiative report,
                         which identified a number of reengineering initiatives aimed at adopting
                         modern business practices to achieve world-class standards of
                         performance. In addition, the DOD performance plan for fiscal year 2000
                         noted that the inventory supply system is larger than required to support
                         today’s smaller force structure and outlined goals to reduce inventory
                         levels and streamline infrastructure. In March 1999, the Under Secretary of
                         Defense (Acquisition Reform) stated that DOD needed “a revolution in
                         business affairs . . . that embodies the best of modern business practices,
                         the ability to access the full range and scope of technologies to meet the
                         speed and agility demanded by the new battlespace, and an absolute
                         commitment to finding the best, most efficient means of delivering goods
                         and services to our warfighters.”



Air Force’s Schedule     The Air Force’s schedule is generally responsive to the requirements of the
                         act. It contains 17 initiatives that address the acquisition and distribution of
Generally Responds to    secondary inventory items the Air Force manages and provides for
the Act’s Requirements   implementation of these initiatives to be completed within 5 years, with
                         one exception.10 The initiatives are aimed at improving the maintenance,
                         information management, and acquisition processes and reducing
                         infrastructure. For example, the Contract Repair Enhancement Program
                         initiative is designed to reduce not only the time it takes to provide a
                         customer with a needed item (called logistics response time) but also the
                         number of days it takes to repair items. Another initiative is intended to
                         track items removed from aircraft through the repair pipeline until they are
                         ready for reissue, as well as track items ordered until they are received by
                         the customer.

                         For most of the initiatives, the schedule provided a description; specific
                         goals and objectives; linkage to higher level Air Force goals and objectives;


                         10
                          The final phase of the Pipeline Tracking Analysis and Metrics System is dependent on
                         receiving 2 to 3 years of data from other information management initiatives. Therefore,
                         implementation is expected to be completed between 2004 and 2006.




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                                            an estimate of the portion of inventory to be affected by the initiative; and
                                            general outcome measures, such as increased readiness. For a few
                                            initiatives, the schedule provided the accountable organization and interim
                                            milestones to measure progress. The schedule also contained a description
                                            of the inventory management functions the initiatives would affect and
                                            projected dates for completion. Table 1 lists the initiatives and the
                                            projected dates for implementation to be completed. (See app. I for a
                                            description of each initiative.)



Table 1: Air Force Initiatives and Projected Completion Dates

Initiative category      Initiative                                                                          Projected completion date
Maintenance              Depot Repair Enhancement Program                                                    Mar. 1998a

                         Contract Repair Enhancement Program                                                 Sept. 2001

                         Aircraft Repair Enhancement Program                                                 Dec. 2000
Information              Integrated Maintenance Data System                                                  Sept. 2003
Management
                         Integrated Logistics System-Supply                                                  Sept. 2001

                         Pipeline Tracking Analysis and Metrics System                                       2004−2006

                         Execution and Prioritization of Repair Support System                               July 2001

                         Merger of D041 and D062 Systems                                                     Sept. 1999

                         Requirements Management System                                                      Jan. 2000
Outsourcing or           Virtual Prime Vendor                                                                July 2000
Otherwise Reducing
Infrastructure           Reengineering Supply Support Process                                                June 2002

                         Express Transportation                                                              Dec. 1999

                         Depot Maintenance Consolidation                                                     Sept. 2000

                         Regional Supply Squadron                                                            July 2002

                         Supply and Transportation Unit Reengineering                                        Sept. 2001
Acquisition              Corporate Contracts                                                                 June 1999
Other                    Logistics Transformation and Functional Integration                                 Mar. 2000


                                            a
                                             Although formally completed in March 1998, the Air Force continues to examine potential
                                            improvements.




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Management                    The Air Force’s schedule for implementing its initiatives provides a
                              management framework that lacks an overall strategy and specific
Framework Is Key to           elements needed to assess implementation progress, measure success, and
Implementing                  identify needed changes. The Government Performance and Results Act
                              can provide a model for developing an effective management framework to
Initiatives                   guide the implementation of the initiatives and to provide the Congress and
                              DOD managers with information on progress and results.


Schedule Provides a Limited   In our past work, we reported that the lack of a management framework
Management Framework          containing an overall strategy and outcome-oriented goals and
                              performance measures contributed to DOD’s difficulty in implementing
                              new initiatives. For example, we reported that DOD did not have an
                              adequate management framework to clearly determine the progress being
                              made in achieving the Total Asset Visibility initiative goals and that the
                              initiative’s strategic and implementation plans were inadequate.11 As a
                              result, DOD managers did not have a clear picture of the initiative’s
                              implementation status or know how various initiatives within each service
                              contributed to achieving overall DOD goals and objectives. In addition, we
                              reported that there was confusion over who would use the system and how
                              it would be used.

                              The schedule represents a collection of best practice initiatives the Air
                              Force plans to complete within the next 5 years to improve the acquisition
                              and distribution of secondary supply items managed by the Air Force.
                              While the schedule included goals and objectives for each initiative, most
                              were stated in very general terms. For example, the Express Transportation
                              initiative is designed to replace the current way items are delivered with
                              faster commercial or in-house air delivery, which could reduce inventories
                              and increase unit readiness ratings. However, the schedule included no
                              specific performance measures or baselines for these goals. Without this
                              information, it is difficult to determine the impact these initiatives may
                              have on overall Air Force operations. Also, objective information on
                              implementation progress and achievement of desired outcomes may not be
                              available to the Congress and defense managers.


                              11
                                Total Asset Visibility is a DOD-wide initiative to provide users with timely and accurate
                              information on the location, status, and identity of units, personnel, equipment, and
                              supplies. For additional information, see Defense Inventory: DOD Could Improve Total
                              Asset Visibility Initiative With Results Act Framework (GAO/NSIAD-99-40, Apr. 12, 1999).




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                         In some cases, the schedule did provide some elements of a management
                         framework. Each initiative was linked to Air Force logistics improvement
                         goals, which the Air Force has aligned with the DOD Logistics Strategic
                         Plan. The schedule also provided a general estimate of what portions of the
                         existing inventory may be affected by each initiative. Also, five initiatives
                         contained interim actions and milestones that could be used to measure
                         progress toward full implementation, and four initiatives had specific
                         results and outcome measures that could be used to assess whether the
                         initiatives were achieving the desired results.


Results Act Management   The Results Act framework generally consists of establishing strategic
Framework                plans, performance plans, and mechanisms for measuring program
                         progress and results. Such a framework for the Air Force’s initiatives would
                         include (1) establishing broad general initiative goals and objectives,
                         (2) linking the goals to overall DOD goals and objectives, (3) establishing
                         quantifiable performance measures and baselines to assess whether the
                         initiatives are achieving desired results, (4) defining levels of accountability
                         and responsibility for implementing the initiatives and identifying the
                         resources that will be required to achieve goals, (5) establishing milestones
                         necessary to measure progress toward full implementation, and
                         (6) defining an evaluation plan for periodically comparing actual results to
                         established goals and objectives. This information would allow the
                         Congress and other decisionmakers to measure initiative implementation
                         progress and to determine whether the initiatives are achieving their
                         desired results.

                         In addition to these potential benefits, considering the initiatives as
                         interrelated efforts maximizes their systemwide improvement potential.
                         Our prior work on best inventory management practices has shown that
                         efforts to reengineer a logistics system are more successful when various
                         logistics activities are viewed as a series of interrelated processes rather
                         than isolated functional areas.12 For example, when one airline began
                         changing the way it purchased parts from suppliers, it considered how the
                         changes would affect mechanics in repair workshops. Additionally, airline
                         officials described how a combination of supply chain improvements could
                         lead to continuous improvements. They also described how culture
                         changes, improved data accuracy, and more efficient processes lead to


                         12
                          Inventory Management: DOD Can Build on Progress by Using Best Practices for Reparable
                         Parts (GAO/NSIAD-98-97, Feb. 27, 1998).




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                               reductions in inventories and complexity of operations. These reductions
                               can lead to further efficiencies and process improvements.


One Initiative Can Assist in   The Logistics Transformation and Functional Integration initiative, which
Developing Needed              began in March 1999, is a 1-year study designed to identify the steps needed
                               to reengineer the Air Force logistics system and identify opportunities for
Management Framework
                               value-added changes. According to the schedule, this initiative will use
                               integrated supply chain management techniques to identify “. . . the means
                               to accurately predict requirements, acquire the right amount of inventory,
                               rapidly move serviceable and reparable items, and select the optimum path
                               for each item as it moves through the supply chain.” If successful, this
                               initiative might produce many of the management framework components
                               discussed earlier, such as an overarching improvement strategy and
                               integrated implementation plans. It is also expected to identify outcome
                               measures that focus on customer support and optimize operating costs.



Conclusions                    The Air Force’s schedule generally meets the requirements of the act by
                               providing information on 17 initiatives that, with one exception, are
                               expected to have implementation completed within 5 years. Achieving the
                               Air Force’s goal of improved management of secondary items will depend
                               on the successful implementation of these initiatives. Implementation of
                               the initiatives is generally linked to and guided by the Air Force Logistics
                               Support Plan. However, the strategy set forth in that document is general in
                               nature, and implementation and assessment of the Air Force’s initiatives
                               would benefit from more specific guidance. The Results Act provides a
                               model for developing a more effective management framework that could
                               provide this information and allow for more meaningful evaluations of
                               progress and results.



Recommendations                To provide a mechanism to improve the potential for successful
                               implementation of Air Force initiatives and measure results, we
                               recommend that the Secretary of the Air Force develop a management
                               framework for implementing best practice initiatives based on the
                               principles embodied in the Results Act. Specifically, the management
                               framework should include

                               • a strategy that is directly linked to top-level DOD goals and objectives
                                 and that recognizes the interrelationship of the initiatives and the



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                        overall impact the initiatives will have on the Air Force’s logistics
                        pipeline, such as reduced pipeline time, improved customer service, and
                        reductions in total inventory and
                      • a performance plan that includes clearly defined goals and objectives,
                        defined levels of accountability, quantifiable performance measures and
                        baselines, interim schedule milestones, and plans to periodically assess
                        the overall impact the initiatives have achieved in reducing inventory
                        levels while improving the responsiveness of the supply system to user
                        needs.



Agency Comments and   In commenting on a draft of this report, DOD concurred with our
                      recommendation and stated that the Air Force is revising its Logistics
Our Evaluation        Support Plan to more clearly articulate the relationships, goals, objectives,
                      and metrics of logistics initiatives. It will also provide regularly scheduled
                      review and analysis to the Air Force Deputy Chief of Staff (Installations and
                      Logistics). DOD further stated that approval of the expanded Air Force
                      Logistics Support Plan structure by the Air Force Deputy Chief of Staff
                      (Installations and Logistics) is anticipated during the second quarter of
                      fiscal year 2000. DOD’s comments are included in their entirety as
                      appendix II.

                      DOD did express concern that the draft report implied that the current
                      management framework for implementing the initiatives included in the
                      schedule was inadequate. DOD stated that the initiatives are linked to Air
                      Force improvement goals, which, in turn, are aligned with the DOD
                      Logistics Strategic Plan. Further, DOD cited results that have been
                      achieved and asserted that such results would not have been possible
                      without adequate management oversight. Our report states that the
                      schedule links each initiative to Air Force improvement goals, and those
                      goals are aligned with higher level DOD goals and objectives. However, the
                      goals and objectives for most initiatives were stated in broad terms and
                      related performance measures were not included in the schedule to assess
                      progress and results. Without this information, it will be difficult to
                      determine whether the initiatives are improving overall Air Force
                      operations.



Scope and             Our analysis of the Air Force’s schedule was based on the information
                      contained in the schedule, discussions with Air Force officials, and our
Methodology           prior work comparing DOD and private sector logistics practices.



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We also identified areas in which the schedule could be improved to guide
initiative implementation and improve management of secondary inventory
items. Specifically, we examined the schedule in terms of outcome-oriented
Results Act principles to determine whether the schedule provided an
overall strategy for adopting best practices and contained key elements to
guide implementation. We did not assess the merits of the Air Force’s
initiatives or the initiatives’ likelihood for success.

We interviewed officials and obtained information about ongoing and
planned initiatives at Air Force Headquarters in Washington, D.C.; the Air
Force Materiel Command at Wright-Patterson Air Force Base in Ohio;
Warner Robins Air Logistics Center at Robins Air Force Base in Georgia;
and the Air Combat Command at Langley Air Force Base in Virginia. In
addition, we used information from our related reports that have been
issued since 1993 and are listed in GAO related products at the end of the
report.

We conducted our review from November 1998 to August 1999 in
accordance with generally accepted government auditing standards.


We are sending copies of this report to the appropriate congressional
committees; the Honorable William S. Cohen, Secretary of Defense; the
Honorable F. Whitten Peters, Secretary of the Air Force; Lieutenant General
Henry T. Glisson, Director, Defense Logistics Agency; and Jacob Lew,
Director, Office of Management and Budget. We will also make copies
available to others upon request.

Please contact me at (202) 512-8412 if you or your staff have any questions
concerning this report. Key contributors to this assignment are listed in
appendix III.




David R. Warren, Director
Defense Management Issues




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List of Congressional Committees

The Honorable John Warner
Chairman
The Honorable Carl Levin
Ranking Minority Member
Committee on Armed Services
United States Senate

The Honorable Ted Stevens
Chairman
The Honorable Daniel K. Inouye
Ranking Minority Member
Subcommittee on Defense
Committee on Appropriations
United States Senate

The Honorable Floyd Spence
Chairman
The Honorable Ike Skelton
Ranking Minority Member
Committee on Armed Services
House of Representatives

The Honorable Jerry Lewis
Chairman
The Honorable John P. Murtha
Ranking Minority Member
Subcommittee on Defense
Committee on Appropriations
House of Representatives




Page 13                            GAO/NSIAD-00-2 Defense Inventory
Appendix I

Summary of Air Force Initiatives                                                                             AA
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                           The Air Force’s best practices implementation schedule lists 17 initiatives.
                           The initiatives are aimed at improving the Air Force’s maintenance,
                           information management, and acquisition processes; transferring logistics
                           activities to the private sector; or otherwise reducing infrastructure. The
                           schedule describes each initiative and identifies goals and objectives,
                           plans, areas of improvement, the portion of inventory affected, and
                           projected dates for implementation to be completed.



Maintenance                Three initiatives in the Air Force’s schedule are designed to improve Air
                           Force and contractor depot maintenance processes. Each initiative is
                           focused on a different aspect of depot-level maintenance: Air Force organic
                           component repair, aircraft maintenance, and contractor repair operations.
                           We recently issued a report discussing the status of these three initiatives.1


Depot Repair Enhancement   The Air Force considers the Depot Repair Enhancement Program (DREP)
Program                    initiative its standard repair process for organic depot repair of aircraft
                           component parts. The key principles of the program are a standardized
                           repair process, focus on the movement of an asset through the repair
                           process, daily repair based on greatest Air Force need, supply support on
                           the shop floor, standardized functions with defined roles and
                           responsibilities, alignment of responsibility and authority of key players,
                           standardized data systems, and customer performance measures. The
                           program is intended to reduce the time it takes a customer to receive an
                           order, as well as increase unit readiness. This initiative began in June 1996
                           and in March 1998 was considered completed, although improvements are
                           ongoing.


Contract Repair            The Contract Repair Enhancement Program (CREP) initiative is for depot
Enhancement Program        repair of aircraft component parts by contractors. Its purpose is to improve
                           processes and thus improve customer support while reducing repair times
                           and inventory costs. The Air Force has established specific CREP goals for
                           fiscal years 1999 and 2000, such as to reduce the time it takes for a
                           requisitioning activity to receive an order. The program was started in
                           February 1996, and implementation is to be completed by September 2001.


                           1
                           Air Force Depot Maintenance: Management Changes Would Improve Implementation of
                           Reform Initiatives (GAO/NSIAD-99-63, June 25,1999).




                           Page 14                                           GAO/NSIAD-00-2 Defense Inventory
                         Appendix I
                         Summary of Air Force Initiatives




Aircraft Repair          The Aircraft Repair Enhancement Program initiative is designed to be the
Enhancement Program      Air Force’s program to improve depot maintenance of aircraft by such
                         steps as streamlining the process for aircraft repair, improving requirement
                         visibility and planning, and standardizing a programmed depot
                         maintenance scheduling system. The program’s goals are to reduce the
                         time an aircraft is in depot repair, the number of aircraft at the depot, and
                         material to support aircraft, while delivering aircraft on schedule. This
                         initiative was started in October 1998, and implementation is to be
                         completed by December 2000.



Information              Six initiatives in the Air Force’s schedule involve improvements to data
                         systems and forecasting capability. Two of these initiatives are for new data
Management               systems, one initiative is designed to support the repair-on-demand
                         philosophy in the DREP and CREP initiatives, and three initiatives are to
                         combine systems. For example, over 30 data systems, which provide data
                         for 2 systems, were analyzed to determine where changes were needed and
                         which interfaces could be eliminated.


Integrated Maintenance   The Integrated Maintenance Data System initiative is designed to be the Air
Data System              Force’s system for collecting and processing maintenance data for
                         production support of assets such as aircraft, engines, and support
                         equipment. It is intended to combine historical and legacy data contained
                         in other databases to enhance maintenance production, thus improving the
                         flow, accuracy, and availability of essential logistics information. This
                         initiative is designed to reduce the time it takes for a customer to receive an
                         order. This initiative was started in May 1995, and implementation is to be
                         completed by September 2003.


Integrated Logistics     The Integrated Logistics System-Supply initiative is a new system for
System-Supply            base-level supply operations that is to replace the Standard Base Supply
                         System. The new system is designed to use commercial off-the-shelf
                         products to provide a wider range of processing options to ensure an
                         integrated logistics system. This initiative started in February 1997, and
                         implementation is to be completed by September 2001.




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                               Appendix I
                               Summary of Air Force Initiatives




Pipeline Tracking Analysis     The Pipeline Tracking Analysis and Metrics System initiative is designed to
and Metrics System             be a new single integrated information management and decision support
                               system. The system is to provide more timely information on the
                               performance of the various segments of the logistics pipeline (supply,
                               distribution, transportation, and maintenance), produce decision support
                               metrics, and track individual assets throughout the pipeline (from removal
                               to return of an asset to serviceable condition and issuance of the asset). It
                               is intended to reduce the time it takes for a customer to receive an order
                               and to be completed in three phases. Implementation of the first phase is to
                               be completed by June 2000; the second phase by June 2001; and the third
                               phase, which depends on other data systems to provide 2 to 3 years of data,
                               between 2004 and 2006. According to an Air Force official, this third phase
                               is an ongoing improvement phase to use and validate data generated from
                               new systems coming on-line.


Execution and Prioritization   The Execution and Prioritization of Repair Support System initiative is
of Repair Support System       designed as an automated system to prioritize repair and distribution of
                               reparable aircraft parts based on weapon system availability. It is to
                               identify and prioritize customer needs, determine the ability of existing
                               resources to support the repair, and provide the data and mechanism that
                               are needed to move an item into repair. This initiative is intended to
                               maximize aircraft availability and reduce the time it takes for a customer to
                               receive an order. It is designed to support the repair-on-demand philosophy
                               of DREP and CREP. This initiative started in June 1996, and
                               implementation is to be completed by July 2001.


Merger of D041 and D062        Upon completion of the merger of the D041 reparable item computation
Systems                        system and the D062 financial system, all secondary item requirements
                               (reparable and consumable) and budgeting processes should be integrated
                               into a single process. This merger is designed to provide more accurate
                               planning for reparable items by accurately forecasting requirements for the
                               consumable items that are used to repair the reparable parts. This initiative
                               is intended to improve requirement forecasting and unit readiness ratings
                               and reduce the time it takes for a requisitioning activity to receive an order.
                               This initiative started in November 1996, and implementation is to be
                               completed by September 1999.




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                          Appendix I
                          Summary of Air Force Initiatives




Requirements Management   The Requirements Management System initiative is designed to combine
System                    the systems for secondary item requirements computation and for item
                          stratification into a single system. For example, items that make up a
                          weapon system could be stratified by cost, level of repair, or time to repair.
                          It is designed to provide more timely updates on items, as well as item and
                          summary level projected expenditures for depot level repair and buy
                          decisions. It is also to automate as many manual tasks as possible while
                          enhancing requirement accuracy. This initiative is intended to replace the
                          D041 system and provide a more responsive requirements determination
                          process that better serves customer needs by implementing a modern, near
                          real-time, user friendly system. It started in July 1997 and is projected to be
                          complete by January 2000.



Outsourcing or            Six initiatives involve moving work to the private sector or otherwise
                          reducing inventory holdings and/or infrastructure. Three initiatives call for
Otherwise Reducing        private industry support to government. The other three are intended to
Infrastructure            reduce existing government infrastructure. For example, the Depot
                          Maintenance Consolidation initiative is the transfer of two Air Force
                          depots’ workload to the remaining three depots.


Virtual Prime Vendor      The Virtual Prime Vendor initiative is designed to allow the use of a single
                          contractor to supply parts to repair shops and depot maintenance facilities
                          for Air Force aircraft. It is to allow the contractor to use preexisting
                          distribution networks and state-of-the-art information technology systems.
                          This initiative is intended to increase the effectiveness of the supply system
                          and reduce the time it takes to fill customers’ orders. This initiative started
                          in October 1998 and is still under development, but a contract is to be
                          awarded by July 2000.


Reengineering Supply      The Reengineering Supply Support Process initiative is designed to support
Support Process           the management of spare parts by certifying contractors rather than the
                          government to manage parts for certain Air Force weapon systems.
                          Weapon systems being considered are the C-17, C-130J, F-22, and AWACS.
                          This initiative is intended to reduce order and ship time and the time it
                          takes for a requisitioning activity to receive an order and increase unit
                          readiness ratings. This initiative started in July 1998, and implementation is
                          to be completed by June 2002.




                          Page 17                                         GAO/NSIAD-00-2 Defense Inventory
                            Appendix I
                            Summary of Air Force Initiatives




Express Transportation      Express Transportation is an initiative designed to use commercial and
                            in-house air transportation to deliver parts faster to Air Force customers in
                            the continental United States and overseas. This initiative is designed to
                            increase unit readiness ratings and reduce the time it takes for a
                            requisitioning activity to receive an order. The U.S. and overseas systems
                            are on separate implementation timetables. The continental United States
                            delivery system was implemented on October 1998, with improvements
                            ongoing. The overseas contract was awarded in July 1998, with a
                            performance start of October 1998. A test of the overseas concept is
                            scheduled for the first quarter of fiscal year 2000.


Depot Maintenance           The Depot Maintenance Consolidation initiative is transferring the
Consolidation               workload from two air logistics centers, which are being closed, to the
                            three remaining centers and the Army. This initiative is intended to
                            generate a 10-percent savings by identifying new processes, lowering
                            general and administrative costs, improving efficiency, and increasing
                            output. Ultimate goals are to reduce operating costs, depot repair cycle
                            time, and the time it takes for a requisitioning activity to receive an order.
                            The initiative started in October 1997, and implementation is to be
                            completed by September 2000.


Regional Supply Squadron    The Regional Supply Squadron initiative is designed to consolidate
                            requisitioning, funding, computer support, equipment management, and
                            record maintenance into four regional squadrons. These squadrons are to
                            provide peacetime, contingency, and major regional conflict support for
                            units within or deployed to each area. The regions are under the Air
                            Combat Command, the Air Material Command, the Pacific Air Force, and
                            the U.S. Air Force Europe. The goals of regionalization are to eliminate
                            redundancy, save manpower, streamline processes, improve core tasks,
                            leverage technology, and improve customer support. This initiative started
                            in August 1997, and implementation is to be completed by July 2002.


Supply and Transportation   The Supply and Transportation Unit Reengineering initiative is designed to
Unit Reengineering          eliminate duplicate efforts in base level cargo shipping, delivery, pickup,
                            and receiving, thus reducing time, manpower, and vehicles. The initiative is
                            being done in two phases. Phase one is examining pickup, delivery, cargo
                            in-check, and receiving processes. Phase two is verifying the merits of
                            express carrier direct delivery to flightline organizations and the value of



                            Page 18                                         GAO/NSIAD-00-2 Defense Inventory
                             Appendix I
                             Summary of Air Force Initiatives




                             integrating outbound shipping processes. This initiative started in July 1998
                             at the Air Combat Command, with testing in other major commands
                             ongoing. The projected completion date for this initiative is under
                             evaluation; however, if adopted Air Force-wide, it is intended to be
                             implemented within the time period set by section 347.



Acquisition

Corporate Contracts          The Corporate Contracts initiative is designed to consolidate government
                             requirements for spares or repair work from a single contractor into one
                             long-term contract with preestablished pricing. A corporate contract would
                             replace multiple contracts, combining requirements for several
                             Department of Defense customers. This would allow multiple customers to
                             order from a single contract. This initiative is intended to reduce cost and
                             acquisition time for the three remaining air logistics centers. This initiative
                             started in November 1998, and implementation is to be completed by June
                             1999.



Other

Logistics Transformation     The Logistics Transformation and Functional Integration initiative is a
and Functional Integration   study designed to identify improvements needed in logistics processes and
                             develop an overall strategy for implementing these improvements. The
                             current processes and improvements needed are to be evaluated by a team
                             of contractor and Air Force members. The team is to use integrated
                             logistics chain management techniques to develop processes that
                             accurately predict requirements, acquire the right amount of inventory,
                             rapidly move serviceable and reparable items, and select the optimum path
                             for each item as it moves through the logistics chain. This initiative is
                             intended to optimize performance and cost while delivering support to
                             customers at the right time, cost, and condition. The study started in March
                             1999 and is to be completed in March 2000.




                             Page 19                                         GAO/NSIAD-00-2 Defense Inventory
Appendix II

Comments From the Department of Defense                      Appendx
                                                                   iI




              Page 20         GAO/NSIAD-00-2 Defense Inventory
               Appendix II
               Comments From the Department of Defense




Now on p. 10




               Page 21                                   GAO/NSIAD-00-2 Defense Inventory
Appendix III

GAO Contacts and Staff Acknowledgments                                                         Appendx
                                                                                                     Ii




GAO Contacts      Charles Patton, (202) 512-4412
                  Robert Repasky, (202) 512-9868



Acknowledgments   In addition to those named above, Leslie Gregor, Willie Cheely, and William
                  Woods made key contributions to this report.




                  Page 22                                       GAO/NSIAD-00-2 Defense Inventory
Page 23   GAO/NSIAD-00-2 Defense Inventory
Related GAO Products


             Financial Management: Better Controls Essential to Improve the Reliability
             of DOD’s Depot Inventory Records (GAO/AIMD-99-132, June 28, 1999).

             Department of Defense: Status of Financial Management Weaknesses and
             Actions Needed to Correct Continuing Challenges
             (GAO/T-AIMD/NSIAD-99-171, May 4, 1999).

             DOD Financial Management: More Reliable Information Key to Assuring
             Accountability and Managing Defense Operations More Efficiently
             (GAO/T-AIMD/NSIAD-99-145, Apr. 14, 1999).

             Defense Inventory: DOD Could Improve Total Asset Visibility Initiative
             With Results Act Framework (GAO/NSIAD-99-40, Apr. 12, 1999).

             Major Management Challenges and Program Risks: Department of Defense
             (GAO/OCG-99-4, Jan. 1999).

             Inventory Management: More Information Needed to Assess DLA’s
             Best Practice Initiatives (GAO/NSIAD-98-218, Sept. 2, 1998).

             Results Act: DOD’s Annual Performance Plan for Fiscal Year 1999
             (GAO/NSIAD-98-188R, June 5, 1998).

             Inventory Management: DOD Can Build on Progress by Using Best
             Practices for Reparable Parts (GAO/NSIAD-98-97, Feb. 27, 1998).

             Defense Inventory Management: Expanding Use of Best Practices for
             Hardware Items Can Reduce Logistics Costs (GAO/NSIAD-98-47,
             Jan. 20, 1998).

             Inventory Management: Greater Use of Best Practices Could Reduce
             DOD’s Logistics Costs (GAO/T-NSIAD-97-214, July 24, 1997).

             Inventory Management: The Army Could Reduce Logistics Costs for
             Aviation Parts by Adopting Best Practices (GAO/NSIAD-97-82,
             Apr. 15, 1997).

             Defense Inventory Management: Problems, Progress, and Additional
             Actions Needed (GAO/T-NSIAD-97-109, Mar. 20, 1997).




             Page 24                                      GAO/NSIAD-00-2 Defense Inventory
                   Related GAO Products




                   Inventory Management: Adopting Best Practices Could Enhance Navy
                   Efforts to Achieve Efficiencies and Savings (GAO/NSIAD-96-156,
                   July 12, 1996).

                   Best Management Practices: Reengineering the Air Force’s Logistics
                   System Can Yield Substantial Savings (GAO/NSIAD-96-5, Feb. 21, 1996).

                   Inventory Management: DOD Can Build on Progress in Using Best
                   Practices to Achieve Substantial Savings (GAO/NSIAD-95-142,
                   Aug. 4, 1995).




(709383)   Leter   Page 25                                     GAO/NSIAD-00-2 Defense Inventory
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