Dollar Cost Banding: A New Algorithm for Computing Inventory Levels for Army Supply Support Activities
Sep 2, 2004
This research brief describes work documented in Dollar Cost Banding: A New Algorithm for Computing Inventory Levels for Army Supply Support Activities (MG-128-A), Velocity Management: An Approach for Improving the Responsiveness and Efficiency of Army Logistics Processes (DB-126-1-A), and Establishing a Baseline and Reporting Performance for the Order and Ship Processes (DB-173-A).
Excerpt: The Army's Deputy Chief of Staff for Logistics sponsored Velocity Management (VM) research at RAND Arroyo Center to develop a new algorithm for calculating inventory levels in SSAs. Known as dollar cost banding (DCB), the new algorithm has produced immediate and significant gains in performance at little or no additional inventory cost. Improved inventory performance means that customers spend less time waiting for parts. As a result, repairs can be completed more quickly, which translates into higher equipment readiness rates. The Army has moved quickly to approve the use of dollar cost banding as a policy option for setting inventory at retail supply points Armywide. It is currently in use at over 40 percent of SSAs and is in the process of being implemented at many more.