The Department of Defense (DOD) spends billions of dollars to purchase, manage, store, track, and deliver spare parts and other supplies needed to keep military equipment ready and operating. Since 1990, we have identified DOD supply chain management as a high-risk area due in part to ineffective and inefficient inventory management practices and procedures, weaknesses in accurately forecasting demand for spare parts, and challenges in achieving widespread implementation of key technologies aimed at improving asset visibility. These factors have contributed to the accumulation of billions of dollars in spare parts that are excess to current requirements.
Moreover, we have recently reported on the inventory management practices of the military departments and the Defense Logistics Agency (DLA) and recommended DOD take steps to improve demand forecasting, modify policies to provide incentives to reduce on-order inventory that is not needed to support requirements (i.e., on-order excess), ensure proper, documented reviews are conducted to validate methodologies for making retention decisions, and establish metrics and goals for tracking and assessing the cost efficiency of inventory management. To provide high-level strategic direction, DOD issued its Logistics Strategic Plan in July 2010, which, among other things, established a goal to improve supply chain processes, including inventory management practices.
Our objectives were to (1) determine the extent to which DOD's Plan addresses the reporting elements required by section 328 of the NDAA and (2) assess the extent to which the Plan addresses six key characteristics that help establish a comprehensive, results-oriented management framework to guide implementation. These characteristics were not required to be included by section 328, but our prior work examining national strategies and logistic issues has shown that these characteristics help establish a results-oriented management framework for effective implementation.