DEFENSE LOGISTICS AGENCY

 HEADQUARTERS

 8725 JOHN J. KINGMAN ROAD

 FORT BELVOIR, VIRGINIA 22060-6221

January 22, 2018

MEMORANDUM FOR SUPPLY PROCESS REVIEW COMMITTEE (SPRC) AND JOINT 

PHYSICAL INVENTORY WORKING GROUP (JPIWG) MEMBERS

SUBJECT: Approved Defense Logistics Management Standards (DLMS) Change (ADC) 

1262, Revision of Location Survey Requirements under Records Reconciliation 

Program (Supply/JPIWG)

We are forwarding the attached approved change to DLM 4000.25, Defense Logistics 

Management Standards, and DLM 4000.25-2, Military Standard Transaction Reporting and 

Accountability Procedures (MILSTRAP) for immediate implementation. It is the responsibility of 

the Component Supply PRC representative to ensure full compliance of the approved change

within your Component. 

Addressees may direct questions to Mr. Rafael Gonzalez at email: rafael.gonzalez@dla.mil. 

All others must contact their Component designated Supply PRC representative or JPIWG 

representative available at: http://www.dla.mil/HQ/InformationOperations/DLMS/allpoc/. 

HEIDI M. DAVEREDE

Program Manager 

Enterprise Business Standards Office

Attachment

As stated

cc:

ODASD (SCI)
Attachment, ADC 1262

Page 1

Attachment to ADC 1262

Revision of Location Survey Requirements under Records 

Reconciliation Program

1. ORIGINATING SERVICE/AGENCY AND POC INFORMATION:

a. Requesting Activity: Defense Logistics Agency (DLA)

b. Functional POC: DLA HQ, J-345 IM, Troy Brown, Telephone COMM: 709-767-

3979, email: troy.brown@dla.mil

2. FUNCTIONAL AREA: 

a. Primary/Secondary Functional Area: Inventory

b. Primary/Secondary Functional Process: Records Reconciliation Program

3. REFERENCES:

a. Defense Logistics Manual (DLM) 4000.25-2, Military Standard Transaction 

Reporting and Accountability Procedures (MILSTRAP), Chapter 7 Physical Inventory Control

b. DLM 4000.25, Defense Logistics Management Standards (DLMS), Volume 1, 

Appendix 2, Terms and Definitions

c. DLM 4000.25, Defense Logistics Management Standards (DLMS), Volume 2, 

Chapter 6 Physical Inventory Control

d. DoDM 4140.01 Supply Chain Materiel Management Procedures, Volume 5 Delivery 

of Materiel

4. APPROVED CHANGE(S):

a. Brief Overview of Change: 

(1) This change will allow storage sites to utilize various physical counts and 

formal inventories to satisfy the location survey requirement in combination with targeted 

complete annual location surveys. The change will also add the flexibility to apply resources to 

target critical inventories while maintaining a high inventory accuracy rate.

b. Background:

(1) MILSTRAP, Definitions and Terms, (Reference 3.a.) and DLMS Volume 1, 

Appendix 2 (Reference 3.b.), define a location survey as “a physical verification, other than 

actual count, between actual assets and recorded location data to ensure that all assets are 

properly recorded as to location, identity, condition, and unit of issue.”
Attachment, ADC 1262

Page 2

(2) Current policy requires storage activities to: (1) perform a complete survey of 

all locations; (2) use a statistical sampling methodology that ensures all locations are included in 

the population and have a probability of selection; or (3) a combination of complete and 

statistical sampling. However, storage activities already perform numerous inventory actions to 

validate materiel in location in addition to actions currently performed to meet the annual 

requirements for location survey. Consequently, the Defense Logistics Agency submitted this 

change request to the ODASD Supply Chain Integration (SCI) to expand the location survey 

requirements documented under the Physical Inventory Control Program.

(3) Location surveys require a physical verification, other than actual count, 

between actual assets and recorded location data to ensure that all recorded assets are accurate as 

to location, identity, condition, and unit of issue. During various physical inventory procedures, 

the storage activity performs the same verification procedures as required under location surveys, 

including location count. In addition, DLA performs statistical sample inventories on an annual 

basis as required under the Chief Financial Report (CFO) procedures. This change will allow 

DLA to eliminate the duplicative effort of location surveys by using existing storage activity 

inventory actions where there is a physical verification, to meet the Location Survey 

requirement.

(4) MILSTRAP, Chapter 7, paragraph C7.8.1.2 (Reference 3.a.) and DLMS 

Volume 2 Chapter 6, paragraph C6.8.1.2. (Reference 3.c.) direct each storage site activity to 

accomplish a location survey not less than once each fiscal year, by (1) performing a complete 

location survey of all locations; (2) using a statistical sampling methodology that ensures all 

locations are included in the population and have a probability of selection; or (3) a combination 

of complete and statistical sampling.

(5) MILSTRAP, Chapter 7, paragraph C7.2.10.1.1. (Reference 3.a.) and DLMS 

Volume 2, Chapter 6, paragraph C6.2.10.1.1. (Reference 3.c.) direct an annual record accuracy 

statistical sample be performed by storage activities.

(6) MILSTRAP, Chapter 7, paragraph C7.2.10.2.1. (Reference 3.a.) and DLMS 

Volume 2, Chapter 6, paragraph C6.2.10.2.1. (Reference 3.c.) Identify types of controlled items 

that require a complete inventory and do not qualify for use of a random sampling approach. 

(7) DLA Distribution currently conducts an annual statistical sample inventory 

Type Physical Inventory Code (TPIC) N, and an annual wall-to-wall inventory of controlled 

items (TPIC G). During these counting inventories, the storage site performs a physical 

verification between actual assets and recorded location data to ensure that all recorded assets are 

accurate as to location, identity, condition, and unit of issue. Additionally, storage sites may be 

required to conduct additional inventories during the year such as denial research, retention 

quantities for disposals, on hand balance mismatches discovered during operations, cyclic 

inventories, and other record mismatches. All the various inventories ensure accurate records of 

the physical assets as well as any appropriate adjustments made to correct the data if necessary.

(8) DLA Distribution has more than 5.9 million storage locations on record. 

Performing an annual location survey on such a large population is excessive. In addition, the 

requirement does not meet Financial Improvement and Audit Readiness (FIAR) standards. 
Attachment, ADC 1262

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Focusing resources on higher yield types of inventories is preferable to maintaining a large 

workload of lower yield location surveys. Controlled items (classified, sensitive, pilferable, and 

radioactive) will continue to require a complete annual wall-to-wall location survey.

c. Approved Change in Detail:

(1) This change expands current procedures under the record reconciliation 

program to allow the use of other physical inventory activities where a physical verification 

occurs in order to meet the annual location survey requirements as described in Reference 3.c. 

The storage activity performs an acceptable location survey when it finalizes a qualified physical 

verification or completes an actual DLM 4000.25 Vol. 2 Chapter 6 Physical Inventory Control 

paragraph C6.8.1.2. The storage activity has the option to perform a second location survey as 

necessary but it is not required for the purpose of the annual location survey. This change does

not overwrite current guidance and procedures for any discrepancies found at location.

(2) DLA Distribution will continue to conduct complete location surveys of

controlled items (classified, sensitive, pilferable, radioactive, etc.). 

(3) The storage activity will satisfy the annual location survey requirement 

referenced in Chapter 6 by including locations that it did not survey via a qualifying physical 

verification or location survey in the population of locations for statistical sampling.. This will

provide DLA Distribution with the flexibility to focus inventory efforts on critical areas with the 

available resources. 

(4) This change does not prevent DLA Distribution from completing location 

surveys for larger populations of locations if inventory accuracy metrics fall below acceptable 

levels or during re-warehousing projects or as directed by command. 

d. Revisions to DLM 4000.25 Manuals:

(1) Revise DLM 4000.25-2, MILSTRAP, Chapter 7 as described in the 

Enclosure.

(2) Revise DLM 4000.25, DLMS, Volume 2, Chapter 6 as described in the 

Enclosure.

e. Proposed Transaction Flow: No change.

f. Alternatives: None identified.

5. REASON FOR CHANGE: DLA Distribution implemented an inventory control program 

comprised of various types of inventories that accurately reflect inventory record accuracy while 

meeting FIAR existence and completeness requirements. Changes to the location survey 

requirement enables efforts on higher yield programs in line with risk profile.
Attachment, ADC 1262

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6. ADVANTAGES AND DISADVANTAGES: 

a. Advantages: Creates flexibility to apply limited resources of inventory personnel to 

higher yield activities. Enables focus on the physical inventory program, which supports FIAR 

existence and completeness requirements.

b. Disadvantages: None identified.

7. ESTIMATED TIME LINE/IMPLEMENTATION TARGET: Immediately after the 

release of the Approved DLMS Change (ADC).

8. ESTIMATED SAVINGS/COST AVOIDANCE ASSOCIATED WITH 

IMPLEMENTATION OF THIS CHANGE: This change will save an estimated $1.2 M or 

more in labor costs. DLA Distribution will perform about 4.1 M fewer location surveys per year, 

this will allow inventory personnel to focus on higher impact location inventories.

9. IMPACT: 

a. New DLMS Data Elements: None.

b. Changes to DLMS Data Elements: None.

c. Automated Information Systems (AIS): None.

d. Transaction Services: None.

e. Non-DLM 4000.25 Series Publications: DOD Components may need to update 

internal guidance to comply with this DLMS change.

10. PROPOSED DLMS CHANGE (PDC) 1241 STAFFING RESPONSE/COMMENT 

RESOLUTION:

Originator Response/Comment Disposition

1. Army Concur without Comment Noted.

2. Navy Concur without comment. Noted. 

3. Air Force Concur without Comment. Noted.

4. Marine Corps None. Noted.

5. DLA Concur without Comment Noted.

6. GSA Not received as of 12/15/17. Noted.

7. DAAS None. Noted.

8. USTRANSCOM Abstain. Noted.
Enclosure, ADC 1262

Page 1

ENCLOSURE to ADC 1262

A. Revise DLM 4000.25-2, MILSTRAP, Chapter 7 as shown (changes are identified by 

bold, red italics or double strikethrough)

C7.8.1. Location Survey

C7.8.1.1. A location survey requires a physical verification other than actual 

count between physical assets and recorded location data to ensure that all assets are 

properly recorded. The storage activity will conduct prompt research and assess the 

need for a special inventory (DIC DJA request with Type of Physical 

Inventory/Transaction History Code K) when identifying a discrepancy during the 

location survey program (type I or type II error (see paragraphs C7.8.1.8.1. and 

C7.8.1.8.2.)). In some instances, location survey and physical inventory will occur 

simultaneously be conducted concurrently for ammunition and subsistence.

C7.8.1.2. Location survey will be accomplished at each storage activity not 

less than once each fiscal year, by (1) performing complete location survey of all 

locations; (2) using a statistical sampling methodology that ensures all locations are 

included in the population and have a probability of selection; or (3) a combination of 

complete and statistical sampling.

C7.8.1.3. Storage locations that have undergone a qualifying physical 

inventory action within the previous 12 months, with the exception of controlled 

item(s), may be considered to have satisfied the annual location survey 

requirements stated in paragraph C6.8.1.2. A qualifying inventory action is one 

where the storage activity performs a successful physical verification of the 

item(s) between the physical asset(s) and the recorded location data. The 

storage activity has the option to perform a second location survey as necessary 

but it is not required for the purpose of the annual location survey. These 

procedures do not override current guidance and procedures for any 

discrepancies found at the location. 

C7.8.1.3.1. Storage activities will perform complete location survey 

on all controlled items (classified, sensitive, pilferable, radioactive, etc.) and do 

not qualify for use of a random statistical sampling approach.

C7.8.1.3.2. Locations not surveyed as a result of a qualifying 

inventory activity or as described in C6.8.1.2 will be part of the population needed 

for statistical sampling in order to satisfy the annual location survey requirement 

defined in this chapter.

C7.8.1.34. A location survey will take place be conducted in both the gaining 

and losing storage areas following the completion of re-warehousing projects. A 

location survey conducted as a result of due to re-warehousing projects may be 

considered to have satisfied the annual survey requirement for the area surveyed.
Enclosure, ADC 1262

Page 2

B. Revise DLMS, Volume 2, Chapter 6 as shown (changes are identified by bold, red 

italics or double strikethrough)

C6.8.1. Location Survey

C6.8.1.1. Location survey requires a physical verification, other than actual 

count, between assets and recorded location data to ensure that all assets are properly 

recorded. When a discrepancy is identified during the location survey program (Type I 

or Type II error (see subparagraphs C6.8.1.28.1. and C6.8.1.28.2.)), the storage activity 

will conduct prompt research and assess the need for a special inventory Physical 

Inventory Request Transaction with Type of Physical Inventory/Transaction History 

Code K). In some instances, location survey and physical inventory will occur be 

conducted concurrently simultaneously for ammunition and subsistence.

C6.8.1.2. Timing. Location survey will be accomplished at each storage 

activity not less than once each fiscal year, by (1) performing complete location survey 

of all locations; (2) using a statistical sampling methodology that ensures all locations 

are included in the population and have a probability of selection; or (3) a combination 

of complete and statistical sampling.

C6.8.1.3. Storage locations that have undergone a qualifying physical 

inventory action within the previous 12 months, with the exception of controlled 

item(s), may be considered to have satisfied the annual location survey 

requirements stated in paragraph C6.8.1.2. A qualifying inventory action is one 

where the storage activity performs a successful physical verification of the 

item(s) between the physical asset(s) and the recorded location data. The 

storage activity has the option to perform a second location survey as necessary 

but it is not required for the purpose of the annual location survey. These 

procedures do not overwrite current guidance and procedures for any 

discrepancies found at the location. 

C6.8.1.3.1. Storage activities will perform complete location survey 

on all controlled items (classified, sensitive, pilferable, radioactive, etc.) and do 

not qualify for use of a random statistical sampling approach.

C6.8.1.3.2. Locations not surveyed as a result of a qualifying 

inventory activity or as described in C6.8.1.2 will be part of the population needed 

for statistical sampling in order to satisfy the annual location survey requirement 

defined in this chapter.

C6.8.1.34. Rewarehousing. A location survey will take place be conducted

in both the gaining and losing storage areas following the completion of rewarehousing 

projects. A location survey conducted as a result due to of re-warehousing projects 

may be considered to have satisfied the annual survey requirement for the area 

surveyed.