An Roinn Cosanta Óglaigh na hÉireann Department of Defence Defence Forces

4.6 Inventory

The primary management and storage of Naval Service maintenance inventory is performed by Naval Service Technical Stores. All requisitions made by units involved in the maintenance of vessels are made to the Tech Stores, with the Tech Stores in turn filling requisitions from their stock, or requisitioning from commercial suppliers. In addition to inventory being held at Tech Store level, inventory is also held in each of the maintenance units, e.g. MENDY, etc and also on board each of the vessels. Figure 4.3 outlines the units involved in the storage and requisitioning of maintenance inventory.

MENDY

WEU

FSG

Tech Stores

Commercial Suppliers

4.6.1 Naval Service Technical Stores

The Naval Tech Stores staff are responsible for the administration of the stores procurement process, control of Naval Service contracts and the custody, care and maintenance of inventory. Not all inventory under the control of Tech Stores relates to maintenance, e.g. Naval Service stock of ship fuel. Activity analysis undertaken of transactions conducted provided us with an estimate showing that 57% of the productive effort of Tech Stores relates to maintenance inventory. Table 4.8 below outlines the staff employed in Tech Stores.

Table 4.8 Military and Civilian Staff Employed in Tech Stores as at June 2006

	Officers	NCOs	Enlisted Pers	Total Pers
Military	3	5	2	10
Civilian				16
Total				26

4.6.1.1.Staff Costs

Military Staff. Costs were calculated using the staff in place as at 2006. This gave a total of €526,043 for military staff. Apportioning costs on the basis of activity analysis gives the staff costs for 2006 as €299,885. Although military staff rotated through appointments, the rank profile of staff remained consistent allowing this cost to accurately reflect staff costs for each year of the Review.
Civilian Staff. The Tech Stores staff remained constant throughout the period of the Review allowing costs to be calculated from individual pay data. Costs were again apportioned using activity analysis, which gave a cost for civilian staff of €329,553.

4.6.2 Inventory Costs

During the period of the Review the Naval Service, in line with the Defence Forces transitioned from the Inventory Management System (IMS) to the MIF to manage inventory. This transition created difficulty in extracting data on the value of inventory used in vessel maintenance. This difficulty was compounded by the fact that the vessels could only link with MIF when they were alongside the Naval Base.

Figure 4.4 and Table 4.9 below outline the cost of inventory purchased over the period of the Review.

Figure 4.4 Cost of Maintenance Inventory Purchased 2003 – 2006

Table 4.9 Cost of Maintenance Inventory Purchased 2003 – 2006

	2003	2004	2005	2006
Cost of maintenance Inventory Purchased (€)	3,469,939	3,326,176	3,061,172	3,006,583

4.6.3 Efficiency

As outlined above there are currently data deficiencies, which make it difficult to make an informed assessment on whether inventory is being purchased and expended in the most efficient manner. In order to monitor efficiency in the purchase and use of inventory, data relating to inventory needs to be made more readily accessible by management systems. Additionally, analysis of procurement activity indicates large numbers of small orders for maintenance inventory. This would appear to be reducing the opportunity available to gain economies of scale by aggregating orders. The Naval Service have already begun to examine past purchase history to identify opportunities to combine future orders.

4.6.4 Recommendations

Data on inventory used annually needs to be more readily accessible with this information being available on a ship-by-ship basis. Costs must be related to individual vessels in this way and will facilitate annual budgets to be assigned to individual vessels.

The Steering Committee recommends that notional budgets for each ship should be developed with a system to monitor outturn against assigned budgets. The notional budgets for each of the vessels should be apportioned to the individual vessels with performance monitored by OC PIMM. This should be piloted in the interim on a manual basis until EAM is fully implemented.
This type of system is being used successfully in Arklow Shipping on a manual paper based system. The Naval Service are currently involved in three initiatives, which should make this data accessible going forward. Firstly, the refined use of cost centre codes as part of the roll out of MIF Phase II. Secondly, a pilot on MIF connectivity via a new satellite link is underway involving two vessels. The ultimate objective of the project is to achieve constant MIF connectivity with each vessel in the flotilla. Thirdly the full implementation of EAM should assist in the gathering of the required data. In the interim, budgets should be assigned to each of the ships with a system to monitor outturn against allotted budgets piloted on a manual basis until EAM is fully implemented.
The Steering Committee recommend that every effort be made to aggregate orders and reduce the number of smaller orders so as to fully exploit economies of scale achievable in ordering inventory. It is anticipated that this will be achieved through two initiatives previously referred to that the Naval Service have embarked on. Firstly, the introduction of EAM, will trigger ordering of inventory for large scheduled maintenance routines and secondly the introduction of MMT to manage each individual vessels maintenance. The planned introduction of MMT’s will be expanded upon in Chapter 5. Both of these initiatives will have the effect of reducing the need for large numbers of smaller orders. To ensure economies of scale are achieved, a formal system to monitor the number of small orders should be established.

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