	Background

The Defense Logistics Agency (DLA), service headquarters, and inventory control points are responsible for managing secondary inventory. Opportunities Exist to Reduce Inventory and Storage Space

According to DLA, DOD’s secondary inventory occupies about 360 million cubic feet of storage space and has an actual volume of about 300 million cubic feet. This work showed that DOD has a substantial number of items that (1) have over a 20-year supply beyond the levels needed to meet war reserve and operational needs, (2) are for weapon systems no longer in use, (3) are no longer usable, and (4) are not needed. Substantial Amounts of Stored Inventory Exceed 20 Years of Supply

To estimate the years of supply for each of the types of items, we divided the on-hand inventory by past or projected demand data. We had demand data for about 488,000 of the 2.2 million items that were not needed to satisfy current war reserves or operating requirements. DOD Has Made Progress Reducing Its Inventory

DOD has implemented several programs—some DOD-wide and others service specific—to reduce secondary inventory. This charge should be an incentive for item managers to dispose of material that is not needed. The Secretary could begin by instructing inventory control points and program managers to focus their inventory reduction efforts on the material that occupies a great deal of storage space and has more than 20 years of supply on hand. GAO Comments

1. 2. As we stated in our report, many of these items may have potential future use and should be retained. 3. 5. 6. 7. 8. The statement that inventory disposals have been insufficient to offset increases in material returns is from DOD officials. This reduced our calculation of the space occupied by secondary inventory.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the Department of Defense's (DOD) inventory management system, focusing on the: (1) size and space occupied by DOD secondary inventory; (2) cost of storing this inventory; and (3) efforts taken to reduce DOD secondary inventory.

What GAO Found

GAO found that: (1) DOD secondary inventory occupies about 218.8 million cubic feet; (2) 60 percent of the secondary inventory is not needed to satisfy current war reserve or operating requirements, however, many items may have potential future use; (3) the inventory not currently needed consists of 2.2 million different types of items; (4) DOD has more than a 20-year supply for some items, but many others have deteriorated or become obsolete; (5) DOD should get rid of unneeded items that occupy space and exceed more than 20 years of supply; (6) although DOD has begun programs to reduce the secondary inventory, its efforts have been partially offset by decreasing inventory demands and increasing returns of materials by deactivated forces; (7) DOD disposed of secondary inventory items valued at $43 billion during the past 3 fiscal years; and (8) the Defense Logistics Agency is implementing a pricing procedure that should increase inventory managers' incentives for disposing of unneeded items.