Tovey Bachman and Pat Kumashiro of LMI wrote in an opinion piece published Wednesday on Defense News that implementing hedging models could help the Department of Defense address sustainment issues with the F-35 Joint Strike Fighter program.
Kumashiro and Bachman discussed how the use of hedging algorithms helped the Defense Logistics Agency increase availability on frequently demanded parts to 90 percent from 85 percent and achieve an annual cost avoidance savings of $400M and inventory cost reduction of $600M.
“Forgoing forecasts and variances as inputs, these hedging algorithms use transactional data to produce control levels that generate a better mix of spare parts regardless of the demand scenario,“ they noted. “This means more of the parts requested by maintenance are available when needed and fewer parts sit on the shelf.
Hedging models help decision makers see the tradeoff between key interests (e.g., inventory value, average wait time for parts, total annual buy and repair spending) and set a path that meets multiple potential demand scenarios “” enabling DoD to be better prepared for the unpredictable,“ they concluded.
They also compared the difference between hedge algorithms and predictive modeling when it comes to assessing target availability for space parts. Bachman is lead developer of the Peak/Next Gen algorithm development team at LMI, while Kumashiro is a retired Air Force colonel and a director at the nonprofit consulting company.