GAO urges DOD to better regulate inventory lead times

Defense Department agencies regularly miss estimates on the lead times needed for acquiring spare parts, needlessly tying up billions of dollars that could be used elsewhere, according to the Government Accountability Office.What’s more, GAO said in a recent study, improvements that were being made to this situation slowed considerably in recent years.In its study, GAO said that of the major DOD components, the Army underestimated lead times, the Defense Logistics Agency (DLA) overestimated them, and the Air Force and the Navy did both.These agencies’ lead time estimates came within a week of the actual lead times only 5 percent of the time, GAO said, while another 44 percent of the estimates varied either earlier or later by at least 90 days.“The combined effect of the understated lead time estimates for all the components was slightly over $12 billion in spare parts arriving more than 90 days later than anticipated,” GAO said, potentially affecting the military’s readiness rates because units may not have the necessary inventory to support ongoing military operations.Lead times at DOD had been cut by an average of 5.6 percent a year between 1994 and 2002 because of more aggressive management of the problem, GAO noted. Between 2002 and 2005, however, the cuts averaged only 0.9 percent a year.Officials in the Office of the Under Secretary of Defense for Acquisition, Technology and Logistics, told GAO they no longer oversee this area because managers’ focus had shifted from reducing lead times to improving performance on broader metrics, such as back orders. GAO recommended that the components take steps to improve lead time estimates, including updating and maintaining lead time data in their computer systems, reviewing the methodologies they use to estimate lead times, and establishing lead time reduction goals and metrics to measure progress in meeting them.DOD largely agreed with GAO’s findings and recommendations, although it also pointed out that GAO had used existing system data for the 2002 to 2005 period rather than that reflected in the DLA’s new Enterprise Resource Planning system.It also rejected a DOD recommendation that the Army and Navy develop joint strategic relationships with suppliers since all services and the DLA share a common group of key suppliers, and this new relationship would lead to a duplication of effort.