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Defense Inventory: Cost Factors Used to Manage Secondary Items

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Report Type Reports and Testimonies
Report Date May 14, 1992
Report No. NSIAD-92-112
Subject
Summary:

This report examines the cost considerations underlying the Defense Department's (DOD) inventory decisions for secondary items. Through the economic order quantity formula, the cost of ordering and holding secondary items influences the size of individual orders for items with frequent or high demand. The purchase of infrequently used items is based on military need rather than optimum order quantities. In the past, DOD retained secondary item inventory, regardless of its quantity, that pertained to active weapon systems. Recently, DOD revised its policies to encourage disposal of more excess items. As a result, disposals have been increasing. Excess property is sold for a fraction of its value. In fiscal year 1990, DOD sold excess property valued at $9.1 billion for $138.5 million.

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