Author: Steven D. MacDonald

Publisher:

Published: 1997-03-01

Total Pages: 85

ISBN-13: 9781423572428

The General Accounting Office (GAO) has stated that the Department of Defense (DoD) believes it is better to overbuy inventory items than to manage with just the right amount of stock. This thesis asserts that Navy inventory managers do not have a general tendency to overbuy items, but rather make rational purchasing decisions influenced and motivated by the environment of rewards and penalties in which they work. It is also asserted that Navy inventory managers are risk adverse due to the nature of their environment. Personal stockout costs are examined as one of the key factors influencing decision-making and risk adverse behavior. This thesis introduces a conceptual model that describes the Navy inventory management decision-making environment. This model shows the relationship between personal stockout costs, required service levels, cost considerations, and planning horizons across the different decision-making levels in the Navy. This study concludes that readiness-based performance measures must be changed to incorporate a cost focus, and that the risk facing inventory managers due to personal stockout costs needs to be reduced to change their behavior of lower inventory levels are desired.