Outdated IT systems at MoD could lead to supply problems for frontline troop, NAO warns

While the department has taken steps to enhance its logistics and commodity procurement processes, several longstanding deficiencies in its inventory management system persist

The Ministry of Defence (MoD) faces ongoing challenges in managing its national defence inventories due to the sluggish modernisation of legacy IT systems, jeopardising the timely delivery of inventory to troops.

That's according to a 44-page report [pdf] by the National Audit Office (NAO). The NAO reviewed the MoD's inventory management and concluded that despite the department's shift in strategic goals for inventory management, the continued use of outdated IT systems is increasing the potential for failures and amplifying the costs associated with their maintenance and support.

The MoD manages an extensive inventory, consisting of over 640,000 unique item lines, totalling more than 740 million individual units with a net book value of £11.8 billion.

In the fiscal year 2022-23, the MoD allocated a budget of £1.5 billion for the acquisition of inventory.

Effectively managing this extensive inventory is a complex undertaking, as the department is tasked with supporting a diverse array of global operations and training exercises, necessitating a high level of adaptability to meet sudden demands for various items.

Recent events like the Ukraine war and the Covid-19 pandemic have highlighted the vulnerability of supply chains optimised for cost efficiency when faced with unexpected disruptions or increase in demand.

While the MoD has taken steps to enhance its logistics and commodity procurement processes, as well as eliminating financial incentives for excessive purchasing, several longstanding deficiencies in its inventory management system persist, the NAO report says.

A significant issue lies in the MoD's delay in upgrading its outdated IT infrastructure, which includes two core inventory systems for the Army and Navy, both over 40 years old.

These systems frequently face communication issues, necessitating cumbersome manual interventions to transfer data from one system to another. As a result, accessing data becomes a laborious process, hindering the ability to efficiently compile an overarching picture of the inventory.

The report also says that certain aspects of data quality are subpar, exemplified by the Navy's Crisp inventory management system. While this system can register that an item is damaged, it lacks the capacity to offer additional specific details. As a result, determining whether the item can be repaired or requires disposal is difficult.

The MoD also oversees inventory that is managed separately from these systems, such as shipping containers. Consequently, once the MoD dispatches a container to the front line, tracking its whereabouts and status is a highly challenging task.

In February 2023, a report from the Public Accounts Committee highlighted that the MoD was ill-prepared to swiftly and comprehensively implement digital transformations, emphasising the necessity for substantial changes in this area.

The NAO report also reveals that staffing pressures are presenting challenges to the timely delivery of resources to the front line, thereby introducing risks to operational readiness.

The Defence Equipment and Support body, which bears the responsibility for delivering equipment, informed the NAO that it had progressively decreased the number of inventory manager positions as part of its workforce reduction targets.

Ash Finnegan, VP GTM innovation and transformation at Conga, commented that NAO's latest report reveals "the consequences of running on legacy software or systems."

"According to NAO's findings, while the MoD has taken steps to improve its commodity and logistics, many long-standing weaknesses with its inventory management persist," Finnegan said.

"Moving forwards, the MoD must ensure it prioritises the resources it needs for its transformation programmes, building data and system resilience by deploying the people and equipment it needs in the right places. Its leaders will need to review their current operational model and think about where a particular solution or system upgrade would be best suited, or where a certain technology may be better placed to improve overall operability.

"By reviewing their data lifecycle, they will be able to better understand which process works or where systems need to be better aligned. Most importantly, they need to ensure that all teams are on board from the start to guarantee wider adoption across all of the MoD's departments and hubs."