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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 Author:Daniel A. Relles, Marygail K. Brauner, John R. Bondanella, Paul Steinberg 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 "stoc... more »k 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.« less