An analysis of economic retention models for excess stock in a stochastic demand environment

Description

Retention policy for U.S. Navy wholesale inventories in long supply has been in a state of flux and under Congressional scrutiny since 1985. This thesis analyzes and compares the U.S. Navy's current economic retention process to four mathematical Economic Retention Decision Models designed to assist in making retention determinations with respect to excess inventories. The motivation for this research was based on several factors, the two primary factors were; the Navy does not currently use a classical economic retention decision model when making retention/disposal decisions for essential material, and U.S. Navy inventories in long supply were estimated to be as high as 3.4 billion dollars in March 1993. A Pascal based simulation was developed to compare the Navy's retention process and the mathematical models. The comparison was based on performance with respect to the Measures Of Effectiveness (MOE) of Total Cost and Average Customer Wait Time. The simulation was designed to emulate the portions of the Navy's consumable item inventory management system (UICP) applicable to the demand process for a Navy managed consumable item. The goal of this research was to determine how effective the Navy's retention process was as compared with economic retention decision models for both a steady state and a declining demand environment.

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