The Application of Quantity Discounts in Army Procurements.
ARMY PROCUREMENT RESEARCH OFFICE FORT LEE VA
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The Department of Defense DOD has directed the use of basic Economic Order Quantity EOQ principles in the acquisition of secondary items. One assumption of the EOQ model is that there is no control over acquisition price yet, it has been established that the unit price of an item is not always independent of the quantity procured. The approach taken in this study included a review of the Quantity Discount QD program as implemented by the Air Force, and the development of a total variable cost equation to evaluate offers in response to a QD solicitation. A QD program in the Army is expected to result in reductions in both acquisition cost and long run administrative workload. A proposed QD program has been developed and it is recommended that a test be conducted at one or more Materiel Readiness Commands to determine the degree of success a full QD program can be expected to accomplish.
- Administration and Management
- Economics and Cost Analysis
- Logistics, Military Facilities and Supplies