PNG: Effective Inventory Control for Items with Highly Variable Demand

LMI developed the PNG inventory control solution to manage inventory items with infrequent demand (i.e., isolated spikes in demand) as well as items with frequent, highly variable demand. Such items account for the majority of hardware stocked at the U.S. Defense Logistics Agency (DLA). The forecasting of demand for these items–no matter how sophisticated the forecasting method–had resulted in years of problems for DLA: excess inventory for some items, backorders for others, and excessive buyer workload. The implementation of PNG, a software package that consists of two inventory solutions, Peak Policy and Next Gen, allowed DLA to shift from trying to forecast each item individually to using a portfolio or risk‐management approach to inventory control. Since DLA implemented PNG in January 2013, the agency has achieved its inventory‐related goals for better customer service and reduced buyer workload, has experienced no inventory increase, and has saved nearly $400 million per year.