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

2  Improving future performance

13.  The Department's lack of information on its supply operations and the cost of its activities is not a new problem. Previous reports by this Committee, some going back as far as 1986, have identified similar issues with tracking supplies and collecting cost data.[38] Our 1997 report on operations in the former Yugoslavia identified problems with keeping track of high-value equipment.[39] Meanwhile, our 2004 report on Operation TELIC in Iraq found equipment shortages at the front line had occurred, in no small part due to the lack of a credible consignment tracking system.[40]

14.  In response to these reports, the Department promised that new systems would close the information gaps, but it has not delivered on these promises. For example, in response to our report on TELIC, the Department said that one new system - Management of Materiel in Transit - would allow end-to-end control of the process for consignment management, optimise the supply chain, ensure that operational priorities dictate the movement of supplies and improve the speed and certainty of consignments.[41] Yet the faults that this system was supposed to rectify have now been identified again by the NAO.[42]

15.  The Department accepts that historic underinvestment has meant its management information systems and the underlying IT systems are not up to the task. In particular, its spending on IT systems has not kept pace with the need to upgrade those systems.[43] The Department told us that while it accepts it can do better, it believes it is already doing things 'a hundred times better' now in Afghanistan than in 2003 in Iraq.[44]

16.  The Department has made investments in new data systems - for example £66 million has been spent on the Management of the Joint Deployed Inventory system which tracks equipment in theatre - and more is planned.[45] In 2010, the Department signed an £803 million, 11-year contract with Boeing for the provision of the Future Logistics Information Services project. Under this contract, Boeing is required to bring together 270 different data systems operated by 50 different contractors, which should provide a complete and coherent set of data for managers to use.[46] Separately, the Department has now approved an additional £75 million to upgrade some of the defence base inventory management systems that are now at critical risk of failure.[47]

17.  The implementation of the Future Logistics Information Services project, including the additional upgrade to the warehouse inventory management IT system, will not be complete until 2014. The Department told us it would take a long time to upgrade systems and data, in part because of the need to 'cleanse' the data - otherwise the poor quality information the Department currently holds would simply be transferred onto a better IT system.[48] We are very concerned that, until the systems are fully rolled out in 2014, the high risk of system failure will remain in systems that are critical to supporting front line troops.[49] To ensure that there is no further slippage in this critical area, the Department has provided us with a plan of the scheduled projects for improving data systems and has promised to report back in six and twelve months on how it is performing against its milestones.[50]

18.  As with other defence projects, such as the Future Rapid Effect System armoured vehicle, there is a risk that funding for this project could be reduced as the Department seeks to lower spending and balance its overall budget.[51] However, the Department assured us there were currently no plans to cut back the investment that is planned for logistics IT systems.[52] It also told us that despite the need to reduce staffing by between a quarter and a third following the Strategic Defence and Security Review settlement, it would make sure it had people in post sufficiently trained and experienced to use the systems effectively.[53] It is important that the Department safeguards this expertise, as there is little point in investing money in advanced IT systems if staff do not have the necessary skills and experience in supply chain management to use them effectively.[54]

19.  One method for improving future performance and identifying best practice is to benchmark against other relevant organisations. The Department told us that it had begun to benchmark its supply systems against those in the private sector and that it was an active member of the Cranfield University Agile Supply Chain Research Club.[55] However, there is scope to expand the range of organisations the Department compares its performance against. In particular, the Department has not carried out any benchmarking exercises with the supply chains operated by the armed forces of other nations of similar scale or complexity. For example, there is no comparative cost data available for American or French forces against which the Department's operations could be benchmarked.[56]

38   Qq 89, 117  Back

39   Committee of Public Accounts, Twenty-Third Report of Session 1996-97, Ministry of Defence: The Financial Management of Military Operations in the former Yugoslavia, HC 242 Back

40   Committee of Public Accounts, Thirty-Ninth Report of Session 2003-04, Ministry of Defence: Operation TELIC - United Kingdom Military Operations in Iraq, HC 273 Back

41   Q 117 ; HM Treasury, Treasury Minutes on the Thirty-seventh to Thirty-ninth Reports from the Committee of Public Accounts 2003-2004, Cm 6355, November 2004, pp 14-15  Back

42   C&AG's Report, para 3.6 Back

43   Qq 94, 98  Back

44   Q 117  Back

45   Q 100  Back

46   Q 166; C&AG's Report, para 4.4 Back

47   Q 91  Back

48   Qq 92-94  Back

49   Qq 93-94, 98  Back

50   Q 101  Back

51   C&AG's Report, The cost-effective delivery of an armoured vehicle capability, HC (2010-12) 1029 Back

52   Qq 105-108  Back

53   Qq 2, 120-124  Back

54   Qq 122-123  Back

55   Qq 142-143  Back

56   Qq 143-146  Back

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Prepared 19 August 2011