Economic Retention of Ammunition Items.
Abstract
When stock levels exceed those needed to sustain operations, materiel managers need to decide if they should retain that stock or dispose of it. Economic retention models support that decision-making by trading off the savings from disposal against the savings from retention to arrive at a breakeven point called an economic retention limit. The Logistics Management Institute analyzed how economic retention limits should be set for ammunition items. Our analysis concluded that (1) the factors involved in the economic retention of ammunition items are the same as those involved in the economic retention of ammunition items, although the factors have different values; (2) the standard net present value model used to set limits for nonammunition items can be used for ammunition items by modifying the expression for revenues from disposal; and (3) the most economic retention limit for an ammunition item is the level of stock that will cover all known future demand. The study recommends that the economic retention limit for an ammunition item should simply he based on its remaining service life, but the actual computation should consider the error in forecasting demand to ensure a high level of confidence that future customer demand will be satisfied.
Document Details
- Document Type
- Technical Report
- Publication Date
- Jun 01, 1998
- Accession Number
- ADA354006
Entities
People
- Dennis L. Zimmerman
Organizations
- LMI