DOD MANUAL 4140.01, VOLUME 2
DOD SUPPLY CHAIN MATERIEL MANAGEMENT PROCEDURES:
DEMAND AND SUPPLY PLANNING
Originating Component: Office of the Under Secretary of Suspense for Acquisition and
Sustainment
Effective: November 9, 2018
Releasability: Cleared for public release. Available on the DoD Issuances Website at
http://www.dtic.mil/whs/directives.
Reissues: DoD Manual 4140.01, Volume 2, “DoD Supply Chain Materiel
Management Procedures: Demand and Supply Planning,” February 10,
2014
Approved by: Robert H. McMahon, Assistant Secretary of Defense for Sustainment
Purpose: This manual is composed of several volumes, each containing its own purpose. In
accordance with the authority in DoD Directive (DoDD) 5134.12 and DoD Instruction (DoDI) 4140.01:
• The manual implements policy, assigns responsibilities, and provides procedures for DoD materiel
managers and others who work within or with the DoD supply system consistent with DoDI 4140.01,
and establishes standard terminology for use in DoD supply chain materiel management.
• This volume describes procedures for the DoD supply chain materiel management processes
associated with demand and supply planning.
DoDM 4140.01-V2, November 9, 2018
TABLE OF CONTENTS
SECTION 1: GENERAL ISSUANCE INFORMATION .............................................................................. 5
SECTION 2: RESPONSIBILITIES ......................................................................................................... 6
2.1. Assistant Secretary of Defense for Sustainment (ASD(S)). ............................................. 6
2.2. DoD Component Heads. ................................................................................................... 6
2.3. Secretaries of the Military Departments and Director, Defense Logistics Agency
(DLA). ................................................................................................................................. 6
SECTION 3: PLANNING ..................................................................................................................... 7
3.1. Supply Chain Planning and Execution. ............................................................................ 7
3.2. Demand and Supply Planning. .......................................................................................... 9
SECTION 4: PROVISIONING ............................................................................................................ 11
4.1. Provisioning Planning. .................................................................................................... 11
4.2. Provisioning Data Management. ..................................................................................... 11
4.3. Provisioning Screening. .................................................................................................. 13
4.4. Transition Support. ......................................................................................................... 14
4.5. Provisioning Requirements Determination. .................................................................... 14
a. Provisioning Procedures for Organic Requirements. ................................................... 14
b. Provisioning with Readiness-Based Sparing (RBS). ................................................... 15
c. Provisioning with Demand-Based Sparing (DBS). ...................................................... 15
4.6. Procuring Provisioned Support Items. ............................................................................ 16
4.7. Provisioning Performance Measures. ............................................................................. 17
SECTION 5: ITEM CLASSIFICATION AND CODING FOR STOCKAGE REQUIREMENTS ........................ 18
5.1. Item Classification Coding. ............................................................................................ 18
5.2. SMR Assignment. ........................................................................................................... 18
5.3. Essentiality Assignment. ................................................................................................. 18
5.4. RSC Assignment. ............................................................................................................ 20
a. Purpose. ........................................................................................................................ 20
b. Category Codes. ........................................................................................................... 20
5.5. Review Requirements. .................................................................................................... 21
SECTION 6: SUPPORT GOALS FOR SECONDARY ITEMS ................................................................... 23
6.1. Support Goals.................................................................................................................. 23
6.2. Setting Support Goals. .................................................................................................... 24
SECTION 7: FORECASTING CUSTOMER DEMAND ........................................................................... 26
7.1. Demand for Forecastable and Non-Forecastable Items. ................................................. 26
7.2. Use of Engineering Estimates. ........................................................................................ 28
7.3. Use of Quantitative Models. ........................................................................................... 29
7.4. Basics in Establishing and Improving a Forecasting Process. ........................................ 30
7.5. Collaboration................................................................................................................... 33
7.6. Value Added Analysis. ................................................................................................... 35
SECTION 8: MATERIEL STOCKAGE COMPUTATIONS ...................................................................... 37
8.1. Right Sizing Inventories. ................................................................................................ 37
8.2. Computational Methodologies ........................................................................................ 37
a. Categorization and Use of Computational Methodologies. ......................................... 37
b. RBS Methodologies. .................................................................................................... 38
DoDM 4140.01-V2, November 9, 2018
c. DBS Methodologies. .................................................................................................... 39
d. Computational Considerations. .................................................................................... 39
e. Information Exchanges. ............................................................................................... 40
8.3. RBS Computations.......................................................................................................... 41
a. Usage ............................................................................................................................ 41
b. Capabilities. ................................................................................................................. 42
c. Applications. ................................................................................................................ 42
d. Special Considerations. ................................................................................................ 43
e. Readiness Assessments. ............................................................................................... 44
8.4. Wholesale Demand-Based Sparing Computations. ........................................................ 44
a. Requirements Objective. .............................................................................................. 44
b. EOQ. ............................................................................................................................ 45
c. ROP. ............................................................................................................................. 46
d. Procurement Lead Time Quantity or Period. ............................................................... 47
e. Levels for Reparable Items. ......................................................................................... 48
f. Economic Repair Quantity. .......................................................................................... 48
g. Repair Point. ................................................................................................................ 48
h. Repair Cycle Level (RCL). .......................................................................................... 48
i. Safety Level (SL). ......................................................................................................... 48
j. Non-Forecastable Items. ............................................................................................... 49
8.5 Retail Sparing Computations. .......................................................................................... 50
a. Retail Requirements. .................................................................................................... 50
b. Operating Level (OL). ................................................................................................. 50
c. Order and Shipping Time Level (OSTL). .................................................................... 51
d. Retail SL. ..................................................................................................................... 51
e. Retail ROP. .................................................................................................................. 52
f. Local RCL for Reparable Items. ................................................................................... 52
g. Requisitioning Objective. ............................................................................................ 52
h. Combined Wholesale and Retail Demand-Based Computation. ................................. 53
8.6. Non-Demand-Based Requirements. ............................................................................... 53
a. Numeric Stockage. ....................................................................................................... 53
b. Insurance Stockage. ..................................................................................................... 54
c. Planned Program Stocks. ............................................................................................. 54
d. Validation of Non-Demand Based Stockage. .............................................................. 54
8.7. Non-Stocked Items.......................................................................................................... 55
APPENDIX 8A. CYCLE TIME MEASUREMENTS ............................................................................... 56
8A.1. Procurement Lead Time Measurement. ....................................................................... 56
8A.2. Repair Cycle Time. ...................................................................................................... 56
8A.3. Field Repair Cycle. ...................................................................................................... 57
8A.4. Depot Repair Cycle. ..................................................................................................... 57
a. Depot Repair Cycle Time............................................................................................. 57
b. Retrograde-Time Segment. .......................................................................................... 58
c. Repair-Turnaround Time Segment. ............................................................................. 59
d. Transfer-to-Maintenance Time. ................................................................................... 59
e. Maintenance-Shop Time. ............................................................................................. 59
DoDM 4140.01-V2, November 9, 2018
f. Transfer-from-Maintenance Time. ............................................................................... 60
SECTION 9: SECONDARY ITEM WAR RESERVE REQUIREMENTS .................................................... 61
9.1. Meeting Strategic Objectives for War Reserves. ............................................................ 61
9.2. Computing War Reserve Materiel Requirements ........................................................... 61
GLOSSARY ..................................................................................................................................... 62
G.1. Acronyms. ...................................................................................................................... 62
G.2. Definitions. ..................................................................................................................... 63
REFERENCES .................................................................................................................................. 77
TABLES
Table 1. Weapon System Group Codes ....................................................................................... 19
Table 2. Item Essentiality Codes ................................................................................................. 20
Table 3. Segmenting Items by Demand Intermittency ................................................................ 27
Table 4. Segmenting Items by Demand Volatility....................................................................... 27
Table 5. Segmenting Items as Forecastable and Non-Forecasting Based on Demand
Intermittency and Volatility .......................................................................................................... 28
Table 6. Basics in Establishing and Improving a Forecasting Process ........................................ 31
FIGURES
Figure 1. Application of Computational Methodologies ............................................................. 38
DoDM 4140.01-V2, November 9, 2018
SECTION 1: GENERAL ISSUANCE INFORMATION 5
SECTION 1: GENERAL ISSUANCE INFORMATION
APPLICABILITY. This volume applies to OSD, the Military Departments (including the
Coast Guard at all times, including when it is a Service in the Department of Homeland Security
by agreement with that Department), the Office of the Chairman of the Joint Chiefs of Staff and
the Joint Staff, the Combatant Commands, the Office of the Inspector General of the Department
of Defense, the Defense Agencies, the DoD Field Activities, and all other organizational entities
within the DoD (referred to collectively in this issuance as the “DoD Components”).
DoDM 4140.01-V2, November 9, 2018
SECTION 2: RESPONSIBILITIES 6
SECTION 2: RESPONSIBILITIES
2.1. ASSISTANT SECRETARY OF DEFENSE FOR SUSTAINMENT (ASD(S)). Under
the authority, direction, and control of the Under Secretary of Defense for Acquisition and
Sustainment (USD(A&S)), the ASD(S) oversees the DoD supply chain planning process.
2.2. DOD COMPONENT HEADS. The DoD Component heads:
a. Share information on their supply chain requirements with their supply sources (e.g.,
vendors, maintenance activities, or contingency contracting organizations) to support cost-
effective collaborative planning with end-to-end visibility of DoD materiel across the DoD
supply chain.
b. Use demand and supply planning to optimize DoD supply chain resources. Collaborate
with supply chain support providers and customers to efficiently and securely meet mission
requirements.
c. Plan and provide resources for all elements of the DoD supply chain to meet customer
demand. Develop and establish risk management and support strategies to meet future DoD
supply chain requirements for the future.
2.3. SECRETARIES OF THE MILITARY DEPARTMENTS AND DIRECTOR,
DEFENSE LOGISTICS AGENCY (DLA). In addition to the responsibilities in Paragraph
2.2., the Secretaries of the Military Departments and the Director, DLA (the Director, DLA is
under the authority, direction, and control of the USD(A&S), through the ASD(S)):
a. Ensure that new items that are acquired to carry out mission requirements are properly
cataloged, classified, and coded according to Sections 2451-2454 and 2456-2458 of Title 10,
United States Code, as described in Volume 8 of this manual.
b. Establish and maintain, within authorized funding, a war reserve materiel program for
secondary items that are required in accordance with DoDI 3110.06.
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SECTION 3: PLANNING 7
SECTION 3: PLANNING
3.1. SUPPLY CHAIN PLANNING AND EXECUTION. The DoD Components will:
a. Provide for and manage an integrated planning infrastructure that addresses demand and
supply planning and the supply chain processes of source, make and maintain, deliver, and return
(this process is discussed in Volumes 3- 6 of this manual). Establish and communicate DoD
supply chain plans that:
(1) Provide for support strategies as described in Volume 3 of this manual.
(2) Execute a sales and operations planning framework (described in Volume 12 of this
manual), over an appropriate planning interval (e.g., long-term, annual, monthly, weekly) so that
all available resources are used to efficiently meet DoD supply chain requirements.
(3) Address mitigating risks to avoid any disruptions to the DoD supply chain.
b. Collaborate with maintenance, distribution, or transportation managers and customers to
determine optimal support strategies that meet documented performance requirements. For
example, those requirements that are being acquired under a contract with a commercial vendor
or those requirements that are filled by an organic supply source and supplied to another
component under a performance based agreement. The DoD Components will:
(1) Use a performance-based logistics (PBL) strategy that considers performance
attributes of consistency, responsiveness, flexibility, cost, security, equipment reliability, and
asset allocation. The DoD Components will specify performance requirements in PBL contracts
with commercial suppliers who manage items for the DoD. For items managed by organic
sources of supply, requirements must be delineated in performance-based agreements between
suppliers and their customers.
(2) Establish support strategies that satisfy customer performance requirements by:
(a) Setting parameters or goals for computing inventory levels that meet documented
performance requirements at minimum total cost in accordance with Section 6 of this volume.
(b) Collaborating with customers on their future needs when classifying and coding
items for requirements in accordance with Section 5 of this volume.
(3) Maximize the use of DoD-owned inventory (across all DoD Components) on all
contractual or support arrangements and partnering agreements before procuring inventory items
from commercial sources.
(4) Protect critical program information within a research, development, test, and
evaluation program throughout the military life cycle of the defense system, in accordance with
DoDI 5200.39.
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SECTION 3: PLANNING 8
(5) Protect critical components of trusted systems and networks throughout the system or
network life cycle in accordance with DoDI 5200.44.
(6) Emphasize metrics and steps to ensure that the spares pipeline is not subordinate to
ongoing acquisitions of items from commercial sources that are procured in support of mission
requirements.
c. Establish DoD supply chains that support time-definite delivery and quality of order
fulfillment (e.g., right quantity, right condition, and right documentation). DoD Components
will:
(1) Establish supply chains that meet readiness-based customer support goals for weapon
system items.
(2) Design supply chains with the flexibility and resources to compensate for volatility of
customer demand, the supplier cycle fluctuations, and identified risks while meeting customer
needs.
(3) Work with customers to reduce the scale of the logistics supply chain in military
operations and, thus, reduce the risks from interruptions in the supply chain process and the
interception of supplies.
(4) Plan and provide resources to support the elements of the DoD supply chain to meet
customer demand. The DoD Components will:
(a) Ensure that the inventory is the right size to efficiently meet customer demand in
accordance with Section 8 of this volume.
(b) For items stocked, plan inventory to provision new materiel in accordance with
Section 4 of this volume. Determine peacetime, wartime, and high tempo operating condition
replenishment stock levels by location (i.e., stockage location and echelon) to efficiently satisfy
customer demands.
(c) Consider planning factors described in Joint Publication 4-0, including total
supply chain costs (e.g., inventory holding, materiel handling, transportation, and the cost to
protect the supply chain from tactical and operational interruptions).
d. Use DoD asset visibility capabilities to maximize existing inventories, DLA-managed
assets, or component-owned assets at storage locations throughout DoD. They will:
(1) Use asset visibility in all issuable or potentially issuable condition codes and
requirements of retail supply activities to satisfy requirements across the supply chain.
(a) Use retail-level activities that will provide the materiel manager with the asset
and requirements information needed to make decisions on procurement, maintenance, and
lateral redistribution of supplies as described in Volume 5 of this manual.
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SECTION 3: PLANNING 9
(b) Consider using knowledge of wholesale and retail assets to compute materiel
stockage requirements levels when multi-echelon requirements computation processes are used
as described in Section 8 of this volume. Where cost effective, retail level supply activities will
make their asset quantities (excluding assets in the hands of the user) visible to the requirements
computing system of the managing DoD Component to support the process.
(2) Provide the Combatant Commands with visibility of materiel assets on hand, in
transit, and on order to their area of responsibility that helps them with:
(a) The information needed for in-theater operational planning and for repositioning
or redirecting of assets to support critical operations.
(b) In-theater joint deployment and distribution operations centers to effect cross-
docking of assets between units, increase asset visibility, improve movement of materiel to and
within theater, and move materiel out of theater.
(3) Provide the Military Departments headquarters, subordinate units, and the weapon
system managers of retail-level assets and requirements within their respective Military
Departments with sufficient visibility of materiel to assess their capability to support operational
and contingency plans and to support weapon system readiness.
(4) Participate in the DLA In-Storage Visibility Program and minimize restrictions on
the use of available consumable inventories to offset other component’s orders and to fulfill open
backorders for consumable materiel. Exceptions include:
(a) Forward-deployed and overseas units with limited or prohibitively costly access
to transportation resources.
(b) Contingency locations that cannot divert manpower to support redistribution of
consumable materiel.
(5) Use visibility of assets in all condition codes transferred to the DLA Disposition
Services to recall serviceable items instead of initiating a procurement or depot repair action for
those items.
3.2. DEMAND AND SUPPLY PLANNING.
a. Materiel managers will:
(1) Establish and manage a demand planning process that accumulates and forecasts
customer demand for products or services at the appropriate category, organizational level, and
time interval in accordance with Section 7 of this volume.
(2) Establish and manage a supply planning process that plans for acquiring and
maintaining the inventory needed to meet customer demand.
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SECTION 3: PLANNING 10
(3) Use all applicable planning information including operating programs, customer
requirements, supply chain resources, and total assets in their demand and supply planning to
maximize supply chain productivity.
(4) Consider the context and perspective of joint theater operations for demand and
supply planning as directed in Joint Publication 4-0.
b. The DoD Components will:
(1) Work to integrate supply chains to optimize demand and supply planning.
(2) Ensure that all supply chain work centers and organizations understand their impact
on supply and demand balancing.
(3) Use the procedures for accessing and sharing information used in demand and supply
planning in Volume 7 of this manual.
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SECTION 4: PROVISIONING 11
SECTION 4: PROVISIONING
4.1. PROVISIONING PLANNING. Provisioning planning begins with program initiation for
planning and acquiring initial spares to support a new or existing weapon system, subsystem, or
major end item and continues through the system acquisition.
a. Materiel managers and primary inventory control activities (PICA) will work with
program managers to:
(1) Address logistics requirements and related supply chain costs (e.g., materiel, storage,
and transportation) within the total life-cycle systems management. Ensure the coordination of
provisioning requirements and initial materiel support activities via provisioning conferences.
(2) Document technical and logistics data that is relevant to end item supply support and
make this data accessible to DoD and commercial materiel managers who are responsible for
provisioning, follow-on support, and evaluation of supply chain performance. Provide timely
access to provisioning data required to identify, acquire, and assess support items.
(3) Catalog items repeatedly used, bought, stocked, or distributed in accordance with
Section 2451 of Title 10, United States Code. Generally, catalog new items before first units are
equipped in accordance with the procedures in DoD Manual (DoDM) 4100.39. Assign
demilitarization, essentiality, critical item control, and other item-level specific codes in
accordance with the procedures in DoDM 4100.39.
(4) Assign demilitarization coding to component items of new weapon systems or major
end items in accordance with Volume 1 of DoD 4160.28-M. Materiel managers will ensure the
assignments are made early in the development of new weapon systems or major end items
before any new component item is released to a non-military activity.
b. When the DoD Components are the preferred source of supply for a new major system,
they will integrate provisioning requirements and activities into the system acquisition process in
accordance with performance based agreements with program managers.
c. Items not associated with the acquisition of a new major system may be provisioned (e.g.,
items newly introduced into the supply system and items associated with the modification of a
system or the introduction of a new subsystem or component). In such cases, materiel managers,
together with user representatives, will set support goals according to Section 5 of this volume,
and evaluate various supply support strategies for the provisioning of these items (e.g., organic
and contractor) as described in Volume 3 of this manual. Special procedures for introducing new
clothing and textile items are in Volume 9 of this manual.
4.2. PROVISIONING DATA MANAGEMENT.
a. When materiel managers acquire provisioning technical documentation (PTD) and
engineering data for provisioning (EDFP) needed for future procurement of system components
and parts, they will:
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SECTION 4: PROVISIONING 12
(1) Familiarize themselves with the data requirements in Government Electronics and
Information Technology Association Standard 0007 and Military Handbook 502A. For the
acquisition of parts for which the government does not have data with rights to use in a
specification or drawing for competitive acquisition, refer to Subpart 217.7504 of the Defense
Federal Acquisition Regulation Supplement (DFARS).
(2) Tailor the EDFP to get electronic 3-dimensional model based data, product
engineering drawings, or commercial drawings. Generate and accept the PTD and the EDFP,
preferably in digital format.
(3) Provide program managers with applicable data requirements and deliverables for
incorporating into the solicitation for acquiring end items.
(4) Receive contractually acquired PTD and EDFP deliverables from equipment
manufacturers. Materiel managers will work with technical and procurement personnel to verify
that the PTD and EDFP are sufficient to support procuring additional required support items that
are required. Identify any data deficiencies and ensure that they are corrected during the
provisioning review process if possible, or before the contract for the procurement of the end
item expires.
(5) For joint Military Service acquisition programs, establish uniform PTD and EDFP
requirements. The materiel manager of the lead DoD Component will coordinate provisioning
requirements with the supporting DoD Components to avoid unnecessary duplication of data,
formats, procedures, and operations.
b. Materiel managers will use provisioning data to:
(1) Assign source, maintenance, and recoverability (SMR) coding according to Section 5
of this volume.
(2) Complete provisioning screening of the range and quantity of support items
necessary to operate and maintain an end item of materiel for an initial period of service.
(3) Review for parts standardization.
(4) Review for potential interchangeability and substitutability.
(5) Assign item names as prescribed in DoDM 4100.39.
(6) Assign item management codes as prescribed in Volume 2 of DoD 4140.26-M.
(7) Prepare item identifications for assigning national stock numbers (NSNs) as
prescribed in the Federal Logistics Information System technical procedures at the DLA
Website, referenced in DoDM 4100.39.
(8) Prepare allowance and issue lists.
(9) Determine requirements for items.
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SECTION 4: PROVISIONING 13
(10) Procure spares, repair parts, and supplies for initial support, unless initial support is
procured by the program manager.
c. For non-developmental items, materiel managers will, where possible, use contractor
commercial data products provided contractually to satisfy provisioning data requirements.
Whenever economically feasible, materiel managers should adopt commercial off-the-shelf
software to exchange product data and adopt open-source commercial product data exchange.
d. During acquisition, materiel managers will ensure that provisioned support items are
coded and reviewed for shelf-life considerations and assign a shelf-life code according to the
DoD Shelf-Life Item Management Program as described in Volume 5 of this manual. Identify
shelf-life characteristics of support items using the procedures and codes identified in Volume 1
of DoDM 4140.27. Materiel managers should also identify and potentially use non-hazardous,
non-shelf-life, longer shelf-life, or recycled items where possible.
e. During provisioning, materiel managers will ensure that the manufacturer or engineering
support activity performs a criticality determination for each new item. Aviation and ship items
that have flight safety critical characteristics have additional requirements outlined in Volume 11
of this manual.
4.3. PROVISIONING SCREENING.
a. Materiel managers and PICA will work with program managers to reduce the variety of
parts and associated documentation required by weapon systems or end items through
provisioning screening.
b. DoD Components will coordinate with the Integrated Materiel Management Committee,
in accordance with Volume 3 of this manual, on the uniform DoD-wide guidance for improving
the overall efficiency and effectiveness of procedures and program controls for consumable
items subject to item management coding and non-consumable items subject to non-consumable
item materiel support codes within the DoD and other applicable federal agencies as needed.
c. During the provisioning process, the DoD Components will:
(1) Screen manufacturers’ part numbers and other reference numbers in accordance with
DoDM 4100.39 to prevent unnecessary or duplicate items from entering the supply system.
(2) Fill the requirement from existing stocks or through normal replenishment
procurement when provisioning screening reveals that a support item or an acceptable substitute
item is already established (i.e., already assigned a NSN). This additional provisioning
requirement must be coordinated with the materiel manager.
(3) Facilitate electronic access to Federal Catalog System files by contractors who are
performing under current weapon system development or production contracts.
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SECTION 4: PROVISIONING 14
(4) Use the DLA Information Services for additional screening support as needed and to
enter new state-of-the-art technology into the supply system by developing new cataloging
nomenclature and descriptive methods.
4.4. TRANSITION SUPPORT. When transitioning from initial contractor support to organic
supply support is required, materiel managers will develop:
a. A transition schedule based on design stability and supply support concept compatibility
with maintenance concepts and other logistics support elements including logistics data.
b. Schedules from contractor to organic supply support transition that are consistent with the
system and equipment logistics support plan. Consider phased support to allow for the cost-
effective transition to organic supply support.
c. Transition plans to transfer some or all of the support for weapon system from organic
assets, including supply support for established items, when a contractor provides supply
support.
4.5. PROVISIONING REQUIREMENTS DETERMINATION.
a. Provisioning Procedures for Organic Requirements.
(1) DoD Components will compute requirements for provisioned items using the latest
end item program or delivery data and projected mature maintenance replacement rates. When
using interim contractor support for computing DoD Component requirements for provisioned
items, materiel managers will identify the necessary usage data to be collected and delivered by
the contractor in a format compatible with the automated system used in the U.S. Government’s
requirements determination process.
(2) Procuring partial quantities of computed requirements for the provisioning of
selected spare and repair parts may be deferred when program uncertainties or other
circumstances during the provisioning period of these items make such calculated risks
acceptable in the context of available resources and readiness goals.
(3) The DoD Components will retain documentation that portrays how contractor and
U.S. Government factors were evaluated and used to determine provisioning requirements.
(4) Extend provisioning requirements based on engineering data through the demand
development period (DDP) as addressed in Section 7 of this volume.
(5) Contractors and depot maintenance managers may recommend the range and quantity
of support items required to be provisioned.
(6) When an established item is managed by a DoD Component other than the
provisioning one, the DoD Component using the item registers the requirement with the materiel
manager by submitting supply support requests (SSRs) for consumable items, in accordance with
DoDM 4140.01-V2, November 9, 2018
SECTION 4: PROVISIONING 15
Volume 1 of DoD 4140.26-M, and by submitting non-consumable item materiel support requests
(NIMSRs) for reparable items, in accordance with DoDM 4140.68.
(7) The SSR and NIMSR process is designed to provide materiel managers with an
estimate of the time-phased requirements necessary to provide support items for weapon systems
as they are activated. The SSRs and NIMSRs submitted to the materiel managers should include
a forecasted 12-month requirement, identify how the requirement to provide support items is
computed, and should be based on average program requirements during the DDP. Materiel
managers may adjust the computations for support item requirements that have been submitted
by DoD Components on the basis of affordability, but these adjustments must reflect the dollar
savings and the impact on system or equipment readiness resulting from the adjustment.
(8) After the DDP for support items is complete, any pre-planned increases in end item
density or operating usage should not be the basis for further procurement of initial spares.
Those requirements will be considered replenishment spares and should be satisfied using the
provisioning requirements process.
b. Provisioning with Readiness-Based Sparing (RBS). To determine the inventory
investment required for the fielding of a new weapon system, the DoD Components will use
RBS methods, where feasible. Paragraph 8.3 of this volume contains the procedures for
computing RBS inventory requirements.
(1) DoD Components will use tools that implement RBS methods for provisioning new
weapon systems to determine the optimum range and quantity of items required at all stockage
and user locations to meet approved weapon system readiness goals.
(2) DoD Components will retain procedural control over RBS tools and processes.
(3) RBS methods will consider end item population build-ups during provisioning for
demand and supply planning.
(4) DoD Components will establish quality standards to measure the effectiveness of
RBS provisioning performance, RBS tools, and process improvement initiatives in the
implementation of RBS methods.
c. Provisioning with Demand-Based Sparing (DBS). When use of RBS is infeasible, the
DoD Components will use DBS methods. Paragraphs 8.4 and 8.5 of this volume contain the
procedures for computing wholesale and retail DBS inventory requirements. For provisioning
with DBS, the following limitations apply:
(1) DBS methods may be used for non-weapon system support provisioning where
readiness requirements for systems or end items are not stated, where data is not available for
input to RBS models, or where the application of RBS methods is not cost-effective.
(2) When using DBS methods, minimize the costs of achieving a targeted supply
performance goal.
DoDM 4140.01-V2, November 9, 2018
SECTION 4: PROVISIONING 16
(3) Total provisioning stockage computed by DBS methods will not exceed 1 year of
projected demand at each echelon in question.
(4) With DBS methods, no safety level quantities are authorized for provisioning.
(5) When anticipated demands are insufficient to justify stockage by DBS methods, only
limited-demand or insurance items will be stocked.
4.6. PROCURING PROVISIONED SUPPORT ITEMS.
a. When the procurement of provisioned support items is selected as the preferred source of
supply, DoD Components will:
(1) Create interactive support management plans that enable incremental scheduling and
implementation of provisioned items support of weapon systems and equipment, based on
configuration indenture and delivery of weapon systems and equipment.
(2) Develop and implement:
(a) Provisioning retail procurement levels based on end item density factors and site
activation schedules.
(b) Provisioning wholesale procurement levels based on the average number of end
items supported each month calculated for the time-weighted average month’s program.
b. The procuring DoD Component may award a contract for long lead time items for
provisioned items support using multiyear contracting, as outlined in Subpart 217.172 of the
DFARS for long-lead time support items:
(1) To obtain limited quantities of long lead time items at not less than minimum
economic rates.
(2) Which require early ordering to ensure timely delivery due to their complexity of the
items’ design due to complicated manufacturing processes, or limited production.
c. When procuring support items for DoD stocks, DoD Components will:
(1) Use phased-in procurement process to acquire support items based on weapon system
or end item program development and delivery schedules.
(2) Use procurement lead times during the acquisition of support items before the
fielding of an organically supported weapon system or end item.
d. DoD Components should issue orders for the procurement of provisioned support items
incrementally so the funds are obligated based on the procurement lead time required to ensure
the support items arrive for the scheduled initial outfitting support dates. When issuing orders
incrementally is uneconomical, the procuring DoD Component may use an alternative method to
ensure the support items arrive for the scheduled initial outfitting support dates.
DoDM 4140.01-V2, November 9, 2018
SECTION 4: PROVISIONING 17
e. DoD materiel managers, with product support managers and product support integrators
selected by program managers, will:
(1) Integrate the acquisition of initial spares and replenishing spares into the
requirements of production contracts.
(2) Acquire replenishment parts concurrently with parts being produced for the end item.
(3) Follow the guidance for contracts with provisioning requirements in Subpart 217.76
of the DFARS.
4.7. PROVISIONING PERFORMANCE MEASURES.
a. When DoD Components are the preferred source of supply, they will develop and
maintain provisioning performance measures.
b. In accordance with DoDI 4140.01, DoD Components will include measurement criteria in
these customer-oriented and performance-oriented measurement goals:
(1) Assessment of provisioning contribution to readiness or other PBL objectives in
program performance agreements.
(2) Accuracy of provisioning buys, projected use versus actual use.
(3) Ability to meet provisioning milestones.
(4) Accuracy of provisioning documentation.
(5) Inventory efficiency, as measured by minimal inactive inventories.
DoDM 4140.01-V2, November 9, 2018
SECTION 5: ITEM CLASSIFICATION AND CODING FOR STOCKAGE REQUIREMENTS 18
SECTION 5: ITEM CLASSIFICATION AND CODING FOR STOCKAGE
REQUIREMENTS
5.1. ITEM CLASSIFICATION CODING. The DoD Components will use:
a. Essentiality coding to identify secondary items needed to sustain weapon system
readiness.
b. Controlled inventory item (CII) codes and critical safety item (CSI) codes to identify
secondary items in need of special handling and control as prescribed in Volume 11 of this
manual.
c. Acquisition advice codes (AACs) to identify how an item is managed at wholesale level
of supply as:
(1) Stocked by a Military Service or DLA (either with readiness-based or demand-based
requirements).
(2) Stocked with non-demand-based requirements by a Military Service or DLA.
(3) Non-stocked.
(4) Stocked by a commercial supplier for direct vendor delivery.
(5) Variations of how an item is managed as defined in Volume 2 of DoD 4140.26-M.
d. Reason for stockage codes (RSCs) to identify how an item is managed at the retail level of
supply.
5.2. SMR ASSIGNMENT. To classify the source of supply, reparability, and recoverability of
items, the DoD Components will:
a. Assign the uniform SMR codes in accordance with DoDM 4100.39, DoDM 4140.68, and
Volume 6 of DoD 4140.26-M.
b. Coordinate coding decisions among the users to maximize inter-Service maintenance and
supply support for end items used by multiple Military Departments.
c. Use SMR coding to classify items as “consumable,” “field-level reparable,” or “depot-
level reparable.”
5.3. ESSENTIALITY ASSIGNMENT.
a. The Military Departments will:
DoDM 4140.01-V2, November 9, 2018
SECTION 5: ITEM CLASSIFICATION AND CODING FOR STOCKAGE REQUIREMENTS 19
(1) Ensure when generating weapon system application files that component items
receive essentiality codes and those codes are accessible to materiel managers.
(2) Ensure the weapon system group codes and item essentiality codes listed in
Paragraphs 5.3.b.(2) through 5.3.b.(3) are assigned and maintained. The Military Services may
change group and essentiality coding to meet operational needs.
(3) Validate the weapon system group codes and item essentiality codes for their weapon
systems periodically and provide any updates to respective materiel managers. Annually
reconcile their essentiality codes against codes in the DLA weapon system support program and
resolve identified discrepancies.
(a) Provide equipment application data to DoD materiel managers and the DLA
Weapon System Support Program within 90 days of a change in an item’s criteria or when items
or weapon systems become obsolete. When a weapon system is being removed from active
service or foreign military sales, notify the DLA weapon system support program manager of the
phase-out schedule to allow DLA to align its essentiality coding and requirements computations
with that schedule.
(b) When a change to the equipment application data results in a computer-generated
rejection notice, research, correct, and resubmit the application data within 90 calendar days of
the date of rejection.
b. The DoD Components will:
(1) Allocate management resources for each item based on its essentiality coding.
(2) Use the weapon system group codes in Table 1 to indicate how essential each
weapon system or end item is to the mission of the Military Service and for inter-DoD
Component exchange of weapon system data.
Table 1. Weapon System Group Codes
Code
Description
A
Highest Priority Mission-Essential. Only a limited
number of weapon systems are designated Code A.
B
Lower Priority Mission-Essential.
C
Not Mission-Essential.
(3) Use one of the five item essentiality codes in Table 2 to indicate the degree to which
failure of a secondary item that is part of an end item affects the ability of the end item to
perform its intended operation and for inter-DoD Component exchange of item essentiality data.
DoDM 4140.01-V2, November 9, 2018
SECTION 5: ITEM CLASSIFICATION AND CODING FOR STOCKAGE REQUIREMENTS 20
Table 2. Item Essentiality Codes
Code
Description
1
Failure of the item renders the end item inoperable.
3
Failure of the item does not render the end item inoperable
5
Item does not qualify for the assignment of Code 1, but is needed for personal safety.
6
Item does not qualify for the assignment of Code 1, but is needed for legal, climatic,
or other requirements peculiar to the planned operational environment of the end item.
7
Item does not qualify for the assignment of Code 1, but is needed to prevent the
impairment or temporary reduction of operational effectiveness of the end item.
5.4. RSC ASSIGNMENT.
a. Purpose.
(1) The Military Departments and DLA will assign an RSC that identifies the rules that
are applicable to the categorization of all secondary item inventories held at retail supply
activities. That categorization applies to secondary item inventory that is held at retail supply
activities without regard to the ownership or funding sources for the inventory.
(2) Within their materiel management systems, the Military Departments and DLA may
use the specific codes listed below or any data element or combination of data elements to
delineate inventory levels for secondary items held at retail supply activities.
b. Category Codes.
(1) Stocked Readiness. This demand-supported RSC is for an item with readiness-based
requirements levels.
(2) Stocked Demand. This demand-supported RSC is for an item with demand-based
requirements levels.
(3) Stocked Numeric. This non demand-supported RSC is for an item with demand that
is available on a limited and intermittent basis (e.g., a seasonal item) and does not warrant
demand-based requirements levels but does warrant the stockage required to meet demand-based
requirements.
(4) Stocked Provisioning. This non-demand-supported RSC is for an item specifically
stocked to support a newly introduced end item until requirements are forecast entirely upon
actual demands. That period of assignment of non-demand based RSC may not exceed 2 years
after actual demand for the item is established. The requirements objective that is established for
these items is based upon the asset positioning policy and anticipated usage developed during the
provisioning process.
DoDM 4140.01-V2, November 9, 2018
SECTION 5: ITEM CLASSIFICATION AND CODING FOR STOCKAGE REQUIREMENTS 21
(5) Stocked War Reserve. Stock specifically held to support a wartime requirement.
The stock for an item can be divided between this category and any other demand-supported or
non-demand-supported RSC.
(6) Not Stocked. This category is for items with no established requirements levels.
Inventory or usage data may or may not exist for this category of items; however, orders placed
on sources of supply are to satisfy customer backorders and not to replenish requirements levels.
(7) Other. This category is meant to be a temporary assignment (i.e., 90 days or fewer),
until another RSC is assigned.
5.5. REVIEW REQUIREMENTS. As part of their internal control programs, DoD
Components will have procedures dealing with item classification and coding:
a. The objective of the procedures will be to classify and code items accurately and properly.
b. The procedures will apply document analysis, direct observation, and sampling to ensure:
(1) DoD Component logistics systems are using the latest coding structures.
(2) DoD Component operating staff applying the codes have knowledge of the codes,
their assignment, and their use within the DoD Component.
(3) DoD Component operating staff are trained on item classification and coding in
accordance with DoD and DoD Component manuals.
(4) Code assignments are up-to-date and accurate.
c. DoD Components will review and update code assignments, if required, as follows:
(1) SMR code assignments for reparable items whenever repair costs become greater
than 75 percent of their replacement costs (i.e., the sum of the cost to order and the acquisition
price). If the item is no longer procurable (e.g., obsolete item), its SMR code should not be
updated to a consumable item.
(2) SMR code assignments for consumable items whenever an item is experiencing a
significant level of field repair and has a high annual demand value that indicates repair is a
viable and cost effective alternative to procurement.
(3) Item essentiality code assignments whenever a change in weapon system
configuration is replacing or deleting items.
(4) CII codes whenever there is a change to the item’s tolerance, fit restrictions,
application, nuclear hardness properties or other characteristics which affects the technical
identification of the item.
(5) CSI codes whenever a design change may affect the item in accordance with
Paragraph 6.2.k.(8) in Volume 11 of this manual.
DoDM 4140.01-V2, November 9, 2018
SECTION 5: ITEM CLASSIFICATION AND CODING FOR STOCKAGE REQUIREMENTS 22
(6) AAC codes whenever the materiel manager changes how the item is acquired or
managed in accordance with the procedures in DoDM 4100.39.
(7) RSCs at a retail supply activity whenever the materiel manager changes how the item
is managed.
d. To ensure the accuracy of item code assignments, DoD Components will:
(1) Sample SMR codes at least every 5 years in accordance with DoDM 4100.39.
(2) Sample item essentiality codes at least every 3 years.
(3) Conduct CII code reviews in accordance with Paragraph 5.2.c. of Volume 11 of this
manual at least every 5 years.
(4) Sample AACs at least every 5 years.
DoDM 4140.01-V2, November 9, 2018
SECTION 6: SUPPORT GOALS FOR SECONDARY ITEMS 23
SECTION 6: SUPPORT GOALS FOR SECONDARY ITEMS
6.1. SUPPORT GOALS. DoD materiel management activities (e.g., organic or commercial
inventory control points (ICPs) and retail supply activities) that manage secondary items will
establish and use support goals that apply as an integral part of the process to compute stockage
requirements and asset allocation. DoD Components will:
a. Establish support goals for all DoD secondary items to ensure the supply system uses
resources that are available to meet RBS weapon system targets, weapon system and equipment
performance objectives, and unit readiness objectives at the lowest cost. Establishing these goals
is required regardless of the source or method of support (e.g., organic, inter-governmental,
private contractor, and partnership)
b. Establish base support goals for the performance agreements that are negotiated with
customers or, if no agreement exists, for the enterprise metrics that have been adopted for
support.
c. Establish support goals to provide logistics managers with weapons system and unit
readiness capability-based quantitative targets in order to meet in supply planning and asset
allocation and to achieve goals while minimizing costs.
d. Use support goals to assess the performance of the DoD supply chain and to evaluate the
effectiveness and benefits of process improvements to the supply chain.
e. Establish and maintain rules for calculating performance measurements against
established support goals.
f. Set target support goals that reflect both peacetime and wartime needs. Synchronize
support goals with the programming and budgeting process to ensure consistency with
management decisions made to set priorities and to commit resources to achieve those priorities
in the establishment of stockage requirements and asset allocation.
g. Quantify support goals that apply to item populations (i.e., organizational, commodity,
equipment, or weapon system) to permit cost tradeoffs.
h. Establish individual item goals when they are required to meet specific customer
requirements or when they are generated by a process that considers cost tradeoffs in meeting a
population readiness or other established support goal.
i. Emphasize timely receipt of items ordered by customers of the supply system to achieve
responsive, consistent, and reliable support and contribute to the overall confidence of customers
in the DoD supply system. All organizations in the supply chain should emphasize the
importance of time in support goals for their respective logistics functions.
DoDM 4140.01-V2, November 9, 2018
SECTION 6: SUPPORT GOALS FOR SECONDARY ITEMS 24
6.2. SETTING SUPPORT GOALS.
a. In setting support goals that encompass the total responsiveness of the supply system, the
DoD Components will consider both the performance they can expect from having the right
materiel in inventory and the time to deliver materiel in response to a customer order.
b. For items essential to weapon system performance, support goals for inventory
performance will support the readiness goal of the weapon system throughout its life cycle (e.g.,
operational availability and mission capable rates). DoD Components will:
(1) Set weapon system readiness goals with weapon system managers or operational
commands.
(2) Set inventory performance goals to:
(a) Meet readiness goals of a weapon system throughout its life cycle.
(b) Balance stock positioning goals in order to minimize total costs.
(c) Synchronize distribution, integrity, and security requirements with inventory
planning efforts.
(3) Set goals to manage supply chain risk management for critical components of critical
systems essential to weapons systems performance in accordance with procedures on the
protection of mission critical functions to achieve trusted systems and networks in Section 8 of
Enclosure 2 of DoDI 5200.44.
c. For items not essential to weapon systems or for items for systems that are not categorized
as weapon systems, DoD Components will base support goals for inventory performance on the
time that is needed to fill a customer’s order and whether that order is requisitioned to an ICP or
is considered a demand request to a retail supply activity. Those time goals may be established
by organizational, commodity, equipment, or weapon system groupings in order to apply them to
the computations for individual item requirements.
d. Program managers or materiel managers will negotiate support goals with the commercial
sources that are providing contractual support for secondary items under contracts for the
provision of direct materiel support to DoD activities. Program managers or materiel managers
should include in their negotiations contractual support goals that the commercial sources can
use to size their inventories used to support contract performance. Program managers or materiel
managers will consider overall inventory performance goals when negotiating contract
performance requirements with commercial sources that are providing support for secondary
items.
e. For timely delivery and process improvement in responding to requisitions to the ICPs,
the DoD Components will use negotiated time-definite delivery standards or, if no standards
exist, the general delivery standards described in Volume 8 of this manual.
DoDM 4140.01-V2, November 9, 2018
SECTION 6: SUPPORT GOALS FOR SECONDARY ITEMS 25
f. The DoD Components will provide an automated capability to store and retrieve support
goals and related item data that permits historical performance analysis at an enterprise, group, or
item level. Include data for items supported from both organic and commercial sources.
Maintain this capability throughout the life cycle of the supported end item or for as long as the
DoD Component deems necessary.
DoDM 4140.01-V2, November 9, 2018
SECTION 7: FORECASTING CUSTOMER DEMAND 26
SECTION 7: FORECASTING CUSTOMER DEMAND
7.1. DEMAND FOR FORECASTABLE AND NON-FORECASTABLE ITEMS.
a. DoD Components will use demand frequency and demand variability to identify items (or
groups of items) as forecastable or non-forecastable.
b. The conditions for identifying a non-forecastable item are:
(1) No demand history or forecasts exist for the item as the occurrence of demand is
based solely on the potential of a catastrophic event.
(2) Demand for the item is considered limited:
(a) The item is not new to the supply system but historical demand for the item is too
infrequent to support the use of any quantitative forecasting model.
(b) The item is new to the supply system and neither engineering estimated demand
nor forecasted demand based on an analogous technique utilizing “like items” is available.
(3) Historical demand for the item is not limited but is intermittent or has high volatility
to the extent that any quantitative model for the demand of the item would not produce viable
forecasts.
c. DoD Components will use quantitative techniques to assess the forecastability of items
under their cognizance. At a minimum, an item’s demand intermittency, volatility segmentation,
and level of collaboration will be used.
(1) To judge demand intermittency and volatility for an item, DoD Components should
have a minimum of 2 years of historical demand for the item, preferably 5 years.
(a) Each DoD Component will select the time period for dividing historical demand
(e.g., by month, by quarter) for purposes of determining demand intermittency and volatility.
(b) If 2 years of historical demand is not available, DoD Components may use the
demand history for a similar item or engineering estimates for the item that have been simulated
over 2 years.
(2) To quantify demand intermittency of the item, DoD Components will calculate the
percent of total historical demand periods that have non-zero demand. DoD Components should
use Table 3 to segment items by their demand intermittency.
(3) To quantify demand volatility, DoD Components will use the demand coefficient of
variation (CV) or a similar statistical measure of variance. CV is calculated as the ratio of the
standard deviation of the demand to the average demand and is normally expressed as a
percentage. When using CV to segment items by their demand volatility, DoD Components
DoDM 4140.01-V2, November 9, 2018
SECTION 7: FORECASTING CUSTOMER DEMAND 27
should use the construct in Table 4, or a similar construct if using a different measure of
variance.
Table 3. Segmenting Items by Demand Intermittency
Intermittency
Segment
Description
Limited
Almost no periods of demand
Uneven
Few periods of demand
Erratic
A fair number of periods of demand
Continuous
Many periods of demand
Table 4. Segmenting Items by Demand Volatility
Volatility
Segment
Description
Low variance
The demand history for the item has little
volatility as the standard deviation of demand
is less than the average demand.
Medium
variance
The demand history for the item has volatility
but the standard deviation of demand is near
the average demand.
High variance
The demand history for the item is highly
volatility as the standard deviation of demand
is greater than the average demand.
(4) The DoD Components should use Tables 3 and 4 to identify forecastable and non-
forecastable items:
(a) DoD Components should treat items with low variance and continuous or erratic
demand and items with medium variance and continuous demand as forecastable.
(b) DoD Components should treat items with limited demand as non-forecastable and
items with high variance as non-forecastable unless their demand is continuous.
(c) DoD Components should treat items with medium variance and uneven demand
as non-forecastable, if feasible.
(d) DoD Components may treat items with medium variance and erratic demand, and
items with low variance and uneven demand as either forecastable or non-forecastable depending
on the accuracy of the forecast produced by the DoD Component’s quantitative models and level
of collaboration for those items.
(e) Table 5 illustrates the results of procedures in Paragraphs 7.1.c.(4)(a) through
7.1.c.(4)(d).
DoDM 4140.01-V2, November 9, 2018
SECTION 7: FORECASTING CUSTOMER DEMAND 28
Table 5. Segmenting Items as Forecastable and Non-Forecasting Based on Demand
Intermittency and Volatility
Intermittency
Continuous
Erratic
Uneven
Limited
Volatility
Low
variance
Forecastable
Forecastable
Forecastability
dependent on
Non-
forecastable
accuracy
Medium
variance
Forecastable
Forecastability
dependent on
Non-forecastable
Non-
forecastable
accuracy
High
variance
Forecastability
dependent on
Non-
forecastable
Non-forecastable
Non-
forecastable
accuracy
(5) The DoD Components may deviate from the percentages shown in Tables 3 and 4
based on a documented analysis showing how different percentages provide better customer
support.
d. When determining stockage requirements for non-forecastable items, DoD Components
should use, if feasible, either the computations for non-forecastable items or the computations for
non-demand-based requirements prescribed in Section 8 of this volume.
7.2. USE OF ENGINEERING ESTIMATES.
a. During the DDP for an item introduced as part of a new end item, DoD Components will
use engineering estimates to forecast demand because there is no historical data available that
can be used to forecast demand for the item.
(1) The DDP will extend from the initial date of organic support for a new end item to a
point when demand can be forecasted using actual demands. For items initially under a
warranty, the DDP starts at the end of the warranty period.
(2) If a representative operating time already exists, the DDP can be no more than 1 year.
Otherwise, the DDP will normally not exceed 2 years. If at the end of the 2 year DDP, sufficient
representative operating time has not been attained for the item, the DDP for the item may be
extended up to 3 more years, for a total DDP of 5 years.
(3) If the end item incurs sufficient operating time during the period prior to organic
support (that is, during the period of interim contractor support) and contractor’s usage data is
available, DoD Components may choose to use that data to forecast demand and eliminate the
need to establish a DDP.
b. In establishing and using a DDP for an item, DoD Components:
DoDM 4140.01-V2, November 9, 2018
SECTION 7: FORECASTING CUSTOMER DEMAND 29
(1) Should establish a DDP that is measured against an equipment operating standard
(e.g., hours, miles, and rounds) instead of calendar time. If that is not possible, use a traditional
calendar-based DDP.
(2) Will statistically validate actual usage of the item during the DDP. If actual usage
data is not statistically valid, the materiel manager will continue to base estimates for the demand
of the item on both engineering estimates and actual usage data for the item until statistically
valid data is obtained.
(3) Whether using a calendar-based or operating standard-based DDP for the item, adjust
demand forecasts with actual usage data when sufficient representative operating time exists or
after 5 years (the maximum DDP).
c. During the DDP, DoD Components should combine actual usage with engineering
estimates for the item when actual usage begins to occur.
(1) For example, a DoD Component with a 2-year DDP for an item may start with the
engineering estimate as the forecast but after 6 months use ¾ of the engineering estimate plus ¼
of the actual usage as the forecast. Then after 1 year, the DoD Component may use ½ of the
engineering estimate plus ½ of the actual usage as the forecast and, after 1 year and 6 months,
use ¼ of the engineering estimate plus ¾ of the actual usage as the forecast. Finally, after
2 years, the Components would use the actual usage as the forecast.
(2) When combining actual usage with engineering estimates to forecast demand for an
item, DoD Components will use a technique that produces the most viable forecast during the
DDP of the itme.
7.3. USE OF QUANTITATIVE MODELS.
a. For forecastable items, DoD Components will use quantitative models to forecast demand
for these items.
b. To forecast the demand expected to be placed on the supply system for forecastable items
within a specified time, DoD Components may use models that consider only historical demand
or models that combine future program data with historical demand or failure data for the item.
DoD Components will:
(1) Retain sufficient historical demand or failure data and program data for forecastable
items to continue using the current model to forecast demand, or will allow activities to transition
to another model to forecast demand for these items.
(2) Where feasible, capture actual customer demands and usage of forecastable items at
the point of sale and, along with collaborative forecasting, use the demand and usage to update
future demand forecasts for these items at each echelon of supply.
(3) Maintain records of historical failure data with maintenance replacement data or
supply requisition data for forecastable items. Record demand data, including reparable
DoDM 4140.01-V2, November 9, 2018
SECTION 7: FORECASTING CUSTOMER DEMAND 30
generations and maintenance replacements, in a timely manner on the records of the intermediate
level supply point.
c. Since no universal model exists for forecasting demand for all items, DoD Components
will:
(1) Select the best models for forecastable items based on cost and performance trade-
offs and ease of implementation. Cost of forecastable items is evaluated in terms of value of
inventory and performance of forecastable items is evaluated based on business outcomes (e.g.,
number of backorders, average response time, supply availability, numbers and value of
procurements, and numbers and dollar value of repair actions for reparable items).
(2) Will use demand to build forecasts to compute item requirements levels except for
atypical demand occurrences and selected foreign military sales items. Materiel managers will:
(a) Use data filtering to identify and exclude or adjust atypical data for items that
might unduly influence the forecast of the item, when using models that rely on historical data to
forecast the demand of the item.
(b) Exclude foreign military sales for items that are not under cooperative logistics
supply support arrangements.
(c) Include demand for items that customers identify as non-recurring to the extent
that the materiel manager is able to demonstrate that a particular quantity of non-recurring
demands of items will improve its forecasts.
(3) As explained in Paragraph 7.2., use engineering estimates to forecast future demand
for items at the beginning of the demand development period as needed. After the demand
development period, DoD Components will use actual demand data, augmented with program
data, to forecast future demand for items. However, DoD Components will use engineering
estimates if:
(a) An item has insufficient representative operating time to adjust the forecast with a
valid statistical technique; or
(b) An engineering problem or forthcoming design change of the item means past
demands are not indicative of future demands.
7.4. BASICS IN ESTABLISHING AND IMPROVING A FORECASTING PROCESS.
Besides identifying forecastable items and using quantitative models, DoD Components will
consider the elements in Table 6 when establishing their forecasting process.
DoDM 4140.01-V2, November 9, 2018
SECTION 7: FORECASTING CUSTOMER DEMAND 31
Table 6. Basics in Establishing and Improving a Forecasting Process
Element
Basic requirement
Advanced capability
Demand History
DoD Components will retain a 5 year history of
customer demand for purposes of developing and
testing forecasting quantitative models.
DoD Components will retain up to 15 years of history to
develop and testing forecasting models.
Quantitative
DoD Components will use multiple models to account
If basic models prove lacking, DoD Components should
Models for level of demand, trends, seasonality, and volatility.
Examples are:
• Moving average
• Moving average adjusted by operating tempo
models
• Exponential smoothing models
• Regression models
investigate and incorporate, where appropriate, models
that deal with more complicated demand patterns.
Examples are:
• Seasonal and trend models
• Multivariate regression models
• Croston model
• Asymmetric threshold models
• Transition models
• Conditional volatility models
• Support vector regressions
• Neural networks
Program Data
DoD Components may include projected operational
data, such as flying hours, sortie rates, steaming hours,
rolls fired, and number of troop, or maintenance data,
such as maintenance schedules and bill of materials, in
their forecasts if the data can be shown to add
accuracy.
The Component’s process will evaluate the accuracy of
projected operational data and adjust forecasts
accordingly.
Parameter Setting
The Component’s process has provisions to change
The Component’s process includes tests for
and Diagnostics parameter setting with quantitative models and
diagnostic capabilities to identify where changes are
necessary.
autocorrelation, heteroscedasticity, unit roots, normality
of residuals, outliers, etc.
DoDM 4140.01-V2, November 9, 2018
SECTION 7: FORECASTING CUSTOMER DEMAND 32
Table 6. Basics in Establishing and Improving a Forecasting Process, continued
Element
Basic requirement
Advanced capability
Life Cycle
DoD Components will consider where an item is in its
life cycle as part of its forecasting process:
• Move from engineering estimates to
quantitative models during the item
introduction phase
• If applicable, use end item densities to adjust
forecasts during the end of life phase
The Component’s process considers sub-phases with the
three major life cycle phases of item introduction,
sustainment, and end of life.
Quality Control
Materiel managers will flag variances in demand
forecasts which are outside established parameters
management analysis and action.
for
The Component’s materiel management system will flag
for management analysis and action variances in demand
forecasts which are outside established parameters.
Adjustments
Using their materiel management system, materiel
managers will have the capability to adjust forecasts
affected by:
• erroneous, incomplete, or inapplicable data
• the introduction or phase-out of weapon
systems or equipment for items whose demand
is significantly affected
Adjustments to forecasts are captured in a way that
allows for the evaluation of forecast accuracy and bias
before and after the adjustments.
Collaborative Input
The DoD Components will provide collaborative input
to wholesale source of supply when such collaborative
provides for more accurate forecasting of item demand
than simple history.
To guard against over or under forecasting item demand
by customers, DoD Component forecasting processes
will provide for the evaluation of and adjustment of
collaborative input in a manner that improves forecast
accuracy.
Sales and
Operations
Planning
The process will support a business management
decision framework with a limited or basic capability
as defined in Volume 12 of this manual.
The process will support a business management
decision framework with an advanced capability
defined in Volume 12 of this manual.
as
Training
Individuals responsible for the application of
quantitative models used to forecast demand should
have basic training on statistical algorithms and
heuristics used to forecast demand.
Individual responsible for the application of quantitative
models should have advanced training on statistical
algorithms, heuristics, and data mining techniques that
can be used to forecast demand.
DoDM 4140.01-V2, November 9, 2018
SECTION 7: FORECASTING CUSTOMER DEMAND 33
7.5. COLLABORATION.
a. To improve the accuracy of demand forecasts, materiel managers and supply providers
will collaborate with their customers to project future demand for items. Demand forecasts for
items can be supported with demand forecasting models, special one-time events, or factors that
will systematically change the item’s demand.
(1) Program collaboration involves the collection of program data from customers for
use in computing a demand forecast. In support of program collaboration, DoD Components
will:
(a) Maintain records of past and future program data that provides actual quantitative
measures of operation of the system or end item (e.g., the actual and planned number of hours
flown or operated, component reliability experience, expected operating environment, the
weapon system or end item density, or the number of overhauls or scheduled depot maintenance
actions accomplished or planned).
(b) Use estimates of operations where actual program data is not available.
(c) Follow procedures in Volume 7 of this manual for storing and accessing weapon
system data.
(2) Customer demand collaboration involves the submission of expected future demand
from customers. For formal collaboration between materiel managers and their customers, the
using DoD Components should use tools such as SSRs, special program requirements (SPRs) or
the DLA Demand Data Exchange (DDE) Program.
(a) The DoD Components sponsoring new consumable item applications will use
SSRs to pass forecasted wholesale and retail requirements to the respective materiel managers.
The procedures governing SSRs are located in Volume 6 of DoD 4140.26-M.
(b) The using DoD Components may submit SPRs to the materiel manager to
forecast special program or project requirements that are non-repetitive and may not be
forecasted based on historical demand data.
1. SPRs will not be used for subsistence, war reserve, provisioning, and other
requirements based on recurring demand.
2. SPR will be submitted as far in advance of the date required as practical, at
least 90 days, to allow for sufficient time for materiel managers to act to acquire the assets
needed to fill the special requirement.
3. When submitting SPRs, DoD Components will use the detailed procedures on
the SPR process in Chapter 2 of Volume 2 of Defense Logistics Manual (DLM) 4000.25.
DoDM 4140.01-V2, November 9, 2018
SECTION 7: FORECASTING CUSTOMER DEMAND 34
(c) The DLA DDE program allows DoD customers to provide DLA materiel
managers with a projected supply plan that consists of demand quantities for future months for
customer-selected items.
1. The DLA DDE program may be used for recurring demand requirements,
subsistence, and other special one-time or project requirements listed in Chapter 2 of Volume 2
of DLM 4000.25.
2. The future months in the submitted supply plan may be as short as 12 months
and as long as 60 months. The DLA DDE program will accept projected supply plans for
60 months where zeros are entered for those months with no plan data.
3. When submitting a projected supply plan via the DLA DDE program, DoD
Components will use the detailed procedures on the DDE projected supply plan in Chapter 2 of
Volume 2 of DLM 4000.25.
(d) A using DoD Component can submit item future demand quantities as either an
SPR or as input to a DDE program but not both.
(3) Collaborating DoD Components will have internal control programs to ensure that
the information they are receiving or submitting is as accurate as possible and can be used to
improve the accuracy of demand forecasts.
(a) The program for submitting DoD Components will consist of internal controls
and supporting documentation that ensure the appropriateness and accuracy of SPR and DDE
submissions, correlate requisitions with related SPRs and DDEs, and ensure timely and accurate
documentation of significant changes in demand forecasts.
(b) The program for DoD Components receiving SPRs and DDEs will consist of
internal controls that ensure SPR and DDE data does not increase forecast error and the
investment in inventory to support SPRs and DDEs does not lead to excessive growth of demand
forecasts.
(c) A key internal control for receiving collaborative data is the value added to
demand forecast accuracy by program collaboration and by customer collaboration. Value added
metrics for each should serve as the basis for assessment the overall effectiveness of
collaboration and for identifying areas where collaboration needs to be improved.
(4) DoD Components will:
(a) Use the standard procedures and electronic data interchange conventions in
Chapter 2 of Volume 2 of DLM 4000.25 for SPR and DDE projected supply plan processing.
(b) Follow the standard accounting methods, electronic data interchange conventions,
and procedures in Chapter 13 of DLM 4000.25-2 for the SPR and DDE projected supply plan
process.
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(5) For items that one wholesale materiel manager uses but for which another wholesale
materiel manager has buy or repair responsibility for the Department, the using materiel manager
will provide the managing materiel manager with demand forecast data for the item.
b. To improve the responsiveness and reliability of suppliers, DoD materiel managers should
collaborate on expected future requirements with vendors who perform contracts to provide long
term supply support through strategic sourcing and planned direct vendor delivery contracts.
(1) DoD materiel managers should work with the vendors on:
(a) The best way for the DoD Components to communicate future requirements to
vendors.
(b) A way for vendors to notify materiel managers of any problems that require
mutual resolution.
(2) DoD materiel managers will establish and maintain internal controls to monitor the
accuracy and variability of expected future requirements transferred to vendors and, thereby,
ensure the continuity and stability of supply while alerting vendors of the flexibility required to
provide the requisite contractual support.
7.6. VALUE ADDED ANALYSIS.
a. DoD Components will determine the value that their demand forecasting process adds to
the simplest of forecasting models, namely, the naive forecast, which is last period’s demand.
(1) For purposes of analyzing demand forecasts and setting targets, the forecast value
added metric is the differences in forecast accuracy and forecast bias percentages between the
naïve forecast and the forecast produced by the DoD Component’s forecasting process. DoD
Components can also analyze forecasts and set targets by using the relative absolute error (RAE)
metric to calculate the ratio of the actual forecast error and the forecast error for the naïve
forecast.
(2) For purposes of identifying their value added to forecast accuracy and forecast bias to
Deputy Assistant Secretary of Defense for Logistics, the DoD Components will use a period of 1
year.
b. Each DoD Component will use its value added analysis to evaluate its forecasts, set its
targets for its forecasts, and to identify item forecasts that need improvement.
(1) Where the naive forecast produces better forecast accuracy (RAE >1) or forecast bias
than the forecast out of the DoD Component process, the value added is negative and the DoD
Component should improve their forecasting process.
(2) Where the forecast out of the DoD Component process produces better forecast
accuracy (RAE < 1) or forecast bias than the naive forecast, the value added is positive and the
DoDM 4140.01-V2, November 9, 2018
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DoD Component need only seek improvement if the value added indicates that the forecast
accuracy and forecast bias were not at the DoD Component’s internal target.
(3) If a DoD Component is using periods less than a year for internal value added
analyses, that is, months or quarters, the DoD Component may need to use more than one period
to judge value added.
(4) When evaluating value added metrics, DoD Components may choose to segment
their forecastable items into similar grouping based on characteristics such as demand frequency,
demand value, weapon system application, etc.
(5) A DoD Component may set its value-added target based on a goal for its value added
across all forecastable items, goals for items in value added ranges (either positive or negative
ranges or both), or combinations of those goals. If a DoD Component sets a forecast target in
terms of forecast accuracy or forecast bias, it may use value added analysis to determine if the
target is realistic and achievable.
(a) To gauge the feasibility of potential targets, DoD Components may use value
added distributions to establish minimum and maximum target thresholds for the quantitative
models that they use within their forecasting process.
(b) When judging the relative performance of their forecasting process against goals,
DoD Components should not only consider percentage and percentage point differences in value
added metrics but also actual dollar value and quantity differences, particularly at the item level.
DoDM 4140.01-V2, November 9, 2018
SECTION 8: MATERIEL STOCKAGE COMPUTATIONS 37
SECTION 8: MATERIEL STOCKAGE COMPUTATIONS
8.1. RIGHT SIZING INVENTORIES. To minimize total supply chain costs while supporting
customer requirements, the Military Departments and DLA will use the methodologies in this
section as well as the methodology prescribed in Section 9 of this volume for war reserve
materiel.
8.2. COMPUTATIONAL METHODOLOGIES
a. Categorization and Use of Computational Methodologies.
(1) The DoD Components will categorize stockage requirements and associated levels of
inventory as either wholesale or retail.
(a) The DoD Components will manage retail assets regardless of ownership under
the retail inventory policies delineated in this section.
(b) The DoD Components will manage wholesale assets regardless of where
positioned under wholesale inventory policies delineated in this section.
(2) To compute peacetime wholesale and retail stockage requirements for secondary
items, the DoD Components will use readiness-based, demand-based, and non-demand-based
methodologies in this section of the volume (see Volume 6 of this manual for guidance on the
requirements computations of ammunition items).
(a) The methodologies and models will be compatible with those developed to
achieve optimum stockage during provisioning. The methodologies and models that the DoD
Components use to categorize stockage requirements and related levels of inventory should share
comparable target objective functions, data elements, and computational techniques.
(b) As shown in Figure 1, the DoD Component’s selection of the specific
methodology used to compute stockage requirements for a secondary item will be based on the
type of item (reparable or consumable), the supply performance goal (weapon system readiness
or time to fill a demand), and the demand forecastability for the item.
DoDM 4140.01-V2, November 9, 2018
SECTION 8: MATERIEL STOCKAGE COMPUTATIONS 38
Figure 1. Application of Computational Methodologies
b. RBS Methodologies.
(1) For weapon system items, materiel managers will use RBS modeling, when possible,
to:
(a) Optimize their inventory to achieve weapon system performance objectives.
(b) Optimize support across both the wholesale and retail supply echelons.
(c) Account for the indenture level of items being spared, the essentiality of items to
the operational design of the weapon system, and the levels of maintenance for the items and
their higher assemblies.
(2) When RBS modeling is not possible for weapon system items and DoD Components
must use DBS models, materiel managers and weapon system managers must establish time
goals for those models through a collaborative process that links those time goals to the readiness
goals of the particular weapon system.
(3) For secondary items that have support goals related to weapon system readiness, the
DoD Components will compute requirements with RBS models that relate range and depth of
stock to their effect on the operational availability of the weapon system. They will use models
DoDM 4140.01-V2, November 9, 2018
SECTION 8: MATERIEL STOCKAGE COMPUTATIONS 39
that optimize support to achieve weapon system readiness goals for the least cost or maximize
weapon system readiness for a specified level of funding.
c. DBS Methodologies.
(1) For secondary items that have time goals, the DoD Components will use DBS
methodologies:
(a) Compute requirements for secondary items with time goals using sparing models
that relate range and depth of stock to a target time.
(b) Include both the time to fill immediate issues and the time to fill back orders of
these secondary items, minimizing the expected customer wait time.
(c) Use models that optimize stockage of secondary items with time goals to achieve
the target time for the item at the least cost or minimize the expected fill time of the item within a
specified budget.
(d) Project secondary item requirements and assets with enough lead time to place
the order and receive the item before the time that it is actually needed.
(2) For depot-level reparable items, DoD Components will apply these additional
procedures when using DBS methodologies:
(a) Compute the total requirements for each reparable item assigned so that an item
may be:
1. Supplied to authorized using activities at the DoD organizational level (e.g.,
post, base, field, or ship) if failure of a reparable component prevents an end item or weapon
system from achieving its mission.
2. Provided to replace a reparable item that has been determined to be beyond
economical repair during the depot-repair process as described in Chapter 2 of Volume 11A of
DoD 7000.14-R, or that may not be repaired within the same length of time as its next higher
assembly.
(b) Project serviceable and unserviceable asset quantities for reparable items by
month or quarter which will allow the projection of repair requirements and procurement of
repair requirements in the same computation. Consider serviceable returns in requirements
computations from both the asset and requirements perspectives described in Volume 6 of this
manual.
d. Computational Considerations.
(1) To accommodate backward scheduling when managing items using an enterprise
resource planning system, inventory requirements will be expressed in days of supply to allow
for proper timing of procurement and repair actions as well as the proper sizing of procurement
and repair quantities.
DoDM 4140.01-V2, November 9, 2018
SECTION 8: MATERIEL STOCKAGE COMPUTATIONS 40
(2) DoD Components will adjust their computational parameters as necessary to account
for items associated with an end item that is being phased out or that has a decline in demand.
(3) DoD Components will project stockage quantities to satisfy item requirements for
national and international cooperative logistics supply support arrangements item requirements.
(4) When a DoD Component is using actual or projected assets to compute requirements
for depot-level reparable items, DoD Components will:
(a) Use asset visibility capabilities to make serviceable assets and those that need
repair at all supply levels (organic or commercial) visible and available to the materiel manager
(supply system) to satisfy requirements at both the wholesale and retail levels. Ensure assets are
visible and use them to offset requirements (retail or wholesale).
(b) Establish retail supply management system procedures (except afloat) to facilitate
total system asset management. Where possible for the applicable materiel manager, retail
systems should produce a daily summary of the supply transactions that affect the demand base
or stock status of materiel.
(5) For depot-level reparable items with daily summary transaction summaries, materiel
managers will use actual consumer demands to make requirements computations, procurement
decisions, and stock positioning decisions.
(a) This requirement applies to DoD Component-owned inventory at contractor-
operated retail activities as well as inventory within the DoD Component supply management
systems.
(b) Materiel managers at the retail level will maintain item accounting (as opposed to
dollar value inventory accounting) for all items they have determined require daily summary
transaction listings.
(6) For reparable assets held at the retail level, items may be placed in rotatable pools or
positioned near expected consumers.
e. Information Exchanges.
(1) For reparable items managed and used by more than one DoD Component, PICAs
and secondary inventory control activities (SICAs) should collaborate through information
exchanges to gain the following benefits:
(a) Reduced stock-outs between the PICA and SICAs.
(b) Reduced PICA and SICA excess stocks.
(c) Lower levels of investment in inventory across DoD.
(2) If requested by the PICA, SICAs should provide the following:
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(a) The demand forecast data for the item, both weapon system and non-weapon
system forecasted demand. This data will assist the PICA in sizing its inventory to deal with any
deviations from historical data.
(b) The requisition response time objective for the item by weapon system. This data
will assist the PICA in sizing its inventory to provide the levels of support needed by the SICAs.
(c) The number of retail assets above the retail requisitioning objective by item. This
information will assist the PICA in offsetting inventory requirements and reducing the
procurement of unneeded assets.
(3) Using SICA data, PICAs should be able to compute the items’ buy or repair
requirements with the goals of attaining the users’ weapon system availability objectives within
the maximum requisition response times. Based on those computations, PICAs should be able to
advise SICAs of the achievable requisition response time that is achievable for each item, and
SICAs should be able to determine the impact of the achievable requisition response times that is
achievable on cost and weapon system availability.
(4) If requested by a SICA, PICAs, which do not rely on information exchanges, should
be able to advise SICAs of the achievable requisition response time for each item, and SICAs
should be able to determine the impact of the achievable requisition response times on cost and
weapon system availability.
8.3. RBS COMPUTATIONS.
a. Usage Where RBS models are available, DoD Components will use the RBS models’
optimization logic to compute the total requirements for the items essential to a weapon system.
(1) To support RBS computations, each Military Service will establish a secondary item
application or configuration file for each of its weapon systems. The Military Service will show
the indenture structure and essentiality of all reparable and consumable items that are part of the
weapon system, whether peculiar to that system or common to other systems.
(2) Each Military Service will:
(a) Use computations in an RBS model to maximize weapon system performance
required to support unit mission effectiveness for a given level of investment or minimize
investment for a target level of weapon system performance.
(b) Use RBS models to compute requirements levels for replenishing stock for
different echelons of supply and different locations within echelons to minimize total costs, not
just inventory costs.
(3) Preferably, DoD Components will manage weapon system-essential items on the
basis of multi-echelon RBS models in the authorized objective quantities of stockage that the
models determine are appropriate for the particular weapons-system at issue.
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(a) Where multi-echelon RBS models are not yet available, DoD Components will:
1. Base wholesale stockage of weapon system-essential items either on demand-
based requirements with readiness-oriented time goals (e.g., goals that support weapon system
availability targets) or on limited-demand or non-demand-based requirements.
2. Base retail stockage of weapon system-essential items on demand-based
requirements that have their support goals driven by weapon system readiness or on non-
demand-based requirements.
(b) When a weapon system is being phased out of service, the owning Military
Service will inform materiel managers of the phase-out schedule. Before phase-out is
completed, materiel managers will initiate item reduction studies in accordance with Volume 9
of this manual to control the costs of maintaining item assets supporting the weapon system in
the supply system.
(4) A DoD Component may elect to use a single echelon RBS model to compute retail
stockage or allowance quantities for weapon system-essential items at individual retail locations.
The model will use expected wholesale resupply times to represent wholesale stockage.
b. Capabilities. The optimization logic within an RBS model will be capable of:
(1) Setting RBS levels by item or by group of items with similar characteristics. The
computation of RBS levels for an item common to more than one weapon system should
consider the total demand for that item and the contribution of the levels to the readiness goals of
all respective weapon systems.
(2) Computing optimal item stock levels in a dynamic environment. Where possible,
DoD Components will compute item requirements to account for conditions when variables such
as rapidly changing sortie rates, operating programs, maintenance capabilities, item usage rates,
or transportation resources impact the operating unit’s materiel requirements and readiness.
(3) Providing an item’s minimum stock level equal to its pipeline quantity, that is, the
quantity needed to cover demand while item stocks are being replenished. When funds are
insufficient to get the desired support objectives, the RBS model must be capable of overriding
the minimum constraint to attain the optimum mix of stock to maximize weapon system
availability for the funds actually available to obligate the desire support objectives.
(4) Producing a list of item requirements to be satisfied initially by the application of
serviceable assets, unserviceable reparable assets, and applicable due-in assets. The repair
requirement is that portion of the total requirement that is satisfied by repair of unserviceable
reparable assets. The replenishment requirement is the deficit remaining after the supply of
available assets is exhausted.
c. Applications. Where data availability and model capabilities permit, DoD Components
will:
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(1) Use RBS models to compute combined requirements for a range of weapon systems
to minimize the total inventories of items supporting those weapon systems at individual
locations. The RBS models should have the capability to compute those requirements to
availability goals that differ by weapon system so that the goals of weapons systems with higher
priority missions may be targeted at levels higher than those with lower priority missions.
(2) Use RBS models to directly compute both the range and depth for all echelons of
supply, (i.e., models with the multi-echelon capability) to:
(a) Account for the hierarchical structure of supply or maintenance activities from
the customer or consumer level, through the intermediate level, to the depot or wholesale level.
(b) Trade off the wholesale level of supply with the retail level by modeling the
impact of the requisition response time on the retail response time to customer demand.
(c) Account for the transportation and materiel handling cost effects of differences in
wholesale stock locations and positioning by echelon.
(d) Cover demand-related pipeline and safety-level requirements and, to avoid
unnecessary procurement or repair actions, apply the same constraints as demand-based
wholesale safety levels to the safety-level portion of an item’s wholesale stock level.
(3) Use RBS models with a multi-indenture capability that:
(a) To the extent practical, link each item to its next higher assembly in the weapon
system application by modeling the impact of a lower-level assembly (an item whose next higher
assembly is another item or subassembly) on the availability of its next higher level assembly or
assemblies.
(b) Uses an item indenture structure to tradeoff between items at the first level of
indenture (i.e., items whose next higher assembly is the weapon system) and items at lower
levels of indenture needed to repair those items. In that way, the impact of each item on each
level of indenture, and ultimately on the weapon system itself, is portrayed; and the requirement
for the highest level assembly will not be based on assuming 100 percent of its lower level
assemblies are available. Models for non-demand-based items may be excluded from the
indenture structure requirement.
(c) Interfaces with the field-level reparable or consumable item computation so that a
link may be established to consider the impact of the availability of those items on their next
higher assemblies and ultimately on the availability of the weapon system, and its procurement
or repair requirements may be computed using that link.
d. Special Considerations.
(1) Where data availability and model capabilities do not directly compute range and
depth for all echelons, a single echelon RBS model that uses expected wholesale resupply times
will determine retail stock levels required to support weapon system availability goals.
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(a) The process that sets wholesale support objectives and later expected resupply
times should consider the impact those times have on retail stock levels and transportation costs.
(b) When funds are insufficient to attain desired wholesale support objectives, the
expected resupply time must be extended. The wholesale echelon must be capable of passing the
expected change in the resupply time to the retail level so that weapon system availability may
be assessed.
(2) The DoD Components will track actual weapon system performance to determine the
impact of budget and funding decisions on actual operational availability and to calibrate their
models’ predicted support statistics with actual program data.
e. Readiness Assessments.
(1) Military Services with RBS models will be able to:
(a) Compute end item readiness assessments and requirements.
(b) Measure the effects of various levels of investment in spare parts on end item
readiness.
(c) Measure the effects of proposed budget adjustments on end item readiness.
(d) Assess end-item readiness on the basis of various levels of stockage (e.g., assess
the capability derived from assets on-hand or assets planned to be repaired or procured).
(e) Differentiate between items that are essential to a weapon system and those that
are not and to differentiate among degrees of essentiality.
(2) Models used for end item readiness assessment purposes may be different from those
used for requirements determination for purposes of expediency or ease of processing. However,
their algorithms must be similar in terms of the logic and computational objectives and must
produce comparable results.
8.4. WHOLESALE DEMAND-BASED SPARING COMPUTATIONS. Wholesale demand-
based sparing computations provide for cost-effective levels of on-hand and on-order inventory
by balancing materiel, ordering, and holding costs against supply performance goals established
with customers. DoD Components will apply these inventory requirements levels or their
commercial software equivalents when computing demand.
a. Requirements Objective.
(1) The requirements objective for a wholesale demand-based item establishes the target
quantity for replenishing the item’s level of stock through procurement or repair.
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(2) When an economic order quantity (EOQ) and reorder point (ROP) model is used to
compute wholesale demand-based sparing item requirements, the requirements objective is the
sum of their EOQ and ROP.
(3) When a time-phased planning model or materiel requirements planning (MRP) and
distribution requirements planning model is used to compute these requirements, the
requirements objective is not explicitly considered as the model works backward from the
demand plan to develop EOQ and ROP requirements for supply planning.
b. EOQ.
(1) Section 2384a of Title 10, United States Code, and Section 3310 of Title 41, United
States Code, mandate that DoD Components will procure supplies in a quantity that will result in
the most advantageous total and unit cost to the government and that does not exceed the
quantity reasonably expected to be required by the Component.
(a) The total cost of a procurement includes the cost of ordering inventory and the
cost of holding inventory.
(b) The quantity reasonably expected to be required normally would be a quantity
required for 2 years in accordance with the authorized budget cycle. However, that upper limit
may be overridden in accordance with Paragraph 8.4.b(2).
(2) In accordance with the mandate, DoD Components will:
(a) Use EOQ methods to set target order quantities that minimizes the total of the
cost-to-order and cost-to-hold inventory as defined in the Glossary. To accommodate actual
constraints on procurement resources, storage space, or obligation authority, DoD Components
may apply constraints in order to minimize costs.
(b) Compute target order quantities using either the standard Wilson EOQ, a
variation of the Wilson EOQ (e.g., recognizing back orders, quantity discounts, or real world
constraints), or an EOQ-equivalent method consistent with time-phased demand planning within
an enterprise resource planning system (e.g., part period balancing algorithm or dynamic lot size
creation).
(c) Annually validate and update the cost-to-order and cost-to-hold inventory, which
are used to set order quantities. Update immediately when a significant change occurs.
(d) Maximize the use of indefinite delivery and indefinite quantity contracts to
reduce delivery times and the cost of ordering inventory in accordance with Part 16.504 of the
Federal Acquisition Regulations.
(e) Limit EOQs to a maximum equal of 24 months of demand and a minimum equal
to the demand over the item’s administrative lead time (ALT) or 1 month of demand, whichever
is greater. The EOQ minimum may be reduced if a lesser quantity may be ordered economically.
The EOQ maximum may be overridden if the head of the procuring activity certifies in writing
that the acquisition is necessary for any of these reasons:
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1. To achieve an EOQ that is not forecasted to result in an on-hand inventory in
excess of 3 years of operating stocks and the need for the item is unlikely to decline during the
period for which the acquisition is made.
2. To maintain the industrial base or for other reasons of national security.
3. To satisfy a minimum purchase quantity imposed by the vendor.
4. To make a life-of-type (LOT) buy. When production sources of an item are no
longer available, materiel managers will classify the item as LOT and the total issues anticipated
during the life of the end item are forecasted and procured at the wholesale level.
a. Materiel managers should explore alternatives for diminishing
manufacturing sources addressed in Volume 3 of this manual before a LOT buy.
b. When LOT buys are necessary, timing for the procurement should be one
acquisition lead time away.
c. LOT buys should not be confused with lot size. The latter refers to the size
of the EOQ.
(f) Adjust EOQ quantities for items associated with an end item that is being phased
out or with declining demand accordingly.
(g) Use only the demand to be satisfied through procurement to compute EOQs for
reparable items. That excludes demand to be satisfied through repair.
(h) Adjust target order quantities to account for known minimum vendor production
or procurement quantities.
(i) When converting order quantities to periods in time-phased supply planning,
round to the period that minimizes the cost-to-order and cost-to-hold inventory.
c. ROP.
(1) DoD Components use the ROP to identify when an order should be placed to
replenish stock for an item. It is the level of inventory needed to sustain operations until
replenishment stock is delivered. In the case of time-phased demand and supply planning, it is
the point in time a lead time away from when the supply plan will not be able to fill the demand
plan.
(2) DoD Components should consider the item’s procurement lead time, quantity, safety
level by location, repair cycle level, if applicable, and any non-demand-based levels.
(3) When DoD Components interpret the ROP as a level of inventory and an item’s ROP
is the sum of its acquisition lead time quantity; variable safety level; and repair-cycle quantity, if
applicable, DoD Components:
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(a) May procure demand-based items when the assets on hand and on order are equal
to or less than the ROP.
(b) Consider non-demand-based requirements (e.g., war reserve or planned program
requirements) as additives to the ROP level.
(4) When DoD Components interpret the ROP as a point in time and an item’s ROP is
the sum of the acquisition lead time period and the safety level coverage period, DoD
Components:
(a) May procure demand-based items when the assets on hand and on order in the
supply plan are equal to or less than the demand during the ROP period.
(b) Consider war reserve or planned program requirements as additives to the
demand during the ROP period.
d. Procurement Lead Time Quantity or Period.
(1) DoD Components use the procurement lead time as a forecast of the likely future
interval between identifying a requirement and receiving the materiel. It consists of two
consecutive time periods: ALT and production lead time (PLT).
(2) DoD Components will maintain a historical file of ALTs and PLTs for all secondary
item procurements. Exclude historical observations that are not representative of future
performance. The exclusion may be based on the materiel manager’s knowledge, experience,
and judgment or may result from an automated decision process.
(3) DoD Components will provide methods for calculating realistic minimum and
maximum ALT and PLT requirements to ensure inventory management personnel can identify
unusually long or short lead times. The materiel manager will decide how to use the data derived
through such methods.
(4) DoD Components will aggressively pursue the lowest possible acquisition lead times
by employing innovative methods of pursuing minimum acquisition lead times. DoD
Components will emphasize the adoption, where applicable, of lead-time reduction methods
which have proven successful in either the private or U.S. Government sector (e.g., multi-year
contracting, just-in-time procedures, indefinite quantity requirements contracts, phased
deliveries, and gradual reduction of vendor required delivery dates).
(5) For purposes of computing a ROP or for supply planning, DoD Components will use
the procurement lead time quantity equal to the expected demand over a procurement lead time.
For reparable items, DoD Components will:
(a) Base the expected demand in the lead time quantity computation on attrition or
condemnation rates and rates for new future demand and exclude demand satisfied by repairs.
(b) Determine activities authorized to condemn reparable items in accordance with
DoDM 4140.68.
DoDM 4140.01-V2, November 9, 2018
SECTION 8: MATERIEL STOCKAGE COMPUTATIONS 48
(c) Project the quantity of assets that are expected to be condemned over the
applicable forecast period.
e. Levels for Reparable Items.
(1) Repair is the preferred source of supply for reparable items.
(2) For reparable items, DoD Components should only use procurement to replace
unserviceable items condemned during repair, to meet new demand that will not have the return
of an unserviceable asset, or to support obsolete equipment through a life of type buy.
(3) Requirements computations associated with reparable item repair are economic
repair quantity, repair point, and repair cycle level.
f. Economic Repair Quantity. Use economic repair quantity in production planning to
determine total quantities of unserviceable assets to induct into depot-level maintenance, unless
another quantity is specifically justified on a line item basis. To the extent possible, base
economic repair quantities on inventory requirements, not maintenance workload requirements.
g. Repair Point. When serviceable assets for a reparable item reach the sum of the demand
over the repair cycle time, the safety level and any additives (such as war reserve stocks), DoD
Components will induct unserviceable assets into depot-level maintenance.
h. Repair Cycle Level (RCL). DoD Components will:
(1) Set an RCL equal to the minimum number of serviceable assets needed to support
demand while unserviceable assets are undergoing depot-level maintenance.
(2) Compute the RCL as the expected demand over a repair-cycle time. Appendix 8A
provides instructions on how to measure repair-cycle time.
i. Safety Level (SL).
(1) As a buffer against backorders caused by fluctuations in demand over lead times,
repair cycle times, attrition rates, and in other variables, DoD Components should stock safety
stocks. Those stocks should decrease as fluctuations in demand decrease.
(2) In setting wholesale safety stocks, DoD Components will use a computational
objective that seeks to find the level of safety stock that either:
(a) Minimizes the total variable cost of achieving a specified time goal, or:
(b) Minimizes fill time, subject to a budget constraint and delivering materiel from
locations determined to minimize total supply chain costs. Variable costs consist of the cost-to-
order, the cost-to-hold inventory, and an implied shortage cost of not achieving a specified time
goal.
DoDM 4140.01-V2, November 9, 2018
SECTION 8: MATERIEL STOCKAGE COMPUTATIONS 49
(3) To dampen overstatement of SL requirements due to imprecise SL models and avoid
unnecessary procurement or repair actions, DoD Components may constrain an item’s SL to a
maximum of three standard deviations of lead-time demand or the lead-time demand, whichever
is less.
(a) For weapon system items, the maximum lead-time demand may be waived in
cases in which creditable evidence exists that its application significantly impairs weapon system
support.
(b) If waiving the maximum lead-time demand increases the total cost, the DoD
Component must justify the added cost for the item based on the need to improve weapon system
support to meet a readiness goal that is set with a weapon system manager or operational
command.
(4) To limit long fill times for customers, the DoD Components may constrain an item’s
SL computation limiting the expected fill time in the computation to less than or equal to a given
maximum time.
j. Non-Forecastable Items. Non-forecastable items typically demonstrate limited demand,
highly variable demand quantities or highly intermittent demand frequency. For these items,
DoD Components will employ the criteria given in Section 7 to determine forecastability. DoD
Components will set inventory levels for items identified as non-forecastable, using business
rules that consider:
(1) For items with sufficient demand history, establish a minimum and maximum
stockage level, based on trade-offs between inventory investment and performance levels. The
minimum and maximum levels are derived from the range of an item’s observed demands, time
between demands, and unit cost. The levels may also consider current on hand and due-in
inventory along with the volume of purchase requests generated. The minimum level is the ROP
for the item and the maximum level is the requirements objective for the item.
(2) For items with insufficient demand history, formulate ROPs and reorder quantities or
their equivalent time-phased planning quantities that consider:
(a) Associated weapon system density and item applicability across multiple weapon
systems.
(b) Stage of weapon system and item life cycle, to more effectively inform reorder
quantities for new items and to attrite on-hand balances for items at the end of the life cycle.
(c) Projected changes in operational demand or maintenance patterns.
(d) Operational costs such as ordering, holding, and obsolescence costs.
(3) To prevent excessive stockage of non-forecastable items, the total inventory value of
the stockage levels will be limited by the performance target(s) that the DoD Component selects
for its non-forecastable items.
DoDM 4140.01-V2, November 9, 2018
SECTION 8: MATERIEL STOCKAGE COMPUTATIONS 50
(4) Materiel managers may forego the use of minimum and maximum stockage level
business rules in this paragraph and apply requirements levels based on other factors when
appropriate, such as criticality of the item or weapon system and customer collaborative input.
8.5 RETAIL SPARING COMPUTATIONS.
a. Retail Requirements.
(1) DoD Components will use retail demand-based or RBS computations to minimize
the quantity of materiel placed on order and in storage in the DoD supply chain by balancing
costs against supply performance goals established with customers. RBS computations are
addressed in Paragraph 8.3.
(2) When possible, materiel managers will use an automated capability to compute
requirements and a “what-if” capability to evaluate changes in demand, order and shipping
times, cycle times, and other factors and a capability to rapidly re-compute levels as changes
occur in retail demand based requirements.
(3) To compute its retail demand-based requirements, a DoD Component may apply one
or more of the following approaches:
(a) An EOQ and ROP model.
(b) An MRP model.
(c) An endurance model that sets requirements or allowances to cover expected
demand over a time frame based on the customer’s operating requirement. An example of an
operating requirement would be the customer needs to be supported for 30 days in a deployed
environment.
1. In computing endurance requirements, a DoD Component should use the
expected demand for the operational environment, which may be different from the most recent
demand the customer is experiencing in his current environment.
2. To maximize support while reducing cost for customers operating within the
same proximity, a DoD Component may choose to compute a consolidated allowance.
b. Operating Level (OL).
(1) DoD Components will use the OL as a retail EOQ and, as such, a function of the
cost-to-order and cost-to-hold retail inventory. A DoD Component may use the term lot size for
its OL.
(a) When the order is a requisition placed on the wholesale inventory, the cost-to-
order is the cost of requisitioning materiel.
DoDM 4140.01-V2, November 9, 2018
SECTION 8: MATERIEL STOCKAGE COMPUTATIONS 51
(b) When the retail level is replenished by materiel pushed from the wholesale level
according to a time-phased demand plan, the target push quantity is the OL and is a function of
the cost-to-push and cost-to-hold retail inventory.
(2) DoD Components will use the standard Wilson EOQ formula or variations of it to
compute the OL when future demand is assumed constant. When future demand varies
according to a planned schedule of time-phased requirements, such as demand supporting a
depot maintenance program, materiel managers may use a dynamic variation of the EOQ model
to compute target order quantities. In addition:
(a) In computing an OL for a reparable item, use the demand rate for resupply from
external sources, rather than the total demand (e.g., maintenance replacements).
(b) Limit an OL to a maximum of 12 months. Adjust an OL for items associated
with an end item that is being phased out or with declining demand.
(3) Based on the criticality of the operation being supported, a DoD Component may set
the OL equal to one for associated allowance.
c. Order and Shipping Time Level (OSTL). The order lead time for an item is its OSTL.
DoD Components will calculate the OSTL as the anticipated number of maintenance
replacements that require supply from external sources during the item’s OST.
d. Retail SL. DoD Components will use safety stocks to guard against backorders while a
retail level is being replenished.
(1) To determine the degree of risk associated with a retail item being out of stock, the
SL considers the probabilities, when applicable, that:
(a) The repair-cycle time will be exceeded.
(b) The order and shipping time (i.e., order lead time) will be exceeded.
(c) The maintenance replacement rate will exceed the forecasted SL.
(d) A number of maintenance replacements, anticipated for repair at the activity, will
require resupply from external sources.
(2) Materiel managers will calculate the retail SL computation to protect against being
out of stock. In their calculations, materiel managers will find the level that minimizes the total
variable cost of achieving a specified performance goal or maximizes performance of the item,
subject to budgetary constraints. Materiel managers will calculate variable costs of the item as
the cost-to-order, the cost-to-hold the inventory, and an implied shortage cost of not achieving a
specified performance goal of the item.
DoDM 4140.01-V2, November 9, 2018
SECTION 8: MATERIEL STOCKAGE COMPUTATIONS 52
e. Retail ROP.
(1) DoD Components will use the ROP to determine when an order should be placed to
replenish the stock for an item. Demand-based items may be requisitioned or locally procured
when the assets on hand and on order are equal to or less than the ROP.
(2) Materiel managers will calculate the ROP for a demand-based consumable item as
the sum of the item’s OSTL, SL, and any applicable non-demand-based levels.
(3) Materiel managers will determine ROPs for reparable items as a function of
maintenance replacements and tailor ROPs to individual item characteristics based on conditions
existing at the individual retail-level supply points, considering factors such as:
(a) Forecasted rate of maintenance replacement.
(b) The percent of total maintenance replacements locally repaired.
(c) The applicable standard for field repair-cycle time.
(d) The percent of total maintenance replacements not locally repaired.
(e) The order and shipping time.
(f) The cost to order materiel and the cost to hold inventory.
(4) For allowances with an OL equal to one, the ROP should be computed allowance
quantity less one.
f. Local RCL for Reparable Items. DoD Components will calculate the RCL as a function
of the anticipated number of maintenance replacements that will be repaired locally and the
item’s local repair-cycle time.
g. Requisitioning Objective.
(1) Materiel managers using an EOQ and ROP model will calculate the requisitioning
objective for a demand-based item as the sum of its OL and retail ROP. They will:
(a) Take a replenishment action establishing a requisition or local procurement when
the asset position reaches the ROP.
(b) Establish the replenishment order quantity equal to the requisitioning objective
minus the asset position.
(2) Materiel managers using an MRP model should calculate the MRP equivalent of a
requisitioning objective for reporting their retail inventory in accordance with Volume 10 of this
manual. They will:
(a) Take a replenishment action according to their supply plan.
DoDM 4140.01-V2, November 9, 2018
SECTION 8: MATERIEL STOCKAGE COMPUTATIONS 53
(b) Establish the replenishment order quantity as their MRP EOQ plus any
penetration into their MRP target quantity at the time of the order.
(3) For materiel managers using an endurance model, the allowance quantity is the
requisitioning objective. They will:
(a) Take a replenishment action when the asset position breaches the allowance
quantity.
(b) Establish the replenishment order quantity equal to the difference between the
allowance quantity and the asset position.
h. Combined Wholesale and Retail Demand-Based Computation.
(1) If a DoD Component is responsible for managing both wholesale and retail
inventories at a location, it may elect to generate a single combined level of inventory using
demand-based computations.
(2) The retail computations in this section apply to the demand-based computations for
retail portion of the combined level of inventories.
(3) The DoD Component will ensure that a sufficient portion of retail inventory is
protected/reserved to meet performance goals for supporting local customers and is not used to
support world-wide demand, that is, its issue to other customers is blocked unless approved by
the local customers of that retail inventory.
8.6. NON-DEMAND-BASED REQUIREMENTS.
a. Numeric Stockage. For essential items with insufficient demand for demand-based
stockage and are not candidates for commercial support, materiel managers will:
(1) Stock at the wholesale level a numeric stockage objective (NSO) equal to the
quantity required to meet an explicit customer requirement documented within the last 5 years
or, when no such requirement exists, quantities no more than ten minimum replacement units for
items with an acquisition price less than or equal to $100 and five minimum replacement units
for items with an acquisition price greater than $100.
(a) Materiel managers will assume that minimum replacement unit is one individual
unit unless its weapon system’s application dictates a higher number. For a DLA-managed item,
the using Military Service will communicate the higher application number to DLA.
(b) To defer or avoid reinvestment costs, materiel managers will develop ROP rules
for NSO items that, when accounting for investment cost and risks of being out of stock, may
result in a fractional portion of the NSO as the ROP instead of a standard policy of the NSO less
one.
DoDM 4140.01-V2, November 9, 2018
SECTION 8: MATERIEL STOCKAGE COMPUTATIONS 54
(2) Stock at the retail a minimum that is consistent with the operational environment and
the relative essentiality of the item. These guidelines apply:
(a) Stockage of limited-demand items is authorized primarily during the initial period
of operation of a unit, an activity, or a piece of equipment while demand data for the inventory is
being accumulated.
(b) In some operational environments, a continuing need may exist to stock some
items that do not and are not expected to qualify as demand-based items.
(c) Paragraph 8.6.a.(1)(b) applies to the replenishment of NSO items at the retail
level.
b. Insurance Stockage.
(1) Materiel managers may stock essential items with no failure or demand forecast as
non-demand-based insurance items at the wholesale level.
(2) For an item that is procured and stocked for insurance purposes, materiel managers
may stock a quantity required to meet an explicit customer requirement documented within the
last 5 years or, when no such requirement exists, a quantity of no more than two minimum
replacement units.
(a) Materiel managers will assume that the minimum replacement unit for insurance
stock items is one individual unit unless its weapon system’s application dictates a higher
number. For a DLA-managed item, the using Military Service will communicate the higher
application number to DLA.
(b) Materiel managers will replenish insurance items when a unit is issued.
c. Planned Program Stocks.
(1) Materiel managers are authorized to use non-demand-based stockage to satisfy non-
recurring requirements evolving from one-time programs.
(2) Materiel managers will calculate the authorized stockage as the sum of the approved
programmed requirements only. No safety-level or lead-time quantities are authorized to be
utilized in calculations.
(3) Planned program requirements are supplemental to any demand-based requirements
objective for an item.
d. Validation of Non-Demand Based Stockage. For non-demand-based stockage items at
the retail level, these procedures apply:
(1) Except for items being provisioned, the initiator and the DoD Component approval
authority will annually validate the continued need for range and depth of stock.
DoDM 4140.01-V2, November 9, 2018
SECTION 8: MATERIEL STOCKAGE COMPUTATIONS 55
(2) For items being provisioned, the using DoD Component will validate the non-
demand-based stockage levels when concluding the demand development period.
(3) If required, the using DoD Component may establish a more frequent review and
validation of non-demand based stockage items.
(4) Materiel managers will promptly delete the authorization for requirements that are
not validated, and identify and dispose of assets on hand according to the materiel retention and
transfer procedures in Volume 6 of this manual.
8.7. NON-STOCKED ITEMS.
a. No stockage level is authorized.
b. Materiel managers will initiate the procurement of non-stocked items upon receipt of a
valid requisition request at the wholesale level or a demand signal. At the retail level, materiel
managers will initiate the requisition quantity of non-stocked items upon receipt of a valid
demand request and normally limit it to the customer demand quantity. Exceptions are allowed
on an individual item basis, but must be held to a minimum.
DoDM 4140.01-V2, November 9, 2018
APPENDIX 8A: CYCLE TIME MEASUREMENT 56
APPENDIX 8A. CYCLE TIME MEASUREMENTS
8A.1. PROCUREMENT LEAD TIME MEASUREMENT.
a. DoD Components will measure ALT:
(1) Beginning when an item’s wholesale asset level is reduced to the ROP and a
purchase request is initiated to ensure the new stock arrives as the assets on hand reach the safety
level.
(2) Ending on the date the contract is awarded and signed by both parties.
(3) ALT will include the time periods required for identifying the requirement to buy;
reviewing, approving, and documenting the purchase request; reviewing technical data and
documentation; and processing and executing the award of a contract.
b. DoD Components will measure PLT:
(1) Beginning on the date the contract is awarded and signed by both parties.
(2) Ending when the material is received and delivered to the requiring activity by the
vendor.
(a) When the vendor delivers all materiel simultaneously, the receipt confirmation
date is the end of PLT.
(b) When the contract provides for incremental deliveries, the date of confirmation of
the first significant delivery (about 10 percent of the contract requirement) is the PLT for the first
incremental delivery in future contracts with incremental deliveries. Other dates of incremental
deliveries for line items on the same contract may be used in setting the delivery schedule for
future contracts with incremental deliveries.
(c) When incremental deliveries are not part of the contractual requirements, the
confirmation date is when all materiel is delivered by the vendor; however, the resulting PLT
may be treated as non-representative.
(3) PLT may be based on estimates from contractors when appropriate; historical
information for representative procurements, provisioning technical documentation, or estimates
are based on the best judgment of acquisition personnel.
8A.2. REPAIR CYCLE TIME.
a. DoD Components will measure:
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APPENDIX 8A: CYCLE TIME MEASUREMENT 57
(1) Repair cycle time in terms of either the field repair cycle or the depot repair cycle,
since these are the two mutually exclusive processes by which an unserviceable item is returned
to a ready-for-issue condition.
(2) Field repair cycle time for an unserviceable item repaired at the organizational or
intermediate level of maintenance has been processed through the field-repair cycle. Field repair
cycle times apply to field level reparable items and may apply to depot level reparable (DLR)
items if they are repaired at the organizational or intermediate maintenance level.
(3) Depot repair cycle time for an unserviceable item that was beyond the repair
capability of the organizational or intermediate level of maintenance and that was repaired at the
depot level has been processed through the depot repair cycle. Depot repair cycle times only
apply to DLR items.
b. Supply condition codes listed under federal condition codes in Appendix 2.5 of DLM
4000.25-2 apply to assets as they go through the stages of the repair cycle.
8A.3. FIELD REPAIR CYCLE. DoD Components will measure field repair cycle time as
follows:
a. Beginning with the date the initial request for the repair of an unserviceable item is
entered into the supply system as measured by the date of the organizational or intermediate
maintenance activity’s repair work order.
b. Ending with the date an unserviceable item has been restored to serviceable and issuable
condition by the organizational or intermediate maintenance activity and is recorded as such on
supply records, or the date when an unserviceable item is determined to be beyond the repair
capability of an organizational or intermediate maintenance activity, measured by:
(1) The date the organizational or intermediate supply records indicate the repaired item
is serviceable and issuable;
(2) The date of the organizational or intermediate supply activity’s turn-in document; or
(3) The closing date of the organizational or intermediate maintenance activity’s repair
work order.
8A.4. DEPOT REPAIR CYCLE.
a. Depot Repair Cycle Time.
(1) For requirements computations of depot repair cycle time, the method chosen by the
individual DoD Component for computing repair cycle levels will determine if both retrograde
time and repair turnaround times or only repair turnaround time are used for depot repair cycle
time.
DoDM 4140.01-V2, November 9, 2018
APPENDIX 8A: CYCLE TIME MEASUREMENT 58
(2) DoD Components should exclude awaiting parts (AWP) time, awaiting maintenance
time, or awaiting carcass time from depot repair cycle time for computations of requirements.
For purposes of exclusion, recurring delays in getting parts to perform repair should not be
considered AWP time; non-recurring delays should be considered AWP time.
(a) Examples of recurring delay are:
1. The normal time to get a part from local retail supply.
2. The time to get a part that is infrequently used for repair, not stocked locally,
but is immediately available from its wholesale source of supply.
(b) Examples of a non-recurring delay:
1. The time to get a part that is normally stocked locally but is out-of-stock and
must be requisitioned from the wholesale source of supply.
2. When a part needed for repair is not available in the DoD supply system and
must be procured by its wholesale source of supply.
b. Retrograde-Time Segment. DoD Components will calculate retrograde time as the sum
of base-processing time and in-transit time.
(1) Base-processing time begins when an organizational- or intermediate-level
maintenance activity turns into supply an unserviceable DLR asset it cannot repair and it ends
when the asset is turned over to transportation.
(2) In-transit time begins when transportation receives the ready-for-shipment
unserviceable DLR and ends when the receipt of the unserviceable asset by a distribution depot
or maintenance contractor is recorded by the materiel manager.
(3) The beginning date for retrograde time is measured by either:
(a) The date of the organizational or intermediate supply activity’s requisition (turn-
in) document number.
(b) The closing date of the organizational or intermediate maintenance activity’s
repair work order.
(4) The ending date for retrograde time is measured by:
(a) The receipt date in the transaction that updates the ICP records; or
(b) The receipt date notification by the commercial or inter-Service depot
maintenance activity in its status notification to the ICP.
(5) Materiel managers will track and identify retrograde time as an item completes the
base-processing and in-transit times.
DoDM 4140.01-V2, November 9, 2018
APPENDIX 8A: CYCLE TIME MEASUREMENT 59
c. Repair-Turnaround Time Segment. DoD Components will calculate repair-turnaround
time as the sum of transfer-to-maintenance time, maintenance-shop time, and transfer-from-
maintenance time.
(1) Awaiting carcass time may occur before or after transfer-to-maintenance time and
before maintenance-shop time, but is excluded from both of those times.
(2) Maintenance managers will track and record the repair turnaround time for an item as
it is processing through the transfer-to-maintenance, maintenance shop, and transfer-from-
maintenance times.
d. Transfer-to-Maintenance Time. DoD Components will calculate the transfer-to-
maintenance time segment beginning with the request to pull the unserviceable asset from
storage and ending when the organic or contractor maintenance activity receives it. Transfers
from depots to contractor facilities include transportation time.
(1) The beginning date is measured by the date of the request to transfer an unserviceable
reparable item from the depot’s supply activity to an organic or contractor maintenance activity.
(2) The ending date is measured by the date of receipt of the unserviceable DLR item at
the organic or contractor maintenance activity.
e. Maintenance-Shop Time. DoD Components will calculate the maintenance-shop time
segment beginning when maintenance receives the unserviceable DLR and ending when the
availability of the serviceable asset is formally received in storage (AWP and awaiting
maintenance times may occur during the segment, but are excluded).
(1) The beginning date is measured by either:
(a) The date the condition code is changed from unserviceable (reparable) to
suspended (in work) on the ICP’s records;
(b) The in work date (or receipt date) identified by the commercial or inter-Service
depot maintenance activity if no order is required; or
(c) The order date identified by the commercial or inter-Service depot maintenance
activity if an order is required.
(2) The ending date is measured by:
(a) The date the depot maintenance activity identifies that the item has been restored
to serviceable condition; or
(b) The date of the contractor’s shipment notice, (i.e., shipment status or invoicing,
receipt, acceptance, and property transfer reparable receiving notification or property transfer
identified in accordance with Volume 2 of DLM 4000.25), indicating a commercial maintenance
activity restored the item to serviceable and issuable condition.
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APPENDIX 8A: CYCLE TIME MEASUREMENT 60
f. Transfer-from-Maintenance Time. DoD Components will calculate the transfer-from-
maintenance time segment beginning when the maintenance activity formally identifies the
availability of the serviceable DLR and ending when the serviceable asset is received in storage
and is recorded on the records of the ICP. Instances in which an ICP directs shipment of a
repaired asset directly to a customer to fill an outstanding demand should not be included in the
development of standards of demand or the monitoring of those standards. Transfers from
contractors’ facilities to depots include transportation; transfers to customers do not. Transfer-
from-maintenance time does not apply when contractors act as DoD distribution depots, storing
materiel and issuing it directly to customers.
(1) The beginning date is measured by either:
(a) The date the depot maintenance activity documents that the item has been
restored to a serviceable condition; or
(b) The date of the contractor’s shipment notice (i.e., shipment status or invoicing,
receipt, acceptance, and property transfer reparable receiving documentation or property transfer
identified in accordance with Volume 2 of DLM 4000.25) indicating that the contractor has
restored the item to a serviceable and issuable condition.
(2) The ending date is measured by the date a depot supply activity receives an item in
serviceable and issuable condition from a commercial or inter-service depot maintenance
activity, as recorded on the ICP’s records.
DoDM 4140.01-V2, November 9, 2018
SECTION 9: SECONDARY ITEM WAR RESERVE REQUIREMENTS 61
SECTION 9: SECONDARY ITEM WAR RESERVE REQUIREMENTS
9.1. MEETING STRATEGIC OBJECTIVES FOR WAR RESERVES. The DoD
Components will:
a. Size, manage, and position war reserve materiel to maximize flexibility to respond to a
spectrum of regional contingencies, while minimizing the DoD investment in inventories.
b. Use peacetime operating stocks, training stocks, materiel available through industrial
preparedness planning, host-nation support agreements, bilateral military agreements, and
commercial sources to:
(1) Offset their investment in inventory to meet war reserve requirements.
(2) Reduce the risk of funding shortfalls.
(3) Ensure the warfighter receives the latest in materiel technology.
c. Only war reserve stocks for items that cannot be procured and made ready for deployment
within required timeframes will be held in wholesale war reserve stocks. To ensure that
sufficient wholesale war reserve stocks are held, materiel managers should also consider the risk
of stock non-availability from the sources listed in Paragraph 9.1.b.
9.2. COMPUTING WAR RESERVE MATERIEL REQUIREMENTS
a. Policies related to the computation of war reserve materiel requirements are in DoDI
3110.06.
b. As part of their biennial program objective memorandum (POM) and annual budget
estimate submissions, the DoD Components will provide information on the methodology used
to implement the requirements outlined in Paragraph 9.1.a. and assign war reserve funding
priorities.
c. The DoD Components will use an automated capability to:
(1) Identify, compute, and source war materiel requirements.
(2) Build tailored supply support packages for rapid delivery of war reserve materiel
requirements to deploying or deployed forces.
d. For specific commodities where a DoD Component has been formally designated as the
lead agent and assigned responsibility for war reserves, other using DoD Components will
compute requirements and identify them to the lead agent. The lead agent will combine those
requirements into a consolidated requirement for war reserve materiel programming and
budgeting. The lead agent will notify the using DoD Components of any shortfalls in program
requirements, funding or both.
DoDM 4140.01-V2, November 9, 2018
GLOSSARY 62
GLOSSARY
G.1. ACRONYMS.
AAC acquisition advice code
ALT administrative lead time
ASD(S) Assistant Secretary of Defense for Sustainment
AWP awaiting parts
CII controlled inventory item
CSI critical safety item
CV coefficient of variation
DBS demand-based sparing
DDE demand data exchange
DDP demand development period
DFARS Defense Federal Acquisition Regulation Supplement
DLA Defense Logistics Agency
DLM Defense Logistics manual
DLR depot level reparable
DoDD DoD directive
DoDI DoD instruction
DoDM DoD manual
EDFP engineering data for provisioning
EOQ economic order quantity
ICP inventory control point
LOT life-of-type
MRP materiel requirements planning
NIMSR non-consumable item materiel support request
NSN national stock number
NSO numeric stockage objective
OL operating level
OSTL order and shipping time level
DoDM 4140.01-V2, November 9, 2018
GLOSSARY 63
PBL performance-based logistics
PICA primary inventory control activity
PLT production lead time
POM program objective memorandum
PTD provisioning technical documentation
RAE relative absolute error
RBS readiness-based sparing
RCL repair cycle level
ROP reorder point
RSC reason for stockage code
SICA secondary inventory control activity
SL safety level
SMR source, maintenance, and recoverability
SPR special program requirement
SSR supply support request
USD(A&S) Under Secretary of Defense for Acquisition and Sustainment
G.2. DEFINITIONS. These terms and their definitions are for the purpose of this issuance.
acquisition. Obtaining logistics support, supplies, or services under a contract, an ordering
agreement with a commercial vendor, a partnering agreement between a depot and a commercial
vendor, an acquisition agreement or under a cross-servicing agreement. This includes
purchasing (whether for payment in currency, replacement-in-kind, or by exchange for equal
value), renting, leasing, or any method of temporarily obtaining logistics support, supplies, or
services.
advance procurement. Defined in Subpart 217.103 of DFARS.
ALT. The time interval between initiation of a purchase request and the date of signature of a
contract.
assembly. In logistics, an item forming a portion of equipment that can be provisioned and
replaced as an entity and which normally incorporates replaceable parts or groups of parts.
autocorrelation. Correlation between the elements of a series and others from the same series
separated from them by a given interval.
cataloging. The process of uniformly identifying, describing, classifying, numbering, and
publishing in the Federal Catalog System all items of personal property (items of supply)
repetitively procured, stored, issued, or used by federal agencies.
DoDM 4140.01-V2, November 9, 2018
GLOSSARY 64
carcass. Reparable part that can be rebuilt or repaired.
coefficient of variation. A measure of variance given by the ratio of the standard deviation of
the demand and the mean of the demand. The formula is:
  =
   
 
.
collaboration. The exchange of information to:
Improve demand forecasts based solely on historical demand.
Improve planning for targeted and expected support between PICAs and SICAs.
consumable item. An item of supply or an individual item (except explosive ordnance and
major end items of equipment) that is normally expended or used up beyond recovery in the use
for which it is designed or intended.
cost-to-hold. The sum of the annual charge for funds invested in inventory, storage costs and
losses due to obsolescence, inventory losses, misplacement, theft, or damage. For purposes of
computing order quantities, cost-to-hold is expressed as a percentage of the inventory value
being held in storage and considered synonymous with cost to store.
cost-to-order. The sum of the administrative expenses involved in procuring or requisitioning
and issuing a single lot of one item regardless of the number of units ordered, their weight, cube,
or dollar value. The major tasks contributing to the cost-to-order calculation include
requirements determination, order or requisition preparation and recording, receipt processing
and stowage of materiel, accounting for the transfer of funds between the ordering activity and
the source of supply, and in the case of a requisition filled from a distribution depot, issue
processing. For purposes of computing order quantities for time-phased demand, cost-to-hold is
synonymous with lot size independent cost.
Croston model. A forecast strategy for products with intermittent demand consisting of two
steps. First, separate exponential smoothing estimates are made of the average size of a demand.
Second, the average interval between demands is calculated. This is then used to predict the
future demand.
customer wait time. Defined in Volume 10 of this manual.
daily summary transaction listing. Daily listing of supply transactions affecting the demand
base or stock status of materiel.
DDP. The period of time extending from the date of preliminary operational capability to the
time when spare and repair parts requirements can be forecasted based on actual demands using
statistically valid methods.
demand. An indication of a requirement, a requisition or similar request for an item of supply or
individual item. Demands are categorized as either recurring or non-recurring.
DoDM 4140.01-V2, November 9, 2018
GLOSSARY 65
demand-based requirements. Requirements resulting from a computational process that uses
forecasted demand to determine stockage quantities needed to meet a goal targeted at filling a
percent of demand or at satisfying demand within a given period of time.
demand forecasting. The prediction of demand for an item or group of items for a future period
of time.
demand-supported items. Items stocked based on forecasted usage. Demand-supported items
are stocked on the basis of economic or essentiality considerations.
distribution. The operational process of synchronizing all elements of the logistic system to
deliver the right things to the right place at the right time.
DLA Logistics Information Service. A field activity of the DLA located at Battle Creek,
Michigan, it serves as the custodian of federal logistics data for suppliers and supply items. DLA
Logistics Information Service assigns NSNs, disseminates logistics information, and serves as
the U.S. National Codification Bureau.
DLM. A set of manuals that prescribe logistics management responsibilities, procedures, rules,
and electronic data communications standards for use in the DoD to conduct logistics operations
in functional areas such as supply, maintenance, and finance.
DLR. An item that is designated for repair at depot level, or that is designated for repair below
the depot level for which condemnation authority must be exercised by the cognizant depot-level
repair activity.
economic repair quantity. The quantity derived from a mathematical technique used to
determine the optimum (lowest) total variable costs to repair and hold inventory.
EDFP. Technical data that provides definitive identification of dimensional, material,
mechanical, electrical, or other characteristics that depict the physical characteristics, location,
and function of the item. Also referred to as supplementary provisioning technical data and
supplemental data for provisioning, all of which are equivalent to the term form, fit, and function
data defined in subpart 27.401 of DFARS.
end item. A final combination of end products, component parts, or materials that is ready for
its intended use (e.g., ship, tank, mobile machine shop, or aircraft).
engineering support activity. The organization designated to provide engineering or technical
assistance including the development of technical data and engineering criteria, engineering
representation, guidance, and decisions.
EOQ. The quantity derived from a mathematical technique used to determine the optimum
(lowest) total variable costs to order and hold inventory. Synonymous with procurement cycle
level.
enterprise resource planning. Commercial business process management software that allows
a DoD Component to use a system of integrated applications to automate its supply chain
DoDM 4140.01-V2, November 9, 2018
GLOSSARY 66
materiel management activities, such as planning, purchase, and service delivery as well as
related activities, such as finance and human resources.
essential item. A support item or a repair part whose absence renders the supported system or
end item inoperable.
essentiality code. Designation for a weapon system or end item that is used to indicate the
measure of an item’s military worth in terms of how its failure (if a replacement is not
immediately available) would affect the ability of a weapon system, end item, or organization to
perform its intended functions. In stockage models, it is the number by which the shortage cost
parameter is multiplied to reflect the differences in military worth among items.
exponential smoothing. Statistical technique for detecting significant changes in data by
ignoring the fluctuations irrelevant to the purpose at hand. In exponential smoothing (as opposed
to in moving averages smoothing) older data is given progressively-less relative weight
(importance) whereas newer data is given progressively-greater weight.
field-level reparable item. An item that is normally repaired below the depot level of
maintenance and for which condemnation authority may be exercised below the depot level.
forecast accuracy. A measure of the percentage difference between the forecasted and the
actual demand. The forecast accuracy for an item is computed as one minus the absolute or
unsigned value of the item’s forecast error over the item’s demand expressed as a percentage.
The formula is:
    = 100% (1

|

|
)
where abs|x| is the absolute or unsigned value of x, fd
i
is forecasted dollar demand for item i for
the forecasted period, and ad
i
is the actual dollar demand for item i for the period. If ad
i
is zero
and fd
i
is also zero, then the forecast accuracy for the item is 100%. If ad
i
is zero but fd
i
is not
zero, then the forecast accuracy for the item is 0%.
The mean or aggregate demand forecast accuracy for a set of items is computed as one minus the
quotient of the sum of the absolute or unsigned values of the forecast error across the items and
the sum of demand for the items expressed as a percentage. The formula is:
   = 100% 1
|
|
where n is the number of items in the set and abs|x|, fd
i
, and ad
i
as above.
forecast bias. A measure of the over or under percentage difference between the forecasted and
the actual demand. The forecast accuracy for an item is computed as one minus the signed value
of the item’s forecast error over the item’s demand expressed as a percentage. The formula is:
    = 100%
(

)
DoDM 4140.01-V2, November 9, 2018
GLOSSARY 67
where fd
i
is forecasted dollar demand for item i for the forecasted period, and ad
i
is the actual
dollar demand for item i for the period. If ad
i
is zero and fd
i
is also zero, then the forecast bias
for the item is 0%. If ad
i
is zero but fd
i
is not zero, then the forecast bias for the item cannot be
computed.
The mean or aggregate demand forecast basis for a set of items is computed as the quotient of
sum of the signed values of the forecast error across the items and the sum of the demand for the
items expressed as a percentage. The formula is:
  = 100%
(
)
where fd
i
and ad
i
as above and n is the number of items in the set.
forecastability. The ability to forecast demand for an item using a quantitative model or
collaborative demand data from customers. The demand forecast for a forecastable item can be
used to set readiness-based requirements levels or demand-based requirements levels for the
item.
forecastable item. An item whose future demand can be predicted using a quantitative model or
collaborative demand data from customers.
heteroscedasticity. Data with unequal variability across a set of second, predictor variables.
ICP. An organizational unit or activity within the DoD supply system assigned the primary
responsibility for the materiel management of a group of items either for a particular Military
Department or for the DoD as a whole. In addition to materiel management functions, an ICP
may perform other logistics functions in support of a particular Military Department or for a
particular end item (e.g., centralized computation of retail requirements levels and engineering
tasks associated with weapon system components).
indenture. Structure to identify the tradeoff between items in tiers of use for weapon system
assembly. The first level of indenture is for items whose next higher assembly is the weapon
system itself. Items at lower levels of indenture are needed to repair the first level of indenture
items. In that way, the impact of each item on each level of indenture, and ultimately on the
weapon system itself, is portrayed; and the requirement for the highest level assembly will not be
based on assuming 100 percent of its lower level assemblies are available. Models for non-
demand-based items may be excluded from the indenture structure requirement.
implied shortage cost. The derived cost of a shortage of stock based upon a forecast of the
number of days of delay in the availability of materiel.
individual item. A single instance of a stock-numbered item, a single assembly, or a single
subassembly.
initial spares. Spares stocked to support a newly fielded weapon system or a modification of a
weapon system.
DoDM 4140.01-V2, November 9, 2018
GLOSSARY 68
insurance item. A non-demand-based, stocked, essential item for which no failure is predicted
through normal usage. However, if a failure were to be experienced or a loss should occur
through accident, abnormal equipment or system failure, or other unexpected occurrence, lack of
replacement item will seriously hamper the operational capability of a weapon system.
item management code. The process of determining whether items of supply in federal supply
classifications assigned for integrated materiel management qualify for management by the
individual Components other than DLA or General Services Administration.
intermediate supply. Any level of inventory between the consumer and wholesale level of
inventory and considered a retail level or echelon level of inventory.
inventory. Materiel, titled to the U.S. Government, held for sale or issue, held for repair, or held
pending transfer to disposal.
item essentiality. A measure of an item’s military worth in terms of how its failure (if a
replacement is not immediately available) would affect the ability of a weapon system, end item,
or organization to perform its intended functions. In stockage models, it is the number by which
the shortage cost parameter is multiplied to reflect the differences in military worth among items.
item identification. A collection and compilation of data to establish the essential
characteristics of an item that give the item its unique character and differentiate it from other
supply items.
item of supply. A category of items identified by a NSN with the same form, fit, and function.
The individual items (units) included in this category could be manufactured by multiple sources.
just-in-time. Inventory management methodology that minimizes on-hand stockage levels by
ordering and receiving good only as they are needed.
limited-demand item. A non-forecastable item that has limited demand but either has sufficient
historical demand to warrant demand-based stockage or qualifies for non-demand-based numeric
stockage based on its essentiality. That is, the item qualifies for stockage because the lack of a
replacement would seriously hamper the operational readiness of a weapon system.
losses due to obsolescence. Losses resulting from forecast error and obsolescence to include
deterioration.
LOT buy. A one-time procurement, when all cost effective and prudent alternatives have been
exhausted, for the total future requirement of an item that is no longer expected to be produced.
The procurement quantity is based upon demand or engineering estimates of wear out rates or
item malfunction or failure of the item to sufficiently support the applicable equipment until
phased out.
maintenance replacement. The replacement of an unserviceable reparable item by a
serviceable one. Unserviceable items include items that are replaced due to malfunction or those
that have reached the end of an administratively determined removal interval for preventive
maintenance or safety considerations.
DoDM 4140.01-V2, November 9, 2018
GLOSSARY 69
material. Property that may be consumed or expended during the performance of a contract,
component parts of a higher assembly, or items that lose their individual identity through
incorporation into an end-item. Material does not include equipment, special tooling, special test
equipment or real property.
materiel. All items necessary to equip, operate, maintain, and support military activities without
distinction as to its application for administrative or combat purposes, excluding real property,
installations, and utilities. Materiel is either serviceable (i.e., in an issuable condition) or
unserviceable (i.e., in need of repair to make it serviceable).
materiel management. That phase of military logistics that includes managing, cataloging,
demand and supply planning, requirements determinations, procurement, distribution, overhaul,
and disposal of materiel.
materiel manager. Any DoD activity or Defense Agency that has been assigned materiel
management responsibilities for the DoD and participating federal agencies. The term includes
responsibilities performed by either wholesale materiel managers or retail materiel managers:
managing, cataloging, demand and supply planning, requirements determination and definition,
procurement, distribution, overhaul and repair of reparable materiel, and disposal of materiel.
materiel obligation. That unfilled portion of a requisition (for a stocked or a nonstocked item)
that is not immediately available for issue, but is recorded as a commitment for future issue.
Synonymous with “back order”.
mean demand. The average demand for item for a period of time (e.g., month or quarter). For
purposes of determining forecast ability, the formula for computing mean demand is:
 = =

where n is the number of periods with demand, d
i
is the quantity for demand i, and is the mean
demand.
minimum replacement unit. The minimum quantity of an item normally replaced during a
maintenance action, often the quantity of a component used for each end item.
modification. A U.S. Government-approved change in the configuration of a part or item that
offers a benefit to the U.S. Government by correcting deficiencies, satisfying a change in
operational or logistic support requirements, or effecting a life-cycle cost savings.
MRP. A computer-based inventory management system designed to assist materiel managers in
scheduling and placing procurement or repair orders for items of supply.
naïve forecast. The forecast produced by using last period’s actual demand as the predicted
demand without adjusting the demand or attempting to establish causal factors. The accuracy,
bias, and error for the naïve forecast are computed using the same formulas used for other
forecasts and are compared against the accuracy bias, and error for forecasts generated by more
sophisticated techniques.
DoDM 4140.01-V2, November 9, 2018
GLOSSARY 70
neural networks. Artificial intelligence technique that mimics the operation of the human brain
(nerves and neurons), and comprises of densely interconnected computer processors working
simultaneously. A key feature of neural networks is that they are programmed to learn by sifting
data repeatedly, looking for relationships to build mathematical models, and automatically
correcting these models to refine them continuously.
non-consumable item materiel support codes. Alphanumeric codes assigned to non-
consumable items, which indicates the degree of materiel support (numeric) or repair
responsibility (alpha).
non-demand-based requirement. A requirement resulting from a determination process that is
not based on forecasted demand, but qualifies for stockage based on other criteria. Types of non-
demand-based stockage are insurance stockage and numeric stockage. For purposes of this
issuance, LOT buy requirements and program-based buys are considered non-demand-based
requirements even though they are based on future predicted usage but that usage may not be
determined from historical demand.
non-forecastable item. An item whose future demand cannot be accurately predicted using a
quantitative model due to its intermittent or volatile demand pattern.
not stocked. An item for which there is no established requirements objective. Inventory or
usage data may be available; however, stock replenishment would not be initiated.
NSN. The 13-digit stock number replacing the 11-digit federal stock number. It consists of the
4-digit federal supply classification code and the 9-digit national item identification number.
The national item identification number consists of a 2-digit National Codification Bureau
number designating the central cataloging office (whether North Atlantic Treaty Organization or
other friendly country) that assigned the number and a 7-digit (xxx-xxxx) nonsignificant number.
The number is arranged: 9999-00-999-9999.
OL. The quantities of materiel or operating stocks required to sustain operations in the interval
between replenishment shipments.
organic support. The capability of a Military Service or a Defense Agency to sustain logistics
operations through U.S. Government organizational structures.
OSTL. The quantities of materiel required to sustain operations during the interval between the
initiation of a replenishment requisition and receipt of the requisitioned materiel.
outliers. Data point that falls far from most other points.
PBL. Logistics that delineate outcome performance goals of weapon systems, ensure that
responsibilities are assigned, provide incentives for attaining these goals, and facilitate the
overall life-cycle management of system reliability, supportability, and total ownership costs.
performance-based agreement. A product support agreement that has performance tied to the
system, the subsystem, or the component level that describes measurable service and
performance level parameters based on customer requirements and expectations.
DoDM 4140.01-V2, November 9, 2018
GLOSSARY 71
phased support. An approach whereby a contractor provides interim support for new
acquisitions until the U.S. Government attains an organic capability. Phasing may be done by
support level (e.g., organization, intermediate, or depot), by subsystem, by design-stable
components, or other criteria.
PICA. The service or agency ICP designated as the single activity within the DoD responsible
for providing materiel support.
PLT. The interval between the date of signature of a contract execution and the receipt of the
first significant delivery of the purchased materiel into the supply system.
POM. The final product of the programming process within the Department of Defense. The
Components POM displays the resource allocation decisions of the Military Departments in
response to and in accordance with Strategic Planning Guidance and Joint Programming
Guidance. A POM has a 5-year projected blueprint of each organization’s proposals for
updating DoD programs. Each Military Department, Defense Agency, and United States Special
Operations Command submits it to the Secretary of Defense for approval. The approved POM
defines the programs to be funded by the Military Department and by the Defense Agency
budgets described in greater detail in the FMR.
preliminary operational capability. The attainment of the capability for equipment or systems
to be used by operational units and to function in a manner that is preliminary to, but in support
of, the achievement of an initial operating capability.
procurement lead time. The amount of time from initiation of a purchase request until receipt
of the first significant delivery of purchased materiel into the supply system. The sum of the
ALT and PLT.
product support integrator. The integrator of required logistical support processes to ensure
that level of support is obtained through PBL agreements. The designated product support
integrator for a given PBL arrangement may be an original equipment manufacturer, a
commercial (private) entity, a U.S. Government (organic) entity, or a combination of a public
and private partnership.
provisioning. The management process of determining and acquiring the range and quantity of
support items necessary to operate and maintain an end item of materiel for an initial period of
service.
RAE. A value-added metric, which is the ratio of the actual forecast error and the forecast error
for the naïve forecast. The RAE for an item is computed as the absolute or unsigned value of the
item’s actual forecast error for the forecasted period over the absolute or unsigned value of the
item’s forecast error if a naïve forecast was used to forecast demand for the period. The formula
for computing the RAE for an item is:
   = |


| |


|
DoDM 4140.01-V2, November 9, 2018
GLOSSARY 72
where abs|x| is the absolute or unsigned value of x, f
actual
d
i
is the actual forecasted dollar demand
for item i for the forecasted period, ad
i
is the actual dollar demand for item i for the period, and
f
naive
d
i
is the naïve forecasted dollar demand for item i
The RAE for a set of items is computed as quotient of the sum of the absolute or unsigned values
of the actual forecast errors across the items and the sum of the absolute or unsigned values of
the naïve forecast errors across the items. The formula for computing the RAE for a set of items
is:
    = |


|
|


|
where n is the the number of items in the set and abs|x|, f
actual
d
i
, ad
i
, and f
naive
d
i
.
RBS. A requirement determination process that computes the levels of secondary item spares
needed to support a weapon system readiness goal at lowest cost.
RBS tool. An analytical capability primarily used to set the levels of secondary item spares
needed to support a weapon system. Examples of other applications that an RBS tool can
support include:
Assessing the inventory investment required for the fielding of a new program (e.g., weapon
or subsystem).
Negotiating supplier PBL agreements.
Assessing the impact of reliability, maintainability, or supportability improvements on
weapon system readiness.
Planning and developing budgets.
Conducting what-if exercises related to levels of secondary item spares needed to support
weapon system deployments.
RCL. The quantity of reparable items required to sustain operations during the repair cycle that
commences when a maintenance replacement takes place and ends when the unserviceable asset
is returned to stock in a serviceable condition. That includes stages such as removed from the
weapon system, awaiting shipment, in-transit, in pre-repair screening, in process of repair, and
being returned to serviceable stock. Exclude from RCL any extraordinary awaiting-parts delays
and any intentional extended-transit, storage, or repair-process delays from the repair cycle.
readiness. A measure or measures of the ability of a system to undertake and sustain a specified
set of missions at planned peacetime and wartime utilization rates. Examples of system
readiness measures are combat sortie rate, fully mission capable rate, and operational
availability. Measures take account of:
The effects of system design, reliability, maintainability.
DoDM 4140.01-V2, November 9, 2018
GLOSSARY 73
The characteristics of the support system.
The quantity and location of support resources.
reparable item. An item of supply subject to economical repair and for which the repair (at
either depot or field level) is considered in satisfying computed requirements at any inventory
level. Synonymous with repairable item.
replenishment. Actions to resupply an inventory when it reaches the ROP.
representative procurement. A procurement for replenishing wholesale-level stock, such that
the procurement action is routine in nature or the circumstances affecting the procurement are
expected to occur on a continuing basis.
requirement. When used in association with a stockage computations in this volume, the
inventory quantity computed as part of supply planning to satisfy a future need for item stocks.
As prescribed in this volume’s stockage computations, those needs can be either readiness-based,
demand-based, or non-demand-based; can be at the wholesale or retail echelon of supply; and
can directed at satisfying peacetime or wartime customer demand.
requirements computation. Any mathematical calculation performed to support requirements
determination functions.
requirements objective. For wholesale stock replenishment, the maximum authorized quantity
of stock for an item. It consists of the sum of stock represented by the EOQ, the safety level, the
repair-cycle level, and authorized additive levels.
requisition. An order for materiel initiated by an established, authorized organization (i.e., a
DoD or non-DoD organization that has been assigned a DoD activity address code) that is
transmitted either electronically, by mail, or telephoned to a supply source within the DoD or
external to the DoD (the General Services Administration, the Federal Aviation Administration,
or other organizations assigned management responsibility for categories of materiel), according
to procedures specified in Chapter 4 of Volume 2 of DLM 4000.25 and DLM 4000.25-1.
requisition response time. The mean time between the date that the wholesale ICP receives a
requisition and the date ready-for-issue assets are available to satisfy the requisition.
requisitioning objective. The maximum quantity of materiel to be maintained on-hand and on-
order to sustain current operations and core war reserves. It consists of the sum of stocks
represented by the OL, SL, repair cycle, if applicable, the OSTL, and authorized additive levels.
resupply time. The mean time between the date that a retail activity submits a requisition to the
wholesale system and the date it receives the requisitioned materiel.
retail. Level of inventory below the wholesale level, either at the consumer level for the purpose
of directly providing materiel to ultimate users of the materiel or at the intermediate or region
level for the purpose of supplying consumer levels or ultimate users of the materiel in a
geographical area.
DoDM 4140.01-V2, November 9, 2018
GLOSSARY 74
retail-level supply. Those secondary items stored within DoD intermediate and consumer levels
of supply down to and including, but not limited to, these activities: the Army to authorized
stockage list; the Navy to shipboard and shore stations; the Air Force to logistics readiness
squadrons; and the Marines to base supply and the marine expeditionary force supplies. Retail-
level supply does not include secondary item materiel in the hands of end users.
right-sizing inventory. The balancing of the costs of purchasing, managing, storing, and
maintaining inventory with the readiness cost of understocking inventory subject to anticipated
inventory changes.
ROP. The point when an item’s inventory position (i.e., on-hand stock plus stock due in minus
stock due out) reaches or breaches, and this reach or breach event triggers an order to replenish
stock.
RSC. The categorization of an item that indicates the reason or basis for stockage at the retail
level of inventory. Those categories reflect the stockage computation or decision rule applicable,
and in some cases are used for inventory stratification and supply management purposes.
secondary item. An item of supply, includes reparable components, subsystems, and
assemblies, consumable repair parts, bulk items and material, subsistence, and expendable end
items, including clothing and other personal gear. It does not include major weapon systems,
munitions, and equipment and other property under DoDI 5000.64.
serviceable. The condition of an individual item of supply when it can be issued to fill a
customer demand.
SL. The quantity of materiel required to be on hand to permit continued operation in the event
of a minor interruption of normal replenishment or a fluctuation in demand.
spare. When used in reference to stockage computations in this issuance, an individual item
stocked in case another individual item of the same type is worn out, broken, or lost. Examples
are:
A reparable item used in connection with the maintenance of an end item or weapon system
is commonly referred to as a reparable repair part but may be referred to as a spare part.
A consumable item used in connection with the maintenance of an end item or weapon
system is commonly referred to as consumable repair part but may be referred to as a repair part.
SSR. A transaction identifying requirements for consumable items that is submitted by the DoD
Component introducing materiel or a weapon system to the materiel manager.
standard deviation of demand. A measure of the variance of demand. For purposes of
determining forecast ability, the formula for computing the standard deviation of demand is:
   =


DoDM 4140.01-V2, November 9, 2018
GLOSSARY 75
where n is the number of periods with demand, d
i
is the quantity for demand i, and is the mean
demand.
storage costs. The variable costs of storing materiel. A storage cost factor is not variable (and
therefore not considered) if the factor would remain the same after eliminating 50 percent of the
stored materiel. Use one percent of the annual average value of the relevant inventory for
storage costs unless actual variable storage costs are available.
supplier. Organic or commercial sources for items of supply.
supply chain. The sequential activities associated with providing materiel from a raw material
stage to an end user as a finished product.
supply support. The management actions, procedures and techniques necessary to determine
requirements to acquire, catalog, receive, store, transfer, issue and dispose of spares, repair parts,
and supplies. Supply support includes provisioning for initial support, as well as acquiring,
distributing, and replenishing inventories. Proper supply support management results in having
the right spares, repair parts, and all classes of supplies available, in the right quantities, at the
right place, at the right time, and at the right price.
support vector regressions. Supervised learning models with associated learning algorithms
that analyze data used for classification and regression analysis.
system acquisition process. Process of providing a new or improved materiel capability in
response to a validated need.
total variable cost. The sum of the variable cost-to-order, variable cost-to-hold, and implied
shortage cost. Procurement cycles and safety levels are determined through minimizing these
costs for any given group of items in an inventory.
uneven demand. The feature of an item’s demand that has periods of very low or zero demand
followed by spikes in demand.
unit roots. Stochastic trend in a time series where, if present, a systematic pattern is
unpredictable.
unserviceable. The condition of an individual item of supply when it is in need of repair to
make it serviceable.
value added. Increased or improved value, worth, functionality or usefulness.
value added analysis. As applied to demand forecasting in this volume, an analysis of the value
added by a DoD Component’s forecasting process, expressed as the forecast accuracy and bias
percentage points gained by the process forecast over the accuracy and bias of the naïve forecast.
The value added for forecast accuracy is the accuracy of the forecast produced by the
Component’s forecasting process minus the accuracy of the naïve forecast.
DoDM 4140.01-V2, November 9, 2018
GLOSSARY 76
The value added for forecast bias is the absolute value of the bias of the naïve forecast minus
the absolute value of the bias of the forecast produced by the Component’s forecasting process.
The value added for forecast error is the error of the forecast produced by the naïve forecast
minus the error produced by the forecast from the Component’s forecasting process.
weapon system availability. As used in materiel management, the percent of time that a
weapon system does not have a materiel failure that prevents it from performing its intended
mission or missions.
wholesale. The highest level of DoD Component supply. At this level, requiring activities
procure supplies, repair supplies, and maintain stocks to resupply retail levels of supply and to
fill consumer demands not filled by retail levels of supply. DoD Component wholesale supplies
must be Government-owned but may be organically or commercially managed. Synonymous
with wholesale supply, wholesale level of supply, wholesale echelon, and national inventory.
wholesale stock. Stock, regardless of funding sources, over which the materiel manager has
asset knowledge and exercises unrestricted asset control to meet worldwide inventory
management responsibilities. Synonymous with national inventory.
Wilson EOQ. Used to calculate the optimal quantity that can be purchased to minimize the cost
of both the holding inventory and the processing of purchase orders. Variations include
recognizing back orders, quantity discounts, or operational constraints.
DoDM 4140.01-V2, November 9, 2018
REFERENCES 77
REFERENCES
Defense Federal Acquisition Regulation Supplement, current edition
Defense Logistics Manual 4000.25, Volume 2, “Defense Logistics Management Standards:
Supply Standards and Procedures,” June 5, 2012
1
Defense Logistics Manual 4000.25-1, “Military Standard Requisitioning and Issue Procedures
(MILSTRIP),” June 13, 2012
2
Defense Logistics Manual 4000.25-2, “Military Standard Transaction Reporting and
Accountability Procedures (MILSTRAP),” June 13, 2012
3
DoD 4140.26-M, Volume 1 “DoD Integrated Materiel Management (IMM) for Consumable
Items: Operating Procedures for tem Management Coding (IMC),” September 24, 2010, as
amended
DoD 4140.26-M, Volume 2, “DoD Integrated Materiel Management (IMM) for Consumable
Items: Item Management Coding (IMC) Criteria,” September 24, 2010, as amended
DoD 4140.26-M, Volume 6, “DoD Integrated Materiel Management (IMM) for Consumable
Items: Supply Support Requests (SSRs),” July 18, 2014, as amended
DoD 4160.28-M, Volume 3, “Defense Demilitarization: Procedural Guidance,”
June 7, 2011
DoD 7000.14-R, “Department of Defense Financial Management Regulations (FMRs),”
Volumes 1-15, dates vary by volume
DoD Directive 5134.12, “Assistant Secretary of Defense for Logistics and Materiel Readiness
(ASD(L&MR)),” May 25, 2000, as amended
DoD Instruction 3110.06, “War Reserve Materiel (WRM) Policy,” June 23, 2008, as amended
DoD Instruction 4140.01, “DoD Supply Chain Materiel Management Policy,”
December 14, 2011, as amended
DoD Instruction 5000.64, “Accountability and Management of DoD Equipment and Other
Accountable Property,” April 27, 2017, as amended
DoD Instruction 5200.39, “Critical Program Information (CPI) Identification and Protection
within Research, Development, Test, and Evaluation,” May 28, 2015, as amended
DoD Instruction 5200.44, “Protection of Mission Critical Functions to Achieve Trusted Systems
and Networks,” November 11, 2012, as amended
DoD Manual 4100.39, “Federal Logistics Information System (FLIS) Procedure,” March 8,
2017, as amended
DoD Manual 4140.01, Volume 3, “DoD Supply Chain Materiel Management Procedures:
Materiel Sourcing,” February 10, 2014, as amended
1
Available on the internet at
http://www.dla.mil/HQ/InformationOperations/DLMS/eLibrary/Manuals/publications/dlm/dlm_pubs/
2
Available on the internet at www2.dla.mil/j-6/dlmso/elibrary/manuals/dlm/dlm_pubs.asp
3
Available on the internet at www2.dla.mil/j-6/dlmso/elibrary/manuals/dlm/dlm_pubs.asp
DoDM 4140.01-V2, November 9, 2018
REFERENCES 78
DoD Manual 4140.01, Volume 5, “DoD Supply Chain Materiel Management Procedures:
Delivery of Materiel,” February 10, 2014
DoD Manual 4140.01, Volume 6, “DoD Supply Chain Materiel Management Procedures:
Materiel Returns, Retention, and Disposition,” March 8, 2017, as amended
DoD Manual 4140.01, Volume 7, “DoD Supply Chain Materiel Management Procedures:
Supporting Technologies,” February 10, 2014, as amended
DoD Manual 4140.01, Volume 8, “DoD Supply Chain Materiel Management Procedures:
Materiel Data Management and Exchange,” February 10, 2014, as amended
DoD Manual 4140.01, Volume 9, “DoD Supply Chain Materiel Management Procedures:
Materiel Programs,” October 17, 2016, as amended
DoD Manual 4140.01, Volume 10, “DoD Supply Chain Materiel Management Procedures:
Supply Chain Inventory Reporting and Metrics,” March 9, 2017, as amended
DoD Manual 4140.01, Volume 11, “DoD Supply Chain Materiel Management Procedures:
Inventory Accountability and Special Management and Handling,” March 8, 2017, as
amended
DoD Manual 4140.01, Volume 12, “DoD Supply Chain Materiel Management Procedures:
Sales and Operations Planning,” March 22, 2016, as amended
DoD Manual 4140.27, Volume 1, “Shelf-Life Item Management Manual: Program
Administration,” July 6, 2016
DoD Manual 4140.68, “Integrated Materiel Management of Nonconsumable Items,”
September 2, 2014, as amended
Federal Acquisition Regulation, current edition
Government Electronics and Information Technology Association (GEIA) Standard 0007, 2008
4
Joint Publication 4-0, “Joint Logistics,” October 16, 2013
Military Handbook 502A, “Department of Defense Handbook Product Support Analysis,”
March 8, 2013
5
United States Code, Title 10
United States Code, Title 41
4
Available on the internet at http://www.techstreet.com/TechStreet
5
Available on the internet at http://quicksearch.dla.mil//