The Army Operates a Slow, Inefficient, and Costly Logistics System

The Army’s current depot repair pipeline, characterized by a $2.6 billion inventory investment, is slow, unreliable, and inefficient. The benefits for the Army would be greater weapon system availability, more regular and predictable supply of serviceable components, savings from reduced pipeline inventory requirements, and a repair system more flexible and responsive in serving the needs of the combat commander.”
To calculate the amount of time the Army’s system takes to repair and distribute parts using the current depot repair process, we judgmentally selected 24 types of Army aviation parts and computed the time the parts spent in four key segments of the repair process. Several Factors Contribute to This Slow System

Several factors contribute to the Army’s slow logistics pipeline. Functions such as testing, cleaning, and machining are sometimes done at separate shops that are hundreds of yards apart. In early 1995, the Army’s Deputy Chief of Staff for Logistics directed the Army logistics community to implement a program called “Velocity Management” to speed up key aspects of the logistics system and reduce the Army’s need for large inventory levels. Under this program, the Army has established Army-wide process improvement teams for the following four areas: (1) ordering and shipping of parts, (2) the repair cycle, (3) inventory levels and locations, and (4) financial management. As of September 1996, however, Velocity Management has had no impact on CCAD operations and has had only limited success in improving overall logistics operations. Industry Best Practices Can Be Used to Build on Army Initiatives

The airline industry has developed leading-edge practices that focus on reducing the time and complexity of the logistics pipeline. Minimizing idle time helps reduce inventories because it lessens the need for extra “cushions” of inventory to cover operations while parts are out of service. Reorganizing the Repair Process

One approach to simplify the repair process is the “cellular” concept, which brings all the resources, such as tooling and support equipment, personnel, and inventory that are needed to repair a broken part into one location, or one “cell.” This approach simplifies the flow of parts through the process by eliminating the time-consuming exercise of routing parts to workshops in different locations. Recommendations

As part of the Army’s current efforts to improve the logistics system’s responsiveness and reduce its complexity, we recommend that the Secretary of Defense direct the Secretary of the Army, working with DLA, to develop a demonstration project to determine the extent to which the Army can apply best practices to its logistics operations. The specific practices that should be considered, where feasible, are eliminating excess inventory and inducting parts at repair depots soon after they break, consistent with repair requirements, to prevent parts from sitting idle; using the cellular concept to reduce the time it takes to repair parts; establishing innovative supplier partnerships to increase the availability of parts needed to complete repairs at the depot, such as local distribution centers and integrated supplier programs; and using third-party logistics providers to store and distribute spare parts between the depot and end users to improve delivery times. Scope and Methodology

We reviewed documents and interviewed officials on the Army’s inventory policies, practices, and efforts to improve its logistics operations. We did not test or otherwise validate the Army’s data. We did not independently verify the accuracy of logistics costs and performance measures provided by private sector organizations. Additional copies are $2 each.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the Army's logistics system for aviation parts, focusing on: (1) the current performance of the Army's logistics system; (2) the Army's efforts to improve the logistics system and reduce costs; and (3) opportunities where best practices could be incorporated into the Army's logistics operations. GAO did not test or otherwise validate the Army's data.

What GAO Found

GAO noted that: (1) the Army's efforts to improve its logistics pipeline for aviation parts and reduce logistics costs could be enhanced by incorporating best practices GAO has identified in the private sector; (2) the Army's current repair pipeline, characterized by a $2.6-billion investment in aviation parts, is slow and inefficient; and (3) several factors contribute to the long pipeline time, including: (a) broken reparable parts move slowly between field units and a repair depot; (b) reparable parts are stored in warehouses for several months before and after they are repaired; (c) repair depots are inefficiently organized; and (d) consumable parts are not available to mechanics when needed; (4) the Army has recognized that it must improve its logistics systems; (5) under a recently established program called "Velocity Management," the Army plans to focus on and improve repair of components, order and shipment of parts, inventory levels, and financial management; (6) the program is in the initial stages of development and has had limited success in actual Army-wide process improvements to date; (7) best practices used in the airline industry provide opportunities to build on the Army's efforts to improve its logistics pipeline; (8) GAO identified key best practices to address each of the four factors contributing to the Army's long pipeline time: (a) third-party logistics services can assume warehousing and distribution functions, and provide rapid delivery of parts and state-of-the-art information systems that would speed the shipment of parts between depots and field locations; (b) eliminating excess inventory and quickly initiating repair actions can reduce the amount of time parts are stored, improve the visibility of production backlogs, and reduce the need for large inventory to cover operations while parts are out of service; (c) cellular manufacturing techniques can improve repair shop efficiency by bringing all the resources needed to complete repairs to one location, thereby minimizing the current time-consuming exercise of routing parts to different workshops located hundreds of yards apart; and (d) innovative supplier partnerships can increase the availability of consumable parts, minimize the time it takes to deliver parts to mechanics, and delay the purchase of parts until they are needed to complete repairs; and (9) although GAO cannot say that these practices can be successfully integrated into the Army's system, GAO believes they are compatible with many aspects of the Army's operations and the Velocity Management Program.