Rightsizing DoD Inventory : A Critical Look at Excesses, Incentives and Cultural Change

In its report "Major Management Challenges and Program Risks: Department of Defense," (GAO/OCG-99-4, January 1999), the Government Accounting Office (GAO) reported that half of the Department of Defense's (DOD) $69.9 billion in inventory was either obsolete or rarely used. GAO then asserted that DOD would be able to reduce its inventory of secondary items and develop a culture of economic and efficient inventory management if DOD inventory management personnel were trained in modern commercial logistics practices. This thesis presents the position that high inventory levels can be the result of outdated performance measures and reward systems that often encourage holding high levels of inventory. Included is a description of performance measures used for Item Managers, Inventory Managers and unit commanders and their staffs as well as a discussion of other systemic factors that impact inventory levels and may result in excess inventories. In addition, this thesis suggests that some modern commercial logistics practices have been successfully implemented by DOD for certain commodities, while for others, it may not make sense to do so.Naval Postgraduate School Monterey CA is the author of 'Rightsizing DoD Inventory : A Critical Look at Excesses, Incentives and Cultural Change', published 1999 under ISBN 9781423552482 and ISBN 1423552482.