Improvements to Supply Chain Management Are Linked with Overall Defense Business Transformation and Completion of a Comprehensive, Integrated Logistics Strategy

DOD’s success in improving supply chain management is closely linked  with its overall defense business transformation efforts and completion of  a comprehensive, integrated logistics strategy. In previous reports and  testimonies, we have stated that progress in DOD’s overall approach to  business transformation is needed to confront problems in other high-risk  areas, including supply chain management. DOD has taken several steps  intended to advance business transformation, including establishing new  governance structures and aligning new information systems with its  business enterprise architecture. It would identify the scope  of logistics problems and capability gaps to be addressed and include  specific performance goals, programs, milestones, resources, and metrics  to guide improvements in supply chain management and other areas of  DOD logistics. DOD has not established a target date for completing the “To Be” roadmap. According to DOD officials, its completion is pending the results of the  department’s ongoing test of new concepts for managing logistics  capabilities. Without such a strategy, decision makers will lack the means to effectively  guide program efforts and the ability to determine if these efforts are  achieving the desired results. DOD Is Unable to Demonstrate the Full Extent of Its Progress Toward Improving Supply Chain Management

Although DOD is making progress implementing supply chain management  initiatives, it is unable to demonstrate at this time the full extent to which it  is improving supply chain management. DOD’s Supply Chain Management Plan Does Not Track Performance Outcomes and Costs Metrics Associated with Focus Areas and Initiatives

The supply chain management improvement plan generally lacks outcome- focused performance metrics that track progress in the three focus areas  and at the initiative level. DOD’s plan does include four high-level performance measures that are  being tracked across the department, and while they are not required to do  so, these measures do not explicitly relate to the focus areas. In addition  to improving the provision of supplies to the warfighter and improving  readiness of equipment, DOD’s stated goal in its supply chain management  improvement plan is to reduce or avoid costs. DOD Has Implemented Recommendations for Improving Aspects of Supply Chain Management

Over the last 5 years, audit organizations have made more than 400  recommendations that focused specifically on improving certain aspects of  DOD’s supply chain management. DOD or the component organization  concurred with almost 90 percent of these recommendations, and most of  the recommendations that were closed as of the time of our review were  considered implemented. DOD agreed with the intent of the  recommendation, but not the prescribed action. In further  analyzing the recommendations, we found that they addressed five  common themes—management oversight, performance tracking, policy,  planning, and processes. In addition, while DOD has  made a commitment to improving supply chain management, as  demonstrated by the development and implementation of the supply chain  management improvement plan, the plan generally lacks outcome-focused  performance metrics that would enable DOD to track and demonstrate the  extent to which its individual efforts improve supply chain management or  the extent of improvement in the three focus areas of requirements  forecasting, asset visibility, and materiel distribution. Recommendations for Executive Action

To improve DOD’s ability to guide logistics programs and initiatives across  the department and to demonstrate the effectiveness, efficiency, and  impact of its efforts to resolve supply chain management problems, we  recommend that the Secretary of Defense direct the Under Secretary of  Defense for Acquisition, Technology, and Logistics to take the following  two actions: Complete the development of a comprehensive, integrated logistics  strategy that is aligned with other defense business transformation efforts,  including the Enterprise Transition Plan. However, it is unclear from DOD’s  response how and under what timeframes the department plans to  implement this goal. A-2. Development of the foundational role of the Distribution  Process Owner.
Why GAO Did This Study

Military operations in Iraq and Afghanistan have focused attention on the Department of Defense's (DOD) supply chain management. The supply chain can be critical to determining outcomes on the battlefield, and the investment of resources in DOD's supply chain is substantial. In 2005, with the encouragement of the Office of Management and Budget (OMB), DOD prepared an improvement plan to address some of the systemic weaknesses in supply chain management. GAO was asked to monitor implementation of the plan and DOD's progress toward improving supply chain management. GAO reviewed (1) the integration of supply chain management with broader defense business transformation and strategic logistics planning efforts; and (2) the extent DOD is able to demonstrate progress. In addition, GAO developed a baseline of prior supply chain management recommendations. GAO surveyed supply chain-related reports issued since October 2001, identified common themes, and determined the status of the recommendations.

What GAO Found

DOD's success in improving supply chain management is closely linked with its defense business transformation efforts and completion of a comprehensive, integrated logistics strategy. Based on GAO's prior reviews and recommendations, GAO has concluded that progress in DOD's overall approach to business defense transformation is needed to confront problems in other high-risk areas, including supply chain management. DOD has taken several actions intended to advance business transformation, including the establishment of new governance structures and the issuance of an Enterprise Transition Plan aligned with the department's business enterprise architecture. As a separate effort, DOD has been developing a strategy--called the "To Be" logistics roadmap--to guide logistics programs and initiatives across the department. The strategy would identify the scope of logistics problems and capability gaps to be addressed and include specific performance goals, programs, milestones, and metrics. However, DOD has not identified a target date for completion of this effort. According to DOD officials, its completion is pending the results of the department's ongoing test of new concepts for managing logistic capabilities. Without a comprehensive, integrated strategy, decision makers will lack the means to effectively guide logistics efforts, including supply chain management, and the ability to determine if these efforts are achieving desired results. DOD has taken a number of actions to improve supply chain management, but the department is unable to demonstrate at this time the full extent of its progress that may have resulted from its efforts. In addition to implementing audit recommendations, DOD is implementing initiatives in its supply chain management improvement plan. However, it is unclear how much progress its actions have resulted in because the plan generally lacks outcome-focused performance metrics that track progress in the three focus areas and at the initiative level. DOD's plan includes four high-level performance measures, but these measures do not explicitly relate to the focus areas, and they may be affected by many variables, such as disruptions in the distribution process, other than DOD's supply chain initiatives. Further, the plan does not include overall cost metrics that might show efficiencies gained through the efforts. Therefore, it is unclear whether DOD is meeting its stated goal of improving the provision of supplies to the warfighter and improving readiness of equipment while reducing or avoiding costs. Over the last 5 years, audit organizations have made more than 400 recommendations that focused specifically on improving certain aspects of DOD's supply chain management. About two-thirds of the recommendations had been closed at the time GAO conducted its review, and most of these were considered implemented. Of the total recommendations, 41 percent covered the focus areas in DOD's supply chain management improvement plan: requirements forecasting, asset visibility, and materiel distribution. The recommendations addressed five common themes--management oversight, performance tracking, planning, policy, and processes.