DoD inventory management cultural changes and training in commercial practices

Abstract

As the largest single portion of discretionary spending in the federal budget, the Department of Defense (DoD) is a prime target for budgetcuts. Perceptions of fraud and waste have put DoD under tight scrutiny, resulting in many Congressional inquiries and General Accounting Office (GAO) audits. Several of these have identified excess inventory as an area needing major improvement (see the list of related GAO reports in the References Section). As reported in the GAO Report GAO/HR-97-5, DoD's inventory was estimated to be $69.6 billion in 1995. The report also states that about half of the $69.6 billion inventory is considered excess, beyond what is needed to support war reserve and current operating requirements. While military inventory management practices have remained largely unchanged, the past thirtyyearshavewitnessedarevolutioninthewaycommercialfirmsmanagetheirinventories. The private sector has completely changed its view of logistics and how logistics contributes to profitability. As a result, businesses have slashed their on-hand inventories, improved their distribution systems, developed long-term relationships with a small number of suppliers who produce top-quality products, and improved their bottom lines. How can DoD better manage its inventories, get rid of excesses and free up scarce defense dollars for recapitalization and other needs? Can DoD apply the same commercial practices, such as just-in-time (JIT) inventory, direct vendor delivery (DVD), total asset visibility (TAV), and logistics cycle time reduction, that have slashed private sector inventories?