Source · Select Committees · Public Accounts Committee
Recommendation 6
6
Accepted
Set out MoD's improved understanding of inventory disposal needs and reduction targets
Recommendation
While the MoD has reduced the amount of stock it holds, it still holds large amounts of excess and unserviceable inventory. From 2011 to 2023, the MoD told us it achieved a 25% reduction in the net book value of its inventory, which it reduced from £16 billion to £12 billion. However, it is still holding substantial amounts of inventory that is unserviceable, overstocked or beyond the service date of its related platform. The MoD argues that there are many complex reasons for these build-ups of stock. For example, unserviceable inventory may still be useful if repaired, and other items are overstocked for contingency scenarios. It also stated that activity supporting the front line will always take priority over managing disposals, and the move towards building resilience will increase the level of inventory being held in future. Nonetheless, it acknowledged that its decision-making needs to be informed by better data; for example, missing data on why inventory is unserviceable makes it difficult to understand what should be disposed of. The MoD has now put in place projects to target disposals, but these are disparate and some areas, particularly the Royal Air Force, have achieved more than others. Recommendation: In its Treasury Minute response, the MoD should set out how it is improving its ability to understand which inventory items need disposing of, and ensuring this is done so consistently. It should also set out details of any targets it has to reduce the amount of the inventory overall and in particular areas. Improving Defence Inventory Management 9 1 The structure and organisation of inventory management
Government Response Summary
The government agrees and is creating a single centralised disposal team, forming in 2024, to manage inventory disposals more expertly. It states that annual corporate targets for stock reduction remain, and 2023-24 targets are on track, with the new single base inventory system in 2024-25 also improving visibility.
Government Response
Accepted
HM Government
Accepted
The government agrees with the Committee’s recommendation. excess and obsolete inventory. Over the past 10 years, DE&S has established a series of successful standalone projects. Using learning from these projects, the department is creating a single centralised disposal team, tasked with processing disposals from depots. This will utilise existing suitably qualified and experienced staff and exploit best practice. Forming up in 2024, this team will expertly manage disposal services intelligently targeting problematic areas of the Defence inventory. The introduction of the single Base inventory system across Defence in 2024-25 will be a critical enabler ensuring process alignment across environments, improved visibility, and assurance of disposal candidates. Annual corporate targets will remain ensuring consistency in the forecast and processing of disposals; targets for the financial year 2023-24 stock reduction are on track to be met. Initial effort will concentrate on removing obsolete and excess inventory from non-explosive storage depots; later phases will turn to explosive storage and front-line command units. The challenge presented through the disposal of unserviceable equipment (items currently unfit for issue) requires the department to take more risk on disposal decisions. This conflicts with the increasing emphasis on resilience, which is likely to be a limiting factor in the efficiency that can be achieved in inventory holdings. The department may need to re-assess its stock metrics and be more conservative in disposals, which would lead to the department potentially keeping more inventory in the future, as a lesson from Ukraine.