oversight

Defense Inventory: Management of Repair Parts Common to More Than One Military Service Can Be Improved

Published by the Government Accountability Office on 1999-10-20.

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

                  United States General Accounting Office

GAO               Report to Congressional Requesters




October 1999
                  DEFENSE
                  INVENTORY

                  Management of Repair
                  Parts Common to
                  More Than One
                  Military Service Can
                  Be Improved




GAO/NSIAD-00-21
Contents



Letter                                                                                           3


Appendixes             Appendix I:    Scope and Methodology                                     18
                       Appendix II:   Comments From the Department of Defense                   20


Related GAO Products                                                                            22


Tables                 Table 1: Repairable Parts Used by More Than One Service                   6


Figures                Figure 1: Primary Manager Assignments for Identical Parts                 7
                       Figure 2: User Assignments for Identical Parts                            9




                       Abbreviations

                       DOD       Department of Defense
                       DOD-IG    Department of Defense Inspector General



                       Page 1                                     GAO/NSIAD-00-21 Defense Inventory
Page 2   GAO/NSIAD-00-21 Defense Inventory
United States General Accounting Office                                                           National Security and
Washington, D.C. 20548                                                                     International Affairs Division



                                    B-280313                                                                                        Leter




                                    October 20, 1999

                                    The Honorable Tom Harkin
                                    The Honorable Richard Durbin
                                    United States Senate

                                    The Honorable Peter DeFazio
                                    The Honorable Carolyn B. Maloney
                                    House of Representatives

                                    This report is one in a series of reports on the Department of Defense’s
                                    (DOD) management of secondary inventory−spare and repair parts,
                                    clothing, medical supplies, and other items that support DOD’s operating
                                    forces on land, at sea, and in the air.1 We have identified the management of
                                    defense inventory as a high-risk area.2 Past reports have identified
                                    management weaknesses that make some portion of DOD’s inventory
                                    vulnerable to waste and inefficiency. As requested, we reviewed DOD’s
                                    management of identical repairable parts used by more than one DOD
                                    component (hereafter referred to as identical parts).3 Over 57,000 identical
                                    parts, with an estimated value of $4 billion, are used and typically managed
                                    by more than one service. They include such supply items as hydraulic
                                    pumps, computer circuit card assemblies, wing sections, and landing gear.
                                    This report discusses (1) DOD’s progress in correcting problems in the
                                    management of identical parts and (2) opportunities to improve



                                    1
                                     See Related GAO Products at the end of this report.
                                    2
                                     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 on problems that were costing the government billions of dollars. We
                                    identified inventory management as high risk in our 1992, 1995, 1997, and 1999 high-risk
                                    reports because of the high levels of inventory in excess of current needs and the lack of
                                    adequate systems for determining inventory requirements.
                                    3
                                     DOD refers to these parts as multiservice repair items. Each identical item has a unique
                                    national stock number. National stock number refers to a 13-digit stock number that DOD
                                    and other agencies use to identify and manage items of supply. It consists of a four-digit
                                    federal supply class that designates the general commodity grouping of the item and a
                                    nine-digit item identification number that differentiates one supply item from another.




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                   management of these parts. The scope and methodology of our work can
                   be found in appendix I.



Results in Brief   DOD initiatives dating to the early 1970s to improve the management of
                   identical parts have been largely ineffective. Many identical parts continue
                   to be managed by more than one service, even though opportunities for
                   savings and management efficiencies exist by using a single manager when
                   there are multiple users of the same part. While we cannot precisely
                   quantify the savings from improving management of identical parts, our
                   current work and past DOD studies showed that they would be
                   considerable. For example, our analysis of 7,683 identical parts, with assets
                   on hand valued at $474 million, showed that they should have been
                   managed by one DOD component. This condition is similar to what existed
                   in 1995 when the DOD Inspector General reported that the primary
                   inventory manager did not have information on over $400 million in assets
                   held by the other services and that over $140 million of these assets could
                   have been used to fill the needs of the primary manager.

                   Due to planning and management weaknesses, the DOD initiatives have not
                   been successful in moving to an approach that would result in a single
                   manager performing all inventory management functions. These
                   weaknesses include not developing an implementation plan that contains
                   performance objectives, milestones, and outcome measures linked to
                   DOD’s Logistics Strategic Plan, and not establishing oversight
                   accountability for implementing the single manager approach Department-
                   wide. These weaknesses are similar to long-standing problems noted in our
                   high risk reporting on DOD’s inventory management that have hindered
                   other major inventory management improvement initiatives.

                   We are recommending that the Secretary of Defense establish DOD-wide
                   goals to improve the management of identical parts and develop an
                   implementation plan with short- and long-term actions to guide
                   accomplishment of these goals. Further, clear accountability for overseeing
                   the execution of the implementation plan should be established.



Background         DOD has had inventory management problems for decades. In 1990, we
                   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. While some improvements have been made,



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particularly in the management of medical, food, and clothing items, these
general conditions still exist. Program implementation problems have
resulted largely from long-standing issues that have hindered other major
management initiatives. These issues include cultural resistance to change;
service parochialism; and lack of outcome-oriented goals, performance
measures, and management accountability.

Inventory management problems have been identified in many areas. One
problem relates to missed opportunities to standardize parts that have
different stock numbers but actually are very similar. This report focuses
on identical parts that have one stock number but have more than one
manager. Managing parts includes functions such as determining what is
needed; buying needed parts; and storing, maintaining, distributing, and
disposing of these parts once they are received. DOD policy is to have a
single manager to handle these functions for each item. Although DOD’s
goal is to have a single manager for identical parts used by more than one
service, this goal has not been achieved. DOD has divided these
management functions between what it refers to as a primary inventory
control activity and a secondary inventory control activity (hereafter
referred to as primary manager and secondary manager). The primary
manager is responsible for most of the inventory management functions;
however, the secondary manager retains some functions such as
developing supply support requirements.

The Deputy Under Secretary of Defense (Logistics) is responsible for
providing policy and guidance on inventory management in DOD. The DOD
components are responsible for the day-to-day inventory management
operations. In December 1994, the Deputy Under Secretary established a
Nonconsumable Integrated Materiel Management Committee to improve
the management of repair parts. Repairable parts are generally expensive
and can be fixed and used again. The Deputy Under Secretary chairs a
senior steering group, comprised of senior logistics personnel from DOD
and its components, that is responsible for overseeing the work of the
committee.

DOD’s inventory of secondary items contained a reported 524,396
repairable parts as of February 1999. Almost 90 percent of the repairable
parts are used by only one service, and management functions are handled
by that service. The other 57,429 repairable parts are used and, to varying
degrees, managed by more than one service. The number of identical parts
used by more than one service has not changed significantly since October




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1995, remaining steady at about 11 percent of total repairables, as shown in
table 1.



Table 1: Repairable Parts Used by More Than One Service

                                                More than one
Date                     Total repairables             service          Percent
October 1995                      552,772                 60,315            10.9
October 1996                      550,645                 63,819            11.6
November 1997                     537,319                 59,131            11.0
June 1998                         530,550                 58,879            11.1
October 1998                      528,255                 58,202            11.0
February 1999                     524,396                 57,429            11.0



Figure 1 shows the primary manager assignments for identical parts used
by more than one service as of February 1999. The number of primary
managers does not represent inventory management personnel because
individual inventory managers have more than one part assigned to them.
DOD records indicate that these identical parts are valued at a latest
acquisition cost of almost $4 billion.




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                         Figure 1: Primary Manager Assignments for Identical Parts
                         25000    Number of parts




                         20000




                         15000




                         10000




                          5000




                             0

                                    Air Force       Army   Navy     Marines     Other


                         Note: Organizations in the “Other” category include the Defense Logistics Agency and
                         civilian agencies such as the Federal Aviation Administration and the National Weather
                         Service.




Improvement              DOD initiatives to improve the management of identical parts have been
                         largely ineffective. Many identical parts continue to be managed by more
Initiatives Have Not     than one service, even though opportunities for savings and management
Been Successful          efficiencies exist by using a single manager when there are multiple users
                         of the same part. While we cannot precisely quantify the savings from
                         improving management of identical parts, our current work and past DOD
                         studies showed that they would be considerable.


Management Initiatives   Although DOD has had initiatives dating to the early 1970s to improve
Have Yielded Minimal     management of identical parts, they have not accomplished the results
                         DOD wants, leaving some portion of this inventory vulnerable to waste and
Progress
                         inefficiency. DOD initiatives to improve the management of identical parts
                         involves a two-phased process. Under the phase one process, the primary
                         manager handles cataloging, procurement, disposal, and where



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appropriate, maintenance, while a secondary manager develops supply
support requirements for its users and sends them to the primary manager.
The secondary manager also maintains stocks and issues them to its users.
Under the phase two process, the primary manager performs most of the
inventory management functions required of a single inventory manager. In
addition to carrying out all of the functions described for a primary
manager in phase one, the primary manager stocks, stores, and issues
repair parts and establishes, budgets, and funds stock requirements for all
secondary users. The secondary manager still determines some
requirements and submits them to the primary manager for consolidation
with the requirements of other users.

Even though DOD’s goal is to have a single manager for each identical part,
its two-phased initiatives are interim steps toward achieving this goal.
Notwithstanding these initiatives, many identical parts are still in phase
one and none are managed under the single manager approach. In fact,
under the two-phase process the number of phase two secondary manager
assignments stayed at about 51 percent from October 1996 to February
1999, as indicated in figure 2. The number of secondary managers shown in
the figure does not represent inventory manager personnel because
individual inventory managers have more than one part assigned to them.
Also, although each identical part has one primary manager, it may have
more than one secondary manager. For this reason, of the 57,429 identical
parts in February 1999, there were 11,322 parts with three or more users.




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                            Figure 2: User Assignments for Identical Parts
                            80000    Number


                            70000


                            60000


                            50000


                            40000


                            30000

                                       48.9%        51.7%     51.4%      51.2%   51.2%     51.3%
                            20000


                            10000


                                0

                                       October      October   November    June   October   February
                                        1995         1996       1997      1998    1998       1999

                                                 Phase II

                                                 Phase I




Potential Savings Can Be    If DOD moves more identical parts from phase one into phase two, and
Obtained Through Improved   ultimately to a single manager approach, the resulting improved
                            management can provide potential savings. Although we cannot precisely
Management
                            quantify the overall savings, past DOD Inspector General (DOD-IG) reports
                            and our current work show that waste and inefficiencies continue.

                            We analyzed June 1998 Defense Logistics Information Service cataloging
                            data on identical parts in phase two and found that the secondary managers
                            had parts on hand that should have been in the hands of the primary
                            manager as prescribed by DOD regulations. These assets were valued at
                            nearly $474 million for 7,683 parts. For over 1,000 of these parts, the
                            primary manager had no assets to meet current needs while the secondary
                            managers had assets on hand valued at nearly $47 million. DOD also
                            identified a number of secondary managers holding assets that should have
                            been held by the primary managers, according to the February 1999



                            Page 9                                                GAO/NSIAD-00-21 Defense Inventory
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minutes of the DOD Nonconsumable Integrated Materiel Management
Committee.

We reviewed a judgmental sample of 38 identical parts, each of which was
used by the Army, the Navy, and the Air Force. Of these parts, 13 were in
phase one and 25 were in phase two. We found that secondary managers
for 22 of the 25 parts had assets on hand that they should not have because,
according to the applicable DOD regulation, the primary manager stocks,
stores, and issues the parts. For example, two secondary managers had
107 radio receivers on hand, valued at $783,000, even though the primary
manager had 598 receivers on hand, valued at $4.1 million. In another case,
a secondary manager had 12 radar receiver-generators on hand, valued at
$3.2 million, while the primary manager had 43 on hand, valued at
$9.4 million. Parts in the hands of secondary managers create the potential
for unnecessary procurements because primary managers may not be
aware of these assets. Several item managers, in their role as a primary
manager, told us that they did not have information on the amount of
inventory held by the secondary managers.

The DOD-IG issued four reports over the 13-year period ending 1995 that
discussed problems and issues in the area of identical parts.4 The reports
contained recommendations for improvement, and DOD promised
corrective actions. However, our current work shows that problems still
exist. Findings from the DOD-IG audits ranged from basic operational
issues among the services to the primary manager unnecessarily procuring
assets when the secondary manager had assets on hand. The 1995 report
noted that the primary managers did not have information on over
$400 million in assets held by the secondary managers. Over $140 million of
these assets could have been used to fill the inventory needs of the primary
manager. In addition, the report discussed unnecessary procurements,
required inventory being disposed of, and excess inventory not being
disposed. Similar points were made in a 1992 DOD-IG report.



4
 Management of Common Use Repairable Items in the Department of Defense (DOD-IG
Report No. 95-303, Sept. 1, 1995).
Management of Repairable Items Used by More Than One Service (DOD-IG Report No.
92-071, Apr. 7, 1992).
Procurement of Repairable Items Used by More Than One Service (DOD-IG Report No.
86-067, Feb. 18, 1986).
Management of Nonconsumable Items Used by More Than One Service (DOD-IG Report
No. 83-053, Dec. 17, 1982).




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                       A recent DOD-IG audit report, issued in May 1999, dealt with the disposal of
                       identical parts.5 A main finding of that review was that secondary managers
                       were disposing of assets without notifying the primary manager. As a
                       result, the primary manager was purchasing parts at the same time the
                       disposal actions were occurring. The report stated that procurements
                       could have been avoided if procedures were followed and secondary
                       managers notified primary managers of their asset disposal plans.

                       Moreover, savings could result if DOD eliminated the multiple levels of
                       management under the primary/secondary manager process and moved to
                       a single manager for identical parts. According to the minutes of a
                       September 1998 meeting, the DOD Nonconsumable Integrated Materiel
                       Management Committee discussed moving toward a global, or single,
                       manager concept for identical parts, where the role of the secondary
                       manager is eliminated. In a July 1998 briefing, the Air Force, in particular,
                       questioned the need for secondary managers and advocated single
                       managers for identical parts. Eliminating secondary managers would make
                       management of repairables similar to the Defense Logistics Agency’s single
                       management of consumables (supply items that are used and discarded
                       when their useful life is completed). The Defense Logistics Agency is the
                       single manager for most of the 4.3 million consumables in the DOD supply
                       system.



Opportunities for      While DOD in the past has established goals to improve the management of
                       identical parts, DOD initiatives have not been successful in moving to a
Improvement Exist by   single manager approach. The lack of progress in reaching the program
Addressing Planning    goals stems largely from a lack of sustained and clearly formulated
                       commitment to the program. Key management actions needed to guide
and Management         program implementation were absent. These include a lack of
Weaknesses             implementation plans containing performance objectives, milestones, and
                       outcome measures linked to a DOD-wide Logistics Strategic Plan, and not
                       establishing oversight accountability for the improvement efforts. These
                       weaknesses are similar to long-standing issues noted in our high risk
                       reporting on DOD’s inventory management that have hindered other major
                       management initiatives.




                       5
                        Interservice Availability of Multiservice Used Items (DOD-IG Report No. 99-159, May 14,
                       1999).




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DOD periodically issues Logistics Strategic Plans to provide a DOD-wide
guide to the operation of the logistics process. Its efforts to improve the
management of identical parts were emphasized in the fiscal year 1995
DOD Logistics Strategic Plan, which set a goal to move identical parts from
phase one to phase two by October 1996. This second phase would have a
primary manager assigned to perform almost all of the inventory
management functions for all DOD components. A similar goal to fully
implement the second phase by October 1997 was included in the Logistics
Strategic Plan for fiscal years 1996/97. Moreover, another aspect of this goal
was to implement a single (or “global”) manager concept for identical
parts, thus eliminating the primary/secondary manager process.

However, implementation plans with performance objectives, milestones,
time frames, and outcome measures−such as improved efficiency, reduced
costs, and better service to the customer−were not developed and none of
these goals were achieved. Also, comprehensive cost data associated with
the management of identical parts by more than one service was not
developed. The 1996/97 DOD Logistics Strategic Plan contained a strategy
to perform a study to determine the costs of duplication due to
primary/secondary manager assignments, but the study was not done.
Goals were not included in the most recent plan−the fiscal year 1998
Logistics Strategic Plan.

The DOD Nonconsumable Integrated Materiel Management Committee
formed in December 1994 to renew the efforts begun 20 years earlier to
improve management of identical parts has provided limited management
oversight. The activities of the committee, which consists of mid-level
managers from the DOD components, have been sporadic. The committee
met frequently in 1995 but less frequently thereafter. While the committee
reports to a senior logistics steering group chaired by the Deputy Under
Secretary of Defense (Logistics), the activities of the committee have not
been on the agenda of this oversight steering group.

Several issues that cut across service lines evidence the lack of top level
management attention that has been provided in this area. More
specifically, these issues point out the need for an implementation plan that
contains short- and long-term actions to address the underlying obstacles
to more efficient management of identical parts. Identifying assets held by
secondary managers is one major example. Further, the services find it
difficult to track their assets in the hands of another service for repair and
experience difficulties in receiving credit for assets turned in for repair in
exchange for functioning assets. The DOD Nonconsumable Integrated



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                  Materiel Management Committee has been dealing with these issues for
                  many years but has not yet resolved them. In some cases, incompatible
                  data systems contribute to the problems. However, the lack of
                  implementation plans monitored by an active oversight body results in no
                  accountability for progress toward the long-standing DOD goal of
                  improving the management of identical parts.



Conclusions       Although DOD in the past has established goals to improve the
                  management of identical parts, DOD initiatives were not successful in
                  moving to a single manager approach. The lack of progress in reaching the
                  program goals stems largely from a lack of sustained and clearly
                  formulated commitment to the program. Key management actions needed
                  to guide program implementation were absent. These include a lack of
                  implementation plans containing performance objectives, milestones, and
                  outcome measures linked to a DOD-wide Logistics Strategic Plan, and not
                  establishing oversight accountability for the improvement efforts. As a
                  consequence, segments of DOD’s inventory management system remain
                  vulnerable to inefficiency and waste.



Recommendations   In order to address the systemic management weaknesses that have
                  hindered DOD’s progress toward achieving a single manager for identical
                  parts, we recommend that the Secretary of Defense take the following
                  actions.

                  • Establish goals to support the next DOD Logistics Strategic Plan
                    designed to improve management of identical parts by moving to a
                    single manager approach.
                  • Develop an implementation plan that addresses short- and long-term
                    actions to improve the management of identical parts. Short-term
                    actions should include improvements in communications and reporting
                    and long-term actions should include the elimination of primary and
                    secondary managers so that a single manager will manage identical
                    parts. The implementation plan should contain performance objectives,
                    milestones, timetables, and outcome measures that support the
                    Logistics Strategic Plan. The plan should provide outcome measures,
                    such as improved efficiency, reduced costs, and better service to the
                    customer.




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                      • Establish clear accountability for Department-wide oversight and
                        component execution of the implementation plan and achievement of
                        desired results.



Agency Comments and   In commenting on a draft of this report, DOD partially agreed with the
                      report and our recommendations. (See app. II for DOD’s complete
Our Evaluation        comments.) The Department agreed that continuous improvements are
                      needed in the management of repair parts, especially identical parts with
                      more than one user. The Department stated, however, that a single manager
                      approach by item is not feasible until a more modernized information
                      system is developed. We agree that implementation of a Department-wide
                      modernized information system would facilitate the effectiveness of the
                      single manager approach to managing identical parts. However,
                      modernizing information systems will require a lengthy period of time.
                      Consequently, we have modified our report recommendations to reflect
                      both short- and long-term solutions for improving the management of
                      identical parts.

                      With regard to our recommendation that a goal be established to improve
                      management of identical parts to support the next Logistics Strategic Plan,
                      DOD stated that one of the goals of the Nonconsumable Integrated Materiel
                      Management Committee has been to improve the management of identical
                      parts by moving to a single manager approach where feasible. The
                      Department stated, however, that this approach is rarely the best because
                      costly changes to existing information systems are required. According to
                      DOD, while improvements have been made in data sharing between
                      primary and secondary managers, there will continue to be a small number
                      of items with multiple managers until information systems can be
                      modernized.

                      While we agree that the single manager approach would be facilitated by
                      improved information systems, improved systems are not necessary to
                      taking action now to provide opportunities for savings and management
                      efficiencies. For example, improvements can be made by (1) improving
                      communications using telephonic or fax capability before initiating
                      procurement, repair, or disposal actions; (2) having secondary managers
                      provide periodic manual reports to primary managers on their on-hand
                      inventories; and (3) making cost-effective interim changes to existing
                      information systems, such as improving compatibility between existing
                      systems. As a result, we have not made any specific changes to the
                      recommendation on the basis of DOD’s comments. Our recommendation is



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directed toward establishing a goal to support the next Logistics Strategic
Plan and is consistent with the Department’s past actions in setting goals
for identical parts management in the 1995 and 1996/1997 Logistics
Strategic Plans. This goal could be the basis for guiding an implementation
plan designed to make short- and long-term improvements to the
management of identical parts.

In commenting on our recommendation to develop an implementation plan
for managing identical parts by a single manager, DOD agreed that
implementation plans that include outcome measures such as improved
efficiency, reduced costs, and better services to the customer are factors of
success. However, the Department reiterated that the single manager
approach is rarely feasible because costly changes to existing systems are
required and stated that an implementation plan to move all items to this
concept would be inappropriate at this time. It also stated that
improvements in data sharing have been made but further improvements
require Department-wide modernized information systems. As previously
stated, we believe there are opportunities to take interim measures at this
time as well as work toward long-term solutions. We have, therefore,
modified our recommendation to recognize the need for an implementation
plan that includes performance objectives, milestones, timetables, and
outcome measures covering short- and long-term measures.

With regard to our recommendation to establish clear accountability for
oversight and execution of the implementation plan, the Department stated
that this will be done as implementation plans are developed for systems or
items moving to a new management concept. However, DOD did not
explain the new management concept and again cited the need to first
modernize its information system before a single manager approach could
be implemented. In addition, the Department’s comments did not address
the accountability and oversight problems that exist under the current
management structure. Accordingly, we continue to believe that
establishing clear accountability and oversight now is critical to
implementing short- and long-term solutions to the problems we identified.
Therefore, we have not modified our recommendation.


As arranged with your offices, we plan no further distribution of this report
until 7 days from its issue date unless you publicly announce the report’s
contents earlier. At that time, we will send copies of this report to the
appropriate congressional committees; the Honorable William S. Cohen,
Secretary of Defense; the Honorable Louis Caldera, Secretary of the Army;



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the Honorable F. Whitten Peters, Secretary of the Air Force; the Honorable
Richard Danzig, Secretary of the Navy; General James L. Jones,
Commandant of the Marine Corps; Lieutenant General Henry T. Glisson,
Director, Defense Logistics Agency; and the Honorable Jacob J. Lew,
Director, Office of Management and Budget.

Please contact me at (202) 512-8412 if you or your staff have any questions
concerning this report. Key contributors to this report are Charles Patton,
James Murphy, Gerald Thompson, and George Surosky.




David R. Warren, Director
Defense Management Issues




Page 16                                      GAO/NSIAD-00-21 Defense Inventory
Page 17   GAO/NSIAD-00-21 Defense Inventory
Appendix I

Scope and Methodology                                                                     AA
                                                                                           ppp
                                                                                             ep
                                                                                              ned
                                                                                                nx
                                                                                                 idx
                                                                                                   eIis




             To obtain an overall perspective on the magnitude of the parts managed by
             more than one service, we analyzed reports prepared by the Defense
             Logistics Information Service, Battle Creek, Michigan, and information in
             Segment B of the Federal Logistics Information System as of June 1998. We
             also obtained from the services their Master Data Records/Files as of
             February and March 1999 and calculated an inventory value for those parts
             managed by more than one service.

             To evaluate the Department of Defense’s (DOD) progress in correcting
             problems in the management of identical parts and identify opportunities
             to improve management of these parts, we reviewed pertinent documents
             and interviewed DOD officials. We contacted officials located at Army
             Headquarters, Washington, D.C.; Naval Supply Systems Command,
             Mechanicsburg, Pennsylvania; and Air Force Materiel Command,
             Wright-Patterson Air Force Base, Ohio. We interviewed the chairperson of
             the Nonconsumable Integrated Materiel Management Committee in the
             Office of the Deputy Under Secretary of Defense (Logistics), Washington,
             D.C. These offices provided us with documents and information on the
             efforts to eliminate dual management of parts by more than one service. We
             also reviewed the reports issued on this subject by the DOD Inspector
             General.

             We analyzed the September 30, 1997, inventory stratification reports for the
             Army, the Navy, and the Air Force for overall data regarding parts used by
             more than one service. We used this data to identify identical parts being
             used by more than one service and developed four matches between the
             services−Army and Navy; Army and Air Force; Air Force and Navy; and
             Army, Navy, and Air Force.

             We selected a judgmental sample of 38 parts from the data match among
             the Army, the Navy, and the Air Force. We selected those parts that had the
             highest inventory on-hand, highest unit price, highest inventory on order,
             and highest requirements at representative inventory control points in each
             service. Using information from the Federal Logistics Information System,
             we identified for these parts their primary and secondary inventory control
             points.

             We held discussions and collected information from item managers and
             analyzed inventory records during visits to the Army’s Communications-
             Electronics Command, Fort Monmouth, New Jersey; the Air Force’s Warner
             Robbins Air Logistics Center, Georgia; and the Naval Inventory Control
             Point, Philadelphia, Pennsylvania. In addition, we collected and analyzed



             Page 18                                      GAO/NSIAD-00-21 Defense Inventory
Appendix I
Scope and Methodology




records from the Naval Inventory Control Point, Mechanicsburg,
Pennsylvania. We also met with other inventory control officials, as
needed, to discuss various subjects and concepts related to the overall
management of parts used by more than one service. In collecting data on
individual sample items, we used the same data the services use for
inventory management, reporting, and budgeting purposes. We did not
validate the data from the various systems cited above.

This review concentrated on identical parts with the same stock number.
There are other parts in the DOD supply system that are very similar, or
even identical, but have different stock numbers. Because the stock
numbers are different, identification of these parts would take a major
effort. As a result, we did not include these parts in the current review.
However, prior DOD studies have identified opportunities to standardize
them.

We performed our review between May 1998 and July 1999 in accordance
with generally accepted government auditing standards.




Page 19                                      GAO/NSIAD-00-21 Defense Inventory
Appendix II

Comments From the Department of Defense                      Appendx
                                                                   iI




              Page 20        GAO/NSIAD-00-21 Defense Inventory
Appendix II
Comments From the Department of Defense




Page 21                                   GAO/NSIAD-00-21 Defense Inventory
Related GAO Products


                   Defense Inventory: Status of Inventory and Purchases and Their
                   Relationship to Current Needs (GAO/NSIAD-99-60, Apr. 16, 1999).

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

                   Defense Inventory: Navy’s Procedures for Controlling In-Transit Items
                   Are Not Being Followed (GAO/NSIAD-99-61, Mar. 31, 1999).

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

                   High Risk Series: An Update (GAO/HR-99-1, Jan. 1999).

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

                   Navy Inventory Management: Improvements Needed to Prevent Excess
                   Purchases (GAO/NSIAD-98-86, Apr. 30, 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).

                   Defense Inventory: Inadequate Controls Over Air Force Suspended Stocks
                   (GAO/NSIAD-98-29, Dec. 22, 1997).

                   Defense Logistics: Much of the Inventory Exceeds Current Needs
                   (GAO/NSIAD-97-71, Feb. 28, 1997).

                   Defense Inventory: Spare and Repair Parts Inventory Costs Can Be
                   Reduced (GAO/NSIAD-97-47, Jan. 17, 1997).




(709341)   Leter   Page 22                                   GAO/NSIAD-00-21 Defense Inventory
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