[This article was first published in Army Sustainment Professional Bulletin, which was then called Army Logistician, volume 2, number 3 (May–June 1970), pages 8–11, 24–25.
The text is reproduced as faithfully as possible. To view figures and charts, refer to the issue itself, available on DVIDS and the bulletin’s archives at asu.army.mil/alog/.]
The U.S. Army Tank-Automotive Command (USATACOM), Warren, Michigan, a major subordinate command of the U.S. Army Materiel Command (USAMC), is the Army's worldwide manager of tactical vehicles, selected combat vehicles, and automotive repair parts peculiar to those vehicles. The worldwide inventory managed by USATACOM consists of about 50,000 different tactical vehicle parts and 535,000 vehicles with a value of about $3 .5 billion. USATACOM’s annual budget for procurement of vehicles and vehicle parts is almost $1 billion. The Army's combat efficiency and high mobility depend to a high degree on the manner in which USATACOM manages vehicles and repair parts.—Editor
THROUGH THE USE of an internal management procedure, referred to as the "USATACOM Hi-Demand Program," supply support to customers is steadily improving. The Hi-Demand Program is making it possible to apply an effective and systematic approach in detecting and solving supply problems. Our methods may well be a modified application of techniques already in use in other USAMC commodity commands, but for our purposes the evidence confirms that we have come up with a solution to supply problems.
In January 1968, USATACOM was faced with a situation that threatened not only the soundness of its economic position but the very core of its purpose in life—effective vehicular support of our combat effort. Our supply performance was reported as 71 percent, but our analysis showed that this would drop to approximately 50 to 55 percent in the ensuing months. Plagued by ADP systems conversions and funding problems, compounded by uncertain conditions in combat areas, we had over 10,000 items—23 percent of our total stocked items—at zero balance. To top it all off, we had just been jolted with a $34 million cut in our second-half, fiscal year 1968, Army Stock Fund budget. This reduction, we knew, would have serious repercussions in fiscal year 1969. Realizing that a change of approach in our methods was essential, I set up a study group to analyze the problem and devise a solution.
The key finding of the study group was that we had no system for identifying and concentrating management attention on items of significance among the total 70,000 under our management. Apart from the high-dollar-value items, no differentiation was made among the 70,000 items until we got into trouble. Then all our efforts were directed to getting out of trouble. ln short, we had no organized approach to preventive management—no way of anticipating and stopping trouble before it happened.
The major recommendation of the study group was to establish a system of "dynamic management" not only for items having a high-dollar sales volume (to cope with budgetary problems) but also for items with low-dollar sales volume in great demand by customers. This customer-oriented approach was designed to warn of potential problems and to allow immediate, corrective action to be taken.
The next task was to determine which of USATACOM's 70,000 items merited such intensive management attention. The criterion selected was the frequency of demand from our customers. The study group concluded that any item having a demand frequency of 20 or more demands per quarter, over a period of 12 months, should be included in the intensive management program. This frequency-of-demand principle recognized the importance of the item to USATACOM's customers and the probable impact on our budget and workload. We call this the USATACOM Hi-Demand Program.
The Dynamics of High Demand
The Hi-Demand Program involves far more than a careful look at a group of special items by a manager. Special attention is exercised every step of the way from the supply control study to the contract award for all high-demand procurement actions. Priority is given to all actions associated with high-demand items in all USATACOM directorates. Designated individuals assure proper control and expediting of high-demand-item buys. Procurement work directives (PWD's) are actually stamped "Hi-Demand" to insure that the request gets special delivery attention.
Initially, the Hi-Demand Program covered 3,800 items—only 5 percent of all items managed by USATACOM. These items, however, represent about 75 percent of our annual dollar volume and 60 percent of our customer requisitions. As evidence of the reasonableness of the 20-demands-per-quarter criterion, subsequent analysis showed that by adding the items with a demand frequency of 10 to 19 demands per quarter, 2,339 Federal stock numbers would be added to the Hi-Demand Program—a 65-percent increase. Our sales volume, on the other hand, would have increased by only 2 percent. The advantages to be realized from the intensive management of these few high-demand items are obvious. Figure 1 illustrates the tremendous leverage that only a few items have on our secondary items budget.
The primary tool used by the Materiel Directorate to manage our high-demand items is 'the Monthly Hi-Demand Item Report (fig. 2). This summary report is provided to the Director of Materiel each month by the USATACOM automatic data processing (ADP) activity. The performance figures are broken out by vehicle systems to provide, at a glance, indicators of the specific vehicle systems that are experiencing difficulties and to show by comparative performance which groups of item managers are giving the best performance.
Similar ADP information by FSN is provided to individual vehicle system managers. They can then isolate the FSN's that are causing (or may soon cause) problems. This report identifies by predefined codes all items in short supply and tells whether sufficient quantity of stock is on order to keep from getting into trouble in the future. It permits system and item managers to predict with reasonable accuracy when specific items currently in a poor stockage position will be restored to a good supply position. It also permits the manager to isolate items that will fall into a poor supply position in the future, when this will occur, and the causative factors. This stock status information allows the manager to initiate action to prevent this from happening or at least to reduce the impact. This in-stock and out-of-stock trend analysis is the basis for a monthly action briefing presented by the system managers that my key directors and I attend. The briefing is to assure that every possible action is planned and followed through to prevent deterioration of our supply position of high-demand items.
As a result of our analysis of the Hi-Demand Report, action is taken to—
• Purify erroneous data in our files.
• Determine “get-well" dates for deficient items.
• Challenge unusual demand increases.
• Coordinate, in detail, actions to expedite acquisitions.
• Expedite (or delay) engineering changes.
• Request early buys of rebuild parts.
The Quality Assurance Directorate began to analyze the high-demand items for potential product improvement. At the end of last year, 1,754 high-demand items had been assessed for possible product improvement to increase life expectancy. Of the items assessed, 89 were recommended for engineering changes; 181 were designated for corrections in drawings, maintenance aspects, or quality assurance provisions; 266 were selected for clarification and updating of procurement packages; and 1,218 were assessed as fair wear and tear items. To close the loop, the Quality Assurance Directorate performs a followup to insure that their recommendations result in changes to hardware on the production line. Our goal is to conduct similar analyses of all high-demand items.
The high-demand experiment has paid a number of unexpected bonuses. One of these is the ability to discover and analyze problems that may affect all of our items by examining only our high-demand items. The high-demand list includes a wide range of line items—from tank engines and transmissions to springs and seals.
Early in the Hi-Demand Program, we discovered 157 items that appeared to be in a bad supply position—little or no issuable stock on hand, none due in, a preponderance of back orders, and an apparent high rate of demand. How could we have so many items actively requisitioned by our customers with no stock due in? Soon we found that these were superseded items. Many of these items were destined to receive replacement stock numbers. However, until customers in the field received notice of the FSN change, demands kept flowing in and back orders kept piling up. A manual adjustment to transfer the demands and back orders to the replacing or related FSN had to be made. We took steps to correct this situation by implementing a set of computer programs to interrelate items for which firm replacement or interchange had been established. This action materially reduced the time required to issue assets from related items and improved our back order position.
A careful analysis of data from the Hi-Demand Program led to the identification of the major cause of our poor customer demand satisfaction—heavy advance requisitioning of repair parts from oversea rebuild facilities. These activities were given authority to order repair parts for combat vehicles 10 months in advance of their need and for tactical vehicles 7 months in advance. Since USATACOM was given no preparatory period to pre-stock, stock planned for other customers in the field was issued to the oversea rebuild facilities. The impact was obvious. Our overall index or availability (MILSTEP) dropped to 48 percent within a year. Since establishing the Hi-Demand Program our performance has risen to 71 percent—not satisfactory to us, but a decided improvement.
It's Not All Gravy
The profits of our Hi-Demand Program have been significant, but these did not come without sizable efforts. Each Monthly Hi-Demand Item Report is examined in detail, and monthly trends are noted carefully. The initial list included some 3,800 items; but, as we were to discover, this group is by no means static. Subsequent logistics losses and gains and changes in demand rates have reduced the list to its current 2,768 items. The bulk of these losses occurred through decapitalization of assets having low-unit dollar value that were transferred to the appropriate activity of the Defense Supply Agency. For example, in one two-month period, our high-demand list dropped from 3,414 items to 3,382—a net loss of 32 items. The actual turnover for the two months, however, was 344 items—156 gained and 188 lost.
We encountered several problems requiring purification of high-demand data before we could evaluate it. There was the FSN relationship problem already mentioned. Although the computer program altered our issue procedure, a constant surveillance of our high-demand list was required to eliminate the replaced items from our statistical analysis while retaining the items on the detailed listing for scrutiny by the appropriate item managers.
We found many items coded with incorrect vehicle system codes due to delay in financial inventory accounting code changes when the items were transferred to other systems. The FIA coding is important because it shows who is responsible for managing each item. Thousands of FIA code changes were made to both low-demand and high-demand items as a result of the attention the Hi-Demand Program focused on the problem.
The High-Demand Experience
The Hi-Demand Program has been an experiment in supply management. It might best be described as an ''experience" for USATACOM. We planned it that way. We have attempted to keep the program as open-ended as possible, improving it as we go along, and letting it lead us in our search for USATACOM problems and their solutions. It might be said that we "grew" along with the program as it evolved. For example, the original high-demand list included all items meeting the 20-demands-per-quarter criterion regardless of their supply classification. Gradually, we became aware that not all of these items, regardless of the demand, required the same intensive management efforts given to standard high-demand items. This was found to be the case for modification kits, tool kits, and other items. Eventually, the high-demand list focused intensive management effort on our stocked items where our greatest management challenges now lie, although we still continue to examine nonstocked items being demanded to determine if they should he reclassified as stocked items. We know more about all our items as a result of our studies of the characteristics of the high-demand-item group.
Looking Ahead
The Hi-Demand Program has provided us with goals to achieve and a systematic method of working toward these goals. Although the Hi-Demand has already paid dividends, what lies ahead may be even more rewarding. The program has led us into a whole new world of areas to investigate and analyze. For example, our ability to project with reasonable accuracy the future supply position on these few items of heavy impact has led us to a dependable system of forecasting our overall future supply performance. And of the total high-demand group, what about those 200 or 300 most demanded items? We have already identified them. Perhaps an even more intensive management treatment especially tailored to those items (which make up about 50 percent of our total budget) should be developed. We have established as a goal for high-demand items the exacting one of achieving stock on hand through the safety level 95 percent of the time; that is, to fill 95 percent of all valid requisitions for high-demand items on time. Eventually, we plan to apply techniques similar to those used on high-demand items to all stocked items that have zero balances or are in short supply.
The results of our Hi-Demand Program have been encouraging both in terms of new thinking in logistics and performance improvement. We have only begun to reap its rewards.
Major General Shelton E. Lollis is commanding general of the U.S. Army Tank-Automotive Command, Warren, Michigan. General Lollis served as deputy, and later, commanding general, 1st Logistical Command, Vietnam, for 16 months before assuming his present command. Before assignment to Vietnam, he was commanding general of the 8th U.S. Army Depot Command in Korea. General Lollis also served for two years as deputy president of the U.S. Army Materiel Command Board, Aberdeen, Maryland.
| Date Taken: | 12.13.2024 |
| Date Posted: | 12.13.2024 14:51 |
| Story ID: | 487474 |
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