Original Date: 09/14/1998
Revision Date: 01/18/2007

Per Federal Acquisition Regulation, Part 45, Raytheon Missile Systems Company (RMSC) needed to establish a means of controlling and verifying inventory accuracy levels, as described in DOD’s Material Management Accounting Standards . In 1987, RMSC initiated the Cycle Inventory process to comply with this regulation and provide scheduling accuracy for production. Prior to this system, the company experienced significant problems with material availability.

The Cycle Inventory process is a physical inspection method to validate the availability of parts based on counts taken. An automated data system identifies the inspection levels and sample sizes of parts due for cycle inspection. The most expensive 5% of parts in inventory are verified four times a year. Less expensive parts are verified based on either a twice-a-year schedule or a random 7% yearly sample schedule. Once identified, cycle inspections are conducted on the distributed storage areas (supermarkets), and the results are entered into the system. RMSC’s current accuracy rating is 99.2%, compared to its 1987 (pre-implementation) rating of 85%. The Material Management Accounting Standards calls for an inventory accuracy rating of 95%, while the accuracy for government furnished property is 99.9%.

RMSC’s Cycle Inventory process provides a systematic view of inventory balances; a visible way to track the performances of supermarkets and specific production projects; and a support system to improve internal production efficiencies. An added benefit is the early warning feature for identifying potential material shortages due to inaccurate inventory data. Since implementing the Cycle Inventory process, RMSC has exceeded its customers’ requirements for controlling inventory.

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