Improving Air Force Purchasing And Supply Management Of Spare Parts

This research provides the Air Force with a methodology for evaluating various strategies to improve the procurement of spare parts and applies the methodology to F100 engine parts. The author uses exploratory analysis techniques and system dynamic modeling to gain a better understanding of the effectiveness of various supplier management policies, including identifying those policy levers most effective in improving various measures of interest. The research shows that policy and organizational changes in the purchasing and supply management (PSM) process have the potential to improve effectiveness while maintaining or lowering costs. It also demonstrates that a system dynamic model can be an important contribution to defining, discussing, and understanding the complex interactions among policy levers and outcome measures, particularly in enhancing PSM efficiency and effectiveness.

The authors review Air Force purchases of "low-demand" parts, analyzing how much the Air Force spends on such parts and the types of parts that have a low demand. They then identify and synthesize best commercial purchasing and supply chain management practices used for developing supply strategies for such items, concluding with recommendations for the Air Force to improve its supply strategies for such items.

The authors describe spend analyses they conducted in 2002 for the first phase of a purchasing and supply management demonstration at the Oklahoma City Air Logistics Center for of F100 jet engine spares and repair services and jet engine bearings. The authors detail required data and processes for a spend analysis and discuss the implications of their findings for F100 purchasing and supply-chain management for future spend analyses.

Improving the Air Force Modification Process Will Benefit Management of Spare Parts in the Air Force and Defense Logistics Agency

NSIAD/AIMD-99-77 Air Force Supply: Management Actions Create Spare Parts Shortages and Operations Problems

In response to a congressional request, GAO provided information on the Department of Defense's (DOD) progress in implementing its spare parts initiatives, specifically spare parts acquisition at the San Antonio Air Logistics Center, including: (1) information on price growth; (2) an evaluation of the adequacy of the price analysis procurement officials perform; (3) an assessment of the personnel changes made in response to the initiatives; and (4) ways to improve implementing selected initiatives. GAO found that, since its previous review: (1) there was an 18.9-percent increase in procurements with decreased or unchanged prices, a decrease in procurements with higher prices, and a decrease of 48 percent in procurements with price increases of 25 percent or more; (2) the changes in spare parts prices were probably the result of lower inflation, economic improvement, and adverse media publicity; (3) procurement officials have improved their price analyses, but there is room for further improvement since price growths of 25 percent or more should prompt close scrutiny; and (4) in response to the spare parts initiatives, Air Force procurement officials shifted the emphasis from productivity to quality price analyses, hired and trained additional personnel, and revised performance appraisals to emphasize quality of pricing and competitive procurement. GAO also found that the Voluntary Refund Program and purchase request consolidation for items purchased repetitively are areas that need improvement to better achieve the intent of the spare parts initiatives.

The Supply Management Activity Group is part of the Air Force Working Capital Fund, a revolving fund that relies on sales revenue, rather than direct appropriations, to finance its operations. The wholesale division of this group obligated a reported $3.4 billion in fiscal year 1998 to buy new inventory items or pay for the repair of existing items. Working capital funds are expected to (1) generate sufficient revenue to cover the full costs of their operations and (2) operate on a break-even basis over time-that is, not make a profit nor incur a loss. Customers primarily use Operations and Maintenance appropriations to pay for inventory items. Payments from customers replenish the cash balance in the Air Force Working Capital Fund, which is used to finance ongoing operations, such as purchasing new items or paying for the repair of broken items. The Air Force Materiel Command oversees the operations of the Supply Management Activity Group through inventory control points located at its five Air Logistics Centers.