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Depot-Level Reparables (DLRs) Are Managed Relatively Well by the Services

• It is difficult to find DLRs with significant excess inventory due to avoidable situations or poor supply chain management decisions or processes.
• The buildup of excess inventory and resulting disposals stems primarily from DLR phase-outs due to upgrades, reductions in fleet sizes, and complete end item phase-outs, combined with very low condemnation rates.
• However, the data indicate that in most cases of excess leading to disposals, there is a multi-year delay between when DLRs are no longer needed and when disposals occur.

But Some Opportunities for Improving DLR Supply Chain Management Exist

• The broadest issue affecting DLR supply chain management effectiveness is parts supportability, with shortfalls degrading customer support.
• The Army's use of a push-like production planning system increases the risk of customer support degradation and the risk of producing serviceable excess when demand shifts.
• Long lead times for contracts affecting DLR supply chain management increase the risk of inventory excess and customer support shortfalls from unplanned changes in demand.
• Service repair planning systems do not always account for all resource lead times and do not account for all anticipatable demand shifts for new and lifetime repair-limited items.
• Having the right metrics in performance-based agreements between the services and the Defense Logistics Agency and using them as a communications tool would help align inter-organizational priorities, driving more-effective execution of collaborative and intra-organizational planning processes.

The RAND National Defense Research Institute examined Department of Defense depot-level reparable (DLR) supply chain management to assess how it could be improved to enhance customer support and reduce costs. This report concludes that DLR supply chain management appears to be done relatively effectively across the services. What on the surface appears to be substantial inventory excess and high disposals of assets is instead a reflection of the fact that DLRs are durable assets very much like weapon systems and other end items. Most DLRs have very low condemnation rates, with depot maintenance economically repairing them time and again through the life of the supported end item. So when they are replaced by upgraded versions or weapon systems are phased out, demand disappears but the assets remain, leading first to "excess" inventory and then to disposals. This is a cost of doing business. As a result, no large, "silver bullet" solutions were found. Still, a number of modest opportunities for improving DLR supply chain management were identified. The first is improving parts supportability, including taking a total cost perspective that encompasses supply and maintenance costs when planning inventory in support of depot production. The second is to shift the Army more toward pull production. The third is to reduce lead times for all types of contracts affecting DLR supply chain management. And the fourth is to better account for all resource lead times in planning DLR production and for anticipatable shifts in procurement and repair needs. All of these enhancements would improve customer support, with better parts support likely reducing maintenance costs and pull production reducing the buildup of inventory.

• Chapter One

  Introduction

• Chapter Two

  Findings from Item-Level Case Studies

• Chapter Three

  Parts Supportability/Taking a Total-Cost Perspective

• Chapter Four

  Adoption of Pull Production

• Chapter Five

  Reducing Contract Lead Times

• Chapter Six

  Improving Repair Planning: Anticipating Knowable Changes in Demand and Condemnations

• Chapter Seven

  Potential DLR Management Changes for Exploration from the Literature

• Chapter Eight

  Overall Conclusions, Recommendations, and Needs for Further Research

• Appendix A

  Air Force DLR Management

• Appendix B

  Army DLR Management

• Appendix C

  Navy DLR Management

• Appendix D

  Logic to Identify DLRs

• Appendix E

  Categorization of DLRs

• Appendix F

  Illustrating the Consequences of a Push System