Zero Demand Retention Limits
Abstract
The results of this study show that retention limits can vary considerably depending upon the holding and disposal cost factors used. The retention limits were determined using a cost model that calculated the five year cost of both holding and disposing of zero demand stock while still meeting expected demands. The model demonstrated that holding costs are generally favored over disposal and reprocurement costs until the probabilities of demand become so low that the cost of reprocurement is less than the cost to hold. The study also showed that the retention limit was sensitive to the net disposal rate which was probably the most uncertain of the cost factors used in the study. Given the uncertainty in the cost factors, and the overall risk in terms of cost and potential customer support degradation, the study recommendation is to stay at a general five year retention limit for all commodities and reevaluate the policy after a study is conducted to determine the actual net disposal rate. Zero demand, Dead stock, Retention limits.
Document Details
- Document Type
- Technical Report
- Publication Date
- Aug 01, 1994
- Accession Number
- ADA284009
Entities
People
- Bruce E. Lasswell
Organizations
- Defense Logistics Agency