The use of information to manage the defence logisitics supply chain - Public Accounts Committee Contents

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 months' time.

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 stock levels.

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 France.

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© Parliamentary copyright 2011
Prepared 19 August 2011