United States General Accounting Office

GAO Report to Congressional Requesters

February 1997 DEFENSE LOGISTICS

Much of the Inventory

Exceeds Current

Needs

GAO/NSIAD-97-71

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-272664 

February 28, 1997

The Honorable Richard Durbin

The Honorable Tom Harkin

United States Senate

The Honorable Peter DeFazio

The Honorable Carolyn Maloney

House of Representatives

The Department of Defense (DOD) uses its secondary inventory—spare and

repair parts, clothing, medical supplies, and other support items—to

support its operating forces. As requested, we analyzed DOD’s secondary

inventory. Our specific objectives were to provide information on the

(1) number of inventory items with inventory that was not needed to

satisfy war reserve and current operating requirements and their dollar

value (hereafter referred to as unneeded inventory), (2) reasons why DOD

held 100 years or more of unneeded inventory for some items, and

(3) reasons why DOD had 20 years or more of unneeded inventory on hand

and had additional inventory on order.

Overall data on the number and value of DOD’s unneeded inventory were

based on analyses of computerized inventory files. To determine the

reasons for having 100 years or more of unneeded inventory on hand and

for having additional inventory on order for items with 20 years or more of

unneeded inventory on hand, we gathered and analyzed information from

responsible inventory managers on judgmentally selected items.

Background Inventory management represents a significant responsibility within DOD

involving annual purchases of $14.5 billion and the storage and

distribution of inventory valued at $69.6 billion. In 1990, we identified

DOD’s secondary inventory management as a high-risk area because of the

high levels of unneeded inventory and inadequate systems for determining

inventory requirements. This report is one in a series of reports that

address management issues in this area. A list of related products can be

found at the end of this report.

DOD annually summarizes its secondary inventory in its Supply System

Inventory Report. The report is based on financial inventory and other

inventory reports prepared by the military services and the Defense

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Logistics Agency (DLA). DOD uses the report as a management tool to

monitor changes in the level of inventory.

DOD holds inventory to meet the operational requirements of the military

services. When the total of on-hand and due-in inventory falls to or below

a certain level—called the reorder point—inventory managers place

orders for additional inventory. Depending on the item, the reorder point

may include requirements for one or more of the following:

• war reserves that are authorized to be purchased,

• customer-requisitioned material that has not been shipped,

• a safety level to be on hand in case of minor interruptions in the resupply

process or unpredictable fluctuations in demand,

• stock to satisfy demands during the period between when a need to buy an

item is identified and when it is received,

• minimum quantities for designated items (insurance items), and

• stock to satisfy demands during the repair period for repairable items.

Because the reorder point provides for inventory to be used during the

time needed to order and receive inventory and for a safety level,

inventory managers can place orders so that the orders arrive before

out-of-stock situations occur. Generally, inventory managers order an

amount of inventory called an economic order quantity, which is the

quantity of inventory that will result in the lowest total costs for ordering

and holding inventory. Inventory needed to satisfy reorder point and

economic order quantity requirements is the maximum quantity of

material to be maintained on hand or on order to sustain current

operations and war reserves. Inventory used to satisfy these requirements

is referred to as needed inventory in this report. Most of the inventory that

exceeds reorder point and economic order quantity requirements is held

for economic or contingency purposes or for potential

reutilization/disposal.

In commenting on our past reports,1 DOD disagreed with our definition of

needed inventory because it differs from the definition that DOD uses for

budgeting purposes. As we previously reported, the DOD definition covers a

longer period of time and includes inventory in excess of reorder point

and economic order quantity requirements. This overstates by billions of

dollars the amount of inventory needed to be on hand.

1

Defense Inventory: More Accurate Reporting Categories Are Needed (GAO/NSIAD-93-31, Aug. 12,

1993) and Defense Inventory: Shortages Are Recurring, but Not a Problem (GAO/NSIAD-95-137, Aug. 7,

1995).

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Results in Brief Although DOD has made progress in reducing the value of its secondary

inventory, our analysis of inventory valued at $67 billion showed that

$41.2 billion of the inventory was not needed. The unneeded inventory

represents many years of supply. About $14.6 billion of the unneeded

inventory did not have projected demands and will likely never be used. Of

the $26.6 billion with projected demands, unneeded inventory valued at

$1.1 billion represented 100 years or more of supply.

DOD representatives and supporting documents gave many reasons for

having 100 years or more of unneeded inventory on hand. Officials cited

changed requirements as a contributing factor for most items. The

requirement changes involved recurring or nonrecurring demands that

decreased, fluctuated, or did not materialize; parts or the systems on

which the parts were used were obsolete; and weapon system programs

were being reduced. Other reasons included purchases to cover the

expected life of weapon systems and adherence to minimum buy policies.

DOD representatives could not give reasons for 24 percent of the 328 items

reviewed because necessary supporting records were not available or the

representatives had recently assumed responsibility for the items and

were not sufficiently familiar with their histories.

Army, Navy, and Air Force records indicated that unneeded inventory

items valued at $28.4 million had 20 years or more of inventory on hand

and another $11.3 million of inventory on order. However, because the

records for almost 40 percent of the reviewed items were in error

(generally on-order quantities had been delivered but not recorded), these

items, in fact, did not have additional stock on order. In cases where

inventory was actually on order, the reasons included requirement

changes, buys to cover the life of weapon systems, and adherence to

minimum buy policies.

Much of DOD’s

Inventory Is

Unneeded

Our analysis of DOD’s September 30, 1995, Supply System Inventory Report

and inventory stratification reports indicated that $34 billion of the

$69.6 billion secondary inventory that DOD reported exceeded war reserve

and current operating requirements. Although DOD had reduced its

inventory from $77.5 billion since September 30, 1993, about half of the

inventory continued to be unneeded.

On the basis of our analysis of computer data tapes for 3.3 million items,

representing inventory valued at $67 billion, we identified 1.9 million items

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that had $41.2 billion of unneeded inventory on hand.2 Table 1 summarizes

the data by DOD component.

Table 1: Summary of Items and Value

of Unneeded Secondary Inventory by

DOD Component Inventory analyzed Unneeded inventorya

Dollars in billions

Component Items Value Items Value

Army 117,610 $9.0 63,362 $4.8

Navy 334,337 17.6 172,325 11.2

Air Force 289,438 31.1 140,220 19.1

DLA 2,515,231 9.3 1,548,545 6.1

Total 3,256,616 $67.0 1,924,452 $41.2

aMost items with unneeded inventory also have needed inventory on hand.

Some Items Have No

Projected Demands

No projected demands existed for 1.5 million of the 1.9 million items with

unneeded inventory. The 1.5 million items had unneeded inventory valued

at $14.6 billion. Without demands, it is unlikely that this inventory will ever

be used. Table 2 shows the number of items with unneeded inventory that

had no projected demands and the value of the unneeded inventory by DOD

component.

Table 2: Items Without Projected

Demands and the Value of the

Unneeded Secondary Inventory

Dollars in billions

Component Items Value

Army 29,005 $0.7

Navy 124,632 4.0

Air Force 111,982 6.5

DLA 1,281,052 3.4

Total 1,546,671 $14.6

Examples of items with no projected demands can be found in appendix I.

Other Items Have

Projected Demands

Of the 1.9 million items with unneeded inventory, 378,000 items with

unneeded inventory valued at $26.6 billion had projected demands. Using

the projected demand data, we computed the years of unneeded supply for

those items and found that some items had many years of supply. Figure 1

2

The $67 billion inventory that we analyzed differed from the $69.6 billion reported in DOD’s Supply

System Inventory Report because of differences in time frames, valuation methods used, and specific

items included. See the scope and methodology section for more details on our analysis.

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shows the 378,000 items with unneeded secondary inventory stratified by

years of supply, and figure 2 shows the corresponding values. See

appendix II for a breakdown of the data by DOD component.

Figure 1: Items With Unneeded

Secondary Inventory Stratified by

Years of Supply

Items

0

20000

40000

60000

80000

100000

120000

140000

Less

than 1

year

1 to 2

years

2 to 10

years

10 to 20

years

20 to 50

years

50 to

100

years

100 or

more

years

Years of supply

Page 5 GAO/NSIAD-97-71 Defense Logistics
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Figure 2: Unneeded Secondary

Inventory Values Stratified by Years of

Supply

Millions of dollars

0

2000

4000

6000

8000

10000

12000

Less

than 1

year

1 to 2

years

2 to 10

years

10 to 20

years

20 to 50

years

50 to

100

years

100 or

more

years

Years of supply

Unneeded Inventory

Represents Many

Years of Supply

Further analysis of the 3.3 million items identified 11,646 items that had

100 or more years of unneeded inventory valued at $1.1 billion. We

judgmentally selected 328 of these items with unneeded inventory valued

at $354 million for review to determine why the unneeded inventory was

on hand.

Through discussions with item managers and review of supporting

documents, we identified a variety of reasons for having 100 or more years

of unneeded inventory on hand. Most reasons related to changed

requirements. For 81 items with unneeded inventory valued at

$279 million, requirements had changed because parts were obsolete or

were for use on weapon systems that were no longer in service or were

being phased out of service. Additional requirement-related changes

involved items for which recurring or nonrecurring demands decreased,

fluctuated, or did not materialize and items were purchased before the

weapon systems to be supported were activated.

Other reasons included purchases to cover the life of a weapon system,

minimum purchases required by procurement policy, and parts added

through disassembly of modification kits. We were not able to determine

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B-272664 

the reasons for 78 items (24 percent) with $28.9 million of unneeded

inventory because records were not available and the item managers did

not have detailed knowledge of the items. In most cases, responsibility for

the items had transferred to or from another DOD activity. Responsibility

for a large number of these items was transferred from the military

services to DLA under the consumable item transfer program.

We found that the records for 5 of the 328 items reviewed were in error

and incorrectly showed $364,000 of unneeded inventory. Table 3

summarizes the reasons for the remaining 323 items having 100 years or

more of unneeded inventory on hand.

Table 3: Reasons for Items Having 100

Years or More of Unneeded Secondary

Inventory on Hand

Dollars in millions

Reason Items Unneeded value

Demands decreased, fluctuated, or did not

materialize

126 $37.2

Item or system on which the item was used

was, or would be, obsolete

64 261.8

Weapon system program was reduced or

weapon was retired from service

17 16.7

Buy was considered economical (minimum

buy)

15 0.3

Life of system buy 5 2.8

Item was purchased before the system it

supported was activated

4 0.3

Modification kits were disassembled 2 1.2

Other (decreased failure rates, etc.) 12 4.7

Unable to determine reason 78 28.9

Total 323 $353.9

Examples of items with 100 years or more of unneeded inventory on hand

can be found in appendix I.

Additional Unneeded

Inventory Is on Order

We identified 145 Army, Navy, and Air Force items with unneeded

inventory valued at $28.4 million that represented 20 or more years of

supply on hand and that had an additional $11.3 million on order. We did

not make a similar analysis for DLA items because data provided by DLA did

not include the amount of inventory on order.

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We judgmentally selected 57 items for review to determine why additional

inventory was being ordered. These items had $24.9 million of unneeded

inventory on hand that represented 20 or more years of supply and that

had an additional $2 million on order. We found that the records for 23

items were in error and incorrectly showed $553,000 of unneeded

inventory was on order. Generally, the on-order inventory already had

been delivered. Of the 34 remaining items, 11 had 100 or more years of

unneeded inventory on hand and $796,000 of additional inventory on

order. Reasons we identified for having unneeded inventory on order

included demands decreased or did not materialize, purchases were for

weapon systems that had not been activated, and purchases were to cover

the expected life of weapon systems. Table 4 summarizes the reasons for

having additional inventory on order for the 34 items.

Table 4: Reasons for Having Additional

Secondary Inventory on Order Dollars in thousands

Reason Items On order

Demand decreased or did not materialize

after the buy

15 $356.5

Item was purchased before the weapon

system it supported was activated

6 282.1

Life of system or long-term buys 4 235.9

Buy was considered economical (minimum

buy)

1 10.2

DLA purchased the item to satisfy mission

critical requirements of the services

1 547.4

The Air Force transferred assets to the Navy

after the Navy placed the order

1 6.2

All assets were not considered when the buy

was made

1 0.6

Unable to determine reason 5 51.0

Total 34 $1,489.9

Examples of items with 20 or more years of unneeded inventory on hand

and additional inventory on order can be found in appendix I.

Agency Comments

and Our Evaluation

DOD generally agreed with the factual data in this report but did not agree

with our definitions of needed and unneeded inventory. (See app. III for

DOD’s complete comments.) According to DOD, the terms do not reflect

accurately how the Department determines inventory requirements or

decides how much inventory to hold once it has been stocked. DOD stated

that it has consistently defined required inventory as inventory that is

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B-272664 

projected to be used through the end of the budget year and noted that our

definition implies that all unneeded inventory should be disposed of. DOD

also stated that dealing with the requirements determination system and

on-hand inventory in the same report is confusing.

DOD has consistently disagreed with our definition of needed inventory

because it differs from the definition that DOD uses for budgeting purposes.

We continue to believe that our characterization of DOD’s inventory is

reasonable. Our definition of needed inventory represents inventory that is

required to prevent out-of-stock situations. DOD’s definition includes

requirements that are projected to be used through the end of the budget

year and can represent as much as 2 years of potential requirements. As a

result, the DOD definition includes inventory in excess of current operating

and war reserve requirements. In fact, our review showed that much of the

inventory even exceeds DOD’s definition of required inventory. No

demands were projected for unneeded inventory valued at $14.6 billion

and an additional $20.6 billion of unneeded inventory was not expected to

be needed in the next 2 years. Lastly, notwithstanding DOD’s comments, it

is important to note that DOD stated that it has reduced and plans to

continue reducing the inventory.

With regard to DOD’s comment on inventory retention, we are not

suggesting that all unneeded inventory should be disposed of. We

recognize that some of this inventory should be retained for economic or

contingency reasons. Nevertheless, DOD has a tremendous potential for

further inventory reductions because much of the inventory has no

projected demands and it is unlikely that this inventory will ever be used.

Other inventories may not be needed because many years of supply are on

hand.

We do not agree with DOD’s comment that dealing with the requirements

determination system and on-hand inventory in the same report is

confusing. Discussing the inventory that is required and the inventory that

is on hand is entirely appropriate and must be discussed together to

determine whether there is unneeded inventory.

Scope and

Methodology

For overall inventory data, we analyzed March 31, 1996, computerized

inventory stratification reports for items managed by the military services

and August 1996 inventory data for those managed by DLA. Stratification

reports match on-hand and due-in inventory to requirements and are used

for budgeting and reporting purposes. Because our fieldwork at the Navy

Page 9 GAO/NSIAD-97-71 Defense Logistics
B-272664 

and the Air Force inventory control points was completed before

March 31, 1996, data were available, we used their September 30, 1995,

inventory stratification reports as the basis for selecting our sample items

at those locations.

We used the data to identify items with unneeded inventory, compute

years of supply, and identify items with unneeded inventory on hand and

additional inventory on order. We used projected demand data to compute

years of supply. Because demand data were not projected for 1.5 million

items with unneeded inventory, we could not estimate years of supply for

those items. Also, because DLA did not provide contract data, we were not

able to determine the number and value of DLA items with additional

inventory on order.

We judgmentally selected and reviewed 328 items with 100 or more years

of supply and 57 items with 20 or more years of unneeded inventory on

hand and additional inventory on order. For items with 100 or more years

of unneeded inventory, we selected items to review that had the highest

value and quantity of unneeded inventory and a cross section of the

remaining items. For items with 20 or more years of unneeded inventory

and additional inventory on order, we used a similar methodology to select

items for review. Because we did not look at items with 20 or more years

of unneeded inventory and additional inventory on order in prior reviews,

we did not make any comparisons with past performance.

To learn why unneeded inventory was accumulated or was on order, we

held discussions and collected information from item managers and

analyzed inventory records at the Army’s Aviation and Troop Support

Command, St. Louis, Missouri; the Naval Inventory Control Point,

Philadelphia, Pennsylvania; the Air Force’s Warner Robins Air Logistics

Center, Georgia; and the DLA’s Defense Supply Center, Richmond, Virginia.

We also obtained inventory records and photographed items at Defense

Distribution Depots in Warner Robins, Georgia; Norfolk and Richmond,

Virginia; and New Cumberland (Susquehanna), Pennsylvania. At the Army

and DLA inventory control points, we reviewed a limited number of items

that had no projected demands on which we could compute years of

supply to identify the nature of those items.

We did not include such items as petroleum, oil, and lubricants or those in

Marine Corps and retail level inventories in our analysis because they

represented a small part of DOD’s overall inventory or reorder point and

economic order quantity requirements were not available for these items.

Page 10 GAO/NSIAD-97-71 Defense Logistics
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By removing surcharges covering the costs to operate the supply system,

we revalued the inventory at the latest acquisition cost. We did not revalue

items needing repair to reflect their repair costs nor did we revalue

potential reutilization/disposal stocks to their scrap value. We did not

validate DOD’s inventory requirements.

We performed our review between April 1996 and January 1997 in

accordance with generally accepted government auditing standards.

We are sending copies of this report to the appropriate congressional

committees; the Secretaries of Defense, the Army, the Navy, and the Air

Force; the Director, DLA; and the Director, Office of Management and

Budget.

Please contact me at (202) 512-8412 if you have any questions. The major

contributors to this report are listed in appendix IV.

David R. Warren

Director, Defense Management Issues

Page 11 GAO/NSIAD-97-71 Defense Logistics
Contents

Letter 1

Appendix I 

Examples of Specific

Inventory Items

14

Items With No Projected Demands 14

Items With 100 or More Years of Inventory 15

Items With 20 Years or More of Unneeded Inventory on Hand and

Additional Inventory on Order

22

Appendix II 

Unneeded Inventory

Stratified by Years of

Supply and DOD

Component

26

Appendix III 

Comments From the

Department of

Defense

27

Appendix IV 

Major Contributors to

This Report

30

Related GAO Products 32

Tables Table 1: Summary of Items and Value of Unneeded Secondary

Inventory by DOD Component

4

Table 2: Items Without Projected Demands and the Value of the

Unneeded Secondary Inventory

4

Table 3: Reasons For Items Having 100 Years or More of

Unneeded Secondary Inventory On Hand

7

Table 4: Reasons for Having Additional Secondary Inventory On

Order

8

Table II.1: Number of Items With Unneeded Inventory Stratified

by Years of Supply and DOD Component

26

Page 12 GAO/NSIAD-97-71 Defense Logistics
Contents

Table II.2: Value of Unneeded Inventory Stratified by Years of

Supply and DOD Component

26

Figures Figure 1: Items With Unneeded Secondary Inventory Stratified by

Years of Supply

5

Figure 2: Unneeded Secondary Inventory Values Stratified by

Years of Supply

6

Figure I.1: Comparator Stored in Airtight Container at the

Susquehanna Depot

14

Figure I.2: Insulator Insert Stored at the Richmond Depot 15

Figure I.3: Camouflage Screen System Stored at the Susquehanna

Depot

16

Figure I.4: Constant Speed Drive Stored at the Norfolk Depot 17

Figure I.5: Frequency Indicator Stored at the Norfolk Depot 18

Figure I.6: Wiring Harness Stored at the Warner Robins Depot 19

Figure I.7: AP1 Central Computer Stored at the Warner Robins

Depot

20

Figure I.8: Contact Thermocouple Stored at the Norfolk Depot 21

Figure I.9: Circuit Card Assembly Stored at the Norfolk Depot 22

Figure I.10: Direct Linear Valve Stored at the Norfolk Depot 23

Figure I.11: Combining Glass Stored at the Warner Robins Depot 24

Figure I.12: Identification Marker Stored at the Norfolk Depot 25

Abbreviations

DLA Defense Logistics Agency

DOD Department of Defense

Page 13 GAO/NSIAD-97-71 Defense Logistics
Appendix I 

Examples of Specific Inventory Items

Items With No

Projected Demands

The Army had 14 electronic signal comparators (see fig. I.1) on hand as of

March 1996, of which 2 were needed for war reserve and current operating

requirements. The comparators, valued at $90,000 each, are used on a test

set. Inventory records show that the Army has issued one comparator

since January 1994. According to the item manager, the test set overhaul

program was canceled in fiscal year 1996, but the comparators will be

retained in the inventory until the test set is phased out in 2005.

Figure I.1: Comparator Stored in

Airtight Container at the Susquehanna

Depot

Page 14 GAO/NSIAD-97-71 Defense Logistics
Appendix I 

Examples of Specific Inventory Items

The Defense Logistics Agency (DLA) had 2,576 insulator inserts (see 

fig. I.2) on hand as of August 1996, of which 5 were needed for war reserve

and current operating requirements. The inserts, valued at $11 each, are

used on a submarine. Inventory records showed that the item was last

purchased in 1987 and that the last demand was in October 1994. The item

manager was not able to provide information on why so many of the

inserts were on hand, and in October 1996, initiated action to dispose of

1,551 of the inserts.

Figure I.2: Insulator Insert Stored at

the Richmond Depot

Items With 100 or

More Years of

Inventory

As of March 1996, the Army had 424 spacer sleeves on hand for use on

engines such as the T-53-L-701A. Only 3 of the 424 sleeves were needed to

satisfy war reserve and current operating requirements. According to the

item manager at the Aviation and Troop Support Command, the sleeves,

valued at $2 each, were last purchased in November 1994 under a

minimum buy policy. Army Materiel Command procurement policy does

not permit item managers to place orders valued at less than $2,350. The

manager stated that if unneeded sleeves were disposed of, a future

demand could result in another purchase of the minimum dollar amount.

Page 15 GAO/NSIAD-97-71 Defense Logistics
Appendix I 

Examples of Specific Inventory Items

The Army had 6,599 camouflage screen systems (see fig. I.3) on hand as of

March 1996. Inventory records showed that only 712 of the screen

systems, valued at $379 each, were needed. The unneeded screens

represented a 159-year supply. According to the item manager, the screen

system was purchased in 1990 and developed for use during Operation

Desert Storm. The manager said that demands for the screens have

decreased since then and that the screen will remain in the Army supply

system until 2003 when it is expected to be replaced.

Figure I.3: Camouflage Screen System

Stored at the Susquehanna Depot

Page 16 GAO/NSIAD-97-71 Defense Logistics
Appendix I 

Examples of Specific Inventory Items

As of September 1995, the Navy had 361 constant speed drives (see 

fig. I.4), valued at $32,880 each, on hand. Only one of the drives, used on

the TA-4J aircraft, was categorized as needed. According to the item

manager, the drives were accumulated as they were replaced by a newer

part. Because of the high failure rate of the replacement part, the original

drives are being retained in case they need to be reinstalled on the aircraft

through the year 2000. In that year, the TA-4J will be out of the inventory.

Figure I.4: Constant Speed Drive

Stored at the Norfolk Depot

Page 17 GAO/NSIAD-97-71 Defense Logistics
Appendix I 

Examples of Specific Inventory Items

Navy records showed that only 2 of the 364 frequency indicators (see 

fig. I.5) on hand were needed as of September 1995. According to the item

manager, requirements for the indicators, valued at $2,542 each, decreased

when aircraft such as the A-6 and the F-4 were being taken out of service.

The manager stated that 357 of the indicators were disposed of in

February 1996.

Figure I.5: Frequency Indicator Stored

at the Norfolk Depot

Page 18 GAO/NSIAD-97-71 Defense Logistics
Appendix I 

Examples of Specific Inventory Items

As of September 1995, the Air Force had 4,177 wiring harnesses, valued at

$113 each (see fig. I.6), for the airborne radio communication system. Of

these, 4,152 were not needed to satisfy war reserve and current operating

requirements. On the basis of projected demand data, we determined that

the unneeded harnesses represented 277 years of supply. According to the

item manager, demand for the harnesses decreased as modifications to the

radio system were made. However, some of the harnesses are being

retained to support the military services, the Coast Guard, and foreign

military sales and to reconfigure other radios. The item manager informed

us that 3,822 harnesses have been recommended for disposal.

Figure I.6: Wiring Harness Stored at

the Warner Robins Depot

Page 19 GAO/NSIAD-97-71 Defense Logistics
Appendix I 

Examples of Specific Inventory Items

The Air Force had 335 AP1 central computers (see fig. I.7) for the F-15

aircraft on hand as of September 1995. Of these, 326 computers, valued at

$71,673 each, were obsolete and not needed. The unneeded computers

represented 109 years of supply. According to the item manager at the

Warner Robins Air Logistics Center, the obsolete computers are turned in

to the supply system as modifications to the F-15 aircraft are

accomplished. The item manager stated that the computers are eligible for

disposal, but funds are not available to demilitarize them.

Figure I.7: AP1 Central Computer

Stored at the Warner Robins Depot

As of August 1996, DLA had 127 motor blower brakes on hand. The brakes

are used on the B-1B aircraft. Inventory records showed that 101 brakes,

valued at $4,110 each, were unneeded and represented 101 years of supply.

According to the item manager, 100 brakes were expected to be needed

for fiscal year 1996. However, September 1996 records showed that only

one had been used in the past year. The item manager believed that the

demands for the brakes are cyclic because the contractor repairing the

B-1B periodically orders the parts in bulk.

Page 20 GAO/NSIAD-97-71 Defense Logistics
Appendix I 

Examples of Specific Inventory Items

DLA also had 2,152 contact thermocouples (see fig. I.8) for the T-56 aircraft

engine on hand as of August 1996. Of these, 2,113 thermocouples, valued at

$227 each, were unneeded and represented 141 years of supply. According

to the item manager, in March 1996 responsibility for the thermocouple

was transferred from the Navy to DLA. The item manager stated that no

disposal actions were taken because demand was unknown for this newly

transferred item.

Figure I.8: Contact Thermocouple

Stored at the Norfolk Depot

Page 21 GAO/NSIAD-97-71 Defense Logistics
Appendix I 

Examples of Specific Inventory Items

Items With 20 Years or

More of Unneeded

Inventory on Hand

and Additional

Inventory on Order

As of September 1995, the Navy had 27 circuit card assemblies on hand

(see fig. I.9). They are used on the P-3C and S-3B aircraft and the SH-60B

helicopter. Although 25 of the assemblies (valued at $1,156 each) were not

needed to satisfy war reserve and current operating requirements, another

10 were on order. According to the item manager, demands for the

assemblies decreased after the item was ordered in December 1994. The

manager stated that the Navy supply system automatically ordered the

item (automatic ordering is limited to purchases under $25,000) when the

reorder point was reached and the purchase was not reviewed by an item

manager. The 10 assemblies were delivered in May 1996, and the manager

said that all unneeded assemblies, including the 10 delivered, have been

recommended for disposal.

Figure I.9: Circuit Card Assembly

Stored at the Norfolk Depot

Page 22 GAO/NSIAD-97-71 Defense Logistics
Appendix I 

Examples of Specific Inventory Items

As of September 1995, the Navy had 67 direct linear valves (see 

fig. I.10) on hand. They are used on a hydraulic pump for an aircraft

catapult system. Fifty-nine of the valves, valued at $69 each, were

unneeded and an additional 66 valves were on order. The item manager

said that demands for the valves decreased after the last order was placed

in May 1994. The item manager stated that the order was not canceled

because termination was not cost-effective for any purchase costing less

than $10,000.

Figure I.10: Direct Linear Valve Stored

at the Norfolk Depot

Page 23 GAO/NSIAD-97-71 Defense Logistics
Appendix I 

Examples of Specific Inventory Items

The Air Force had 32 combining glasses (see fig. I.11), valued at $17,057

each, on hand as of September 1995. Only one of the glasses was needed to

satisfy war reserve and current operating requirements; however, four

additional glasses were on order. According to the item manager, the

glasses were ordered in July 1993 to support the F-15E aircraft because the

contractor was discontinuing production of the glass.

Figure I.11: Combining Glass Stored at

the Warner Robins Depot

As of September 1995, the Air Force also had 710 band-II backward-wave

oscillators on hand. Although 682 of the oscillators, valued at $8,261 each,

were unneeded, another 20 oscillators were on order. According to the

item manager, the oscillators were ordered in September 1993 because the

manufacturer was shutting down production and the purchase would

cover all Air Force requirements through 2040.

Page 24 GAO/NSIAD-97-71 Defense Logistics
Appendix I 

Examples of Specific Inventory Items

In reviewing the supporting documents for DLA items with 100 or more

years of inventory on hand, we noted that DLA also had additional stock on

order for some items. For example, DLA had 618 identification markers,

valued at $0.65 each, on hand as of August 1996. The markers (see 

fig. I.12) are used on aircraft such as the C-130F and the P-3. Although only

103 of the markers on hand were needed to satisfy war reserve and current

operating requirements, an additional 100 markers were on order.

According to the item manager, the markers were ordered in

November 1995 and demands have been fluctuating. The manager said that

the order should be canceled and that excess markers would be processed

for disposal.

Figure I.12: Identification Marker

Stored at the Norfolk Depot

Page 25 GAO/NSIAD-97-71 Defense Logistics
Appendix II 

Unneeded Inventory Stratified by Years of

Supply and DOD Component

Table II.1: Number of Items With

Unneeded Inventory Stratified by

Years of Supply and DOD Component

Years of supply Army Navy Air Force DLA Total

Less than 1 4,273 5,005 4,332 76,250 89,860

1 to 2 4,557 5,505 3,410 40,205 53,677

2 to 10 15,170 20,275 10,242 90,952 136,639

10 to 20 4,552 6,963 4,534 25,213 41,262

20 to 50 3,426 5,669 3,582 19,815 32,492

50 to 100 1,229 2,256 1,255 7,465 12,205

100 or more 1,150 2,020 883 7,593 11,646

Total 34,357 47,693 28,238 267,493 377,781

Table II.2: Value of Unneeded

Inventory Stratified by Years of Supply

and DOD Component

Dollars in millions

Years of supply Army Navy Air Force DLA Total

Less than 1 $275 $844 $1,133 $246 $2,498

1 to 2 585 1,141 1,531 272 3,529

2 to 10 2,310 3,375 5,009 1,060 11,754

10 to 20 430 884 2,045 427 3,786

20 to 50 212 608 1,633 326 2,779

50 to 100 137 238 619 144 1,138

100 or more 80 172 665 211 1,128

Total $4,029 $7,262 $12,635 $2,686 $26,612

Page 26 GAO/NSIAD-97-71 Defense Logistics
Appendix III 

Comments From the Department of Defense

Note: GAO comment

supplementing those in

the report text appears at

the end of this appendix.

Page 27 GAO/NSIAD-97-71 Defense Logistics
Appendix III 

Comments From the Department of Defense

See comment 1.

Page 28 GAO/NSIAD-97-71 Defense Logistics
Appendix III 

Comments From the Department of Defense

The following is GAO’s comment on the Department of Defense’s (DOD)

letter dated February 4, 1997.

GAO Comment 1. DOD did not agree that acquisition lead time contributes to the amount of

stock purchased, but did agree that it is one of the determinants of when

the reorder point is reached.

Lead time is an important element in the requirements determination

process. In addition, lead time is a major factor in deciding the quantity of

inventory to purchase when an item is initially introduced into the supply

system. Further, as DOD states, lead time also is a consideration as item

managers decide how far in advance of actual needs a resupply order

should be placed.

Page 29 GAO/NSIAD-97-71 Defense Logistics
Appendix IV 

Major Contributors to This Report

National Security and

International Affairs

Division, Washington,

D.C.

Charles Patton

James Murphy

Louis Modliszewski

David Keefer

Norfolk Field Office Sandra Bell

Dawn Godfrey

Kansas City Field

Office

Robert Sommer

Page 30 GAO/NSIAD-97-71 Defense Logistics
Page 31 GAO/NSIAD-97-71 Defense Logistics
Related GAO Products

Defense Logistics: Requirement Determinations for Aviation Spare Parts

Need to Be Improved (GAO/NSIAD-96-70, Mar. 19, 1996).

Army Inventory: Budget Requests for Spare and Repair Parts Are Not

Reliable (GAO/NSIAD-96-3, Dec. 29, 1995).

Defense Inventory: Opportunities to Reduce Warehouse Space

(GAO/NSIAD-95-64, May 24, 1995).

Defense Supply: Inventories Contain Nonessential and Excessive

Insurance Stocks (GAO/NSIAD-95-1, Jan. 20, 1995).

Defense Supply: Acquisition Leadtime Requirements Can Be Significantly

Reduced (GAO/NSIAD-95-2, Dec. 20 1994).

Army Inventory: Unfilled War Reserve Requirements Could Be Met With

Items From Other Inventory (GAO/NSIAD-94-207, Aug. 25, 1994).

Navy Supply: Improved Material Management Can Reduce Shipyard Costs

(GAO/NSIAD-94-181, July 27, 1994).

Army Inventory: Opportunities Exist for Additional Reductions to Retail

Level Inventories (GAO/NSIAD-94-129, June 6, 1994).

Army Inventory: More Effective Review of Proposed Inventory Buys Could

Reduce Unneeded Procurement (GAO/NSIAD-94-130, June 2, 1994).

Air Force Logistics: Improved Backorder Validation Procedures Will Save

Millions (GAO/NSIAD-94-103, Apr. 20, 1994).

Defense Inventory: Changes in DOD’s Inventory Reporting, 1989-1992

(GAO/NSIAD-94-112, Feb. 10, 1994).

Air Force Logistics: Some Progress, but Further Efforts Needed to

Terminate Excess Orders (GAO/NSIAD-94-3, Oct. 13, 1993).

(709190) Page 32 GAO/NSIAD-97-71 Defense Logistics
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