Transforming Global Inventory Management for Marine Corps Secondary Repairables

Aminad Consulting helped optimize supply chain management for Secondary Repairables (SECREP), major weapon system sub-assemblies that include 65,000 parts, totaling nearly $800M in value. Aminad helped optimize processes, implement a new organizational structure, improve workforce development practices and adjust inventory ownership for SECREPs. Improving the SECREP supply chain directly affects Marine Corps readiness, with an estimated jump from a 40% to an 85% SECREP fill rate resulting in greater weapon system uptime. In addition, centralizing inventory ownership reduces enterprise-wide safety stock and can reduce SECREP storage and sustainment costs by ~$6M annually.

In 2018, the Marine Corps Secondary Repairable (SECREP) supply chain was broken, and SECREP supply chain challenges were affecting overall Marine Corps readiness. SECREPs are major weapon system subassemblies (e.g., engines, radios) that are generally more economical to repair than dispose. Imagine, for example, the turbosupercharger engine for the M88 recovery vehicle. If a deployed unit experiences an engine failure, they may try to repair the engine within the unit. If local repair is impossible or is unsuccessful, the unit will return the failed engine (a “carcass”) to a forward SECREP location (a Retail Inventory Point, or “RIP”) and, if available, the RIP will give the unit an as-new engine. The RIP will then send the engine carcass to a CONUS location, and Marine Corps Logistics Command (LOGCOM) will manage the repair of the engine at either a commercial or organic repair facility. If the engine is damaged beyond repair, or if repair is determined to be uneconomical, LOGCOM may dispose of the engine carcass and purchase a new engine to maintain stocking levels. See Figure 1 for a graphical representation of the SECREP supply chain. The SECREP supply chain is designed to ensure that forward-deployed units have access to forward-positioned parts and has a direct effect on Marine Corps readiness. If a replacement for a mission-critical SECREP is not available, an entire weapon system may become inoperable.

Figure 1.—A graphical representation of the SECREP supply chain

In 2018, the SECREP supply chain did not have the right parts in the right place at the right time. As shown in Figure 2, the Marine Corps SECREP fill rate had a two-year average of less than 40% and a quarterly low of less than 25% — when a forward location needed a SECREP item, it was available on the shelf less than a quarter of the time. The Department of Defense (DoD) target for SECREP fill rate was 85%, and the Navy, the Army and the Air Force all met or exceeded the DoD target. LOGCOM’s Supply Chain Management Center (SCMC) manages LOGCOM’s SECREP function, and with such a low fill rate, the SCMC Director faced questions from across the SECREP enterprise. Forward-deployed units were losing trust in LOGCOM, in SCMC, and in the SECREP supply chain. LOGCOM’s Commanding General requested weekly meetings with SCMC to report on the SECREP fill rate. SCMC managers worried about the capability and experience of their front-line staff. SCMC staff struggled to implement a new ERP system while executing day-to-day business. The SCMC Director struggled with how to improve the SECREP line of business with all the competing interests and attention on SECREP performance.

Figure 2.—The Marine Corps SECREP fill rate had a two-year average of less than 48% and a quarterly low of less than 25%

SCMC turned to Aminad to help develop and implement an organizational transformation for its SECREP function.

  • Organizational Development. Aminad worked with SCMC to improve the SECREP organization, including restructuring SECREP management and introducing a new workforce development program. As an example, SCMC managed the SECREP supply chain through two separate divisions, focused on wholesale and retail inventory, which created communications silos and a patchwork of legacy IT systems to support day-to-day operations. Aminad developed a new organizational model for SECREP management that (1) integrated the wholesale and retail SECREP divisions and (2) aligned staff based on SECREP supply chain function (e.g., attainment, channel management) versus inventory segment. In conjunction with the new organizational model, Aminad introduced a series of workforce tools and a new workforce development program to support improved day-to-day staff performance and the successful introduction of a new ERP system.
  • Process Optimization. Aminad helped SCMC transform SECREP execution processes, including planning, attainment, and backorder management. As an example, prior to Aminad’s involvement, SCMC tracked commercial Repair Cycle Time (RCT) – the portion of the repair process from the award of a repair contract through the receipt of a repaired item from the commercial repair provider – but did not track commercial repair Administrative Lead Time (ALT) – the portion of the repair process from requirement identification through contract award. As a result, overall lead times for half of SECREP items were incorrect, creating inaccuracies in SECREP planning and forecasting processes. Aminad helped SCMC develop automated methods of tracking and continually updating ALT, in addition to RCT, to create accurate estimates of total commercial repair lead time.
  • Inventory Ownership. The Marine Corps was unique among the Services in maintaining a decentralized SECREP inventory ownership model that the Navy, the Army and the Air Force had each discarded. Under the Marine Corps model, LOGCOM owned CONUS, wholesale SECREPs, while each RIP – forward locations that provide retail support to customers – owned its own inventory. LOGCOM’s SECREP function acted as a business advisor to the RIPs, but the RIPs were empowered to make their own decisions on stocking levels, reorder points, inventory positioning, etc. See Figure 3 for a graphical representation of this inventory ownership model. The decentralized ownership model created a variety of inefficiencies. As an example, when there was backorder at one RIP, the backordered item was available at another RIP 40% of the time. In addition, each location carried its own safety stock, increasing overall inventory levels and reducing system-wide inventory turns. Aminad helped LOGCOM create a business case for centralized inventory ownership and design a virtual pilot to document the performance of the centralized inventory ownership model under real-world conditions.

Figure 3.— Under the Marine Corps model, LOGCOM owned wholesale SECREPs, while each RIP owned its own inventory

Aminad’s Unique Value to the Marine Corps

Rigorous fact base creates case and momentum for enterprise change

Integration of process changes and IT transformation creates lasting impact

Close collaboration front-line workforce increases performance through skills development

Organizational development, process optimization and inventory ownership changes have put LOGCOM and SCMC on a path toward achieving the DoD-wide goal of an 85% SECREP fill rate. The dramatic increase in fill rate translates directly to weapon system uptime and increased enterprise readiness. In addition to fill rate improvements, the change in inventory ownership has significant financial benefits to the Marine Corps. The integration of inventories and the elimination of duplicative and redundant safety stock will yield a 3X increase in SECREP inventory turns and an overall cost reduction of $6M, resulting from a reduction in storage costs from the smaller inventory footprint and lower procurement and repair costs to maintain a lower target inventory level.

Organizational and process changes have been successfully implemented, but the Marine Corps has difficult work ahead to implement the centralized SECREP inventory model. Changing inventory ownership will require collaboration across the Marine Corps, including budget and personal adjustments across multiple 3-star commands, as well as a culture shift toward centralized material management and away from local control. The change management challenges will be acute, and LOGCOM is pursuing a virtual pilot that will simulate the centralized inventory ownership model under real-world conditions and demonstrate the cost and readiness impacts of changing inventory ownership models.