The Naval Supply System is responsible for insuring that the warfighters and maintainers of today have the right mix of equipment, spare parts and supporting technology to successfully complete their missions. The
Life Cycle Management capabilities described in this paper are a critical component of that technology.
Traditionally, the Navy has been forced to utilize a one-size-fits-all solution to demand recording, selection of demand history, and resultant forecasting methodologies for material/spare parts support. The Navy has imposed rules to distinguish recurring demands from non-recurring and then utilized the recurring stream of demand as input to forecasting algorithms. The ERP solution will allow Navy to diverge from tradition and move towards a ‘best demand forecasting solution’.
During all phases of the item life cycle, the Forecast System must be able to capture and identify specific demand streams and determine their applicability to the material demand forecast. The demand forecast will ultimately be used to generate a buy/repair plan and to compute and generate system safety stock. The demands will be dissected in terms of their nature or rationale for entering the supply system. A combination of Service Code, Unit Identification Code, Fund Code and Management Code will be used to identify sales orders from purchase orders and to identify recurring, non-recurring (scheduled) and nodemand types of transactions. Recurring demand transactions will be identified in monthly buckets and utilized in quarterly demand forecasts. Non-recurring demands will not be included in the demand forecast computations.
In addition to demand, the safety stock and buy/repair programs require other rates and lead times. These include a carcass return rate, carcass return forecast, repair survival rate, repair Turn Around time, individual item procurement lead time, and an individual item safety stock. In this paper we will discuss the cited rates and forecasts and their respective transformation throughout the life cycles.
The following list describes each of the forecast elements required by the buy/repair program and or Safety
Stock calculation. The forecast system must be able to produce these elements on a periodic basis (i.e. current forecasting cycle- which is usually quarterly). These elements need to be run through the calculations in this order, due to dependencies among the elements.
Demand Forecast - a forecast of anticipated customer demands over a 5 year planning horizon is calculated for each National Item Identification Number (NIIN) managed by the Naval Inventory
Control Point (NAVICP). A Demand Sigma (demand deviation) is also required for input into the
Safety Stock calculation. A Demand Forecast and Demand Sigma will also be calculated for retail
Fleet and Industrial Support Center (FISC) managed items.
Requisition Size and Requisition Frequency - a requisition size and frequency is computed for each NIIN managed in the NAVICP wholesale system. Requisition Size represents the average quantity associated with each requisition (customer sales order), expressed as a decimal number
(e.g., 1.7). Requisition Frequency represents the average number of customer requisitions that are submitted to the supply system per quarter, expressed as a decimal number (e.g., 1.4). A requisition size and frequency will also be computed for each retail Fleet Industrial Support Center
(FISC) managed item.
Carcass Return Rate - a carcass return rate is computed for each repairable NIIN. Carcass Return
Rate (CRR) represents the probability that carcasses (broken units) will be returned to the depot level for repair, expressed as a percentage in the format “x.xx” (e.g., 0.95).
Survival Rate - a repair survival rate (expected depot repair success rate) is generated for each

repairable NIIN managed in the ICP wholesale system. Survival Rate represents the probability that a carcass (broken item) will be repaired successfully by the Depot-level repair facility, expressed as a percentage in the format “x.xx” (e.g., 0.95).
Carcass Return Forecast – a carcass return forecast over a 5 year planning horizon is calculated for each repairable NIIN, based on the item’s Demand Forecast and Carcass Return Rate.
Retrograde Pipeline Loss Rate (RPLR) - represents the number of carcasses (“F” condition material) that will be lost due to repair and non-repair reasons (i.e. lost in transit), expressed as a percentage in the format “x.xx” (e.g., 0.95). It will be computed for each repairable item based on the item Carcass Return Rate and the item Survival Rate. It is needed for use in the Procurement
Administrative Lead Time (ALT) Matrix and other budget/ STRATIFICATION (STRAT) calculations, but is not directly needed in the buy/repair plan.
Process Repair Turn Around Time (PRTAT) - a full repair duration is generated for each repairable NIIN managed in the NAVICP wholesale system. PRTAT represents the total amount of time required to repair an item at the wholesale level, measured from the date that a repair is initiated to the date that the carcass (broken item) is officially transitioned into a Ready For Issue asset, expressed as a decimal number in days (e.g., 66.33 days). PRTAT is the sum of RTAT and
Repair Administrative Lead Time. RTAT represents the time required to repair an item by measuring from the induction date to completion date, expressed as a decimal quantity in days
(e.g., 63.25 days). Repair Administrative Lead Time represents the total amount of time required for the purchasing department to award a repair contract to a vendor, measured from the date that a repair is initiated by the item manager (i.e., the date that the Purchase Request (PR) is generated), to the date that the repair contract is awarded to the vendor (i.e., the date that the PR becomes a
Purchase Order), expressed as a decimal number in days (e.g., 35.25 days). A Repair Turn
Around Time (RTAT) Sigma (just repair time deviation-no admin time) is also required as an input into the Safety Stock calculation.
Procurement Lead-time (PCLT) - a Procurement Lead Time forecast is generated for each NIIN managed in the NAVICP wholesale system. Procurement Lead Time represents the total amount of time required to purchase an item from a supplier, measured from the date that a procurement is initiated to the date that the supply is delivered, expressed as a decimal number in days (e.g.,
688.33 days). Procurement Lead Time is the sum of Production Lead Time and Procurement
Administrative Lead Time. Production Lead Time represents the total amount of time required for a supplier to manufacture and deliver an item, measured from the date that a procurement contract is awarded to the supplier, to the date that the supply is delivered, expressed as a decimal number in days (e.g., 405.35 days). Procurement Administrative Lead Time represents the total amount of time required for the purchasing department to award a procurement contract to a supplier, measured from the date that a procurement is initiated by the item manager (i.e., the date that the
Purchase Request (PR) is generated), to the date that the procurement contract is awarded to the supplier (i.e., the date that the PR becomes a Purchase Order), expressed as a decimal number in days (e.g., 181.55 days). A Production Lead Time Sigma (just production time deviation-no admin time) is also required as an input into the Safety Stock calculation. A Procurement Lead
Time forecast will also be calculated for retail FISC managed items.
Statistical Safety Stock - a safety stock requirement is generated for each NIIN managed in the
NAVICP wholesale system and for retail FISC managed items.
The purpose of this paper is to describe the Navy requirement to forecast supply requirements based on the life cycle stage of a material. This is a reengineering initiative, with the intent to tailor forecasting techniques for Navy managed material using different data streams and factors based on the item’s

evolution through its life cycle. Navy has identified six supply life cycle phases requiring different forecasting techniques:
Life Cycle 1: Initial Operating Capability (IOC)
Life Cycle 2: Pre-Material Support Date (Pre-MSD)
Life Cycle 3: Demand Development Interval (DDI)
Life Cycle 4: Mature
Life Cycle 5: Sunset
Life Cycle 6: Retirement
Definition : Initial Operational Capability (IOC), is defined as the time period when a new equipment or system is being introduced. During this period, design changes to the new system based on initial performance in the fleet are common. Consequently spares support during this period is limited to selected components of the system. The initial spares requirements for aviation are computed and procured by
NAVICP on behalf of the Naval Air Systems Command (NAVAIR). Maritime IOC spares are computed and procured by the Naval Sea Systems Command (NAVSEA). No “wholesale” spares support or intermediate repair exists during this time period. Based on configuration changes, Original Equipment
Manufacturer (OEM) engineering rates for demand forecasting, and actual demand observations during
IOC, NAVICP populates its files with the data required to insure the Navy is prepared to support the item through the end of IOC, referred to as the Material Support Date (MSD). The intent of this phase is to populate the rates and forecasts based on the engineering estimates. All of the items in this phase will have a Life Cycle Indicator = 1.
Definition: Pre-Material Support Phase is defined as a procurement lead-time (PCLT) away from
Material Support Date (MSD). During this time period, the Advanced Planning System requisition processing program will continue to process customer orders, and the Advanced Planning System buy/repair algorithm is turned on to compute the MSD wholesale spares buy. Initial allowances are calculated by the Common Rates Computation System (CRCS) Common Allowance Development System
(CADS) for aviation and Reengineered Maritime Allowance Development (REMAD) for maritime, and are reflected as planned requirements to include in the wholesale buy. During this phase, demand observations are probably sporadic and few.
The intent of this phase is to update the demand forecast if there is an updated install schedule or application to another system. The rates and Lead Times calculated in Life Cycle 1 will be maintained.
Also, during Life Cycle 2, we are preparing for the MSD buy. All of the items in this phase will have a
Life Cycle Indicator = 2.
Definition: The Demand Development Interval (DDI), or time interval during which demand observations are expected to increase. The DDI begins at Material Support Date (MSD) and usually extends for two years. DDI can be less than two years, but DOD mandates limit it to a maximum of 5 years. During Life Cycle Phase 3, demand forecasts should become more reliant on actual demand observations rather than the initial engineering failure rates.
The intent of this phase is to gradually augment the demand forecast with true observations. If observations favor the employment of forecasting in Life Cycle 4-Mature, the item could be promoted to
Life Cycle 4. The other rates and Lead Time values will be carried over from Life Cycle 2-Pre-MSD.
All of the items in this phase will have a Life Cycle Indicator = 3.

Definition: The Mature state for items. During this phase, Safety Stock is finally computed based on demand observations, associated rates, and actual lead-time variations. The forecasts generated during this phase will be mainly observation based and utilize various statistical time series tests and procedures. Also, after the forecast has been computed based on historical observations, there is an option to consider population as a leading indicator that can be used as an additive to the observation based forecast.
The intent of this phase is to compute forecasts, employ the statistical tests relevant to this phase, and use population as leading indicator when applicable. All of the items in this phase will have a Life Cycle
Indicator = 4.
Definition: An item is placed into the Sunset phase if it is unique to a system that has been assigned an initial projected retirement date or all of the item’s applications are slated for retirement. In effect, the item is no longer going to be used on any application and there is an Item Final Retirement Date, but that date hasn’t been reached yet.
Typically, a projected end date for the equipment is received from Chief of Navel Operations (CNO) in the form of a Weapon System Planning Document. This planning data is typically updated each year and forwarded to the applicable weapons managers. This date is not usually firm. It can vary due to changes in either the political climate or funding environment. Regardless of the date, the fact that this equipment has been slated for end of life usually means that procurements are no longer prudent and therefore should be curtailed.
The intent of this phase is to respond in a timely manner to the impending retirement date. The auxiliary intent is to restrict procurement in order to avoid excess material at retirement. All of the items in this phase will have a Life Cycle Indicator = 5.
Definition: The Retirement Phase is when an item no longer belongs to an operational system in the
U.S. Navy and has an Item Final Retirement Date that has been reached. However, some Foreign Military
Customers may still submit supply requirements, and Navy will still need to plan to meet those demands.
All of the items in this phase will have a Life Cycle Indicator = 6.
Essentially, forecasting techniques for Cycles 1 and 2 will be based on rate factors from engineering estimates. Cycle 3 will require smoothing or weighted consideration of the original rates and the actual demand observations. Cycle 4 forecasting will be based on historical observations. Cycles 5 and 6, toward the end of the materials service life, will require forecasting based on dampening techniques.
The Table below represents the general forecasting procedures that will be utilized for each forecast element in each life cycle phase:

Calculate forecast from provisioned engineering rate factors and usage schedule/data
Begin with Demand
Forecast from LC2 and start to smooth in demand observations.
Calculate from observations utilizing specialized forecasting algorithm
Dampen the
Forecast
Do not run program, unless FMS-
CLSSA agreement
Calculate an item mean or median Requisition Size using total demand counts and total demand frequency (using 2 years for retail or 5 years for wholesale of history observations if available)
Set Carcass Return
Rate to 1.0
Use value from
LC2, or if there are enough observations use
LC4 algorithm
Calculate from observations utilizing specialized forecasting algorithm
Same forecast algorithm as in LC4
Do not run program, unless FMS-
CLSSA agreement
Do not run program, unless FMS-
CLSSA agreement
For ICP Philly, set
Survival Rate to 1.0
For ICP Mech, set
Survival Rate to .90 or base on commodity matrix
(Appendix D)
Use value from
LC2, or if there are enough observations use
LC4 algorithm
Calculate from observations utilizing specialized forecasting algorithm
Same forecast algorithm as in LC4
Calculate an item Carcass Return Forecast for every quarter over a 5 year horizon using the formula:
Demand Forecast for the quarter * Item Carcass Return Rate
Calculate an item Retrograde Pipeline Loss Rate using the formula:
1 - (Carcass Return Rate * Survival Rate)
Do not run program, unless FMS-
CLSSA agreement
Do not run program, unless FMS-
CLSSA agreement
Do not run program, unless FMS-
CLSSA agreement

Establish an initial
RTAT value Matrix for ICP Mech and
Philly, which will be based onthe commodity matrix
(Appendix D)
Use value from
LC2, or if there are enough observations use
LC4 algorithm
Calculate value from observations utilizing specialized forecasting algorithm
Same forecast algorithm as in LC4
Do not run program, unless FMS-
CLSSA agreement
Calculate
Procurement Lead
Time by adding the provisioned
Production Lead
Time and the
Procurement ALT from the Procurement
ALT Matrix
Do not run Safety
Stock program, but if there is an NSO in file, Safety Stock will equal the NSO.
Use value from
LC2, or if there are enough observations use
LC4 algorithm
Do not run Safety
Stock program, but if there is an NSO in file, Safety Stock will equal the NSO.
Safety Stock is allowed to be calculated for
Maritime Multiechelon RBS items.
Calculate value from observations utilizing specialized forecasting algorithm
Calculate value from observations utilizing specialized forecasting algorithm
Same forecast algorithm as in LC4, unless
AAC=V, then don't run program
Same forecast algorithm as in LC4, unless
AAC=V, then run revised
Safety Stock procedure based only on repair
Do not run program, unless FMS-
CLSSA agreement
Do not run program, unless FMS-
CLSSA agreement
1.
The typical forecast cycle will be quarterly for most items. However, in the future, Navy would like the ability to run monthly forecasts for higher demand items. Because of this future capability, most of the data will be put into monthly buckets from the start, but rolled up to quarterly buckets in order to forecast a quarterly value.
2.
Although the Demand data will initially be stratified at the site/plant level in monthly buckets, the prime demand forecast will be calculated by using quarterly “Global” level buckets (this will be accomplished by rolling all of the history for the sites up to a global level and additionally, rolling the monthly buckets up to quarterly buckets in most cases.) Site level forecasts for an item may be calculated by utilizing the reconciliation program in SAP. Also, demand forecasts calculated for the “family” will be apportioned to the items in the family through the use of the reconciliation program in SAP.
3.
A log file will be produced for each of the Life Cycle 4 algorithms, which will describe the steps the program performed for each item/family processed and list intermediate results from the statistical tests (# of outliers detected, if a trend was found, etc.) that determined the path and the setting of key field values for the item/family. This log file will not only aid in testing, but it will help the Forecast Planner analyze forecast cycle runs or ad hoc requests from customers for validating forecast values for particular items.
4.
The Procurement ALT Matrix will be maintained and updated in ERP.
5.
A Repair ALT Matrix will be created, maintained, and updated in ERP.

6.
A Federal Supply Class (FSC) Matrix will be created for Initial RTAT settings, and will be maintained and updated in ERP.
7.
A Life Cycle Indicator program will be developed and maintained in ERP, which will utilize logic to update the Life Cycle Indicator when appropriate.
8.
Life Cycle Dates (i.e. Material Support Date, Demand Development Interval End Date) will be maintained and updated in ERP, which are key inputs to the Life Cycle Indicator program.
9.
An item can only belong to one Life Cycle Indicator at a time. Even if other applications are added or modified that would indicate that particular application is in another Life Cycle, the overall item will remain in the current Life Cycle. In most cases, an item will never revert back to an earlier Life Cycle phase, but in some cases it may be necessary to move back and a designated role will have the authority to move the Life Cycle Indicator.
10.
The system population data stream (representing a population over a 5 year time period) will be updated and maintained throughout the entire life cycle (except for Life Cycle6-Retirement) as it is a key data element stream required in the demand forecast calculations in each of the phases.
11.
Business rules need to be invoked for new item entries and for existing items incurring a new application such as our common equipment. When a newly provisioned system causes new Navy items to be catalogued and subsequently receive NIIN assignment we need to initialize the Initial
Demand Forecast and create a quarterly demand forecast. The initialization will be accomplished by applying the engineering estimate against the total number of installations over a given duration. However, if the item identified in the provisioning package is an established item of supply that is already identified to other end assemblies or weapon systems, (meaning it is in Life
Cycle 4-Mature), then the system will maintain the integrity of the existing life cycle. For example, if an item is in the Mature stage of it’s life cycle (Cycle 4), and Navy adds an application for a given component, that action will not take the item back to an earlier stage. In essence, the system will let the demand observations drive the forecast and future requirements.
12.
Forecast overrides will be permitted for Demand, Survival Rate, RTAT, and Production Lead
Time, but only certain roles like the Forecast Planner or Provisioner will have the authority to apply the overrides. A special override screen will be created in order to see the calculated/set forecast value, override value, and final forecast value and the period(s) in which the overrides apply. (Survival Rate, RTAT, and Production Lead Time are non-time series forecasts so the forecast value is not displayed for multiple periods, and so the override only applies to one value.
However, Demand is a time series forecast, so all of the periods a Demand Forecast appears in need to be on the screen so the person placing the override can determine which periods to apply the override.) In some cases, the overrides will be wiped out with the next forecast cycle run. In some other special cases, Navy would like these forecasts to remain for a set time period. In order to accomplish this latter case, the system will need to create forecast override locks to for each forecast element that will preserve the override(s).
13.
Specific System Retirement Names and Dates will be identified throughout the entire life cycle, and a system/item retirement program will be created in ERP to identify affected items. When an item belongs to a final system or systems that are all slated for retirement, the retirement program will set the Final Item Retirement Date, to identify when the item will soon by completely retired.
This is needed to show that the item should be part of Life Cycle 5-Sunset Phase or Life Cycle 6-
Retirement.
14.
Certain roles, like the Operations Research Analysts or the Forecast Planners, will require access to certain data tables and the Business Warehouse in order to pull data to perform studies and analyses periodically to update parameter values.

15.
Many of the parameters that are used in the forecasting algorithms will be set with defaults, but many will require script logic to populate the parameters by utilizing other fields (ex. If
ICPInd=”M” setparameter to “Y”, else set to “N”) and depending on those other fields the same parameter may be set differently from item to item. Also, in some cases the wholesale and retail items may use the same parameters, but because they utilize different amounts of historical data
(wholesale typically uses 5 years, while retail uses 2 years), the parameters will need to be set differently.
16.
An initial run program will need to be developed to ensure that the conversion data from legacy is in the appropriate forms for the forecasting algorithms. For example, all consumable items need to have the RPLR set to 1. Or another example deals with the fact that most of the items converted from legacy will be in Life Cycle 4, but may not have a CRR value from legacy.
Because the items are in Life Cycle 4, they won’t receive the initial CRR default like Life Cycle 1 items do, so Navy will need to develop a program to update the field after conversion.
By applying the functionality detailed in this paper and concurrently exploiting the supply chain management capability inherent in the Navy ERP Release 1.1 design, the NAVSUP enterprise will dramatically improve it’s ability to forecast, plan and deliver the range of material support required by today’s complex weapon systems. Overall Life Cycle Management is one of the critical enablers in the
Navy’s ongoing efforts to reduce cycle times, lower Total Ownership Costs (TOC) relative to Weapon
System support while maintaining or improving our level of readiness.