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Defense Logistics Modernization An Opportunity for Excellence (1989) / Chapter Skim
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4 Optimization of Material Management
Pages 41-46

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From page 41...
... For each item, this single-variable optimization model trades off the fixed cost incurred with every purchase against its unit storage cost, assuming that the demand rate for the item is independent of time. This model has many limitations, including the following: It does not exploit the scale economies that are present in procurement because of lower prices that are often available with larger buys.
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From page 42...
... . The Chicago Pneumatic Tool Corporation used large-scale optimization to reduce inventories by 43 percent while increasing the average fill rate from under 80 percent to over 90 percent in a two-echelon inventory system with about 40,000 stocking units and uncertain demands.
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From page 43...
... Coordinates decisions on inventory levels of items at the various locations, including vendors, and redistribution of stocks to improve service and reduce inventories, while respecting space limitations. Consolidates shipments and selects economical carriers to reduce transportation costs.
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From page 44...
... The first are needed to assure that recommendations are practical and the second to assure that opportunities to take advantage of advances in logistics and large-scale optimization research are not lost. The committee suggests that the level and location of the Operations Research and Economic Analysis Office within the DLA may be too remote from the director and in need of review.
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From page 45...
... However, we have not made an organizational study, and we recognize that alternative approaches to accomplish this could certainly be developed, some no doubt superior to those suggested. The important point is that the information gap between senior DLA management and the Operations Research and Economic Analysis Office be closed.
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Key Terms

  • analysis office
  • operations research
  • uncertain demands
  • reduce inventories
  • fill rates

  • integrated materiel
  • integrate supply
  • supply decisions
  • achieve integrated
  • scale economies

  • space limitations
  • procurement costs
  • fill rate
  • average fill
  • information gap

  • item fill
  • budget limitations
  • improved customer
  • service obscures
  • measure service

  • network optimization
  • inventories nor
  • including vendors
  • procurement dollars
  • model trades

  • annual procurement
  • developing models
  • item inventories
  • optimization research
  • committee suggests


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