DOD is one of the largest and most complex organizations in the world to manage effectively. While DOD maintains military forces with unparalleled capabilities, it continues to confront pervasive, decades-old management problems related to its business operations—which include outdated systems and processes—that support these forces. These management weaknesses cut across all of DOD’s major business areas, such as human capital management, including the department’s national security personnel system initiative; the personnel security clearance program; support infrastructure management; business systems modernization; financial management; weapon systems acquisition; contract management; and last, but not least, supply chain management. All of these areas are on our high-risk list for DOD. Supply chain management consists of processes and activities to purchase, produce, and deliver materiel—including ammunition, spare parts, and fuel—to military forces that are highly dispersed and mobile. DOD relies on defense and service logistics agencies to purchase needed items from suppliers using working capital funds. Military units then order items from the logistics agencies and pay for them with annually-appropriated operations and maintenance funds when the requested items—either from inventory or manufacturers—are delivered to the units. Since 1990, DOD supply chain management (previously, inventory management) has been on our list of high-risk areas needing urgent attention because of long-standing systemic weaknesses that we have identified in our reports. Our high-risk series reports on federal government programs and operations that we have identified, through audits and investigations, as being at high risk due to their greater vulnerabilities to fraud, waste, abuse, and mismanagement. In recent years, we also have identified high-risk areas to focus on the need for broad-based transformations to address major economy, efficiency, or effectiveness challenges. The high-risk series serves to identify and help resolve serious weaknesses in areas that involve substantial resources and provide critical services to the public. DOD has taken a number of steps to improve supply chain management in the past several years, including preparing strategic planning documents and experimenting with a new way to manage its logistics portfolio. In 2005, the Under Secretary of Defense (Acquisition, Technology, and Logistics) released the Focused Logistics Roadmap, which presented an “as-is” compendium of logistics programs and initiatives and provided a baseline for future focused logistics capability analysis and investment within DOD. With the release of the “as-is” roadmap, DOD also identified a need for a future-oriented “to-be” roadmap. DOD released the “to-be” roadmap, now known as the Logistics Roadmap, in July 2008. In a separate effort, the Deputy Secretary of Defense began, in September 2006, testing a new approach for managing the development of joint capabilities and included joint logistics as a test case. This concept, capability portfolio management, is an effort to manage groups of similar capabilities across the DOD enterprise to improve interoperability, minimize capability redundancies and gaps, and maximize capability effectiveness. In February 2008, the Deputy Secretary of Defense issued a memo formalizing the first four test cases, including joint logistics, and setting out plans for further experimentation with five additional test cases. In that memo, the Under Secretary of Defense (Acquisition, Technology, and Logistics) was designated the capability portfolio management civilian lead for logistics, with U.S. Transportation Command serving as the military lead. According to the memo, the capability portfolio managers will make recommendations to the Deputy Secretary of Defense and the Deputy’s Advisory Working Group on capability development issues within their respective portfolio. In addition, the memo states that the capability portfolio managers have no independent decision-making authority and will not infringe on existing statutory authorities. A DOD directive, issued in September 2008, established the policy for using capability portfolio management to advise the Deputy Secretary of Defense and the Heads of the DOD Components on how to optimize capability investments across the defense enterprise. DOD has identified total asset visibility as a key focus area for improving supply chain management. DOD has defined total asset visibility as the ability to provide timely and accurate information on the location, movement, status and identity of units, personnel, equipment and supplies; and the capability to act on that information to improve the overall performance of DOD logistics practices. We have previously reported on issues associated with DOD’s lack of asset visibility. DOD’s latest roadmap includes a number of initiatives and programs that involve the implementation of IUID and RFID, two technologies that enable electronic identification and tracking of equipment and supplies and that DOD expects will improve its asset visibility. DOD’s 2007 Enterprise Transition Plan lists IUID and RFID as enablers to achieve the goal of end–to-end materiel visibility in the DOD supply chain. Specifically, the plan states that IUID enables the accurate and timely recording of information on the location, condition, status and identity of appropriate tangible personal property to ensure efficient and effective acquisition, repair, and deployment of items, and states that IUID will contribute to improvements in the responsiveness and reliability of the DOD supply chain. The plan also states that RFID will improve process efficiencies in shipping, receiving, and inventory management, contribute to reductions in cycle time, and increase confidence in the reliability of the DOD supply chain through increased visibility of the location of an item or shipment. IUID includes the application of a data matrix through direct inscription or placement of a permanent machine-readable label or data plate onto an item. The data matrix contains a set of data elements that form a unique item identifier. This data matrix identifies an individual item distinctly from all other items that DOD buys and owns, similar to the vehicle identification number on a car. Items can be marked either by the vendor before entering into DOD’s inventory, or by a DOD component after DOD takes possession of an item. In both cases, information about the item and the mark are uploaded to the IUID Registry, which is located in Battle Creek, Michigan, and managed by the Defense Logistics Agency. The registry serves as the central repository for data about all of the items in the DOD inventory that have been marked with a UID data matrix. Although the registry is intended to contain information about all of the marked items, DOD has issued policy indicating that the registry is not to be used as a property accountability system or to maintain detailed transaction data. As part of its IUID initiative, DOD plans to use this data to more closely track items and more effectively manage its inventory. In July 2003, DOD directed that all new solicitations and contracts issued on or after January 1, 2004, require the use of IUID for items meeting established criteria. Additionally, in December 2004, the IUID policy was updated to require the application of UID to legacy items (that is, existing personal property items in inventory and operational use). In this memo, DOD requested all program and item managers plan to complete this marking by the end of 2010. The number of items this requirement covers is unknown. DOD officials estimate it is probably around 100 million; however, they stated the actual number of items could be much higher. RFID is a data input system that consists of (1) a transponder, generally referred to as a tag; (2) a tag reader, also known as an interrogator, that reads the tag using a radio signal; (3) centralized data processing equipment; and (4) a method of communication between the reader and the computer. The reader sends a signal to the tag, which prompts the tag to respond with information about the item to which it is attached. The information is forwarded to central data processing equipment, which can then be used to get detailed information about the container or item, such as the shipping date or the date received. The information contained in the central data processing equipment can provide visibility over inventory items throughout the supply chain. DOD’s RFID policy, issued on July 30, 2004, finalizes business rules for implementing two types of RFID tags— active and passive. This report focuses on DOD’s implementation of passive RFID, which is a newer technology than active RFID and less well- established in DOD’s supply chain. We previously examined DOD’s implementation of passive RFID in September 2005. A passive RFID tag is an electronic identification device consisting of a chip and an antenna, usually embedded within a “smart” packaging label. Passive RFID tags have no battery; they draw power from the reader, which sends out electromagnetic waves that induce a current in the tag’s antenna. Passive RFID readers transmit significant power to activate the passive tags and are not currently approved for use on ammunition, missiles, or other potentially explosive hazards. Primary responsibility for determining how and where to implement IUID and RFID, as well as funding the implementation and operations of these technologies, resides with DOD components. These costs include the purchase of necessary equipment, costs associated with marking and tagging items, and changes to automated supply systems. In an effort to coordinate the components’ efforts to implement various automatic identification technologies, DOD designated U.S. Transportation Command as the lead functional proponent for RFID and related AIT implementation within the DOD supply chain in September 2006. U.S. Transportation Command subsequently published an AIT concept of operations in June 2007 and an implementation plan for this concept of operations in March 2008. Additionally, the Unique Item Identification Policy Office was established in 2002 in the Office of the Under Secretary of Defense (Acquisition, Technology, and Logistics) to develop and implement unified IUID policy across DOD. Although DOD intended that its Logistics Roadmap would provide a comprehensive and integrated strategy to address logistics problems department-wide, we found that the roadmap falls short of this goal. The roadmap documents numerous initiatives and programs that are under way and organizes these around goals, joint capabilities, and objectives.