Economic Retention Within the Department of Defense
Abstract
When to buy inventory and how much to buy are often touted as the fundamental questions to efficient and effective materiel management in both the private and public sectors. But a third question-one not directly related to buying stock-is equally fundamental to efficient and effective materiel management within the Department of Defense: How much stock should be retained above normal operating levels? Some argue that any stock above normal operating levels is unnecessary and should be disposed of to avoid the cost of storage and to gain the financial return from its disposal. Others contend there are savings when retained stocks reduce or eliminate future repurchase or repair costs for an item, which are substantially higher than storage costs and returns from disposal. If stock is more economical to keep than to dispose of it should be retained. In its materiel management regulation, the Department of Defense has adopted this economic rationale to define economic retention stock (ERS) and to provide policy requirements and procedures for its determination. In recent years, Congress and the General Accounting Office have questioned the economic validity of those requirements and procedures. In response, the Supply Chain Integration Office of the Deputy Under Secretary of Defense for Logistics and Materiel Readiness (DUSDL&MR) tasked the Logistics Management Institute to examine if and how retention policy requirements and procedures could be improved.
Document Details
- Document Type
- Technical Report
- Publication Date
- Dec 01, 2003
- Accession Number
- ADA419710
Entities
People
- Dennis L. Zimmerman
Organizations
- LMI