When we review an  agency’s actions taken to address high-risk challenges, we assess the  actions against five criteria: (1) a demonstrated strong commitment to and  top leadership support for addressing problems, (2) the capacity to  address problems, (3) a corrective action plan that provides for  substantially completing corrective measures in the near term, (4) a  program to monitor and independently validate the effectiveness and  sustainability of corrective measures, and (5) demonstrated progress in  implementing corrective measures. These prior plans represented positive steps toward resolving  weaknesses in supply chain management. DOD Has Developed and Is Implementing a Corrective Action Plan for One of Three High-Risk Focus Areas Needing Improvement

		DOD Has a Corrective Action Plan for Inventory Management That Addresses the Requirements Forecasting Focus Area

DOD has developed and begun to implement a corrective action plan for  requirements forecasting, one of the three major focus areas we identified  as needing improvement in supply chain management. Specifically,  DOD’s Comprehensive Inventory Management Improvement Plan, issued  in October 2010 in response to a statutory mandate, includes  developing more accurate demand forecasting as a key improvement  effort for the department. Corrective action plans are critical to resolving  weaknesses in high-risk areas. DOD Does Not Have Detailed Corrective Action Plans for the Asset Visibility and Materiel Distribution Focus Areas

DOD has not developed corrective action plans for two other supply chain  management focus areas: asset visibility and materiel distribution. DOD Has Outlined a Framework for Guiding and Overseeing Improvement Efforts but Has Not Provided Implementation Plans

		DOD Has Outlined a Performance Management Framework for Guiding and Overseeing Improvement Efforts

In its 2010 Logistics Strategic Plan, DOD outlined a performance  management framework to provide guidance and oversight of logistics  improvement efforts, including supply chain improvement efforts. DOD’s framework consists of a six-step process (see table 2) and offers a  new management tool that may enable DOD to manage performance in  supply chain management. For example, the framework refers to  developing measures and targets that are tied to goals and initiatives, and  it calls for an ongoing assessment and feedback process that could help  to ensure that improvement efforts are effective and staying on track. DOD Has Not Included Key Elements for Instituting Its Performance Management Framework

The department has not instituted the framework because key elements  have not been fully defined and developed. Until these  elements are fully defined and developed, DOD may not be in a position  to effectively use this new management tool to monitor and validate the  effectiveness and sustainability of corrective actions. Further, our prior work has shown  that in order to fully address high-risk challenges, agencies must be able  to demonstrate progress achieved through corrective actions, which is  possible through the reporting of performance measures. Developing Enterprisewide Performance Measures for Supply Chain Management Has Challenged DOD

DOD and its components track many aspects of supply chain  performance, but DOD does not have performance measures that assess  the overall effectiveness and efficiency of the supply chain across the  enterprise. A similar collaborative process for defining performance measurement for  asset visibility and materiel distribution has not yet occurred. The corrective action plan or plans  should (1) identify the scope and root causes of capability gaps and other  problems, effective solutions, and actions to be taken to implement the  solutions; (2) include the characteristics of effective strategic planning,  including a mission statement; goals and related strategies (for example,  objectives and activities); performance measures and associated  milestones, benchmarks, and targets for improvement; resources and  investments required for implementation; key external factors that could  affect the achievement of goals; and the involvement of all key  stakeholders in a collaborative process to develop and implement the  plan; and (3) document how the department will integrate these plans with  its other decision-making processes; delineate organizational roles and  responsibilities; and support departmentwide priorities identified in higher- level strategic guidance (such as the Strategic Management Plan and  Logistics Strategic Plan). Problems in supply chain management, including the three focus areas of  requirements forecasting, asset visibility, and materiel distribution, are  long-standing and complex. DOD did not concur with our recommendation to use a collaborative  approach to identify, develop, and implement enterprisewide performance  measures needed to demonstrate progress in the focus areas of asset  visibility and materiel distribution. As noted in our report, DOD used  a collaborative process to define existing and needed performance  measures as part of the development of its Comprehensive Inventory  Management Improvement Plan. To assess the extent to which DOD has an effective program for  monitoring and validating the effectiveness and sustainability of corrective  actions, we reviewed the performance management framework identified  in DOD’s 2010 Logistics Strategic Plan.
Why GAO Did This Study

DOD estimated that overall spending on logistics, including supply chain management, was more than $210 billion in fiscal year 2010. Because of long-standing weaknesses in supply chain management, GAO has designated DOD supply chain management as a high-risk area and identified three focus areas for improvement--requirements forecasting, asset visibility, and materiel distribution. GAO reviewed the extent to which DOD has developed and implemented (1) corrective action plans that address challenges in the three focus areas, (2) an effective program for monitoring and validating the effectiveness and sustainability of supply chain management corrective actions, and (3) an ability to demonstrate supply chain management progress. GAO prepared this report to assist Congress in its oversight of DOD's supply chain management. GAO reviewed strategic and improvement plans, reviewed documents detailing the performance management framework, and assessed performance measures.

What GAO Found

DOD has developed and begun to implement a corrective action plan for requirements forecasting, one of the three focus areas GAO identified as needing improvement in supply chain management. However, it does not have similar plans for the focus areas of asset visibility or materiel distribution. Such corrective action plans are critical to resolving weaknesses in these two areas. Such plans should (1) define root causes of problems, (2) identify effective solutions, and (3) provide for substantially completing corrective measures in the near-term, including steps necessary to implement solutions. DOD's Comprehensive Inventory Management Improvement Plan, issued in October 2010 in response to a statutory mandate, includes the elements necessary to serve as a corrective action plan for requirements forecasting. DOD's 2010 Logistics Strategic Plan, and other prior logistics-related plans, do not contain all of the elements needed to serve as corrective action plans for either asset visibility or materiel distribution, such as definition of problems or performance information to gauge progress in achieving outcomes. DOD outlined a performance management framework that is designed to provide guidance and oversight of logistics efforts, including supply chain improvement efforts. GAO's prior work has shown that in order for agencies to address challenges, they need to institute a program to monitor and validate the effectiveness and sustainability of corrective actions. The framework, as outlined in the 2010 Logistics Strategic Plan, offers a new management tool that may enable DOD to manage performance in supply chain management. For example, it calls for an ongoing assessment and feedback process that could help to ensure that improvement efforts are effective. However, DOD has not included key elements for instituting its performance management framework, such as implementing guidance to affected stakeholders, a strategy to communicate results internally and to stakeholders such as Congress, or definition of the roles and responsibilities of senior logistics governance bodies and chief management officers. Until the framework is fully instituted, DOD may not be able to effectively use this new management tool to monitor the effectiveness of corrective actions. DOD and its components track many aspects of the supply chain; however, DOD does not have performance measures that assess the overall effectiveness and efficiency of the supply chain across the enterprise. In order to fully address challenges, agencies must be able to demonstrate progress achieved through corrective actions, which is possible through the reporting of performance measures. In the development of its inventory management improvement plan, a collaborative process was used to define existing and needed performance measures for requirements forecasting. A similar collaborative focus on developing enterprisewide performance measures for asset visibility and materiel distribution has not occurred. The department may have difficulty demonstrating progress until enterprisewide performance measures are developed and implemented in all three focus areas for improving its supply chain management.

What GAO Recommends

GAO recommends that DOD develop and implement corrective action plans and performance measures for asset visibility and materiel distribution and take steps to fully institute its performance management framework. DOD concurred or partially concurred with two recommendations and did not concur with four, citing ongoing initiatives and existing policy. GAO believes all recommendations remain valid, as further discussed in the report.