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Oct
07
2016
Report Number:
DR-AR-17-001
Report Type:
Audit Reports
Category: Transportation / Vehicles

Vehicle Parts Purchasing and Inventory Management Process

Background

The U.S. Postal Service has 311 Vehicle Maintenance Facilities (VMFs), or repair garages, nationwide, to maintain its fleet of over 214,000 vehicles. The Postal Service spent more than $428 million in fiscal year (FY) 2015 on vehicle repair parts to maintain these vehicles. VMFs have access to 31,972 different parts for vehicle repairs. The delivery vehicle fleet, which mainly consists of Long Life Vehicles (LLVs), have surpassed 23 years of age, and vehicle parts purchases have increased.

The Postal Service established its vehicle parts purchasing program in 1997 to use consignment suppliers to acquire repair parts from two national suppliers. Through the consignment process, selected vehicle repair parts are ordered, received, and stocked at the VMFs and remain the property of the consignor until they are used to repair a vehicle and then the Postal Service is charged for the part. These consignors stock VMFs with parts ranging from motors and transmissions to nuts and bolts. VMFs can also purchase repair parts locally when national suppliers cannot deliver in a timely manner.

In May 2015, the Postal Service realigned its fleet management structure to place VMF managers directly under the control of field managers at Postal Service Headquarters as opposed to district managers. The Postal Service assigned each of its seven Areas to a Fleet Operations manager and the territories within each Area to a Vehicle Operations manager. VMF managers report directly to their respective vehicle operations manager.

The Postal Service uses its Solution for Enterprise Asset Management (SEAM) system to manage the vehicle parts required to maintain the vehicle fleet. To manage parts at VMFs, the Postal Service established policies and guidelines to monitor price variances, use outside vendors, and physically limit access to stockrooms. Our objective was to evaluate the vehicle parts purchasing and inventory management processes.

What the OIG Found

The vehicle parts purchasing and inventory management processes were not always effective. The two consignment suppliers delivered requested parts to the VMFs, however, personnel did not always select and purchase repair parts priced and aligned with the best-valued product guidelines. Finally, eight of 14 (57 percent) selected VMFs did not have adequate physical security and access controls. These conditions occurred because personnel could not evaluate and compare part price differences between the two consignors in SEAM. Further, managers could not always distinguish or compare

similar but different parts with the same part numbers and price offered by both consignors, in SEAM. Finally, VMF managers were either unaware of requirements to limit access to stockrooms or had not considered the potential risk. Availability of part price information would provide VMFs with options to purchase repair parts for the best-valued products and potentially reduce costs. We estimated the varying prices cost the Postal Service approximately $8.5 million in FY 2015. Furthermore, purchasing value added parts and consistent monitoring would allow a future cost avoidance of approximately $9.1 million annually.

What the OIG Recommended

We recommended management develop a SEAM Business Intelligence report showing a comparison of vehicle part numbers and prices offered by both consignors. Reinforce procedures with VMF managers to ensure physical access control and safeguard of vehicle parts in facilities.