Accession Number : ADA602842
Title : DoD Depot-Level Reparable Supply Chain Management: Process Effectiveness and Opportunities for Improvement
Descriptive Note : Research rept.
Corporate Author : RAND NATIONAL DEFENSE RESEARCH INST SANTA MONICA CA
Personal Author(s) : Peltz, Eric ; Brauner, Marygail K ; Keating, Edward G ; Saltzman, Evan ; Tremblay, Daniel ; Boren, Patricia
Report Date : Jan 2014
Pagination or Media Count : 189
Abstract : The Department of Defense (DoD) has a broad array of weapon systems and other major end items with many expensive components. For many of these components, when they have to be replaced, it costs less to replace them with a repaired, refurbished spare part than to buy a new one. Such items are called reparables within DoD. DoD designates different levels of maintenance to conduct such repairs depending on the skill level, tooling, and facilities needed to execute the repairs, with depot-level repair representing the most sophisticated level. Reparables for which all or some repairs require this level of capability are called depot-level reparables (DLRs). Within DoD, the services manage almost all reparables, with the Defense Logistics Agency (DLA) managing consumable spare parts. DLR inventory comprises the bulk of DoD secondary item inventory in terms of dollar value. There was an average of $100 billion in service-owned secondary item inventory on hand in fiscal year (FY) 2011, of which we estimate about $90 billion consisted of DLRs. The value of inventory is not a recurring cost, though; rather, the costs associated with inventory are called inventory holding costs, and the assets themselves are a sunk cost. Obsolescence is the primary component of DoD inventory holding cost. From 2005 through 2012, the services disposed of an average of $5.1 billion of condition code F unserviceable but economically repairable and $1.4 billion of serviceable DLRs per year (valued at standard price). This represents $6.5 billion (less the surcharges for supply chain management) of assets that were purchased and then later disposed of with useful life remaining. Two questions arise: (1) What led to the development of excess inventory culminating in the disposal of useable assets, and (2) could this level of excess inventory buildup be reduced?
Descriptors : *COSTS , *INVENTORY , *LOGISTICS MANAGEMENT , *MILITARY PROCUREMENT , CASE STUDIES , CONTRACTS , DEMAND(ECONOMICS) , DEPARTMENT OF DEFENSE , LOGISTICS PLANNING , OBSOLESCENCE , PARTS , REPAIR
Subject Categories : Administration and Management
Economics and Cost Analysis
Logistics, Military Facilities and Supplies
Distribution Statement : APPROVED FOR PUBLIC RELEASE