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Measuring and Managing Army Supply Chain Risk: A Quantitative Approach by Item Number and Commercial Entity Code

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Research rept.

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As the United States Army winds down from over a decade of contingency operations, the Army s demand for spare parts is expected to decrease. However, the amount of the decrease is uncertain, as are the parts and vendors that will be most affected. Army Materiel Command AMC executives are concerned that a decrease in orders to suppliers could raise the risk that either the suppliers will fail or shift production, potentially disrupting the Army s supply chain. AMC is currently implementing a Strategic Sourcing and Supplier Relationship Management initiative, to help the Army reduce supply chain costs by identifying strategic suppliers and working closely with them to improve performance. The Strategic Sourcing initiative is focused on active suppliers producing parts to maintain ground and air weapon systems and communications equipment. As part of the Strategic Sourcing initiative, AMC asked RAND Arroyo Center to determine the supply chain risk by supplier and the supply chain risk factors that are critical to AMC. This report documents a process and tool that allow AMC to assess supply chain risk by supplier, part, and weapon system. Starting with 9,300 NIINs provided by AMC, we assembled information from multiple data sources to create a database that can be used to analyze risk by NIIN. We then linked the NIIN to the Commercial and Government Entity CAGE code to identify the supplier. For each NIIN, we calculated a heuristic score for 1 the likelihood that a vendor could fail to supply the NIIN, and 2 a heuristic score for the consequent impact on Army weapons systems. We are most concerned with the cases where there is a high likelihood of supply chain failure and a high impact on the Army. We concluded that only a few hundred of the 9,300 NIINs have much risk, mainly because of the large inventory still on hand. This does not imply that there is no risk, but rather, that the Army has time to address the risk.

Subject Categories:

  • Administration and Management
  • Operations Research
  • Logistics, Military Facilities and Supplies

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