MoD supply chain is bloated, inefficient and at critical risk, say MPs

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The House of Commons’ public accounts committee has criticised the Ministry of Defence’s supply chain, and its systems, which it describes as “at critical risk of failure”.

And committee chair Margaret Hodge warned that government cost cutting could threaten plans to upgrade supply chain IT systems.

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The MPs’ report, “The use of information to manage the defence logistics supply chain”, follows a study by the National Audit Office in March, which found that the MoD could save millions of pounds with better supply chain IT.

Military logisticians say they have been asking for improvements to information systems for some five years.

In November last year, the MoD signed a ten-year £700 million contract with the Boeing Defence making it the Future Logistic Information Services (FLIS) delivery partner.

The public accounts committee found that excess inventory, and inadequate reporting lead to significant waste. It said: “The Department often holds large stockpiles of supplies on operations, which results in some supplies deteriorating before they are used.”

And it complained of a lack of data reporting by the MoD, and a failure to track costs. “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.”

The report found that in the six months to November 2010, over 40 per cent of deliveries were 30 days or more overdue, because of delays from manufacturers and suppliers. Lack of supplies has in some cases lead to cannibalisation of aircraft to maintain others.

The committee has called for the ministry to take on lean principles to reduce the risk of stock deteriorating. It also recommended putting more pressure on suppliers to deliver on time, and benchmarking performance against relevant comparators such as other armed forces.

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It also said the supply chain personnel were of key importance: “It is important that the department retains key skilled staff on the supply chain so that it can make improvements of this kind.”

Hodge said: “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.”

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