DLA Economic Retention/Returns Limits Study
Abstract
The Department of Defense Instruction (DoDI) 4100.37, Retention and Transfer of Materiel Assets, specifies policies for the retention and transfer of materiel assets. The instruction allows for the stratification of wholesale stock into several levels, one of which is economic reasons. The Defense Logistics Agency currently uses an average limit of 10 years worth of stock measured at the current demand rate. This analysis uses a breakeven equation to determine the maximum amount of stock that should be retained for economic reasons. The equation balances the two alternatives available: (1) to incur the cost to hold the stock until it is used or (2) to dispose of the stock and take the chance that it may have to be reprocured to meet a future demand. When the expected cost incurred to hold the stock equals the expected cost to dispose and reprocure, the economic retention limit has been reached. The economic returns limit was also investigated. The same analysis is performed for the returns limit, except that the expected cost to hold is increased by the cost to return the item to the wholesale depot.
Document Details
- Document Type
- Technical Report
- Publication Date
- Sep 01, 1986
- Accession Number
- ADA176428
Entities
People
- Mary K. Cyrus
- Ronald A. Kirchoff
Organizations
- Defense Logistics Agency