The effects of DLA IPG I surcharges on DDRW end user activity inventory policies

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by  Parker, Richard Allen.;Miller, Jonathan David.;Halkias, Telemachus Christos.;Nevels, Jeffrey.;McMasters, Alan W.

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Approved for public release; distribution is unlimited.
The Effects ofDLA IPG I Surcharges on
DDRWEnd UserActivity Inventory Policies
by'
Richard Allen Parker
Commander, SC, United States Navy
B.S., Bethune-Cookman College, 1970
Jonathan David Miller
LieutenantCommander, SC, United States Navy
B.A., University ofIowa, 1979
Telemachus ChristosHalkias
Captain, QMC, United StatesArmy
B.S., United States Military Academy, 1982
Submitted in partial fulfillment
ofthe requirements forthe degree of
MASTER OF SCIENCE IN MANAGEMENT
from the
NAVALPOSTGRADUATE SCHOOL
December, 1992
/)
. .
reclassified
CURITYCLASSIFICATIONOFTHISPAGE
REPORT DOCUMENTATION PAGE
.REPORTSECURITYCLASSIFICATION 1b.RESTRICTIVEMARKINGS
^CLASSIFIED
.SECURITYCLASSIFICATIONAUTHORITY 3.DISTRIBUTION/AVAILABILITYOFREPORT
Approvedfor publicrelease;distributionisunlimited.
DECLASSIFICATION/DOWNGRADINGSCHEDULE
>.
PERFORMINGORGANIZATIONREPORTNUMBER(S) 5.MONITORINGORGANIZATIONREPORTNUMBER(S)
».NAMEOFPERFORMINGORGANIZATION 6b.OFFICESYMBOL 7a.NAMEOFMONITORINGORGANIZATION
avalPostgraduateSchool (Ifapplicable) NavalPostgraduateSchool
55
:.ADDRESS(City,State,andZIPCode) 7b.ADDRESS(City,State,andZIPCode)
tonterey.CA 93943-5000 Monterey,CA 93943-5000
i.NAMEOFFUNDING/SPONSORING 8b.OFFICESYMBOL 9.PROCUREMENTINSTRUMENTIDENTIFICATIONNUMBER
RGANIZATION (Ifapplicable)
:.ADDRESS(City,State,andZIPCode) 10.SOURCEOFFUNDING NUMBERS
ProgramElementNo. ProjectNo TaskNo. WorkUnitAccession
Number
I.TITLE(IncludeSecurityClassification)
ETectsofDLAIPGISuechargesonDDRWEndUserActivityInventoryPolicies
!.PERSONALAUTHOR(S) Parker,RichardA. /Miller,JonathanD. /Halkias,TelemachusC.
la.TYPEOFREPORT 13b.TIMECOVERED 14.DATEOFREPORT(year,month,day) 15.PAGECOUNT
aster'sThesis From To December1992 156
SUPPLEMENTARYNOTATION Theviewsexpre
>.
leviewsexpressedinthisthesisarethoseoftheauthoranddonotreflecttheofficialpolicyorpositionoftheDepartmentofDefenseortheU.S.
>vernment.
'.COSATICODES 18.SUBJECTTERMS(continueonreverseifnecessaryandidentifybyblocknumber)
FIELD GROUP SUBGROUP IssuePriorityGroup(IPG),Inventory,RequisitionPolicy,UMMIPS,FAD,Surcharge
I.ABSTRACT(continueonreverseifnecessaryandidentifybyblocknumber)
lepurposeofthisthesisistoexaminetheeffectsonretailcustomersofsurchargesproposedbytheDefenseLogisticsAgency(DLA)on
suePriorityGroupI(IPGI)requisitions.TheintentofthesesurchargesistoenableDLAtorecaptureaportionofthecostsincurred in
eetingIPGItimestandards. AdditionalgoalsaretodiscourageIPGIrequisitioningforfrivolousreasons,andwhenmaintenanceofsmall
tailinventoriesmaybelesscostlytothegovernment.
)atawascollectedfromtheNavalSupplyCentersatOaklandandSanDiego,andtheformerSharpeArmyDepot,nowincorporatedwith
efenseDepotSanJoaquin(DDJC).Twotypesofsurchargeswereappliedtothisdata.Avarietyofflatratesperrequisitionwereexamined.
Iternately,severalpercentagelevelswereappliedtoanitem'sunitpricetotesttheireffectivenessassurcharges.Combinationsofflatand
xcentagerateswerealsostudied.
'hieevaluationfoundflatratestendtoimpactlowerunitpriceandhighannualdemanditemsfirst.Percentofunitpricesurchargestendto
ivearelativelyevenimpactastheyareincreased.Combinationsofsurchargestendtocausemostitemstobestockedrapidly.
).DISTRIBUTION/AVAILABILITYOFABSTRACT 21.ABSTRACTSECURITYCLASSIFICATION
EJuNCLASSIFIED/UNLIMITED ] SAMEASREPORT ] DTICUSERS UNCLASSIFIED
a.NAMEOFRESPONSIBLEINDIVIDUAL 22b.TELEPHONE(IncludeAreacode) 22c.OFFICESYMBOL
lanW. McMasters [phone] AS/Mg
FORM 1473.84 MAR 83APReditionmaybeuseduntilexhausted SECURITYCLASSIFICATIONOFTHISPAGE
Allothereditionsareobsolete UNCLASSIFIED
.
ABSTRACT
The purpose of this thesis is to examine the effects on retail
customers of surcharges proposed by the Defense Logistics Agency
(DLA) on Issue Priority Group I (IPG) requisitions. The intent of
these surcharges is to enable DLA to recapture a portion of the
costs incurred in meeting IPG I time standards. Additional goals
are to discourage IPG I requisitioning for frivolous reasons, and
when maintenance of small retail inventories may be less costly to
the government
Data was collected from the Naval Supply Centers at Oakland
and San Diego, and the former Sharpe Army Depot, now incorporated
with Defense Depot San Joaquin (DDJC) Two types of surcharges
.
were applied to this data. A variety of flat rates per requisition
were examined. Alternately, several percentage levels were
applied to an item's unit price to test their effectiveness as
surcharges. Combinations of flat and percentage rates were also
studied.
This evaluation found flat rates tend to impact lower unit
price and high annual demand items first Percent of unit price
.
surcharges tend to have a relatively even impact as they are
increased. Combinations of surcharges tend to cause most items to
be stocked rapidly.
111
. .
1.1
TABLE OF CONTENTS
I. PROBLEM, OBJECTIVES, SCOPE, AND PREVIEW 1
A. THE PROBLEM 1
B. RESEARCH OBJECTIVES 2
C. SCOPE 2
1. Data 2
Model Assumptions
2 5
a Demand 5
b. Lead Time and Requisition Splitting 6
. .
c. Costs 7
d. Other Assumptions 7
D. PREVIEW 9
II. BACKGROUND 11
A. ISSUE PRIORITY GROUP I 11
1. IPG I Policy 11
2. IPG I Practices 13
B. OAKLAND'S CONCERNS 14
C. DEPOT DEMAND BASE REVIEW 16
1. Oakland 16
a. History 16
b. Customer Base 18
2 San Diego 22
.
IV
.
NAVAL POSTGRADUATE SCHQCX
MONTEREY CA 93943-5101
a. History 22
b. Customer Base 24
3 Sharpe 27
.
a. History 27
b. Customer Base 2 9
III. ALTERNATIVES 31
A. CUSTOMER REASONS FOR REQUISITIONING USING IPG I 31
B. ALTERNATIVES AVAILABLE TO CURB IPG I ABUSE 34
. .
IV. MODEL EVOLUTION 37
A. BACKGROUND 37
1. Previous Models 37
a. Material Logistics (MN3372) Course
Project 37
b. Logistics Engineering (MN4310) Course
Project 47
B. THESIS MODEL DESCRIPTION 56
1. Model Requirements 56
2 Model Description 59
3. Model Parameters Values 61
4. Tradeoff Analysis 65
V. DATA ANALYSIS 66
A. DESCRIPTION OF ELEMENTS 66
B. A-B-C ANALYSIS 67
v
C. IPG I SURCHARGE WIRE DIAGRAMS 75
1. Data Analysis 75
D. REQUISITIONS PER NSN INTERVAL TABLES AND POINTS
OF INTEREST 94
....
VI. THEORETICAL IPG I SURCHARGE EFFECTS MODEL 99
A. REQUIREMENTS DEFINITION 99
B. VARIABLE LEAD TIME DEMAND SURCHARGE MODELLING 102
.
VII. SUMMARY, CONCLUSIONS, AND RECOMMENDATIONS 107
. . .
A. SUMMARY 107
B. CONCLUSIONS 110
C. RECOMMENDATIONS 113
APPENDIX A. TOP SEVENTY-FIVE OAKLAND UNITS 116
APPENDIX B. TOP SEVENTY-FIVE SAN DIEGO UNITS 119
APPENDIX C. TOP ONE HUNDRED SHARPE UNITS 122
APPENDIX D. FOUR-COLUMN WIRE DIAGRAM OUTPUT 125
APPENDIX E. DETAILED OUTPUT BY NSN 140
LIST OF REFERENCES 143
VI