Analysis of Low Demand Items.
DEFENSE LOGISTICS AGENCY RICHMOND VA OPERATIONS RESEARCH OFFICE
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In recent years several paramount DOD changes have impacted DLA consumable item transfers, force reductions, and the adoption of new business practices such as the Defense Business Operating Fund DBOF. One of many resulting DLA initiatives is the re-evaluation of the management policy for low demand items. Currently, DLA is responsible for managing over four million items of which eighty percent are low demand. These items account for roughly half of agency inventory investment or about five billion dollars. This is a substantial investment in a large number of items managed with a policy based on rule of thumb. This study provides a quantitative foundation to the current policy and recommends additional areas of improvement. Using five years of historical demand, a simulation model is employed to explore variations to the current low demand item management policy Numeric Stockage Objective or NSO and Economic Order Quantity EOQ technique normally used for high demand items. Study results show that the NSO policy has performed well when compared to other heuristic driven policies. However, improvements can be made. The most promising improvements are recommended for test implementation at the DLA Supply Centers and they are extending item NSO computations from considering four quarters to eight quarters, weighting more recent demand, adjusting quarterly updates of item buy quantity, and including leadtime demand in the NSO computation.
- Administration and Management
- Logistics, Military Facilities and Supplies