Cost Savings Via. By Rodney A. Miller, CPPM, CF President, Emerald Coast Chapter

Transcription

1 Receiving Feature Cost Savings Via Centralized Catalog System By Rodney A. Miller, CPPM, CF President, Emerald Coast Chapter Is your catalog ready to deliver significant cost savings to your organization or enterprise? How many of the following items can you check Yes? Does your current catalog system: p Have a single master catalog for the entire enterprise or organization that can be accessed by all buyers and end users? p Identify all the different suppliers (vendors) and their unique catalog/part numbers or Stock Keeping Unit (SKU) for all items with the same form fit and function? p Identify items with different names but which have the same form fit and function as the same or equivalent item? p Identify items that are sensitive, contain precious metals, hazardous material or require special disposition processes? p Identify recoverable items for core exchanges? p Identify shelf life items? p Identify serially managed items? p Require standard approved Item Name Descriptions with a choice table of approved item names and edits to prevent unacceptable descriptions? p Have a single SKU for your enterprise or organization to identify all suppliers/vendors of items with the same form fit and function? p Eliminate manual keying and errors of catalog data by pulling directly from Federal Logistics Information Service? 8 The Property Professional Volume 26, Issue 2

2 The catalog is the central core of a costeffective and efficient asset management system around which all other systems/subsystems should interface. (See Fig 1) Cataloging of requirements must begin in the early planning stages for new equipment and material support. This begins early in the proposal stage for new programs and contracts. Step 1 Load the catalog with all the required data for item based upon the type and classification of the item with complete identification and supply/ vendor source information. Step 2 Upon receipt of material or equipment pull the catalog data for the item received to confirm receipt of the correct item and identify any special handling, marking or control/management of the item from the cataloged information. Submit any reporting required acknowledging receipt of the item as identified by the catalog. Step 3 Begin the asset life cycle management and control to include the maintenance through the asset life required by the asset classifications and manufacturer requirements. Step 4 Monitor and report the status of the catalog data: number of items managed and volume of additions, deletions, or corrections. Step 5 Pull catalog data to ensure proper disposition/ transfer and control/reporting are accomplished based upon classification and requirements recorded in catalog. Step 6 Continuously maintain catalog to correct errors, support new items, and identify suitable substitutes. Figure 1 In order to achieve the maximum cost savings and return on investment of your catalog system the design and data elements of the catalog are critical. Understanding where to start is important to the overall success of an integrated system, but where do we start? Identifying a cost-effective and efficient catalog system and the data elements it should contain is paramount to beginning the process. As educated asset managers we look to standards and industry-leading practices to help us achieve success and exceed customer expectations. However, we frequently overlook the standards and achievements of the Defense Logistics Agency (DLA) and the Defense Logistics Information Service (DLIS) data bases. The DLA Logistics Information Service mission traces back to World War II when each Military Service operated an independent system for cataloging items of supply. As a result, items of supply were given different names making efficient use of available stock impossible. Public Law , the Federal Property & Administration Services Act of 1949, established a common logistics language known as the Federal Catalog System (FCS) During the 9

3 1950s, Public Law , the Defense Cataloging and Standardization Act assigned the creation and maintenance of the FCS to the Department of Defense (DOD). In turn, the DOD established the Armed Forces Supply Support Center (AFSSC) in Washington, D.C., with the mission to administer the FCS. 1 The first Federal Stock Number was assigned by the Army- Navy Munitions Board. The 1960s began the ten year automation of Defense Integrated Data System (DIDS), providing a standardized way of describing and coding items of supply. Today, the 13-character National Stock Number (NSN) format contains the Federal Supply Class in the first four characters and the country of origin in the fifth and sixth characters. Frequently contractors or Government agencies have local buyers in different locations purchasing for 20 or more different contracts/or projects who are not taking advantage of the leading edge spend analysis of the total purchases of the entity. Sharing a common centralized catalog system will facilitate the total requirements of a single item and spend analysis for the entire entity, while reducing management and maintenance cost for the catalog system. Cost Savings By adopting the DLIS cataloging standards we leverage the years of experience, data collected, and improvements made in the cataloging of Federal items with standard approved item names and critical data elements in order to cost effectively and efficiently manage all assets. The catalog should support the goal of providing the right item at the right time at the lowest cost. 1. Data for federally cataloged items can be directly pulled from the FLIS data base into a local catalog which eliminates manually keyed data entry errors and populates all FLIS catalog data elements. a. FLIS data can be pulled directly from FLIS files by entering the NSN, or the part number and CAGE code of the supplier. b. The FLIS data becomes the core and standard around which to add local suppliers. 2. FLIS catalog business rules can be used to ensure that we identify the right item of supply for all items in our catalog. a. FLIS training is available on FLIS business rules for Catalog team members and users. b. FLIS tables can be used to automate the local catalog and provides continuous updates to any changes in FLIS data for the items recorded as an end user. c. Prevent catalog team members from creating multiple ways of naming, spelling and identifying items. d. FLIS data base contains most of the critical data elements needed to cost effectively manage the asset. 3. Establishing a single Stock Keeping Unit (SKU) for the entity catalog system for items with the same form fit and function can crossreference all suppliers items with different part numbers to a single requirement. For items found in FLIS, use the NSN as both the Federal and entity SKU. 10 The Property Professional Volume 26, Issue 2

4 4. Items not in the FLIS catalog can be assigned a local SKU or NSN that has the same format and structure as the NSN. Assign a local stock number code (using alpha characters) in the country of origin like LN in the fifth and sixth characters of the NSN. This makes this SKU unique to your organization, program or operation. The FLIS Catalog and NSN (SKU) allows for the identification of multiple suppliers (vendors) and their unique part (catalog) number to your program requirements. 5. Items found in the FLIS catalog can have local suppliers added to the NSN or cross referenced with your local suppliers (vendor) code from your own purchasing system. 6. Buyers can access the FLIS data, including the FLIS pricing, to help establish and verify current market pricing of items. 7. Everyone recognizes the savings achieved by using acceptable after-market suppliers of filters and other common items and hardware. For example; light bulbs for equipment and vehicles must be identified and cross referenced properly. a. Audit of one contractor s filters found four different filters on the shelf purchased over time by different buyers, but not identified as the same form fit and function to a single end item application. Cost of the filters varied by $2-$3 each. This contractor did not have a central catalog system and had an open work order for a different filter part number. b. Proper cross referencing and identification of items in stock makes it easier to fill requirements and achieve high fill rates from stock. 11

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6 c. Identifying lower cost items that meet manufacturer acceptable performance levels reduces cost. 8. Identification of shelf life items in the catalog system allows better management of inventory stock levels by preventing item life expiring prior to being utilized in the average demand period. 9. Frequently, items are identified by a part number only without a Commercial and Government Entity (CAGE) Code for Government purchased items (or name of the supplier non-government suppliers) to identify the supplier and very limited descriptions. This lack of complete data makes it difficult if not impossible to properly identify an item of supply recorded in many purchasing and inventory systems or on transfer documents. Let s look at part number 1234 for a wrench in the FLIS data base by using the public WebFLIS search tool. ( webflis/pub/pub_search.aspx. (See fig 2.) The search returns 41 item records under part number 1234 for a wrench. In this example, there are 3 different NSN s for wrenches and two NSN s have 3 different (CAGE) each. This highlights a problem first with a lack of recognition and requirement to identify whose part number by the CAGE code (or name of the supplier for the part number for the correct item) and second an omission of a complete description and characteristics of the item need. The type and size of the wrench to include size, type, length and other critical characteristics data are required for proper identification of item needed. a. All too frequently we find excess inventories during contract closeout audits that can be tracked directly back to the wrong item ordered (lack identification or/characteristics data). The incorrect item is simply left on the shelf while the necessary item is reordered with the additional characteristics data and/or supplier information. b. This is a major weakness in most government and contractor systems and transfer documents that don t use NSNs. c. CAGE codes must be mandatory when assigned to a Government supplier to correctly identify the correct item. d. In the absence of a valid CAGE code for a part number it is critical that the supplier name and/or the reference document or catalog be provided. 10. Detail cataloging of items by trained catalog teams for items without NSNs is critical to proper identification. An example of one such item was a circuit card that was identified by the supplier of a security system as proprietary item with a unit cost of $2,239. During the cataloging and physical inspection of material and spares for the system our trained catalog team found another part number under the suppliers barcode label. Research through FLIS identified the circuit card as a standard stocked FLIS item at unit cost of $219. Testing on test bench equipment confirmed the item was the same circuit card. 11. Identify and control tracking of items that require recovery of unserviceable items for core exchange. To avoid unnecessary cost of items in a repair cycle, repairable items must be properly identified in the catalog and tracked for core exchange both in the internal repair cycle and those sent out to subcontractor for repair. Tracking and requiring a turn-in is received for each recoverable item identified in the catalog will reduce cost and prevent end users from hoarding extra units of recoverable items in the work areas. 12. With the catalog item identification standards and use of a single SKU item in place Standardization and Reduction of inventory can begin to reduce range of items purchased and stocked. 13

7 a. Review of purchases to reduce the number different common items into a single product (line item of supply) will reduce the number of different items purchased and increase the volume of a single item to obtain volume purchase discounts. This will also reduce purchasing, administrative handling cost, cost to hold, stock and inventory multiple line items of supply. b. Item reduction studies the example of the split pin (cotter pin). Instead of keeping a 1, 2, 3 and 4 only stock a 4 and cut to size. 13. Strategic sourcing if the total purchase volume was very high in quantity and/or dollars last year you can ask for a reduced price this coming year. An entity can only achieve best pricing and lowest cost with a proper identification description of the items. 14. Finally, there is no cost for the FLIS data and support from FLIS personnel to develop and maintain your catalog system. This is a significant cost saving in the development and maintenance of the catalog system. Summary If you can t answer Yes to at least seven of the questions your catalog system needs immediate attention to reduce cost and improve performance of your asset management system and become one of the industry leaders in delivering the right item at the right time at the lowest possible cost. We have only touched on a few of many cost reductions and performance enhancements that can be achieved from a cost-effective and efficient catalog system that is the core of the asset management system. Establishment of a centralized catalog system is a journey not a destination. It requires continuous maintenance and enhancements to keep all data and systems current with the daily changes and error corrections, but the cost savings and increased maintenance performance and equipment readiness from an industry leading catalog system will return the investment many times over. BIOGRAPHY: Rodney (Rod) Miller, CPPM, CF, is President of the Emerald Coast Chapter NPMA. He has been a frequent speaker at the NPMA NES, regional and local chapter workshops for over 25 years. He is President of RAM-Asset Management Consulting Services LLC, a Service Disabled Veteran Owned Small Business (SDvosB). He has a BS in Business Administration from Georgia Southwestern College with over 31 years experience in asset and supply chain management from acquisition to disposition. Rod s service in the United States Marine Corps included Unit Supply Officer at the Battalion and Squadron level for both ground and aviation units including CONUS and OCONUS. He received the Navy Commendation Medal for his service as the Operations Officer 3 rd FSR supporting all the Marines in the Western Pacific. Rod served as Branch Chief Marine Corps Logistics System Division for all Marine Corps Logistic Systems inventory control systems. He served on a joint tour with Defense Logistics Agency as Chief of Warehouse Division ONE, Defense Depot Memphis where he received the Defense Meritorious Service Medal. He has experience in the commercial communications world as a buyer and asset manager operating in 26 states. As a Government contractor, he has experience with DOD, Federal civilian agencies like DOE, U.S Forest Service. He has held senior level asset/property management positions with Boeing, DynCorp International, Johns Hopkins University, Applied Physics Laboratory and he retired from Bell Helicopter, Textron. He is a member of ASTM E-53 and was a member of the US TAG on ISO development. Rod received an award from the Vice President of the United States for his work and cost savings achieved on the DOE Process Improvement Team for the DOE excess reporting system. Endnotes 1 DLA Logistics Information Service History 14 The Property Professional Volume 26, Issue 2