Sector: Aerospace & Defense

Savings: ($2M-plus)

Submitted by Intermec

The U.S. Navy is using RFID in several ways, including monitoring the pack-up-kits, or PUKs, that are deployed each time a Navy aviation squadron is deployed. Each PUK contains 500-600 replacement parts worth more than $10 million. Using RFID has helped the Navy to gain better visibility into PUK replacement parts. By reducing inventory by just 10 to 15 items per PUK, the Navy has saved between $500,000 and $1 million.

“That’s the key money saver,” says Chet Zeller, project manager for Serco, systems integrator for the project. “If you get accurate control of a $10 million inventory, it can be reduced by 10 or 15 items, which shrinks the dollar value $500,000 to $1 million – a 5 or 10 percent reduction. The real value is enabling just-in-time replenishment and just-in-time inventory management.”

Aside from the savings from not purchasing duplicate products, the Navy reduced the time it takes to perform inventory by a staggering 98 percent.

The U.S. Navy Regional Supply Office in Norfolk, Va. provides logistical support for the aircraft squadrons stationed at Naval Air Station Norfolk. When a squadron is deployed, a PUK of several pallets, containing 5x5x5 foot cartons of supplies known as tri-walls, are sent along with it, traveling from the regional supply office command to the supply command assigned to the squadron.

Before the PUK leaves Norfolk, both commands must agree upon the contents. In the past, one person called out part numbers from a printed list while two others — each representing a command — checked off the items on their own inventory lists. Any discrepancies were noted and manually entered into the system after the inventory was complete.

Before RFID, the process took three people a total of 24 hours. At an average burdened wage of $28.83 per hour, the labor cost for performing one PUK inventory was nearly $700. Multiply that by the 64 PUKs inventoried at least four times a year at Norfolk alone, and the Navy had a very costly logistical nightmare — approaching $200,000 worth of unnecessary labor costs at one site alone.

In addition, once the PUK was in the field, simply locating one part out of the 500 in the kit could take hours. And there was little visibility into the replenishment supply chain, sometimes resulting in multiple orders of the same part.

To improve inventory management, the supply officers at NAS Norfolk looked to an RFID solution from Intermec Technologies, Serco, Phase IV Engineering, Boh Environmental and PSC Technology.

RFID was a natural fit for the Navy’s Automatic Identification Technology (AIT) initiative, and so the Navy ordered a pilot technological overhaul of the PUK inventory process. NAS Norfolk’s first evaluation of RFID integrated the technology into the E-2C PUKs assigned to a detachment at NAS Fallon, Nev. The evaluation yielded dramatic results.

“Each time we sent a PUK out on detachment, we’d have to do a turnover inventory from my command to the supply personnel attached to the squadron,” said Lt. John Wait, assistant supply officer at NAS Norfolk. “Both commands must count the same things together and agree on the contents. It’s extremely cumbersome. We’d each have a paper copy of the inventory and someone would call off each nine-digit number and we all check it off the list. With the manual system, it took about 24 man-hours to do one E2 PUK. With RFID, we now inventory that same PUK in less than 30 minutes.”

Once at work in the field, the Navy’s technology investment in RFID paid even further dividends.

“Under the old system, when a maintenance tech set out to find a part there was no telling its location – down to which tri-wall the part was in or even which pallet,” Wait said. “It was kind of like finding a needle in a haystack.”

“Imagine 500-600 parts in a warehouse on 12 or 15 pallets, or the parts are stored in tri-walls with approximately 50 parts in each, some the size of a carton of cigarettes,” says Zeller. “When a mechanic needs a specific bleed air valve, it may take several hours just to find that one part. With RFID, the mechanic enters the item he needs, scans with the reader and receives the location of the item. It’s that simple.”

The RFID system also paid off by greatly improving inventory accuracy. Previous manual systems allowed little if any visibility to the actual inventory on hand, and as parts were replenished there was significant room for error.

“As maintenance crews worked with the parts, either taking new ones off the PUK or turning old ones in, they sometimes lost track of the part’s specific location. We call those lost parts ‘carcasses’,” Zeller said. “They’re not actually lost, however, they aren’t visible within the supply system. And so the system would react to replenish in error.”

With RFID, inventory is kept in real-time and replenishment orders are transmitted back to NAS Norfolk as parts are checked out. Supply officers also have complete visibility of the replacement parts in-transit, eliminating duplicate orders.

“This project proved that, not only can we find the part quickly by using RFID, our database knows where the part is already,” Wait said. “It greatly improved our organizational abilities and turnover time of a pack up kit.”

Zeller lauds the trial both for its immediate success and the benefits the Navy will reap when RFID technology is more widely implemented.

“There are more than ten identical sites within the Navy that operate in the same way as Norfolk,” says Zeller. “Serco’s business case analysis, provided in our post-implementation report to the Navy, concluded that the total annual savings the Navy reaped by implementing this one business process improvement across all ten sites would be in excess of $2.2 million per year. And this is for just one small section of the Navy supply chain.”