SD-19 Parts Management GuideIn todays acquisition environment-characterized by rapidly changing designs, increased risk for Department of Defense DoD weapon systems and equipment acquisition contracts due to an increase in the use of commercial part types, offshore manufacture of parts, and Diminishing Manufacturing Sources and Material Shortages DMSMS-the need for contractors 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 weapon systems and equipment.

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vary depending on the organizational and operational structure of a given program or company. The following method for roughly estimating costs uses very conservative values for the factors

it includes and does not include values for many nonrecurring and intangible cost factors.

The average total cost for adding a single new part into a system is about $27,500. An effec- tive 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 pro- gram with 10,000 parts may easily achieve a life-cycle cost avoidance of $6.8 million, a not- insignificant amount, through the use of an effective PMP.

As documented by the Parts Standardization and Management Committee in Reduce Program Costs through Parts Management,3  the cost of adding a new part into the inventory derives from six different program areas: engineering and design, testing, manufacturing, purchasing, inven- tory, and logistics support. Table 1 summarizes these average costs by program activity. 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.

Table 1. Average Costs for Adding a Part into a System

aThe testing cost was 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.

Parts management is also effective in mitigating and managing part obsolescence problems. The 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. The DMSMS commu- nity is updating these figures, recognizing that today's obsolescence costs have increased con-

siderably. (See Appendix A for references concerning resolution cost factors for DMSMS.)

1See https://dag.dau.mil/Pages/Default.aspx.

2Manufacturing Readiness Level (MRL) Deskbook,Version 2.2, July 2012, https://www.dodmrl.com/MRL_Deskbook_V2_2.pdf.

3This document can be found at https://www.convergencedata.net/Docs/PartsMgt.pdf.

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