Reducing Excess Secondary Inventory
Department of Defense officials have estimated that the level of investment in the department's supply chains is more than $150 billion a year, and the value of its secondary (spare part) supply inventories has grown by tens of billions of dollars in recent years. The department continues to have substantial amounts of secondary inventory that are in excess to requirements. In 2007, GAO reported that more than half of the Air Force's secondary inventory, worth an average of $31.4 billion, was not needed to support required inventory levels for fiscal years 2002 through 2005. In addition, the military components are experiencing difficulties estimating acquisition lead times to acquire spare parts for equipment and weapon systems.
Effective processes that identify and manage acquisition lead times are of critical importance to maintaining cost-effective inventories, budgeting, and having materiel available when it is needed. Overestimates and underestimates of acquisition lead time contribute to inefficient use of funds and potential shortages or excesses of spare parts.
To reduce its investment in spare parts that are in excess of requirements, the department will need to strengthen the accountability and management of its secondary inventory. For example, GAO has recommended that the Air Force evaluate why it continually experiences decreases in demand for supplies, which has contributed to retaining an inventory in which more than half of the on-hand items are not needed to support requirements; determine what actions are needed to address these decreases; and take steps to implement these actions. GAO has also made a number of recommendations to the military components to improve their accuracy in setting acquisition lead times.
^ Back to topKey Reports
- DOD's High-Risk Areas: Efforts to Improve Supply Chain Can Be Enhanced by Linkage to Outcomes, Progress in Transforming Business Operations, and Reexamination of Logistics Governance and Strategy
- GAO-07-1064T, July 10, 2007
- Summary (HTML) Highlights Page (PDF) Full Report (PDF, 30 pages) Accessible Text
- Defense Inventory: Opportunities Exist to Save Billions by Reducing Air Force's Unneeded Spare Parts Inventory
- GAO-07-232, April 27, 2007
- Summary (HTML) Highlights Page (PDF) Full Report (PDF, 51 pages) Accessible Text Recommendations (HTML)
- Defense Inventory: Opportunities Exist to Improve the Management of DOD's Acquisition Lead Times for Spare Parts
- GAO-07-281, March 2, 2007
- Summary (HTML) Highlights Page (PDF) Full Report (PDF, 46 pages) Accessible Text Recommendations (HTML)
