Source · Select Committees · Public Accounts Committee
Recommendation 19
19
Accepted
MoD reduced inventory value but still holds significant unserviceable or overstocked items.
Conclusion
When we last examined the MoD’s inventory management, we found that it was not consistently disposing of inventory it no longer needed and was purchasing items for which it already held sufficient stock.43 The MoD told us that from 2011 to 2023, it achieved a 25% reduction in the net book value of its inventory, which it reduced from £16 billion to £12 billion. It has also removed the financial incentives which encouraged Front Line Commands to over-purchase consumable commodities. However, it is still holding substantial amounts of inventory that is unserviceable, overstocked or beyond the service date of its related platform.44 37 Q 92; C&AG’s report para 2.5 38 Q 86; C&AG’s report para 11 39 Q 91 40 Qq 86–88 41 Qq 88, 97, C&AG’s report para 2.7 42 Qq 88, 97 43 Committee of Public Accounts, Managing the Defence Inventory, Thirty-Second Report of Session 2012–13, HC 745, 28 February 2013, Part Two para 7 44 Q 58 ; C&AG’s Report paras 12, 14 Improving Defence Inventory Management 15
Government Response Summary
The government agrees with the committee's observation and commits to establishing a single centralised disposal team in 2024 and implementing a new Base inventory system by 2024-25 to improve the identification and processing of excess and obsolete inventory.
Government Response
Accepted
HM Government
Accepted
6.1 The government agrees with the Committee’s recommendation. Target implementation date: July 2028 6.2 The department continues to tackle the challenge of identification and disposal of 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. 6.3 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. 6.4 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.