1

Naval Inventory Control Point

NAVICP Top 2Aviation Supply Chain Concerns

Presented to the Senior Executive Partnership

Round Table 10

2 May 2007

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Naval Inventory Control Point

Meet Warfighter Material Availability Expectations

Decrease Customer Direct Turn Over (DTO) Backorders

Reduce Organic Depot Awaiting Parts (AWP) Levels

Support CNO Cost-Wise Readiness Objectives

Implement Ready For Tasking (RFT) Focus

Expand Utilization of Performance Based Logistics (PBLs)

Naval Aviation Supply

The War On Terror And The Battle Against Cost ... We Must Win Both

NAVICP Concerns

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Naval Inventory Control Point

Decrease Customer DTO Backorders

DTO

FMS

Observations

DTO slice of the pie is too big

We must do a better job of filling outfittng / stock rqmts to prevent DTOs

To succeed, we must reinforce our day to day efforts on basic business

Backorder Breakdown

(NAVICP Managed Items)

Outfitting

Stock

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Naval Inventory Control Point

Reinforce sound supply chain management practices

as part of day to day business operations

Continually improve requirements forecasting

Execute timely placement of procurements

Ensure on-time delivery of all due-in material

Pursue aggressive expediting, where required

Utilize intense customer collaboration to prioritize efforts

Decrease Customer DTO Backorders

The Way Ahead

Focuson theBasics

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Naval Inventory Control Point

Reduce Organic Depot AWP

Metric End FY06 Current % Change

758693 9.4%Comps w/ BBs

Comps > 150 days 772 975 25.8%

Total Comps in AWP 2105 2312 9.8%

East

SouthWest

SouthEast

278164 69.5%Comps w/ BBs

Comps > 150 days 149 273 83.2%

Total Comps in AWP 558 781 40.0%

227162 40.1%Comps w/ BBs

Comps > 150 days 118 317 169.0%

Total Comps in AWP 616 711 15.4%

Fleet Readiness Center AWP Scorecard

Bottomline: Need To Reduce The Negative Trends

FRC

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Naval Inventory Control Point

Reduce Organic Depot AWP

Continue aggressive interface with FRC-Ds / DLA

Validate requirements, target expediting, and discuss select inhibitors

Focus on AWP with BBs, overaged AWP, and AWP with single downers

Review growth in local purchase/local manufacture requirements

Reinforce process discipline and reconcile data bases

Conduct DLA site visits; ICP AWP Summit; Business meetings

Assemble and disseminate “AWP report card”

Develop AWP Entitlement metric

NAVICP developing with DSCR, FRC-D supply/production reps, NAVAIR

Entitlements set by site, based on historical induction rates, budgeted delay time

What We're Doing

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Naval Inventory Control Point

RFT Defined: ”The right readiness, at the right time, at the right cost”

Amount of required readiness for any given aircraft is determined by mission

RFT replaces traditional Full Mission Capable (FMC) standard... ”Aircraft and all mission systems ready at any given time”

RFT creates some Initial Support Challenges

RFT is dynamic...must be defined for each T/M/S and each mission...effort is in its infancy

Virtually all current metrics are based on FMC standard...RFT will demand revised metrics to properly focus support efforts

Paradigm Shift From “Readiness At All Costs” To “Cost-wise Readiness”

RFT Overview

Implement Ready for Tasking (RFT) Focus

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Naval Inventory Control Point

The Naval Aviation Enterprise (NAE) is working three FY07 goals to support RFT attainmentAchieve necessary RFT gap closureIdentify and prioritize systems degrading RFTImprove reliability of RFT degraders

RFT Availability (E-2C)

Actual RFT

RFT EntitlementRFT Gap

Degraded RFT

Right readiness, right time

Implement Ready for Tasking (RFT) Focus

Current Effort

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Naval Inventory Control Point

Engine/ Power Plant, 0.80

Other(Non-RAM/RBM), 0.07

PDS-ESM, 0.11

IFF Interogate, 0.15

CEC, 0.17

JTIDS (Link 16), 0.23

UHF/HF Radio, 0.23

Radar, 0.68

Other NRBA Systems, 0.44

Inspections, 0.10

Navigation/Insts., 0.18 ECS/Pneum. Sys.,

0.25

Elec. Pwr. Sup. & Light, 0.26

Landing Gear, 0.26

Airframe, 0.33

Flight Controls, 0.45

Propellers, 0.46

# dayscontributionto RFT gap

Implement Ready for Tasking (RFT) Focus

E-2C Example

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Naval Inventory Control Point

A Reengineering Tool To Improve Readiness Through Improved Reliability And Better Availability

What we buy:

Comprehensive performance package... not individual parts

Value Proposition:

Substantially improved performance at less than or equal to cost

Why they work:

Government sets performance, establishes long-term fixed price relationship ... Fixed price "pay for performance" contract motivates vendor to reduce failures / consumption

Long term commitment enables vendor to balance risk vs. investment

Vendor asked to provide superior performance

at no additional cost

Expand Utilization of PBLs

The Essence of PBLs

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Naval Inventory Control Point

Availability Reliability Inventory Reduction

H-60 FLIR ... 40% increase

ALR-67 (v)3 Radar Warning

Receiver- 53% increase

Aviation Tires ... - Wholesale Inventory reduced by 90%

- Plane-side inventories reduced by 66%

F/A-18 SMS - availability

was 65% ... now 98%

ARC - 210 Radio –

availability

was 70% ... now 85%

APU - availability was

70% ... now 95%

F404 engine availability

was 43% ... now 99%

Expand Utilization of PBLs

PBL Program Performance

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Naval Inventory Control Point

PBL Demand Coverage

Goal: - Increase aviation demand covered by PBL contract to 28% by the end of FY07

Benefits: - Enhance supply support at equal or lower cost

- Achieve select reliability improvements

- Support NAE RFT and ACWT goals and

objectives

PBL Cost Reduction

- Reduce the cost of PBLcontracts renegotiated inFY07 by an average of 2%

- Reduce AVDLR costs for items supported by PBLs renegotiated in FY07

- Support NAE cost-wise readiness goals and objectives

Expand Utilization of PBLs

Current Enterprise Objectives

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Naval Inventory Control Point

NAVICP Top Priority is Meeting Enterprise Performance Expectations

Summary

CNO Guidance and Our Customers

Improving the Supply Chainand Reducing Life Cycle Costs

as defined by

while