Last year, the Office of Inspector General released a report regarding their spare parts inventory audit. The audit found that the DoD had an excess inventory of spare parts valued at more than $1 billion.
The report went on to show that the DoD failed in the effective management of its spare parts inventories and had been failing for some time. Since 1999, there have been 36 Spare Parts Inventory reports and in only 8% of these reports was it found that the DoD managed its spare parts inventory effectively. This failure is attributed to several factors. According to the audit, the DoD failed to:
- Enforce inventory reduction and assess other existing sources before making the purchases from private venues
- Verify that appropriate requirements were met and established for spare parts for weapon systems
- Use accurate metric data and include vital inventory management metrics as outlined in the contract requirements
- Enforce the requirements of the contract and provide adequate oversight of that contract
- Account for the inventory on the agency’s annual financial statements
This report and others like it highlight the growing importance of the iRAPT system as well as accurate tracking and asset management. This places a burden on government contractors to make the necessary adjustments to bring their areas of responsibility into compliance. There are several anticipated changes that are expected to take place based on this report and the documented feedback. There were 237 recommendations made regarding this issue and 76% addresses spare parts inventory management.
In the report, it is recommended that the Assistant Secretary of Defense for Logistics and Material Readiness take steps to begin rectifying the situation by creating, finalizing, and issuing a policy that would provide more stringent guidelines and requirements for effectively accounting for and managing spare parts inventories that are government owned and controlled by contractors. The proposed policy would require contractors who are responsible for the management of government inventory under commercial sustainment type contracts to file a biannual report with the DoD component on the following:
- Inventory requirements
- Current government inventory
- Excess government inventory
According to this policy, contractors would be required to submit a plan in writing that outlines the actions taken for disposal or reuse of excess government inventory. This essentially puts the responsibility in the hands of the contractors, which means that they will be required to create or utilize better spare parts inventory management tools and procedures. The burden of accountability will fall to the contractors in their role of supporting the DoD in carrying out its mission. This will require an allocation of time and personnel to establish these changes without impacting the support aspect of the contract.
Formation of a Working Group to Establish Inventory Management Metrics
The results of the audit are clear; the inventory management processes are not currently working. As policies are created and implemented, it will be necessary to assemble working groups to develop metrics for inventory management processes. This means that contractor project managers may find that they have to reallocate personnel to this working group while remaining within the terms of the contract that defines job functions.
Current personnel may be required to split their time between the working group and their assigned work. Project managers will need to be very careful that they remain within the terms of the contract while fulfilling the new policy and the steps required to be able to fulfill the new policy.
New Inventory Management Improvement Plan
Ultimately, contractors will have to develop a new inventory management plan that complies with the policies and brings the DoD back into compliance with earlier directives. Implementing a tracking and accountability system is integral to ensuring the success of these changes. RFID asset tracking software or IUID asset tracking software is essential in this capacity. It has several vital benefits that immediately add value:
- Increases productivity
- Reduces labor waste
- Improves customer service
- Eliminates product delivery delays
- Ensures accuracy
- Clean audit of Pentagon programs
Lacking this capability of asset tracking and accountability means wasting money and compromising missions. It is a vital step in resolving the problems that the audit uncovered and set the course for helping to bring the DoD into compliance with regulations.
Tracking and accountability keep costs down and production high. A2B Tracking offers RFID Asset Tracking or IUID asset tracking software that can be easily integrated into existing inventory management systems. It is cost effective and provides a more accurate, faster inventory control. Call A2B Tracking today and speak with a representative to find out how our Asset Tracking Software can help you fulfill the inventory management responsibilities of your contract.