Minimum Procurement Cycle Quantities,
ASSISTANT SECRETARY OF DEFENSE (ACQUISITION AND LOGISTICS) WASHINGTON DC
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The Defense Department projects order quantities for consumable spare parts and some reparable parts by using a standard inventory model that minimizes the total variable cost of ordering and holding materiel, subject to a constraint on the number of requisitions short backorders for each item. The accounting technique of marginal analysis is used to find the quantity that is most economical to order by increasing that quantity until the marginal cost to order is equal to the marginal cost to hold materiel. This policy is being reexamined in light of current economic considerations and readiness objectives. Performance goals that are item oriented do not necessarily provide the best materiel support for our ultimate objective of weapon system readiness. There are also problems with other parameters in the current model. Costs we are using to project materiel requirements may not represent actual experience. And, improving the accuracy of item demand forecasts would help reduce inventories. Excess spare and repair parts tie up funds inadequate stock has a deleterious impact on weapon system readiness. Lack of credibility has damaged the Defense Departments ability to defend its budgets and will continue to do so, unless we take immediate and positive action to improve management of the supply system.
- Logistics, Military Facilities and Supplies