The Defense Logistics Agency developed and met goals for reducing on-hand inventory and on-order excess inventory and has made progress toward goals for reducing backorders, but still needs to improve inventory management, GAO has said.
DLA manages about one-fifth of DoD’s $95 billion in secondary item inventory, such as spare parts. The agency disposed of $4 billion in items for a net reduction of $2.5 billion to its on-hand inventory after continued replenishments to achieve its fiscal 2013 goal of $11.7 billion, according to GAO-14-495.
It said the agency used a risk-based approach to identify items to be disposed, resulting, for example, in a reduction of about $657 million in items with no demand in five years. DLA has also recued on-order excess inventory, and has reduced backorders by nearly 30 percent through monthly reviews.
However, some challenges remain. For example, to meet its fiscal 2013 on-hand inventory goal, DLA disposed of $855 million in items that DLA’s economic analyses determined should be kept due to the risk DLA will need to buy the same items again in the future, the report said.
Further, it said DLA has not established supply chain–specific goals and does not regularly collect data or review on-order excess inventory performance for its supply chains, and DLA’s collaborative forecasting effort, which uses customer input to produce forecasts, has not improved aggregate forecast accuracy.
DoD agreed with recommendations that DLA reassess its inventory-reduction goals and schedule for achieving them based on DLA’s economic analyses, regularly monitor its progress in reducing on-order excess inventory, establish supply chain–specific on-order excess inventory goals, and take steps to improve its collaborative forecasting, such as regularly monitoring performance.
