Conclusions and recommendations |
1. The Department has put a low emphasis on
value for money in managing its supply chain.
The Department rightly gives primary importance to ensuring that
the supply chain supports the military's operational effectiveness,
but we believe there is scope to make efficiency gains without
jeopardising operational effectiveness. In its evidence to us,
the Department was unduly dismissive about whether savings could
be made across its supply operations given it has done little
analysis to identify possible savings. However, we welcome Bernard
Gray's clear acceptance of his personal responsibility for failures
of supply chain performance and look to him to deliver improvements.
As a matter of priority, the Department should implement measures
to capture the full cost of its supply operations, quantify the
full range of potential savings it could make, and take the actions
necessary to manage the supply chain more cost-effectively.
2. The Department has made little progress
in resolving long-standing problems with its supply chain information,
despite previous assurances to this Committee.
Over the past 25 years, our reports have highlighted persistent
problems with late deliveries, missed targets and inadequate cost
and performance information. We welcome the Department's commitment
to bringing together and upgrading many of its IT systems through
the Future Logistics Information Services project, and the information
provided to us since the hearing about the project's milestones
and costs. However, past plans to upgrade these systems have come
to nothing as the Department has focused on other priorities.
To ensure progress is made this time, we will hold the Department
to its promise to report back to us on progress in six and twelve
3. The Department does not know the full cost
of its supply chain routes.
The Department sets target times for deliveries based on how urgently
supplies are required. However, it does not have the cost information
it needs to make informed decisions about alternative ways of
running its supply operations. For example, the Department knows
the cost of some of the air and surface supply routes into Afghanistan,
but without more complete information it is not able to compare
the relative costs of different delivery routes. The Department
should collect comprehensive information on the cost of all potential
supply routes and use this information to identify the most cost-effective
routes for both urgent and lower priority deliveries.
4. Deliveries for operations in Afghanistan
are often late due to delays in receiving goods from suppliers.
Failure to receive goods in time can have adverse knock-on effects.
For example, we have heard of instances in other operations where
delays in receiving spare parts for equipment such as Typhoon
aircraft have resulted in other planes being cannibalised to ensure
sufficient parts are available. The Department should set the
terms of its contracts with suppliers so that manufacturers are
better incentivised to deliver supplies in good time.
5. The Department often holds large stockpiles
of supplies on operations, which results in some supplies deteriorating
before they are used.
The Department acknowledged to us that it does not collect data
on the amount of stock that may be damaged in such circumstances.
The Department should measure the condition of stocks in theatre
and their deterioration rates to inform decisions about appropriate
6. While the Department does some benchmarking
against the private sector, it does not benchmark its supply chain
performance against other armed forces.
Benchmarking against comparator organisations can identify better
ways of working. The Department should seek to benchmark the cost
and performance of its supply chain against other nations which
maintain armed forces of similar complexity, such as the USA and