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Parts Management

ALCL 096

DAU GLOSSARY DEFINITION

Alternate Definition

Parts Management is the practice of considering the application, standardization, technology (new and aging), system reliability, maintainability, supportability, and cost in designing or selecting parts and addressing availability, logistics support, Diminishing Manufacturing Sources and Material Shortages (DMSMS), and legacy issues in supporting them throughout the life of the systems.

General Information

Parts are the building blocks from which systems are created and, as such, greatly impact hardware dependability, readiness, and operating costs. Increasingly important in today’s acquisition environment - characterized by rapidly changing designs and by increased risk for DoD weapons systems and equipment acquisition contracts due to an increased emphasis on the use of commercial part types, offshore manufacture of parts, DMSMS, counterfeit parts, and the use of lead-free parts - the need to have an effective Parts Management Program (PMP) is greater than ever before. The PMP is an integral part of the acquisition process for design, development, modification, and support of weapons systems and equipment.

Selecting, specifying, ensuring proper design applications and, in general, managing parts used in complex systems constitute a major engineering task. As an important element of systems engineering (SE), parts management streamlines the selection of preferred or commonly used parts during the design of weapon systems and equipment. Typically, the use of parts described by non-government standards (NGSs) or military standards or the use of commonly used parts already in the DOD supply system is preferred unless a business case analysis shows that a new unique part would have significant life cycle cost savings, or other advantages.

The parts management process identifies optimum parts while considering all factors that may affect program outcomes. Use of optimum parts provides the warfighter returns that can be measured through enhanced reliability, maintainability, availability, economies of scale, and supportability. In turn, these factors enhance systems performance, logistics and operational readiness, and interoperability, while limiting the logistics footprint, logistics response time, cost per unit usage, and the total ownership costs of weapons systems and equipment. 

Affordability is enhanced by designing for the optimal balance among design effectiveness, which encompasses technical performance and supportability; process efficiency, which enables effective product support; and life cycle cost/Total Ownership Cost (TOC). Effective parts management contributes significantly in these three areas:

Design Effectiveness

Although financial expenditures are relatively low early in a program, decisions about the system requirements and the design approach to meeting those requirements have a major impact on the program costs in the out-years. Therefore, implementing an effective PMP early in the program can have a significant impact on the program’s life cycle cost. Parts management contributes to technical performance and supportability (which result from the design effectiveness) through reliability and maintainability engineering, standardization, proactive DMSMS management, anti-counterfeiting, environmental considerations, and parts/supplier quality.

A disciplined part selection process in the design phase, as part of a formal PMP, increases the probability of using the most optimum parts in weapons systems and equipment, which maximizes availability and reduces overall life cycle costs.

Process Efficiency -

Process efficiency is the optimal balance of logistics processes, infrastructure, and footprint to provide an affordable, agile, deployable, and operationally effective system. Thus, process efficiency encompasses manufacturing, operations, and product support.

In terms of manufacturing, parts management establishes the basis for maintaining a parts baseline and includes a rational approach to qualify or change suppliers, and/or parts. It ensures key design considerations are given sufficient emphasis and that processes are in place to minimize undesirable design practices, non-essential use of hazardous materials, for example. Parts management can reduce costs, and drive decisions toward common, less expensive, corrosion resistant, etc., materials. Parts management also includes failure analysis and quality evaluations, further supporting reliability.

Parts management impacts supply chain management and operations support; for example, by reducing procurement lead time, maximizing quality control analysis and feedback, and facilitating interoperability, supportability, and safety.

Product support is impacted by parts management processes in two key ways. First, via DMSMS management, which DOD history has shown to be extremely important in management of life cycle cost and system readiness, and secondly, via risk mitigation. For example, the commercial prevalence of lead-free solder can pose safety and reliability risks in many military applications, and sound parts management processes can help identify and mitigate such risks for COTS products and materials.

Life Cycle Cost/TOC –

Government and industry program managers and contractors must manage their scarce resources carefully to procure the advanced technology systems and equipment needed to provide required capabilities affordably. Therefore, the TOC cost of weapons systems or equipment is an important consideration for the program office.

Parts management helps reduce equipment design and life cycle costs by promoting the application of commonly used parts. Standardization of parts and the replacement of numerous similar parts with one common part can result in fewer purchase orders and larger procurement quantities of the smaller numbers of parts, resulting in economies of scale in manufacturing, purchase, shipment, etc., for both manufacturer and customer. Part standardization also helps the contractor avoid the increased cost of maintaining technical data and storing, tracking, and distributing multiple parts configurations.

An analysis of historical parts management data clearly shows that the tangible benefits of reducing the proliferation of part types in new design can be substantial. Cost factors may vary depending on the organizational and operational structure of a given program or company.

The average total cost for adding a single new part into a system is about $27,500. An effective PMP will avoid this cost every time it precludes unnecessarily introducing a new part into the system. Analysis of historical acquisition program parts management data has revealed that programs without parts management requirements introduce 2.5 percent more new parts into the logistics system than do programs with parts management requirements. Therefore, a program with 10,000 parts may easily achieve a life cycle cost avoidance of $6.8 million through an effective PMP.

As documented by the Parts Standardization and Management Committee in Reduce Program Costs through Parts Management, the cost of adding a new part into the inventory derives from six different program areas: engineering and design ($12,600), testing ($1,000), manufacturing ($2,400), purchasing ($5,200), inventory ($1,200), and logistics support ($5,100) = average total $27,500. While it is possible that in some cases the added costs of adopting a unique part design could be offset by lower manufacturing or purchasing costs, such choices would need to be carefully justified and documented. In some cases the testing cost may be reduced significantly because not every part added to inventory requires testing. However, every part needs to be evaluated, either by similarity, bench test, or analysis.  The advent of Additive Manufacturing (AM) may significantly reduce these costs as it becomes more prevalent, but in general, AM is not an option for the more expensive, obsolescence-prone system components containing microelectronics--at least not for government applications.

Parts management is also effective in mitigating and managing part obsolescence problems. The expected costs of resolving part obsolescence problems have been estimated as ranging from a low cost for part reclamation to a very high cost for a major redesign effort, but in most cases such costs are rising.

Visit the Parts Management Knowledge Sharing Knowledge Sharing Portal (PMKSP) for additional information and resources on the topic, as well as a forum to share information with others the parts management community.  Key Parts Management policy and guidance can also be found there.