United States General Accounting Office

GAO Report to the Secretary of Defense

December 1996 LOGISTICS

PLANNING

Opportunities for

Enhancing DOD’s

Logistics Strategic Plan

G O A

years

1921 - 1996

GAO/NSIAD-97-28

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-272661 

December 18, 1996

The Honorable William J. Perry

The Secretary of Defense

Dear Mr. Secretary:

The Department of Defense (DOD) has recognized that its logistics system,

designed decades ago to support the U.S. military in a global conflict, is

slow, complicated, redundant, and costly. With the end of the Cold War

and the advent of budgetary limitations, DOD’s logistics system must now

support a smaller, highly mobile, high-technology force with processes

that are as efficient as possible. Thus, in 1994, DOD developed a logistics

strategic plan with the goal of developing a better, faster, more reliable,

highly mobile, less costly response capability to deliver logistics material

and services to the user. We reviewed DOD’s logistics strategic plan to

identify opportunities for increasing the likelihood of implementing the

plan’s goals and objectives successfully.

Background DOD uses its secondary inventories, such as spare parts, clothing, and

medical supplies, to support its operating forces worldwide. However, its

logistics system to acquire, store, and deliver these materials has

frequently been criticized as cumbersome, inefficient, and costly. DOD’s

inventory management problems have been long-standing, characterized

by the expenditure of billions of dollars on excess supplies and the failure

to acquire sufficient tools and expertise to manage them effectively. DOD’s

culture has historically encouraged maintaining excessive inventories

rather than managing with just the right amount of stock, and DOD has

been slow to adopt new management practices, technologies, and logistics

systems. Lately, however, DOD has taken several steps, such as developing

a prime vendor for medical, food, and clothing supplies, to help change

this culture.

In fiscal year 1994, DOD developed a logistics strategic plan, which it has

updated annually, to provide an integrated logistics roadmap to support its

warfighting strategy. The plan, which is prepared by the Office of the

Deputy Under Secretary of Defense (Logistics) and approved by the Under

Secretary of Defense (Acquisition and Technology), indicates senior

leaders’ commitment and support, which are important in overcoming

barriers to changing DOD’s culture. Its current plan states that DOD is

striving to cut secondary inventories from the current $70 billion to 

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B-272661 

$53 billion or less by October 2001, or about 24 percent, and occupied

storage space from 631 million cubic feet to 375 million cubic feet or less,

or about 40 percent. DOD’s data appear to indicate that, for the most part,

DOD is on target in achieving these outcomes by the end of the decade. DOD

also hopes to reduce logistics response times by one-third from its fiscal 

year 1996 first-quarter average by September 1997, and to reduce the

average age for backordered items to 30 days by October 2001.

DOD’s plan can further serve as a fundamental building block to creating a

results-oriented organization as envisioned by the Government

Performance and Results Act (GPRA) of 1993, which requires federal

agencies, including DOD as a total entity, to develop strategic plans no later

than September 30, 1997, for a 5-year period. In previous work, we have

found that leading organizations that successfully implement

results-oriented management have established clear hierarchies of

performance goals and measures throughout all levels of their

organizations. GPRA was designed to create a new results-oriented federal

management and decision-making approach that requires agencies to

clearly define their missions, set goals, link activities and resources to

goals, measure performance, and report on their accomplishments. In

crafting GPRA, Congress recognized that agencies must be alert to the

environment in which they operate; in their strategic plans, they are

required to identify the external factors that could affect their ability to

accomplish their missions.

The cost of DOD’s logistics system is larger than the budgets of some

federal agencies that are required to submit their strategic plans to

Congress under GPRA. Although DOD is required to develop and submit a

DOD-wide plan to Congress, the GPRA approach to strategic planning is, in

our opinion, a useful technique for larger efforts, such as DOD’s logistics

system.

Results in Brief DOD’s plan gives direction to improvements that are needed to reduce the

costs of its logistics system (i.e., reducing logistics cycle times, developing

a seamless logistics system, and streamlining the logistics infrastructure)

and lays out specific objectives and strategies to produce these

improvements. DOD could build on its plan and increase the likelihood of

implementing its goals and objectives successfully, as well as be better

prepared for implementing the requirements of GPRA, if the plan (1) linked

its action plans to resources so that both DOD managers and Congress can

make more informed decisions on the value and priority of logistics

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system improvements; (2) better linked the services’ and the Defense

Logistics Agency’s (DLA) plans to DOD’s plan; and (3) identified interim

approaches that can be developed and implemented when milestones of a

priority strategy, aimed at achieving the plan’s overall goals and objectives,

have been extended. DOD’s success in bringing these elements together

hinges on its top-level managers’ continued and visible support of efforts

to remove institutional cultural barriers.

DOD’s Logistics

Strategic Plan

Recognizing that it needed an integrated logistics roadmap to support its

warfighting strategy into the next century, DOD developed a strategic plan

in 1994 to improve its logistics system. The plan does a good job setting

out a vision of what DOD expects the logistics system to do, that is “provide

reliable, flexible, cost-effective and prompt logistics support, information,

and services to the warfighters; and achieve a lean infrastructure.” DOD’s

vision is guided by several principles, which its plan highlights, such as the

• need for near real-time information on material and logistics support

capabilities,

• need for both performance metric and performance measurement

methods, and

• use of process reengineering and investment to reduce the operational and

support cost burden on defense resources without reducing readiness.

The plan recognizes that the future logistics environment will require

greater mobility, visibility of key assets, and more dynamic workload

management to provide a rapid response to changing requirements and

improved and accurate management information to better control logistics

resources as defense budgets decline. The plan also points out that

streamlining to a leaner logistics system can be achieved through greater

integration of business and production processes but that performance of

logistics processes must be continually assessed to identify opportunities

for improvement through the adoption of new initiatives.

DOD’s fiscal year 1996-97 edition of its plan reiterates the 1994 plan’s goals

and aims to achieve them by 2001. According to DOD’s plan, its overall

goals are to (1) reduce logistics cycle times, (2) develop a seamless

logistics system, and (3) streamline the logistics infrastructure. The plan

also sets forth the objectives and strategies for addressing these goals. In

all, the plan lists a total of 95 specific strategies, including the

identification of 12 priority strategies, such as the total asset visibility,

battlefield distribution, and continuous acquisition and life-cycle support

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(CALS) strategies. The strategies are to help accomplish the plan’s goals

and, as a result, “achieving world-class capabilities, while reducing the

cost of DOD’s logistics system.”

DOD Has

Opportunities to

Enhance

Implementation of the

Plan’s Goals

DOD reported that it has made progress in achieving all three of its goals.

DOD recognized, however, that implementing certain strategies was often

more complex than originally anticipated and that while most strategies

included specific milestones, many actions do not happen just once but

continue. As a result, DOD has adjusted its approaches to some of the

strategies and its projected completion dates for others. DOD can further

improve its planning process by (1) linking its priority strategies to

resources, (2) better linking the services’ and DLA’s plans to its logistics

strategic plan, and (3) identifying interim approaches when milestones of a

priority strategy have been extended.

Linking Strategies and

Action Plans to Resources

Although DOD’s plan indicates that staffing and financing requirements are

to be aligned to the planning, programming, and budgeting system’s (PPBS)

cycle, it does not indicate the magnitude and source of resources that are

required to implement many of its strategies, particularly the priority

strategies. By including the resources to carry out the plan’s strategies,

DOD could help ensure that a strategy based on priorities, and agreed to by

those who must approve the resources to implement them, guides

management actions and shapes the budget consistent with the direction

and outcomes it wishes to achieve.

In this connection, logistics managers for one of DOD’s priority logistics

strategies—the CALS strategy—have not identified, either in DOD’s plan or

the CALS implementation plan, the magnitude and source of resources that

are required to implement its many initiatives. CALS, which began in 1985,

is intended to automate and integrate acquisition, engineering,

manufacturing, and logistics data on weapons. If successfully

implemented, this effort is expected to allow for more efficient

management of weapon systems information by converting into digital

format millions of technical manuals and engineering drawings used

throughout a weapon’s life cycle, linking databases, and providing access

to users within and outside of DOD for managing this information. CALS

managers acknowledged that there is no single point of funding

accountability for implementing CALS and that DOD also does not know the

total cost associated with this effort. Because CALS funding comes from

many sources, such as weapon system budgets and CALS-related system

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budgets, CALS managers further indicated that it is difficult to arrive at an

estimated total cost to implement CALS.

We and the DOD Inspector General have reported over the years problems

associated with implementing CALS. We recognize that it is difficult to

arrive at a cost for CALS, but until resource requirements for CALS are

clearly identified and tied to the PPBS cycle, DOD will continue to have

difficulty implementing CALS.

Linking the Services’ and

DLA’s Plans to DOD’s

Logistics Strategic Plan

Effective strategic planning helps guide members of an organization to

envision their future and develop the necessary procedures and operations

to achieve that future. Therefore, it is equally important that DOD’s plan

cascade through all its organizations so that responsible elements of those

organizations work toward attaining the same goals. However, the

Executive Steering Group, which is responsible for directing

implementation of the plan, assessing progress, setting priorities, and

developing plan updates, has not required the services and DLA to develop

logistics strategic plans that link their individual goals and strategies to

DOD’s plan. Consequently, the services’ goals, objectives, and strategies do

not always support DOD’s plan.

We did note that DLA is the only major defense agency to take the initiative

to ensure that the goals and strategies of its corporate plan (similar to a

strategic plan) link directly to DOD’s plan. The Army’s and the Air Force’s

logistics plans have evolved over the last several years to better reflect

DOD’s goals and objectives. The Navy has only recently begun to develop

its first logistics strategic plan and expects to complete it by the end of the

year. In our opinion, this is an opportune time for the Navy to ensure its

plan ties directly to DOD’s goals and objectives.

Identifying Interim

Approaches

During this review, we noted that DOD’s plan did not contain interim

approaches that could be developed and implemented when milestones of

a priority strategy have been extended. Interim approaches are

particularly important in cases where other strategies outlined in the plan

are interrelated and dependent on the success of the priority strategy, such

as the corporate information management (CIM) initiative, to accomplish

their goals and objectives. To illustrate, in 1989, DOD introduced the CIM

strategy to improve business practices and the use of information

technology and to eliminate redundant systems in medical, civilian payroll,

and material management. According to DOD’s plan, CIM’s milestones have

Page 5 GAO/NSIAD-97-28 Logistics Planning
B-272661 

been extended an additional 5 years because of operational difficulties.1

But, the plan does not describe any interim approaches to achieve the

objectives of the CIM strategy and continue furthering the goals and

objectives of other priority strategies that depend on CIM to be successful.

There are several interrelated strategies in DOD’s plan that depend on CIM

for success, such as the joint battlefield distribution, the joint total asset

visibility, and the in-transit visibility strategies. CIM migration systems are

required to provide the communication links for transmitting logistics data

to managers. For example, the joint battlefield distribution strategy, which

is intended to improve delivery of supplies to fighting units, depends on

improved battlefield communications and real-time asset information,

which CIM was expected to provide, to be successful.

Similarly, the joint total asset visibility strategy is ultimately dependent on

CIM migration systems to help it provide timely, accurate information on

the location and movement of personnel, equipment, and supplies.

Likewise, in-transit visibility, intended to track the identity, status, and

location of cargo in transit, is also dependent on both total asset visibility

and CIM migration systems to communicate the data. Therefore, until CIM

migration systems are fully implemented, these dependant strategies may

experience considerable difficulty achieving their goals and objectives.

These issues are in line with similar issues that we reported in

September 1996 on problems with the development of materiel

management systems, which are a part of the CIM initiative.2

 In that report,

we stated that DOD had made a major change in its materiel management

migration system policy and that it did so before critical steps were taken

that would help ensure good business decisions were made and that risks

were minimized. We concluded that DOD (1) may likely deploy systems that

will not be significantly better than those already in place and (2) could

waste millions of dollars resolving problems that result from a lack of

developing and implementing a clear and cohesive strategy. We stated

that, before proceeding with any new strategy, DOD needs to take the

necessary steps to fully define its approach, plan for risks, ensure

adequate oversight, and complete testing of new systems.

1

We have reported on several occasions fundamental weaknesses in CIM that have delayed its full

implementation. See Defense Management: Impediments Jeopardize Logistics Corporate Information

Management (GAO/NSIAD-95-28, Oct. 21, 1994) and Defense Management: Stronger Support Needed

for Corporate Information Management Initiative to Succeed (GAO/AIMD/NSIAD-94-101, Apr. 12,

1994).

2

Defense IRM: Critical Risks Facing New Materiel Management Strategy (GAO/AIMD-96-109, Sept. 6,

1996).

Page 6 GAO/NSIAD-97-28 Logistics Planning
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We also recently reported that weaknesses in the materiel management

information system strategy were evident in the migration information

systems strategies for the depot maintenance and transportation business

areas, putting even more millions of information technology investment

dollars at risk.3

 For example, for depot maintenance systems, we found

that even if the migration effort was successfully implemented as

envisioned, the planned depot maintenance standard system would not

dramatically improve depot maintenance operations principally because

there were problems with the system that delayed reengineering efforts to

make the improvements. For the transportation area, we found that had

DOD followed its own regulations and calculated investment returns on its

transportation migration selections, it would have found, based on data

available when the systems were selected, that two of the systems would

lose money.

We concluded that many of these systems’ problems may have been

prevented if DOD had employed a strategic information resources planning

effort beforehand. Such planning would have helped DOD focus on meeting

the objectives intended to dramatically improve operations for these areas

rather than incrementally improving them. Strategic planning for

information resources is supported by the Clinger-Cohen Act of 1996,

which Congress recently passed, in part, to provide for the cost effective

and timely acquisition, management, and use of effective information

technology solutions.4

 Moreover, strategic information resources planning

is a critical step in the development of a strategic business plan, such as

DOD’s logistics strategic plan.

Recommendations To build on DOD’s existing strategic planning efforts and to have a better

chance of achieving the major logistics system improvements that its plan

envisions, we recommend that the Secretary of Defense direct the Deputy

Under Secretary of Defense for Logistics to (1) ensure that future logistics

plans include a recognition of the magnitude of the investment that is

required to accomplish the plan’s goals, objectives, and strategies and

(2) issue specific guidance to the Secretaries of the Army, the Navy, and

the Air Force and the Director of DLA instructing the services and DLA on

how to link their goals and budgets to the DOD logistics strategic plan’s

overall goals and strategies.

3

Defense IRM: Strategy Needed to Align Logistics Improvement Efforts With Business Objectives

(GAO/AIMD-97-6, Nov. 14, 1996).

4

This act was formerly known as the Information Technology Management Reform Act of 1996,

Division E of Public Law 104-106, February 10, 1996.

Page 7 GAO/NSIAD-97-28 Logistics Planning
B-272661 

Agency Comments

and Our Evaluation

In its comments on a draft of this report, DOD generally agreed with the

thrust of our report and partially concurred with our recommendations.

DOD stated that the resourcing process for the logistics strategic plan needs

to be strengthened, but it believed it is presently impractical to include the

magnitude of the investment made to implement the plan’s goals,

objectives, and strategies in the plan itself. DOD stated that it relies on PPBS

to cost and resource the plan’s priority strategies. It pointed out that,

under the current PPBS process, the magnitude of the investment of the

plan’s various alternatives is generally not known until the PPBS process is

completed, long after the plan is issued.

DOD acknowledged, however, that resourcing the plan’s requirements

through PPBS may not be the best way for ensuring its accomplishment, but

presently, there is not a better alternative. DOD’s explanation has some

merit, and we recognize the inherent difficulties it faces in identifying

investment requirements for the plan that must compete with other

requirements for scarce resources. However, we believe that future plans

still need to recognize that trade-offs between and among the priority

strategies must be made from time to time, often necessitating a

reevaluation of the financial resources that are currently needed or will be

available to fund them. In this regard, GPRA will require federal agencies,

including DOD, to develop plans that link activities and resources to goals,

starting next year. However, for purposes of the logistics strategic plan

itself, we have revised our recommendation to encourage DOD to include a

recognition of the difficulties involved in making these financial trade-offs

in its plan, and DOD agreed to ensure that the next edition of the plan

includes language to that effect.

DOD also stated that it will ensure the next edition of the plan includes

specific guidance to the military services and DLA on linking their plans to

DOD’s plan. DOD pointed out that the Deputy Under Secretary of Defense for

Logistics cannot issue specific budget guidance on which DOD

requirements will be funded or not. Although we agree, the intent of our

recommendation was not to be interpreted as a budget driven issue;

rather, we are trying to alert DOD to one of the principles of effective

strategic planning that will be strongly encouraged under GPRA. That is,

DOD will need to ensure that lower level units focus their efforts on

supporting the goals of the next level and, ultimately, to DOD’s overall

corporate goals. Without this basic tenet, organizations like DOD, which do

not make sufficient progress toward achieving their goals, may neither

know why the goals were not met nor what changes are needed to

improve performance. DOD’s comments are included in appendix I.

Page 8 GAO/NSIAD-97-28 Logistics Planning
B-272661 

Scope and

Methodology

We reviewed and analyzed DOD’s logistics strategic plan to determine

whether it was characteristic of generally accepted models that focused on

the process of strategic planning. In analyzing DOD’s plan, we applied

fundamental strategic planning practices identified from our review of

literature on this topic, including our prior reports that addressed the

implementation of strategic management processes in government

agencies. We also discussed the adequacy of DOD’s logistics strategic

planning efforts with a consultant (a retired high-ranking military officer)

who is on our Logistics Advisory Panel. In addition, we reviewed selected

services’ logistics strategic plans to determine the extent to which their

individual goals and objectives matched those contained in DOD’s plan.

We selected six top-priority strategies contained in the plan to assess how

well DOD was carrying out the plan’s goals, objectives, and

strategies—total asset visibility, CIM, mobility requirements study

bottom-up review, battlefield distribution, CALS, and in-transit visibility

strategies. Specifically, we spoke to officials responsible for developing

the plan and monitoring its implementation. We also reviewed pertinent

documents such as implementation plans, charters, status reports, and

other related information. We did not independently verify the accuracy of

this information.

In conducting our review, we held discussions with officials in the Office

of the Deputy Under Secretary of Defense for Logistics (Materiel and

Distribution Management); the Office of the Under Secretary of Defense

for Acquisition and Technology; the Office of the Joint Chiefs of Staff; the

Offices of the Air Force and Army Deputy Chiefs of Staff for Logistics,

Washington, D.C.; DLA, Fort Belvoir, Virginia; the U.S. Transportation

Command, Scott Air Force Base, Illinois; and the Office of the Chief of

Naval Operations and the Naval Supply Systems Command, Arlington,

Virginia.

We conducted our review from September 1995 through July 1996 in

accordance with generally accepted auditing standards.

We are sending copies of this report to the appropriate congressional

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

Directors of DLA and the Office of Management and Budget; and other

interested parties. We will make copies available to others upon request.

Page 9 GAO/NSIAD-97-28 Logistics Planning
B-272661 

Please contact me on (202) 512-8412 if you or your staff have any

questions concerning this report. The major contributors to this report are

listed in appendix II.

Sincerely yours,

David R. Warren, Director

Defense Management Issues

Page 10 GAO/NSIAD-97-28 Logistics Planning
Page 11 GAO/NSIAD-97-28 Logistics Planning
Appendix I 

Comments From the Department of Defense

Page 12 GAO/NSIAD-97-28 Logistics Planning
Appendix I 

Comments From the Department of Defense

Now on p. 7.

Page 13 GAO/NSIAD-97-28 Logistics Planning
Appendix I 

Comments From the Department of Defense

Now on p. 7.

Page 14 GAO/NSIAD-97-28 Logistics Planning
Appendix II 

Major Contributors to This Report

National Security and

International Affairs

Division, Washington,

D.C.

Charles I. Patton, Jr., Associate Director

Kenneth R. Knouse, Jr., Assistant Director

Nancy T. Lively, Evaluator

Marjorie L. Pratt, Evaluator

Norfolk Field Office Frank R. Marsh, Evaluator-in-Charge

Sandra D. Epps, Evaluator

(709164) Page 15 GAO/NSIAD-97-28 Logistics Planning
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