Alternative Approaches to the Standard Base Supply System Economic Order Quantity Depth Model

Abstract : The current Air Force inventory policy for Economic Order Quantity (EOQ) items in the Standard Base Supply System (SBSS) minimizes total variable costs to determine how much to order and when to order. There are many inventory experts in both the Air Force and academic communities who believe minimization of variable costs is not the correct way to determine Air Force inventory policy. This report documents the comparison of ten alternative inventory systems to the two Standard Base Supply System models. Using a 40-item selected sample and many larger samples, we compared the performance of these inventory systems in terms of the number of backorders, the number of orders, unit fill rates and total variable costs. We found an aggregate model that minimizes backorders subject to a limitation on investment funds and the number of requisitions was more efficient and reduced backorders up to 95% as compared to the current SBSS. The aggregate model outperformed all other models as well. In addition, the aggregate model is well suited for computing EOQ stock fund requirements since each base operates under a stock fund dollar constraint.