CHAPTER 5 INVENTORY MANAGEMENT

The Navy supply system has two primary parts-inventory management and physical distribution. In this chapter we describe the information you should know about inventory management.

Aviation Storekeepers are assigned to billets in Navy stocking activities. These are activities afloat or ashore that carry materials in inventory stores account for their own use or to support other activities. As a senior AK, you should familiarize yourself with the procedures for managing stock items in your activity. This chapter will help you understand the practices and procedures applicable to material custody and inventory management. You should also learn the procedures for conducting physical inventory and reconciling inventory results.

Inventory management functions include deciding what items and how many of these items should be stocked. The function includes deciding where to store the items so they will be close to the likely users. It also includes tracking the material from the time it is ordered until it is issued. Inventory management is mainly done at the naval inventory control points (NAVICPs).

A perfect inventory management enables every material requirement to be satisfied from stock within the required time frame. Although this is the ideal result for each material request, this goal is often not achieved. To achieve this goal is to put every item needed to support all aircraft and equipment in the stock inventory. However, this will cost a large amount of money, especially for those items that are seldom used. To provide supply support and keep the inventory cost to a minimum, the projected customer demand is used as the foundation of the federal inventory management system. (NOTE: Demand is any request for an item.) To properly invest funds, any item without a projected demand is not stocked, or is removed (purged) from stock.

The Navy inventory management activities are those organizations assigned as primarily responsible for managing assigned groups or categories of supplies. These activities are classified into two groups as

follows:

1. Navy commands whose principal mission is Navywide program management of weapons systems/major items. These are the Hardware Systems Command (HSC), Project Offices, the Navy Training Systems Center, and the Military Sealift Command.

2. Naval Inventory Control Point (NAVICP) under the Naval Supply Systems Command (NAVSUPSYSCOM or NAVSUP). The NAVICP is located in two sites. They are the NAVICP Philadelphia site (formerly known as Aviation Supply Office [ASO]) and NAVICP Mechanicsburg site (formerly known as Ships Parts Control Center [SPCC]).

The primary function of the inventory manager (IM) is to get and distribute material to effectively support Navy activities. The IM provides support for the life cycle of weapons systems and equipment assigned by the HSC. After the material requirement is determined, the IM locates the material in places that ensures the quickest response time. The Navy's distribution system is involved with three stocking levels. They are the consumer (including shipboard), intermediate (ashore and afloat), and wholesale. The distribution system is designed to push material to wholesale stock points based on its customer's anticipated requirements. Ships and other customers then pull or requisition material from the wholesale stock points. When this pull of material is reported to the IM, the IM replaces the item with push material to the stock points. In cases where the wholesale stock points also carry intermediate stock, the items are pulled from the wholesale to satisfy retail requirements.

Items in stock are managed as wholesale or retail material. Both involve a central IM at the NAVICP who initially brings the item into the supply system. The difference between wholesale and retail is the handling of the item after it is brought in to the supply system. Wholesale material is always under central management at the NAVICP level. The IM positions the material at stock points but retains management responsibility. On the other hand, retail stock is locally managed at the stock points, The local managers set the level of inventory to satisfy local demands. Retail items are replenished by using the demand, insurance, and lead-time criteria.

Both the stock points and NAVICP perform inventory control tasks, but only stock points actually maintain an inventory. IMs at the NAVICP are responsible for procurement of specific items and positioning of these items in stock points to satisfy worldwide demand. The IM centrally manages these items for the customers. The managers in the stock points are responsible for local inventory management to support local demands.

The NAVSUP designates ashore Navy stocking activities (stock points) after coordination with affected commands and activities that receive support. The fleet commanders and type commanders designate afloat stocking activities.

The NAVICP provides the authorized allowance for repair parts and equipage requirements to ships, squadrons, or shore activities, Repair parts that are needed to support aviation weapons systems are listed in the activity's Aviation Consolidated Allowance List (AVCAL) or Shorebased Consolidated Allowance List (SHORCAL). As a senior AK, you are responsible for ensuring that the items in stock are properly managed.

DEFINITIONS

Some of the common terms used in inventory management are described in the following paragraphs. You should familiarize yourself with these terms. . Bouncebacks-The procedure used when the stock point is notable to fill the requirement referred by the item manager. 

l Classified items-Materials that require protection in the interest of national security, Refer to the Department of the Navy information and Personnel Security Program Regulation, OPNAVINST 5510.1. 

l Consumer level of inventory-An inventory, regardless of funding source and usually of limited range and depth, held for the sole purpose of internal consumption. 

. Controlled inventory items-Material having characteristics that require special accounting, security, or handling. These materials are categorized as classified and sensitive items.

. Intermediate level of inventory-An inventory, regardless of funding source, that is required between the consumer and wholeale levels of inventory. Its purpose is to support a defined geographic area. Intermediate level of inventory may also be held for tailored support of specific consumer organizations or activities. l Operating site-Any activity, either afloat or ashore, authorized to stock in a retail-level (consumer or intermediate) inventory. 

. Pilferable items-Materials having a ready resale value or application for personal use and, therefore, subject to theft.

. Retail inventory-Materials held below the wholesale level in either consumer or intermediate inventories. 

l Retail inventory stocking activity-Any activity authorized to stock items in retail-level inventory. 

l Sensitive items-Materials that require a high degree of protection and control. Some examples of these items are narcotics, precious metals, ammunitions, explosives, and so forth.

. Wholesale inventory-Materials under the control of an inventory manager that are required to meet worldwide inventory requirements.