Recommendation 4

MoD will need to work closely with industry to ensure resilience in its supply chains. The MoD outsourced its central warehousing and the procurement of some of its commodities—food, clothing, general and medical supplies—to a consortium under the “Team Leidos” banner through the Logistics Commodities and Services Transformation (LCST) contract in 2015. This has been successful overall, forecast to generate financial efficiencies of £403 million over the life of the contract and has increased the agility of MoD’s supply operations. The MoD is looking at incorporating the learning from the LCST contract into its £1.8 billion FDSS programme for future contracts which will replace LCST in 2028. The CDLS admits FDSS is a large, complex piece of work which he is expecting will require external advice. FDSS provides a once in a generation opportunity to merge important inventory-related software contracts into a single programme. Recent events, such as the war in Ukraine and covid-19, have brought about a reassessment of how the MoD should manage its inventory, away from prioritising efficiency to ensuring greater resilience. Ukraine and previous conflicts have also highlighted the importance of protecting support networks. For example, the MoD stated that throughout its recent operations in Afghanistan, 60% of casualties were among personnel involved in force protection of lines of communication, such as convoys of fuel or stores. Future conflicts may Improving Defence Inventory Management 7 require sudden surges in demand and industrial capacity, which industry may need support to provide. MoD told us it helped develop a North Atlantic Treaty Organisation (NATO) defence production action plan to signal demand clearly to industry and the MoD plans to invest around £2.4 billion in strengthening supply chains. In the longer term it intends to create an “always-on” demand pattern to create a more robust supply chain. Recommendation: In its Treasury Minute response, the MoD