The Ministry of Defence (the Department) sends supplies to forces deployed overseas for military operations, such as in Afghanistan and Libya, and to personnel stationed in permanent bases or taking part in training exercises. Staff deployed on operations determine what supplies are needed by front line troops, which are then sent to them through a supply chain that stretches back to manufacturers. The Department spent at least £347 million in 2010-11 on transporting supplies overseas, but this underestimates the full cost as the cost of military supply flights is not included. Some 130,300 individual deliveries were made to Afghanistan alone in 2010.
This report assesses the Department's performance in managing the supply chain to front line troops. The Department rightly puts a strong emphasis on ensuring troops get the supplies they need. Equally, providing an efficient supply chain would release resources for the front line. We believe the Department must place greater emphasis on securing value for money and that there is room for it to find efficiencies in the supply chain without jeopardising operational effectiveness. Over decades our reports have identified persistent problems with late deliveries, unnecessary costs and missed targets. At present, the Department does not have the information to identify where savings could be made. It does not know the full costs of its current activities or the cost of alternative supply options, information it needs if it is to begin improving value for money. The failure to collect basic data about where supplies are stored has directly contributed to the Department's accounts being qualified for three consecutive years.
Successive reports by this Committee have identified significant problems with the Department's logistics information. Since 1986, the Department has repeatedly assured us that it was aware of the gaps in its information and was introducing better systems to close them. Despite these efforts, the same problems persist.
The Department is now seeking to resolve these information problems through a major initiative known as the Future Logistics Information Services project, expected to be implemented by 2014. Until then, the Department will continue to store data in systems that are at critical risk of failure. Against the background of repeated failures to get to grips with asset tracking and allied information systems for logistics, it is vital that the MOD sustains its programme in order to secure value for money. Should this not be the case, we will return to the issue.
Supplies are delayed because manufacturers miss their delivery schedules. In the six months to November 2010, over 40% of deliveries were 30 days or more overdue. We have found in our past reports on the Typhoon that lack of supplies led to cannibalisation of other aircraft. The Department has yet to demonstrate that this is the best way to employ constrained resources.
Other measures which could improve the efficiency of supply operations include putting more pressure on suppliers to deliver on time, keeping stocks at lower levels to reduce the risk of them deteriorating, and benchmarking performance against relevant comparators such as other armed forces. It is important that the Department retains key skilled staff on the supply chain so that it can make improvements of this kind.
On the basis of a Report by the Comptroller and Auditor General we took evidence from the Ministry of Defence on its use of information to manage the supply chain.