Insights

GAO High-Risk Series: Supply Chain Management

April 11, 2022

The Government Accountability Office (GAO) recently released a report highlighting the successful efforts of federal government agencies to address high-risk areas and improve programs. The quantifiable benefits of these enhancements ultimately led GAO to remove the respective areas from its high-risk list. LMI’s support for the Department of Defense (DoD) supply chain management area featured prominently in the report.

Supply chain management is a broad, but essential, component of DoD operations. In 1990, GAO designated DoD inventory management as high-risk due to excess inventory levels and inadequate controls. In its February 2005 High-Risk Series update, GAO not only kept inventory management on the list but added the two sub-areas of asset visibility (AV) and materiel distribution due to weaknesses uncovered during military operations in Iraq and Afghanistan. Those are only three sub-areas under DoD supply chain management.

As stated in the GAO report, “Effective and efficient supply chain management is critical for (1) supporting the readiness and capabilities of the force and (2) helping to ensure that DOD avoids spending resources on unneeded inventory that could be better applied to other defense and national priorities.”

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Illustration representing military supply chain

— Government Accountability Office Report (GAO-22-105184)

Congressional Action

DoD made little progress addressing these high-risk supply chain management sub-areas, leading Congress to establish several statutory requirements. The National Defense Authorization Act (NDAA) for FY10 required a comprehensive plan for improving the inventory management systems of the military departments and the Defense Logistics Agency while the NDAA for FY14 required a comprehensive strategy and implementation plan for improving asset tracking and in-transit visibility.

Partnership with LMI

In partnership with the Office of the Deputy Assistant Secretary of Defense for Logistics (ODASD[Log]), LMI served as the architect and program manager for three efforts to address these areas and remove DoD from the GAO high-risk list.

Comprehensive Inventory Management Improvement Plan

The publishing of the Comprehensive Inventory Management Improvement Plan (CIMIP) in October 2010, addressed the GAO supply chain management high-risk inventory management sub-area and the FY10 NDAA. The CIMIP established specific process and outcome goals and focused on reducing the acquisition and storage of secondary excess inventory. It produced a cultural shift: “don’t buy what you don’t need” and “don’t keep what you won’t use.”

Strategy for Improving Asset Visibility

In 2014, the Strategy for Improving AV was published to address the GAO supply chain management high-risk AV sub-area and the FY14 NDAA. The Strategy for Improving AV created the framework to guide and integrate DoD-wide efforts to improve AV continuously and enable collaborative identification of sustainment and improvement opportunities.

Materiel Distribution Improvement Plan

In 2016, the Materiel Distribution Improvement Plan (MDIP) was published, directing DoD-wide efforts to improve materiel distribution support to the warfighter. It established goals and actions to enhance the measurement of the end-to-end distribution process, ensure the accuracy of underlying data, and strengthen and integrate distribution policies.

LMI’s unbiased partnership with ODASD(Log) throughout the development and execution of these three efforts stemmed from our longstanding relationships with the military components and our deep understanding of all DoD supply chains.

Removal from the GAO High-Risk List

In 2017, following the successful execution of the CIMIP, GAO removed the sub-area of inventory management from the high-risk list. Then, in 2019, because of the successful execution of the Strategy for Improving AV and the MDIP, GAO removed the additional sub-areas of asset visibility and materiel distribution, leading to the removal of DoD supply chain management from the high-risk list.

Quantifiable Savings for the Federal Government

In addition to the removal of DoD supply chain management from the GAO high-risk list, our combined efforts led to significant financial benefits for the federal government. The CIMIP reduced excess on-hand by $4.1 billion (i.e., items in the inventory that are no longer needed to fill requirements) and due-in potential future excess by $1.1 billion (i.e., items already on-order that may no longer be needed due to changes in requirements). DoD improvements in AV and materiel distribution eliminated more than $82 million in costs in the supply chain. These results, and many others, are the reason LMI continues this long-standing support. ODASD is one of LMI's oldest customers, with many collaborations that span nearly 60 years.

 

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