Changes needed in DoD's incentive and reward structure to affect inventory reductions in DoD inventory levels

Abstract

In its report titled "Organizational Culture: Use of Training to Help Change DOD Inventory Management Culture," (GAO/NSIAD-94-193) (1994), the Government Accounting Office asserts that the Department of Defense would be able to reduce its inventory of secondary items and develop a culture of economic and efficient inventory management if Department of Defense inventory management personnel were trained in modem logistics practices. In contrast, this thesis presents the position that high inventory levels are the result of performance measures and reward systems that encourage holding high levels of inventory. Included is a description of performance measures used for Item Managers, Inventory Managers and unit commanders along with a discussion of an employee motivation model and other systemic factors that impact inventory levels. This thesis suggests the addition of Inventory Turnover and Total Costing to the performance appraisals of those within the Department of Defense's supply systems, and a separation of readiness criteria into supply-related and non-supply related issues for unit commanders' performance appraisals as means to promote lower on-hand secondary inventories while continuing to meet the demand for those items.