Development of a Time-Weighted, Essentiality-Weighted Shortage Cost (Lambda E)
Abstract
Currently, the Navy uses shortage costs which are fixed over a large range of items and are independent of the item's average acquisition price, average acquisition time and military essentiality. Today's shortage costs are imputed costs based on a given budgetary goal. This analysis evaluates procedures designed to measure the actual time-weighted, essentiality-weighted shortage costs (Lambda E). One of the methods evaluated for computing shortage costs is based on the item's average acquisition price, since this is the minimum measure of how much the Navy is willing to spend to avoid a shortage. Shortage costs are also computed using the cost to operate and support a ship. This method is based on the assumption that the value of a ship's primary mission capabilities is equivalent to the amount of money the Navy is willing to spend to operate and support the ship. Under this method, item shortage costs are computed as a percentage of the ship's operating and support costs based upon that item's essentially to the ship's primary mission. This report analyzes alternatives techniques to measure the (Lambda E), recommends a specific method and discusses related to the implementation of he recommendation.
Document Details
- Document Type
- Technical Report
- Publication Date
- Mar 21, 1984
- Accession Number
- ADA140637
Entities
People
- J. A. Mellinger
- J. L. Zamer