Spares and the Life Cycle Management Strategy

       This week I decided to take a closer look at how the spares allocation for a weapon system is determined.  Procurement costs for a new aircraft encompasses much more than the individual article or aircraft. In fact, sustainment accounts for approximately 60 to 80 percent of the total life cycle cost. Life-cycle cost (LCC) is the total cost for the weapons or support for defense acquisition system research and development (R&D), investment, operation and support (O&S), and disposal. (MIL STD 881C, para 2.3.4) The spares allocation to support a system can account for between 50 and 80 percent of the total cost of procurement (Myerson, 2012).  This is why finding the correct balance between cost, schedule, and performance is so challenging. The manufacture is interested in minimizing or deflecting cost in order to increase profit while the customer is concerned with ensuring performance for the negotiated cost. Of course schedule delays can have negative impacts resulting in direct and indirect cost for both parties. The specific acquisition strategy will have direct impact on replacement parts procurement plan and must be decided during the technology development phase.

Acquisition strategies for procurement of spares can be grouped into two approaches, demand-based modeling and readiness-based sparing. Spares to support legacy systems are driven from demand data. Essentially, inventory levels are established based on the frequency each item is placed on order. High demand items will have a larger number of replenishment articles available than infrequently consumed items. Demand data may provide accurate sparing requirements over time but, may prove to be sporadic and unpredictable. For example, consumption of a modulating engine bleed air valve could dramatically increase due to a change in corrosion preventative or metal plating of a sub-component within the valve body. Demand data would identify the unusual rate of consumption but not before the fleet was struggling with limited spare availability. An item manager could choose to flooding the supply system with excess inventory to ensure the weapon system can meet the customers performance (aircraft availability) requirements. However, as stated earlier, spares allocation accounts for approximately 50 to 80 percent of the total weapon system procurement cost (Myerson, 2012). Therefore, reducing the number of spares in the supply system will have significant impact on reducing total life cycle cost. 

A different approach could be a readiness-based sparing practice to optimize aircraft availability while decreasing the logistics footprint for sustainment spares (DoD 4140.1-R). This strategy looks to modeling data to predict the spares allocation requirements for system and sub-system assets. Elimination of surplus spares inventory in exchange for lean supply chain drive the life cycle cost down. Unlike the feast or famine cyclic environment of the demand-based supply strategy, readiness-based procures exactly enough to support the total life cycle based on reliability and maintainability predictions. Initial spares availability may prove to be challenging as the modeling data is validated. However, once stable, the supply chain management strategy should be able to achieve the required performance (aircraft availability) as defined by the customer. The implementation plan may be designed as a phased approach to help manage customer expectations. For example, initial spares procurement levels may be somewhat limited to assess proper range and depth of available inventory. Establishing  performance milestones to track program readiness may prevent surplus spares inventory. Additionally, assessing performance against validation of the modeling data will ensure manufactures design in reliability from the ground up.  

The most sophisticated weapon system in the world would be rendered totally useless if it breaks and no spares are available to return it to service. Spares to sustain the total life cycle of the system is balancing act between cost and performance. The spares allocation can be determined by demand-based data or readiness-based sparing. Each approach has its challenges but readiness-based sparing strives to procure sufficient assets to ensure the right parts are at the right place at the right time which drives total ownership costs down. 

References:

MIL-STD-881C. Work Breakdown Structures or Defense Material Items. Retrieved from: 

(https://acc.dau.mil/adl/en-US/482538/file/61223/MIL-STD%20881C%203%20Oct%2011.pdf)

Myerson, P. (2012). Lean Supply Chain Logistics Management. United States: McGraw-Hill Companies, Inc.

DAU, ACQuipedia. Readiness-Based Sparing (RBS). Retrieved from: https://dap.dau.mil/acquipedia/Pages/ArticleDetails.aspx?   

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