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Improving Air Force Purchasing and Supply Management of Spare Parts

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Improving Air Force Purchasing and Supply Management of Spare Parts DISSERTATION R Improving Air Force Purchasing and Supply Management of Spare Parts Robert W. Bickel RAND Graduate School This document was submitted as a dissertation in August 2003 in partial fulfillment of the requirements of the doctoral degree in public policy analysis at the RAND Graduate School. The faculty committee that supervised and approved the dissertation consisted of Bart Bennett (Chair), Nancy Moore, and Susan Gates. The RAND Graduate School dissertation series reproduces dissertations that have been approved by the student’s dissertation committee. RAND is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND® is a registered trademark. RAND’s publications do not necessarily reflect the opinions or policies of its research sponsors. © Copyright 2003 RAND All rights reserved. No part of this book may be reproduced in any form by any electronic or mechanical means (including photocopying, recording, or information storage and retrieval) without permission in writing from RAND. Published 2003 by RAND 1700 Main Street, P.O. Box 2138, Santa Monica, CA 90407-2138 1200 South Hayes Street, Arlington, VA 22202-5050 201 North Craig Street, Suite 202, Pittsburgh, PA 15213-1516 RAND URL: http://www.rand.org/ To order RAND documents or to obtain additional information, contact Distribution Services: Telephone: (310) 451-7002; Fax: (310) 451-6915; Email: [email protected] iii Preface This dissertation is submitted to the RAND Graduate School in partial fulfillment of the requirements for the degree of Doctor of Philosophy in Policy Analysis. It was funded by Project Air Force and is part of the overall analytical support provided under the Project AIR FORCE study, “Designing, Implementing, and Evaluating a Purchasing and Supply Management (PSM) Demonstration for Engines,” sponsored by AF/IL-I and SAF/AQC. This research provides the Air Force with a methodology with which to evaluate various strategies for improving the procurement of spare parts and an example use of the methodology for F100 engine parts. Using exploratory analysis techniques and system dynamic modeling a structural analysis of the interaction of these changes is studied leading to a better understanding of the effectiveness of the various supplier management policies. This includes identifying those policy levers most effective in improving various measures of interest. Although this research provides a broad structure across objectives and alternatives that are often “stove-piped” between organizations, it also points out where additional research is needed to improve understanding certain relationships (e.g. the impact of contract length on quality), their functional forms and their parameters. Some parameters may require alteration for other kinds of parts in other applications. Thus, the methodology highlights achieving a broad macro understanding of purchasing management policy. The findings of this study should be of interest to policy makers in the acquisition and sustainment communities as well as those interested in the application of System Dynamic Models and exploratory analysis techniques. v Contents Preface ..................................................................................................................... iii Figures ....................................................................................................................vii Tables .....................................................................................................................xi Acknowledgments............................................................................................... xiii List of Abbreviations .............................................................................................xv 1. Introduction ..........................................................................................................1 The Need for Change.......................................................................................1 Logistical Support Systems Are In Transition..............................................3 Research Approach ..........................................................................................6 Scope of the Analysis.....................................................................................10 Outline of this Dissertation...........................................................................13 2. Current Support System....................................................................................15 Structure of the Support System ..................................................................15 Air Force Supply Chain.................................................................................18 Description of the PSM Problem..................................................................21 3. Modeling for Policy Improvement ..................................................................27 Historical Uses of Models .............................................................................28 Exploratory Analysis .....................................................................................31 Use of System Dynamics...............................................................................32 Software Chosen.............................................................................................34 Data Sources....................................................................................................37 Verification and Validation...........................................................................40 4. PSM Levers, Measures, and Model Development.........................................43 Measures of Improvement............................................................................44 Policy Levers...................................................................................................54 PSM Model Structure.....................................................................................62 The PSM Model Structure Facilitates the Policy Debate...........................68 Model Limitations..........................................................................................70 5. Individual PSM Policy Lever Effects...............................................................75 Base Case .........................................................................................................75 Range of Outcome Measures........................................................................87 Varying Individual Policy Levers ..............................................................100 Validation......................................................................................................107 6. Multi-dimensional Lever Configuration.......................................................109 Policy Lever Interactions.............................................................................109 Observations and Policy Recommendations............................................122 7. Conclusions.......................................................................................................127 Summary of Findings ..................................................................................127 Future Research............................................................................................131 A. PSM Model.......................................................................................................134 vi Modeling Environment ...............................................................................134 Overall Model Structure..............................................................................136 Interface .........................................................................................................137 Working Model.............................................................................................139 Output Measures..........................................................................................149 B. Sources of Data ................................................................................................152 1. Parts List Selection ..................................................................................152 2. Collection of Additional Data Elements...............................................156 3. Transfer of Data Into the Model............................................................168 C. Policy Levers....................................................................................................169 D. Alternative Improvement Concepts.............................................................192 Acquisition Reform......................................................................................193 Strategic Sourcing.........................................................................................194 Supply Chain Management ........................................................................197 PSM ................................................................................................................199 Summary .......................................................................................................201 Bibliography ..........................................................................................................203 vii Figures Figure 1. Traditional Approach to Modeling.............................................................. 7 Figure 2: System Dynamic Modeling Approach .......................................................
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