portation, at the Army Materiel Command. He has held that position for the past 4 years.

He is a member of the Senior Executive Service and has been since 1982. I would like to note that Mr. Mills was honored last year with the President's Distinguished Service Award for Senior Executives.

Mr. RAY. Congratulations, Mr. Mills.

Mr. MILLS. Thank you.

General MURRAY. Sir, we believe that today's Army is the best equipped force in the world. It has a logistics system which ensures that the Army of over one and a half million soldiers is ready to fight and fit to win.

The mission requires over one million individually identified items. These items range from tanks to clothing, to medical materiel and ammunition and high explosives.

Today's inventory of major items and weapons systems exceeds a $118 billion. This is larger than the combined inventories of IBM, General Motors, Exxon, Mobil, Sears and K-Mart. So, it is a large system. Those inventories are located in over 2,000 installations worldwide.

I have talked briefly about our two level system. Now, let me address some-in general terms, of the findings of the GAO. I would like to begin, sir, by saying that we generally agree with the findings of the GAO. We have no major differences with them.

We do take some exceptions to their methodologies. We believe that some of their methodologies tend to overstate the amount of long supply and excesses in our inventories.

When we have the reports in hand, we will be able to iron out those differences and the methodologies and come to some agreement on them.

We do have some reservations on the review conducted regarding the use of long supply assets in depot maintenance. On face value, it sounds like exactly the right thing to do. In fact, we have got a regulation on the books that says we will do that. We have not been doing that because we have not proven yet that it is, in fact, cost effective.

The Army is in the process of running a test on that using one commodity, the missile commodity. That test will be completed at the end of this fiscal year, and at that time, based on the results of that test and the GAO findings, we will be in a better position to determine the cost effectiveness of that system.

The GAO identified significant amounts of growth of items with no known requirements. I would point out that while they have no known requirements in the current budget year, if you look beyond that budget year, you will find that much of that inventory, and we project somewhere near 50 percent of that inventory, will be used, will have forecasted requirements and will be used to offset future procurements.

In their review of the Army buy-ahead policy and practices, the GAO did find that two of the buying commands were buying ahead. Buying items for which they had not reached the reorder point. This is in violation of Army policy. Once the situation was discovered, corrective actions were taken and those two commands are now in compliance with Army policy.

Elimination of retail excesses and its causes have been a focus of the Army for several years now. In May of 1988, I received the results of a study I chartered on the causes of excesses, and I think we must change our focus from ways of getting rid of excess to ways of ceasing to generate excess, and that is what this study has done.

It has made some recommendations. I have implemented or have approved the implementation of many of those recommendations, and the automated systems and policy changes will be implemented this summer.

Asset visibility is a common denominator in several of the General Accounting Office's reviews, and we are moving in several areas to improve that asset visibility.

First, I would like to comment on the SARSS system that Mr. Davis mentioned. It will provide in the division asset visibility across the five ASLS of the division, giving an automated view and aiding in the cross-leveling of assets in the division. It will do the same thing at corps level and in its final implementation at the theater level.

So, asset visibility across the corps and theaters is coming. That system will be totally implemented in mid-1990.

We are also developing a prototype supply system called the Objective Supply System, which takes the same benefits as does SARSS and extends that over a larger front. It also provides greater interface between the retail and wholesale systems because it places the retail asset balance files on record at the wholesale source of supply. The wholesale source of supply then can direct use of excess assets at an installation before passing the requisition to the wholesale system.

In summary, sir, the logistics of ensuring our soldiers are ready to fight is big business. The Army is working toward greater asset visibility and to maximize the return on Army investment. We look forward to the continued help from GAO and to the continued support from the House Armed Services Committee.

Sir, that concludes my statement. I will be happy to respond to any questions.

PREPARED STATEMENT OF MAJ. GEN. CHARLES M. MURRAY

Mr. Chairman and Members of the Readiness Subcommittee, I am pleased to testify once again on the Army's inventory management

program.

Today's Army is the best equipped force in the world. Our logistics system ensures our 772,000 active duty soldiers and 776,000 reserve component soldiers are always ready to fight and fit to win. If they must fight, the logistics system will sustain our soldiers anywhere in the world.

The Army's operation and maintenance require the use of over 1.2 million individually identified items. Items range from tanks to track and trucks to tires. From individual clothing to medical From tools and test equipment to ammunition and high

materiel.

explosives.

The Army manages over 416,000 items. The balance of our supply support is provided by the Defense Logistics Agency, the General Services Administration, and the other Services.

To accomplish our mission the Army employs a two-level supply system which includes a wholesale procurement and production component and a retail, or customer, level. The Army's wholesaler is the Army Materiel Command. The Army Materiel Command's inventory is stored at 15 depots in 10 states. The Army's retail customers are located worldwide at 2241 installations.

Today, the Army's total inventory of major items, weapon

systems, exceeds $118.6 billion. This is larger than the combined

inventories of IBM, General Motors, EXXON, Mobil, Sears, and

K-Mart.

During my nearly three years as the Director of Supply and Maintenance for the Army's Deputy Chief of Staff for Logistics, the Army has been expanding stock visibility between our two levels of supply. The Army's new generation of automated systems, now being fielded to our soldiers, will provide greater asset visibility and opportunities for cross-leveling and asset redistribution than ever before possible in the U.S. Army. I will discuss this and other similar initiatives later in my testimony.

Against this backdrop, I would like to discuss four ongoing or recently completed General Accounting Office reviews, which I understand are of interest to this subcommittee. These are:

a. Growth of Army Inventory Levels (GAO Code 393310);

b.

C.

Army Buy-Ahead Practices (GAO Code 393294);

Review of Army Depot-Level Inventories (GAO Code 393300);

d. Excess Items at the Retail Level (GAO Code 393303). Before discussing the specifics of these four reviews, I want to state the Army's concern with not being provided the opportunity to review and comment on the General Accounting Office's findings and recommendations prior to this hearing.

As I mentioned during my testimony last year, the Army works to maintain a positive relationship with both internal and external audit and investigative agencies. We view their findings and recommendations as important independent measures of the health and

well-being of the Army's logistics system.

I am not aware of a

single report by these agencies that did not cause the Army to step

back and review its policies, procedures, and compliance

mechanisms.

This positive relationship will continue.

Growth of Army Inventory (GAO Assignment 393310)

The General Accounting Office is now conducting a full review of the growth of the Army's secondary items at the wholesale level between fiscal years 1983 and 1987. Secondary items are the replacement items, repair parts and consumable items that support our weapon systems.

Since I have not been provided the opportunity to review the General Accounting Office's report and their methodology, I cannot comment on their specifics. Additionally, our discussions with the General Accounting Office lead us to believe their methodology overstated the dollar value of assets and we are uncertain as to their baseline for determining current requirements.

The Army's inventory is comprised of both applicable and inapplicable stocks. Applicable stocks are those for which we have a current requirement, known as the approved force acquisition

objective.

Inapplicable stocks are items above the approved force acquisition objective which we continue to hold to fill

unforecasted demands. The Army's retention policy is in full