Strategic inventory positioning of Navy depot level repairables

Abstract

Navy Inventory Control Point (NAVICP) is the principle controller of the Navy's inventory consisting of over 470,000 line items valued at over $30B. NAVICP provides the Fleet the parts necessary to maintain weapons systems. In 2003, NAVICP spent over $444M in transportation charges to fulfill customer requests for repair parts. The research in this thesis is the result of an initiative by NAVICP to study the benefits in modifying their current inventory positioning policy for repairable items. NAVICP wishes to incorporate a strategic inventory positioning policy that reduces transportation costs. This thesis develops the Strategic Inventory Positioning (SIP) model that looks at historical inventory demand and determines the optimal storage locations for NAVICP's inventory of repairable items. SIP provides NAVICP an optimization-based tool to aid in determining the strategic inventory location for each repairable item. Using results from SIP and historical transaction data, a cost comparative analysis of 176 of the highest cost and demand volume items shows that using a new synchronized and scheduled truck delivery system combined with strategically locating both new procurements and returns from repair in depots near high demand concentrations, enables NAVICP to reduce annual transportation costs by an average of $110K per repairable item.