	Introduction

The Department of Defense (DOD) operates a worldwide logistics system to buy, store, and distribute inventory items. Traditionally, the Defense Logistics Agency (DLA) buys and stores consumable items (such as food, clothing, and hardware supplies) in large quantities until they are needed by the military services. This report summarizes our past reviews and addresses (1) the extent to which DOD has adopted the specific practices we recommended, (2) the savings and benefits being achieved through the use of these practices, and (3) DOD’s overall progress in improving consumable item management. Our discussions focused on (1) the inventory management practices that DOD is using for consumable items; (2) commercial practices, programs, and tests underway or planned to improve DOD operations and reduce costs; and (3) DOD officials’ positions on the use of best practices as alternatives to traditional DOD inventory practices. For the personnel items it manages, which account for 23 percent of DLA’s inventory value, DLA has made the most progress to adopt best inventory practices by establishing prime vendor programs that have reduced inventories and improved service to the customer. As a result of its improvement efforts, DLA expects to reduce its inventories and days of supply of personnel items by over 50 percent between 1992 and 1997. Since 1993, DLA has taken steps that use prime vendors to supply personnel items directly to military facilities.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the Department of Defense's (DOD) efforts to adopt best inventory management practices, focusing on: (1) whether DOD has adopted the specific practices recommended for consumable items; (2) the savings and benefits being achieved through the use of these practices; and (3) DOD overall progress in improving consumable item management.

What GAO Found

GAO found that: (1) the Defense Logistics Agency (DLA) has taken steps to improve its logistics practices and reduce consumable inventories, although it could make further improvements with items such as bolts, valves, and fuses that cost millions of dollars to manage and store; (2) DLA inventories are expected to decrease only 20 percent by 1997, but these inventories could last over two years; (3) DLA has not tested the most innovative commercial practices of using supplier parks and other techniques that give established distribution networks the responsibility to manage, store, and distribute inventory on a frequent basis directly to end users; (4) DLA use of best inventory practices is exemplified for personnel items where prime vendors are used to supply personnel items directly to military facilities; (5) DLA expects to reduce the 1992 personnel item inventory by 53 percent in 1997; and (6) DOD hospitals still hold larger inventories than those civilian hospitals that have reduced inventories through effective partnering arrangements with prime vendors.