Demand Forecasting: DLA'S Aviation Supply Chain High Value Products

Abstract

This study set out to provide the Defense Logistics Agency (DLA) a set of demand forecasting and risk modeling tools and techniques to help both achieve target service levels and quantify the risk of stock-outs in the DLA aviation supply chain. This vision culminated in a simple process that all together takes between 1 to 2 hours to understand a product's demand volume, pattern, probability distributions as well as quantifying the risk of stock-outs. Perhaps an easier way to think about this study is that it became a discussion about buying the right stuff at the right quantity and at the right time. The result of this study is the recommendation of three actions to (1) identify the few stock items that have the greatest impact on the organization's annual budget (2) use the forecasting and risk modeling technique described herein to calculate adequate inventory for the target service level(s) and (3) execute a lean six sigma project to reduce drivers for the organization's risk exposure. A higher risk exposure influences the decision to carry more safety stock; thus creating a vicious cycle of increased material costs.