NAVAL POSTGRADUATE SCHOOL

1 NAVAL POSTGRADUATE SCHOOLM onterey, California00 DTIC1 ELEC'LrEIIIsSEP1 6 THESIS*AN ANALYSIS OF SPARE PARTS FORECASTINGMETHODS UTILIZED IN THE UNITED STATESMARINE CORPSbyRobert E. LoveandByron F. StebbinsJune 1987 Thesis Advisor: Dale I. ScogginApproved for public release; distribution is unlimited87 9 15 05aUNCLASSIFIEDWSE CRIry CLASSCICATION OF THIS PACEX 7 REPORT DOCUMENTATION PAGE'a REPORT SECLRITY CLASSIFICATION 1b RESTRICTIVE MARKINGSUNCLASS IFIED2a SECUR-Tv CLASSIFICATION AUTH4 ORITY 3 OiSTRiBUTIONIAVAILAUILITY OF REPORT2b ECS54C-A ON- DWNGADIG SHEDLEA pproved for public release;Zb OC~AS~CATONDOWGRAING CMEULE distribution is unlimited4 PEFOR-MNG ORGANIATION REPORT NuMBER(S) S MONITORING ORGANIZATION REPORT NUMBER(S)*6a NAVE OF PERFORMING ORGANIZATION 6b OFFCFE SYMBOL 7a NAME OF MVONir~iNG ORGANiZATiONNaval POSTGRADUATE SchoolsI Code 54 NAVAL POSTGRADUATE SCHOOL & ADDRESS City State and ZIP Code) 1b ADRESS (Cty. State, "n ZIP Code)Monterey, California 93943-5000 Monterey, California 93943-50003a %ME OF $u%DING SPONSORING Tab OFFiCE SYMBOL 9 PROCUREMENT iNSTRuMENT IDEN74 ICATION lNLM9ER, RGA%IZAT ON (if applicable)3c -%ZD0 ESSiCry Start, an"ZIP Code) 10 SOUjRCE OF FUNDING NUMBERSPROGRAM PROjECT ITASK I AORK , NIELEMENT NO INO NO ACCESS ON N1include Secury Classficaton)AN ANALYSIS OF SPARE PARTS FORECASTING METHODS UTILIZED IN THE UNITEDSTATFS MARINE CORPSLoe obr and Stebbins, Byron F.

2 ; EOr3 ' ME COvERED 11 AtS OF REPORT (Year. Month Day) PACcDMaster's Thesis Q~Ov ro Il B, June 1 144 COS~r, CODDES 1 8 SuBjECT IERMS (Continue on reverse of necesary and identify by block mr.,nber)-D 3 ROP SuB-GPOU~P Inventory Policies; Inventory Models, ReplacemeiIFactors; Provisioning Models; Spare Parts;I I Provisioning Policies; Initial ' Continue on reverse if necessar and identify by block num~ber)The main thrust of this study is centered around the United StatesMArine Corps' initial provisioning of spare parts. The research focuseson two intec'ral components for the establishment of stockage levels. Thefirst component considers an analysis of the peacetime replacement rate aithe production leadtime data provided by contractors. The second compone:evailuates the current Marine Corps inventory model as compared to theNavy's inventory model and the Initial Spares optimization Model (ISOM).This study is primarily concerned with initial issue provisioning stockag,levels maintained by the Marine Corps Logistics Base, Albany ' G OF ABSTRACT 21 ABSTRACT SECURITY ED'UNL MITfO 50 SAME AS RPR CODTIC uSERS TUnla;r-i f it-'.

3 A .E OF FIESPONSILE I220 TELERmONE (Include Area Code) 22c COW C I. Sc osacin (408) 646-2539 lCode 54Sc:DO) FORM 1473, 84 MAR 83 APR ed'to' -"ay be wied iiit I extaysted SECyRiTv CLASSFCA?'C% 0; -- S PA'CEAll ottic' ed-t-oi9 are obsolete UNCLASSI FIED11111 UNCLASSIFIEDSECUNITY CLASSIICATION OF THIS PAGE (MOM #19 -ABSTRACT -(CONTINUED)During the course of the study it was found that:(1) Difficulties exist in documenting contractorprovided engineering estimates maintained inthe Marine Corps Provisioning Files.(2) The current inventory is inadequate and stateof the art methods and models should beimplemented by the Marine Corps.(3) Contractor provided engineering estimatestend to be skewed. Provisioners have no formalmethod for validating contractor major contribution of this study is thedevelopment of an initial manual of standard factorsthat can be used by provisioners to validate data andas a baseline from which pertinent questions couldbe NTIS CRA&I'- f C TAB "; , -'- iDi:t i, "S N 0102- LF-014- 66012 UNCLASSIFIEDSECUNITY CLASSIICATION OF THIS PAOE(VhWa DWS Enee*d)11 M.

4 , -, ,Approved for public release; distribution is unlimitedAn Analysis of Spare Parts Forecasting MethodsUtilized in the United States Marine CorpsbyRobert E. LoveCaptain, United States Marine , State University of New York at Albany, 1977andByron F. StebbinsCaptain, United States Marine , Texas A&M University, 1978 Submitted in partial fulfillment of therequirements for the degree ofMASTER OF SCIENCE IN MANAGEMENT from theNAVAL POSTGRADUATE SCHOOLJune 1987 Authors: 24Ct -4 Robert E. LoveByr~n F. StebbinsApproved by: ~~~i oDale I. Scoggin, IWOMs AdvisorNancy VRoberts, Second ReaderWillis R. Greer, Jr., C iran,Department of AdministratiVe SciencesDean of Information and Policymlnce3~ABSTRACTThe main thrust of this study is centered around theUnited States Marine Corps' initial provisioning of spareparts. The research focuses on two integral components forthe establishment of stockage levels. The first componentconsiders an analysis of the peacetime replacement rate andthe production leadtime data provided by contractors.

5 Thesecond component evaluates the current Marine Corpsinventory model as compared to the Navy's inventory modeland the Initial Spares Optimization Model (ISOM). Thisstudy is primarily concerned with initial issue provisioningstockage levels maintained by the Marine Corps LogisticsBase, Albany the course of the study it was found that:, I) Difficulties exist in documenting contractor providedengineering estimates maintained in the Marine CorpsProvisioning (2) The current inventory is inadequate and state of theart methods and models should be implemented by theMarine Corps.,-) (3) Contractor provided engineering estimates tend to beskewed. Provisioners have no formal method forvalidating contractor major contribution of this study is the developmentof an initial manual of standard factors that can be used byprovisioners to validate data and as a baseline from whichpertinent questions could be OF CONTENTSI. INTRODUCTION---------------------------- ------------- 8A.

6 GENERAL--------------------------------- --------- 8B. OBJECTIVES OF THE RESEARCH -------------------- 10C. RESEARCH QUESTIONS----------------------------- 10D. RESEARCH METHODOLOGY-------------- ------------- 11E. SCOPE OF THE STUDY----------------------------- 12F. DEFINITIONS----------------------------- -------- 12G. ORGANIZATION OF THE STUDY---------------------- 13I. BACKGROUND------------------------------ ------------ 15A. INTRODUCTION---------------------------- -------- 15B. ACQUISITION CONCEPTS AND PROVISIONINGPRACTICES------------------- -------------------- 16C. DEPARTMENT OF DEFENSE POLICY AND PROCESS --- 20D. NAVY POLICIES AND PROCEDURES------------------- 22E. MARINE CORPS POLICIES AND PROCEDURES------------25F. SUMMARY--------------------------------- -------- 28II. PROVISIONING---------------------------- ------------ 30A. INTRODUCTION---------------------------- -------- 30B. METHODS OF ACQUISITION------------------------- 31C. PROVISIONING DATA FACTORS---------------------- 33D.

7 PROVISIONING CATEGORIES FOR INITIAL SPAREPARTS PROCUREMENT----------------------------- - 40E. MARINE CORPS PROVISIONING SYSTEM--------------- 42F. MARINE CORPS PROVISIONING MODELS--------------- 435G. COMPARISON OF INITIAL PROVISIONING MODELS -- 52H. CONTRACTOR REQUIREMENTS------------------------ 65IV. METHODOLOGY----------------------------- ------------ 68A. INTRODUCTION---------------------------- -------- 68B. SAMPLE DESCRIPTION----------------------------- 68C. VARIABLE DEFINITION---------------- ------------ 70D. VARIABLE CONSTRUCTION AND MEASUREMENT-----------71E. DATA ANALYSIS DESCRIPTION -------- 75V. RESULTS--------------------------------- ------------ 78A. INTRODUCTION---------------------------- -------- 78B. PRODUCTION LEADTIME---------------------------- 78C. PEACETIME REPLACEMENT RATE--------------------- 83VI. DISCUSSION------------------------------ ------------ 84A. INTRODUCTION---------------------------- -------- 84B. PRODUCTION LEADTIME---------------------------- 84C.

8 PEACETIME REPLACEMENT RATE--------------------- 86 VII. CONCLUSIONS AND RECOMMENDATIONS-------------------- 88A. CONCLUSIONS----------------------------- -------- 88B. RECOMMENDATIONS------------------------- -------- 90C. ANSWERS TO RESEARCH QUESTIONS------------------ 91 APPENDIX A: ABBREVIATIONS/ACRONYMS------------------ ---- 93 APPENDIX B: DEFINITION OF TERMS------------------------- 96 APPENDIX C: MIL-STD-1388-1A------------------------- ---- 103 APPENDIX D: MIL-STD-1388-2A------------------------- ---- 106 APPENDIX E: SAIP PROCEDURES----------------------------- 109 APPENDIX F: INITIAL SYSTEM STOCK OPERATING LEVEL--------1136 APPENDIX G: STANDARD PEACETIME REPLACEMENT FACTORS --- 114 LIST OF REFERENCES -------------------------------------140 INITIAL DISTRIBUTION LIST ----------------------------- 1437I. INTRODUCTIONA. GENERALThe early 1980's saw a dramatic increase in the numberof weapons systems being fielded within the Department ofDefense (DOD).

9 By 1982 total DOD outlays had increased toapproximately 200 billion dollars, the highest level sincethe height of the VietNam conflict (1968). For the firsttime in nearly 14 years the DOD had sufficient funds tomodernize and maintain its forces [Ref. l:p. 17].Along with the increased funding came the burden ofmanaging the dynamic provisioning process. Unfortunatelythe services were inadequately prepared to meet thechallenge. By 1983 horror stories abounded of governmentprocurement of overpriced spare parts. The DOD's internalaudit agency uncovered numerous instances where DODcontractors had overcharged Navy and Air Force contractingactivities [Ref. 2]. A popular example was the procurementof a 4 cent diode-for which the DOD had paid 110 dollars[Ref. 3:p. 10]. While overpricing received consicderablecongressional attention, other problems in the provisioningprocess remained is a method used to acquire support for theinitial spare parts necessary to field a weapons system(when it first becomes operational) prior to the development8 Bonnof sufficient usage data to meet the inventory stockagecriteria [Ref.]

10 4:p. ]. For the purpose of this thesisthe term spare parts will be used in a general sense. Inother words, spare parts is defined as material that isacquired for the purpose of maintaining, overhauling andrepairing a piece of equipment. This definition includessuch terms as repair parts, spares, parts, subassemblies,components and subsystems. Excluded are major end itemssuch as tanks, trucks, aircraft and the like [Ref. 4:p. 10].Initial provisioning is generally based on the estimatedmaintenance factors provided in the Logistics SupportAnalysis (LSA). Estimated maintenance factors include butare not limited to replacement rates, failure rates, repairtimes, and leadtimes. These estimates are provided to themilitary service by the contractor. They can be based onengineering estimates or past experience for a similarcomponent [Ref. 4:p. 313]. The estimates are used in theappropriate inventory model to establish stockage levels,requisitioning objectives, reorder points and the maintaining any type of inventory incurs expenses,the benefits of holding inventory must equal or exceed theholding and ordering two fundamental issues in controlling any inventoryare when to order and how much to order.