COMMONS

Committee publishes report on defence logistics supply chain

19 August 2011

On Friday 19 August 2011, the Public Accounts Committee published a report examining the Ministry of Defence's use of information to manage the supply chain to frontline troops.

Speaking on the publication of the report the Rt Hon Margaret Hodge MP, Chair of the Committee of Public Accounts said:

"The Ministry of Defence has a duty to make sure that our troops serving on the frontline get the supplies they need, when they need them and in the most cost-effective way.

"For twenty-five years, the Department has promised this Committee that it would resolve the long-standing problems associated with its supply chain: late deliveries, missed targets and inadequate cost information. Yet these problems persist.

"Deliveries are often late because of delays in receiving goods from suppliers. Last year, over 40 per cent of deliveries from suppliers were a month or more overdue.

"In some cases, delays in receiving spare parts have led to planes and other vehicles being cannibalized to make parts available. Stockpiling to guard against delays has resulted in some supplies deteriorating before they are used.

"A more efficient supply chain could release resources for the frontline. But the Department does not have the information to develop more cost-effective ways of running its supply operations.

"The Department is now seeking to resolve its information problems through a major initiative, the Future Logistics Information Services project, due to be implemented by 2014.

However, there is a risk that funding for this project could be reduced as the Department seeks to lower spending and balance its overall budget.

 

"In the meantime, IT systems being used to track supplies will remain at critical risk of failure. If they fail, there could be shortages at the front-line within a month."

Background

Margaret Hodge was speaking as the Committee published its 43rd Report of this Session which, on the basis of evidence from the Ministry of Defence, examined its use of information to manage the supply chain.

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.

Value for money

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. 

Future Logistics Information Services Project

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. There is also the risk that the budget for the project may be reduced or cut completely, as the Department makes further cuts to balance its overall budget. 

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 cannibalization 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.

Further Information

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