Right Price, Fair Credit: Criteria to Improve Financial Incentives for Army Logistics Decisions
Editorial Reviews
Book Description
Under the Army1s financial management system for spare parts, logisticscustomers receive budgets to buy spare parts from the supply system andreceive credits for returning parts to the supply system, either for repairor because they are no longer needed in local inventories. The Army1swholesale inventories of spare parts are financed by a "stock fund," whichuses its income from the sale of parts, net of credits issued to customers,to pay for repairs and procurement of replacement parts. Someinstallation-level, or retail, inventories are also financed by stock funds.During fiscal year 2001, the Army1s stock funds were in a period oftransition from separate wholesale and retail components to a Single StockFund (SSF). As part of this change, the Army implemented new price andcredit policies for spare parts. In this document, the authors introduce aset of criteria to assess price and credit policy changes in terms of theireffectiveness in meeting the overall objective of maintaining the logisticscustomer1s ability to meet mission requirements while keeping weapon systemsin operating condition at the lowest total cost to the Army. The authorsthen use these criteria to compare and evaluate pre-SSF, SSF, and proposedfuture price and credit policies, and define the characteristics of anoptimal Army price and credit policy.
From the Publisher
This report discusses how prices and credits for spare parts affect the behavior of logistics customers and suppliers and the performance of the Army logistics system as a whole. It describes a set of system-wide criteria for evaluating price and credit policies and applies them to current and proposed policies. It then uses the criteria as a basis to develop the characteristics of an optimal price and credit policy that would support the needs of logistics customers at a lower total cost to the Army.This analysis is an outgrowth of previous research evaluating the Army's Integrated Sustainment Maintenance program and proposed price and credit policies for Single Stock Fund (SSF), and applying Velocity Management's (VM's) "Define-Measure-Improve" (D-M-I) methodology to the Army's logistics financial management system. It should be of interest to financial managers and logistics customers and suppliers in the Army and the Department of Defense (DoD), as well as to business organizations that use transfer pricing mechanisms to promote efficient internal allocation of resources.The research documented here was sponsored by the Army's Deputy Chief of Staff for Logistics and conducted in the Military Logistics Program of the RAND Arroyo Center. The Arroyo Center is a federally funded research and development center sponsored by the United States Army.
Right Price, Fair Credit: Criteria to Improve Financial Incentives for Army Logistics Decisions
Right Price, Fair Credit: Criteria to Improve Financial Incentives for Army Logistics Decisions,Daniel A. Relles,Marygail K. Brauner,John R. Bondanella,Paul Steinberg,Ellen M. Pint,United States Army,Arroyo Center,RAND Corporation,0833029525,Army,Business & Economics,Business/Economics,Government - U.S. Government,Military Science,Political Freedom & Security - International Secur,Politics - Current Events,Politics / Current Events,Prices,Purchasing & Buying,Spare parts,Supplies and stores,United States,United States.
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