Best Practices Methodology: A New Approach for Improving Government
Operations (Letter Report, 05/01/95, GAO/NSIAD-95-154).

Private sector organizations recognize that in order to survive, they
have to undertake major changes to make themselves more productive and
to reduce costs.  Today, many federal agencies face that same reality.
The Defense Department (DOD) is a prime example of an agency facing the
challenge of streamlining for efficiency and lower costs while
maintaining quality.  DOD has accomplished that goal in several areas.
For example, the Defense Logistics Agency (DLA) has since 1992 had
private sector vendors supply personnel items directly to military
facilities in lieu of the traditional military supply system.  As a
result, DLA expects a 53-percent reduction in its 1992 inventory level
of these items by 1997.  What is behind these improvements? In large
measure, these organizations have benefitted from GAO studies
highlighting "best practices"--processes, practices, and systems--that
organizations have adopted in a particular area, such as inventory
management.  These best practices provide a model for other
organizations with similar missions. Frequently, benchmarking is used to
gather information on these practices from several organizations, which
is then applied to improving operations.  The best practices approach
need not be confined to defense issues, however.  This report explains
how others could go about using the same principles and techniques to
promote and implement improved processes.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  NSIAD-95-154
     TITLE:  Best Practices Methodology: A New Approach for Improving 
             Government Operations
      DATE:  05/01/95
   SUBJECT:  Federal agency reorganization
             Human resources utilization
             Productivity
             Agency missions
             Strategic planning
             Property and supply management
             Inventory control systems
             Defense operations
             Operations analysis
             Defense cost control

             
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Cover
================================================================ COVER


National Security and International Affairs Division

May 1995

BEST PRACTICES METHODOLOGY - A NEW
APPROACH FOR IMPROVING GOVERNMENT
OPERATIONS

GAO/NSIAD-95-154

Best Practices Methodology

(709090)


Abbreviations
=============================================================== ABBREV

  DLA - Defense Logistics Agency
  DMN - Defense Management and NASA Issues
  DOD - Department of Defense
  GAO - General Accounting Office
  NSIAD - National Security and International Affairs Division

PREFACE
============================================================ Chapter 0

Private sector organizations are recognizing that in order to survive
in the future, they have to initiate major changes within their
organization that will make them more productive and reduce costs. 
Today, many federal agencies are facing that same reality. 

The Department of Defense (DOD)\1 is a prime example of an agency
facing the challenge of streamlining for efficiency and lower costs
while maintaining quality.  DOD has accomplished that goal in several
areas.  For example, since 1992, as a direct result of our
recommendations, the Defense Logistics Agency (DLA) has taken steps
to have private sector vendors supply certain personnel items
directly to military facilities in lieu of the traditional military
supply system.  As a result, by 1997, DLA expects a 53-percent
reduction in its 1992 inventory level of these items. 

What is behind these improvements?  In large measure, these
organizations have benefited from GAO studies emphasizing "best
practices," carried out by the Defense Management and NASA (DMN)
issue area within the National Security and International Affairs
Division (NSIAD).  The best practices approach to change involves
identifying organizations that are widely recognized for major
improvements in their performance and efficiency in a specific area,
such as inventory management.  The processes, practices, and systems
identified in these organizations are referred to as best practices,
and provide a model for other organizations with similar missions. 
Frequently, benchmarking is used to gather information on these
practices from a number of different organizations, which is then
applied to improving operations.  Benchmarking is also an effective
approach for promoting organizational change. 

By applying a best management practices approach, DMN has been able
to make recommendations intended to radically change DOD processes
and correspondingly produce substantial savings.  To date, DMN has
issued 14 reports related to implementing and managing best
management practices.  Many of these reports illustrate the benefits
from a best practices review.  Appendix I contains a listing of these
reports. 

The best practices approach need not be confined to our defense
issues.  In this report, we explain how others could go about using
the same principles and techniques to promote and implement improved
processes. 

If you have any questions about this strategy, please contact me on
(202) 512-8412.  Major contributors on the best practices assignments
are listed in appendix II. 

Donna M.  Heivilin
Director, Defense Management
 and NASA Issues


--------------------
\1 DOD remains the largest U.S.  government entity, employing 3.5
million personnel with annual budgets ranging from $240 billion to
$250 billion. 


WHAT ARE BEST MANAGEMENT
PRACTICES? 
============================================================ Chapter 1

Best management practices refer to the processes, practices, and
systems identified in public and private organizations that performed
exceptionally well and are widely recognized as improving an
organization's performance and efficiency in specific areas. 
Successfully identifying and applying best practices can reduce
business expenses and improve organizational efficiency.  Best
practices we have identified in our work resulting in recommendations
to the defense community include:  (1) relying on established
commercial networks to manage, store, and directly deliver defense
electronic items more efficiently; (2) using private sector food
distributors to supply food to the military community faster and
cheaper; and (3) adopting the use of supplier parks to reduce
maintenance and repair inventories. 

Most of the Defense Management and NASA's (DMN) best practices
reports have focused on using best management practices to improve a
specific the Department of Defense (DOD) process.  DMN has also
reported on management concepts that are important in successfully
implementing best management practices throughout an organization,
such as reporting on techniques companies use to achieve and manage
change.\1 See appendix I for a list of the reports related to the use
of best management practices and additional information on each
report's findings. 


--------------------
\1 See the reports Reengineering Organizations:  Results of a GAO
Symposium (GAO/NSIAD- 95-34,
Dec.  13, 1994) and Organizational Culture:  Techniques Companies Use
to Perpetuate or Change Beliefs and Values (GAO/NSIAD-92-105, Feb. 
27, 1992). 


WHY USE THE BEST MANAGEMENT
PRACTICES APPROACH IN EVALUATIONS? 
============================================================ Chapter 2

DMN chose initially to look at applying best management practices
techniques in the area of supply management, because DOD's supply
system has been an area with long-standing problems in which proposed
solutions seldom corrected the conditions identified.  Also, DOD's
supply management is a large budget item so the potential for large
dollar savings was present.  DMN believed that comparing DOD's supply
management practices to those that had a proven track record in the
private sector would provide a picture of what improvements were
possible and indicate proven strategies.  A GAO consultants' panel,
consisting of retired DOD officials and logistics business and
academic experts, agreed that looking at private sector practices
would help us find ways to improve DOD operations, because many
private sector companies had made fundamental improvements in
logistics management. 

DMN's best practices work can result in radical changes in certain
DOD processes, as well as substantial dollar savings.  Since 1992, as
a direct result of our recommendations, the Defense Logistics Agency
(DLA) has taken steps to have private sector vendors supply
pharmaceutical products, medical supplies, food, and clothing and
textiles directly to military facilities in lieu of the traditional
military supply system.  As a result, by 1997, DLA expects a
53-percent reduction in its 1992 inventory level of these items. 
With fewer days' worth of supplies on hand, DLA depot overhead costs
will decline also.  Other examples of results of best management
practices reviews are shown in figure 1. 

   Figure 1:  Results in DOD's
   Inventory Management Following
   GAO's Best Practices Reviews

   (See figure in printed
   edition.)


WHEN IS A BEST PRACTICES APPROACH
APPROPRIATE? 
============================================================ Chapter 3

Deciding whether to use a best practices approach involves
considering a number of factors.  Our experience shows that the
following questions can serve as a guide in making the decision. 

  -- Have GAO and others reported on the acknowledged problem areas
     before, and to what extent has there been attempts to make the
     process work as designed?  In our case, GAO had reported on
     DOD's inventory problems for over 30 years, and DOD had
     generally agreed with our observations and had often taken steps
     to improve the process.  However, improvements were incremental
     at best and failed to achieve significant gains in effectiveness
     or dollar savings.

  -- Is there a process with similar requirements that can be
     compared to the one being examined but is implemented in a way
     that provides significantly better results?  For example, a
     military and private hospital both depend on timely and accurate
     delivery of supplies.

  -- Do the areas being considered have an established counterpart in
     the private or public sector that will provide evidence of the
     benefits of a new process?  For example, we compared the way DOD
     procures, stores, and delivers food to base dining halls to the
     way institutional food users in the private and public sector
     obtain food.  Other areas looked at, such as medical, clothing,
     and spare parts inventories, also allowed us to make comparisons
     with processes with similar objectives in the private and/or
     public sector. 

A best practices review can be applied to a variety of processes,
such as payroll, travel administration, employee training, accounting
and budgeting systems, procurement, transportation, maintenance
services, repair services, and distribution.  You may consider
looking at an area where the agency has already begun to implement
some best management practices, but with limited success.  Additional
work in the area may provide a crucial boost to an agency's efforts. 
Looking at current industry trends in contracting out business
functions (also referred to as "outsourcing") can also suggest areas
that could benefit from a best practices review.  For example,
private sector companies are beginning to outsource logistics
functions, primarily transportation and distribution, and data
processing functions. 

The decision to use a best practices review should be made in a
larger context that considers the strategic objectives of the
organization and then look at the processes and operating units that
contribute to those objectives.  Ask questions like (1) What drives
the costs in a particular process?  and (2) Is the process effective
in achieving its goals?  An initial step is to determine all the
variables that contribute to the expenditures associated with the
area.  Another early step is to start with the areas that the
customers think are of major importance to the organization being
reviewed. 

Identifying the scope of the process you plan to review is not always
easy.  It is not always clear where you begin and where you stop when
you decide to benchmark a process.  It is important that the entire
process be considered, rather than just part of the process.  For
example, in reviewing DOD's food supply, we examined the entire food
supply system, including buying, storing, and distributing food
rather than just a part of the system such as distribution because
these parts are interconnected and changes in one part will impact
the others.  If you fail to capture the entire process then you may
push costs into another section of the process or create an
improvement that is inhibited by trying to marry old ways with new
ways that are in conflict with each other.  However, you cannot look
at everything.  At least initially, select a process which is about
ready to accept change. 


HOW DO YOU PERFORM A BEST
MANAGEMENT PRACTICES REVIEW? 
============================================================ Chapter 4

Under a best practices review, you are forced to consider new
approaches.  Specifically, you will compare how an organization
performs functions with one doing them differently--such as a
function in a unique government agency with a company performing the
same or similar function in the private sector.  The different
approach may turn out to be a much better way of performing a
function.  Implementing this better way to perform a process
throughout the organization is what allows an agency to make
meaningful changes. 

In identifying best practices among organizations, the "benchmarking"
technique is frequently used.  In benchmarking with others, an
organization (1) determines how leading organizations perform a
specific process(es), (2) compares their methods to its own, and (3)
uses the information to improve upon or completely change its
process(es).  Benchmarking is typically an internal process,
performed by personnel within an organization who already have a
thorough knowledge of the process under review.  Our approach is
similar.  However, GAO's role is to look at the process from the
outside, much like a consultant, and determine if that process can be
improved upon or totally changed. 



   (See figure in printed
   edition.)

The best practices evaluation will look not only at quantitative
data, such as costs, but also at how other processes and aspects such
as organizational culture might be affected by change. 

In our work, we have found several elements that any best practices
review should include.  These elements are listed below and then
discussed separately in detail: 

(1) Gaining an understanding of and documenting the government
process you want to improve. 

(2) Researching industry trends and literature, and speaking with
consultants, academics, and interest group officials on the subject
matter. 

(3) Selecting appropriate organizations for your review. 

(4) Collecting data from these selected organizations. 

(5) Identifying barriers to change. 

(6) Comparing and contrasting processes to develop recommendations. 


   UNDERSTANDING THE GOVERNMENT
   PROCESS YOU WANT TO IMPROVE
---------------------------------------------------------- Chapter 4:1

The first step in beginning a best practices review is to thoroughly
understand the government process you are reviewing before you go out
to speak with officials in various organizations.  This will help not
only to fully understand the process but to recognize opportunities
for improvement.  Understanding the process will ease your analysis
by defining a baseline for comparison and providing more focus to
your questions when you make inquiries on the best practices
identified in other organizations.  Further, a good depth of
understanding is essential to selecting appropriate comparison
companies.  Discussing the process in detail with agency officials
and flowcharting the process will facilitate data gathering from the
comparison organizations and the comparative analysis. 


   RESEARCHING TO PLAN THE REVIEW
---------------------------------------------------------- Chapter 4:2

Preliminary planning and research are key elements in preparing a
best practices review; both must be done before selecting the
organizations for comparison.  Performing a literature search,
researching industry trends, and speaking with consultants,
academics, and industry/trade group officials will provide valuable
background information on the process under review.  It will also
provide you with the names of leading edge companies and public
sector organizations. 



   (See figure in printed
   edition.)

The people you speak with before selecting the organizations for
comparison can give you useful information on the best practice you
are reviewing, as well as the names of leading edge organizations. 
They may also be able to provide you with a contact into an
organization.  You will find the names of consultants, academics, and
industry/trade groups during your literature search.  Other resources
for finding these names range from telephone book listings of
industry groups to faculty rosters for schools that specialize in the
area you are evaluating. 

Obtaining company annual reports or other background information on
the organization before your visit will help you to prepare for your
meetings with officials.  Most of the leading edge organizations
receive calls from many others to learn about their practices. 
Therefore, they will only provide you with a limited amount of time. 
Having a thorough background on the issue, including the government's
process, will allow for an effective use of both parties' time. 


   SELECTING APPROPRIATE
   ORGANIZATIONS
---------------------------------------------------------- Chapter 4:3

After you have reviewed the literature and after all of your
discussions with consultants, academics, and industry/trade group
officials, you will have compiled a list of many organizations cited
as "best" in their respective industry for the process you are
reviewing.  The next decision is determining how many organizations
to visit.  In our best practices reports, we visited an average of
nine companies per job.  Visiting too many companies can cause
"analysis paralysis," according to benchmarking experts.  These
experts say to keep the number of companies to a manageable number,
which can be as low as five. 

Officials from each organization that you speak with will also be
able to tell you which companies are the best in a given area.  You
may want to add a company to your list if it is one that you keep
hearing about.  Getting the names of other leading edge organizations
from these officials will also help to confirm that you selected the
right companies to visit and provide additional leads on others. 

Depending on the process under review, you may want to select
companies that are geographically dispersed.  We used this criterion
for the selection of companies in the DOD food inventory report.  You
will need to determine the criteria that best meet your needs. 

Your criteria need not require finding the "best of the best" if the
difference in the process is not significant among leading edge
organizations.  In these cases, what is important is to find
companies that are considered by experts to be among the best at the
process you are reviewing.  Such companies may be able to give you
more time than the very best, which may be flooded with requests to
study them. 


   COLLECTING DATA FROM SELECTED
   ORGANIZATIONS
---------------------------------------------------------- Chapter 4:4

After you have researched and begun planning your review, you should
develop a list of questions to use as a guide for discussions with
the consultants, academics, and industry/trade group officials.  You
may need to refine the questions after these discussions and prior to
your first interview with private sector company or public sector
officials.  You may also need to refine the questions again after
your first interview with these officials.  A standard list of
questions will ensure that you are obtaining comparable information
among the organizations you speak with. 

As with the process of the agency you are evaluating, you will need a
thorough understanding of the process in the private sector before
you can compare and contrast the two and make effective
recommendations.  The list of questions will help you obtain the
information needed from all sources in order to make a detailed
analysis.  Your analysis will involve looking for common practices
and characteristics among the organizations you have identified as
having best practices in the selected function you are reviewing. 


   IDENTIFY BARRIERS TO CHANGE
---------------------------------------------------------- Chapter 4:5

A major challenge to ensuring that your final recommendations will be
implemented and effective lies in identifying the barriers to change,
whether real or perceived.  Your discussions with agency officials
and your background research should provide information on such
potential sources of barriers as regulatory requirements,
organizational culture, and the impact of the change on the agency
and its services. 

Government agencies often must operate under many statutory
requirements that do not exist in the private sector.  While such
regulations do not always prevent the use of best management
practices, they may make change difficult.  For example, DOD
officials were concerned that using private sector distributors to
deliver food to base dining halls would eliminate the participation
of small businesses.  This concern was alleviated when we
demonstrated that most private sector food distributors were already
small businesses. 

Organizational culture may be a major obstacle.  In our work, we were
faced with the fact that DOD has been doing business the same way for
over 50 years.  Such an entrenched system could make changes
difficult to implement.  As a way to encourage and support new ways
of operating, we did a review on how leading edge companies were able
to change their organizational culture in the face of radically new
operations.  The report provided an impetus for DOD to think
differently.  However, this work also showed that immediate and
comprehensive change is unlikely in any organization:  it can take 5
to 10 years or longer to change an organization's culture. 

A paramount consideration should be the effect of recommendations on
the agency's future ability to provide its service.  For example, if
your review leads to recommending that a function be privatized, you
will need to consider the impact this will have on taking the
function away from the government.  You will need to raise--and
answer--such questions as what would happen if a strike should occur
at the company that takes on the function, a natural disaster
destroys the company building, or the company goes out of business. 
However, it is likely that the private sector may provide information
on these instances since the same events would equally have an impact
on the private and public sectors. 


   MAKING RECOMMENDATIONS FOR
   CHANGE CONSTRUCTIVE AND
   CONVINCING
---------------------------------------------------------- Chapter 4:6

The final step in the best practices review is to compare and
contrast the agency's process to the processes of the organizations
you benchmarked, and to decide whether the agency would benefit from
implementing new processes.  If the answer is "Yes," remember that
flexibility is a key theme, as it may not be possible for the agency
to do things exactly as they are done in the other organizations. 

A successful recommendation strategy in our work that encourages the
idea of change is to give the agency a "basket of ideas" from which
to choose and adapt to their unique operations.  Demonstrating
possible savings and recommending key steps for change will help to
promote that change.  Photographs of the consequences of the
government's process versus the private/public sector's process are a
convincing tool to illustrate the effectiveness of a recommended
change. 



   (See figure in printed
   edition.)

In addition, we have tried to help DOD one step past issuance of the
report.  Specifically, we have tried to use the knowledge gained
during the review to help in facilitating the change.  For example,
we have met formally and informally with key officials to discuss how
the change can be implemented.  We also made presentations to groups
affected by the change.  In work such as this, "follow through" means
staying in touch and educating and influencing with whatever
assistance can be provided.  At the same time, we maintain our
ability to critique the results in a constructive way. 

Perhaps the most convincing argument for implementing recommendations
for radical change lies in the environment of tight budgets.  At DOD,
such constraints have forced DOD officials to look toward new ways to
do business and, in turn, save money.  Consequently, most officials
have been receptive to many of our streamlining recommendations. 


WHAT ELSE DO YOU NEED TO KNOW? 
============================================================ Chapter 5

Much of what we have learned about doing best practices reviews goes
into any evaluation-related work.  However, we have some specific
practices that were so useful to us that we created an ongoing list
of helpful tips.  These should help in planning the review and in
establishing productive relationships with the selected
organizations. 

  -- We used two different approaches to arranging a meeting with the
     desired officials of the target organization.  First, if you
     have a contact's name, you can call the person directly and
     request an interview.  You might either call first or send a
     letter followed up with a call.  Second, if you were not able to
     obtain a name through the literature or through your discussions
     with the consultants, academics, and industry/trade officials,
     you can contact the office of the president of the company
     either by phone or by letter.  This office will be able to
     direct you to the appropriate official(s).  With either
     approach, your letter or your phone call should state your
     purpose very clearly and ensure them that the information will
     only be used for benchmarking.

  -- Send a copy of the questions to the organization's officials
     before your visit.  This will allow them the opportunity to
     prepare for the meeting, gather requested information, and
     invite pertinent personnel.  If the list of questions is long,
     you may want to consider sending a shorter version.

  -- After you have set up a meeting time, date, and place, it is
     best to mail (or fax) a letter of confirmation.  Your questions
     can be sent with this letter.  It is also a good idea to
     reconfirm the meeting a few days prior to your scheduled time. 
     After the meeting, follow up with a thank you letter.

  -- On average, plan to spend between 1/2 day to a day and 1-1/2
     days with the company.  However, the amount of time a company
     will give you will vary.  DMN's experiences have run the gamut
     from a 1-hour phone interview to a 2-week detailed look at a
     company's operations.

  -- If you plan to use the organization's name in the report, ask
     for permission.

  -- Inform all interviewees that you will be providing them with a
     draft or relevant portions of the report for their review.  This
     will help ensure that you correctly interpreted the information
     obtained from interviews.  It also allows the company the
     opportunity to ensure that they did not give you any proprietary
     information during the interview.

  -- Plan for your review (planning, data collection, and analysis)
     to take an average of 12 months.  As pointed out above, these
     reviews take a lot of up-front work, and getting into
     leading-edge companies can take a long time.  Nonetheless, we
     have found that the results of these reviews have justified the
     time spent.

  -- Throughout the review, pay attention to establishing good
     working relationships with these organizations.  As in any
     evaluation, this provides a sound foundation for future
     contacts. 


GAO REPORTS ON BEST MANAGEMENT
PRACTICES
=========================================================== Appendix I

Reengineering Organizations:  Results of a GAO Symposium
(GAO/NSIAD-95-34, Dec.  13, 1994). 

We conducted a symposium to address private sector best practices in
reengineering in an effort to provide insight into the Department of
Defense's (DOD) efforts to streamline its business practices.  Five
principles for effective reengineering emerged from the symposium,
including:  (1) support from top management helps remove barriers to
change; (2) an organization's culture is receptive to reengineering
goals and principles; (3) major improvement and savings are realized
by focusing on the business from a process rather than functional
perspective; (4) reengineering efforts are based on a clear notion of
customer needs, anticipated benefits and potential for success; and
(5) process owners manage reengineering projects with teams that are
cross-functional, maintain a proper scope, focus on customer metrics,
and enforce implementation timelines. 

Commercial Practices:  Opportunities Exist to Enhance DOD's Sales of
Surplus Aircraft Parts (GAO/NSIAD-94-189, Sept.  23,1994). 

In fiscal year 1993, DOD's proceeds from the sale of commercial-type
surplus aircraft parts averaged less than 1 percent of what DOD paid
for them.  In contrast, commercial airlines realize proceeds on the
order of
40 to 50 percent.  The large difference in proceeds reflects the
different incentives and marketing practices at work within DOD and
the private sector.  While DOD is driven by policies designed to
dispose of the parts quickly, commercial companies use marketing
techniques that enhance the visibility and marketability of their
parts. 

Organizational Culture:  Use of Training to Help Change DOD Inventory
Management Culture (GAO/NSIAD-94-193, Aug.  30, 1994). 

DOD has acknowledged that to reduce the size and cost of its
inventories it must change its inventory management culture.  As
reported in an earlier report, training has been shown to be a key
vehicle for helping organizations change their cultures.  However,
DOD has yet to take essential steps for using training to foster
change. 

Partnerships:  Customer-Supplier Relationships Can Be Improved
Through Partnering (GAO/NSIAD-94-173, July 19, 1994). 

The decision to use a partnership approach in a business relationship
is based on whether the potential partners believe they can benefit
from such a relationship and the benefits outweigh the costs. 
Partnering that has been successfully implemented by some companies
has resulted in reduced costs and improved service and quality for
both parties.  DOD has recognized the potential benefits of
partnering, and the Army Corps of Engineers has had successful
partnership experiences with its contractors as well as among
internal divisions in the Corps. 

Commercial Practices:  DOD Could Reduce Electronics Inventories by
Using Private Sector Techniques (GAO/NSIAD-94-110, June 29, 1994). 

DOD continues to buy and store redundant levels of electronics items,
valued at over $2 billion.  During the past decade, many private
sector companies have adopted modern inventory management practices
that have significantly reduced electronics inventories, decreased
procurement times, and saved millions in associated operating costs
while improving the availability of stock.  The companies rely on
established commercial distribution networks to manage, store, and
directly deliver inventory on a frequent, regular basis. 

Commercial Practices:  Leading Edge Practices Can Help DOD Better
Manage Clothing and Textile Stocks (GAO/NSIAD-94-64, Apr.  13, 1994). 

DOD continues to store redundant levels of clothing and textile
inventories throughout its wholesale and retail system, with 10 years
of supply on hand for some inventories.  Private sector firm have
learned to cut costs by moving to just-in-time inventory concepts
that help keep inventories low, turn stock frequently, fill orders
quickly.  Many private sector firms and some federal agencies with
uniformed employees are relying on prime vendors to manage their
clothing inventories. 

Defense Transportation:  Commercial Practices Offer Improvement
Opportunities (GAO/NSIAD-94-26, Nov.  26, 1993). 

Commercial shippers have integrated their transportation functions
with the entire logistics process, limiting the number of carriers
they use to those that provide high-quality service at a competitive
price, expanding the use of information technology, and contracting
out certain logistics operations.  DOD has acknowledged that it can
benefit from transportation practices performed in the commercial
sector and has made some progress in improving transportation
management. 

Defense Inventory:  Applying Commercial Purchasing Practices Should
Help Reduce Supply Costs (GAO/NSIAD-93-112, Aug.  6, 1993). 

DOD's replenishment formula used to compute optimum order quantities
for secondary items is not conducive to today's business operations
because it is based on some assumptions that are rarely met, such as
constant demand.  Private sector companies are using alternative
purchasing methods such as quick response.  Even though DOD's reasons
for holding inventory differ from that of private sector companies,
it must find a balance between inventory depth and supply cost. 
Commercial replenishment strategies offer better opportunities for
DOD to meet this balance. 

Commercial Practices:  DOD Could Save Millions by Reducing
Maintenance and Repair Inventories (GAO/NSIAD-93-155, June 7, 1993). 

DOD can reduce maintenance and repair inventories by adopting
commercial practices, such as the use of supplier parks and direct
delivery programs.  These practices could reduce unnecessary
inventory requirements at military industrial centers and eliminate
the need to store supplies in the Defense Logistics Agency's depot
system. 

DOD Food Inventory:  Using Private Sector Practices Can Reduce Costs
and Eliminate Problems (GAO/NSIAD-93-110, June 6, 1993). 

The military food supply system, which is generally outmoded and
inefficient, offers the opportunity to achieve cost savings by using
private sector food distributors.  Many of the costs DOD incurs for
holding, handling, and transporting large quantities of food are
unnecessary because the existing network of private sector full-line
distributors can supply food to DOD much more efficiently.  Because
of heavy competition within the industry, distributors have an
incentive to cut costs, keep prices low, and provide excellent
customer service. 

Organizational Culture:  Techniques Companies Use to Perpetuate or
Change Beliefs and Values (GAO/NSIAD-92-105, Feb.  27, 1992). 

An organization's decision to change its culture--the underlying
assumptions, beliefs, values, attitudes, and expectations shared by
an organization's members--is generally triggered by a specific event
or situation, such as a change in the world situation or severe
budget reductions.  It usually takes a company between 5 to 10 years
to make a complete cultural change and involves using a combination
of many techniques.  The two key techniques are top management
commitment and training that promotes and develops skills related to
desired values and beliefs. 

DOD Medical Inventory:  Reductions Can Be Made Through the Use of
Commercial Practices (GAO/NSIAD-92-58, Dec.  5, 1991). 

DOD's health care system can save millions of dollars by increased
use of inventory management practices pioneered by leading civilian
hospitals.  These practices include standardization of supplies,
electronic ordering, and just-in-time and stockless delivery
programs. 

Commercial Practices:  Opportunities Exist to Reduce Aircraft Engine
Support Costs (GAO/NSIAD-91-240, June 28, 1991). 

The value of DOD's secondary inventories (including spare parts and
components for aircraft, ships, and general supplies) increased $60
billion between 1980 and 1988.  Both the Air Force and commercial
airlines use the F-108 engine, but DOD bought millions of dollars of
excess engines and spare parts.  Commercial airlines estimate their
requirements to more closely reflect actual experience and rely more
heavily on the manufacturer to provide spare parts.  The Air Force
could benefit from adopting some commercial practices to prevent the
purchase of excess engines and parts. 

Defense Logistics:  Observations on Private Sector Efforts to Improve
Operations (GAO/NSIAD-91-210, June 13, 1991). 

Private sector firms have found that integrated logistics management
can help reduce costs and increase their competitiveness.  Major
elements for successful implementation of integrated logistics
management include total cost analysis and top management commitment. 
DOD may be able to benefit from private sector experiences in
improving their logistics operations. 


MAJOR CONTRIBUTORS IN DMN'S BEST
MANAGEMENT PRACTICES ASSIGNMENTS
========================================================== Appendix II


   NATIONAL SECURITY AND
   INTERNATIONAL AFFAIRS DIVISION,
   WASHINGTON, D.C. 
-------------------------------------------------------- Appendix II:1

Uldis Adamsons
Claude T.  Adrien
Carolyn S.  Blocker
John J.  D'Esopo
Thomas W.  Gosling
Diane Blake Harper
Joan B.  Hawkins
Donna M.  Heivilin
John J.  Klotz
M.  Glenn Knoepfle
Kenneth R.  Knouse, Jr.
Kay D.  Kuhlman
Marilyn Mauch
F.  Earl Morrison
B.  Scott Pettis
Nancy L.  Ragsdale
Arnett Sanders
George C.  Surosky
Nomi R.  Taslitt
David R.  Warren
Marilyn K.  Wasleski


   GENERAL GOVERNMENT DIVISION,
   WASHINGTON, D.C. 
-------------------------------------------------------- Appendix II:2

Ken Miyamoto
Keith E.  Steck


   RESOURCES, COMMUNITY, AND
   ECONOMIC DEVELOPMENT DIVISION,
   WASHINGTON, D.C. 
-------------------------------------------------------- Appendix II:3

Stephen L.  Jones



   CINCINNATI REGIONAL OFFICE
-------------------------------------------------------- Appendix II:4

Donald L.  Allgyer
Cheryl K.  Andrew
Bruce D.  Fairbairn
Shari A.  Kolnicki
Laurie R.  Housemeyer
Matthew B.  Lea
Brian T.  Mullins
Robert L.  Repasky
Richard L.  Strittmatter


   DETROIT REGIONAL OFFICE
-------------------------------------------------------- Appendix II:5

Audrea L.  Buck
Robert W.  Herman
Daniel J.  Martin
Louise N.  Roy-O'Connell


   NORFOLK REGIONAL OFFICE
-------------------------------------------------------- Appendix II:6

Tracy W.  Banks
George O.  Morse
Johnnie M.  Phillips
Harry E.  Taylor, Jr. 


   OFFICE OF GENERAL COUNSEL,
   WASHINGTON, D.C. 
-------------------------------------------------------- Appendix II:7

John A.  Carter
Michael D.  Hipple

*** End of document. ***