VA Medical Centers Could Determine Supply Requirements More Accurately by Updating Factors Used To Compute Economic Order Quantities

NSIAD-84-28: Published: Nov 7, 1983. Publicly Released: Nov 7, 1983.

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GAO reviewed the supply management procedures and practices at a Veterans Administration (VA) medical center.

GAO obtained information which indicates that the weaknesses it identified during the review relate to systemwide procedures and computer operations throughout VA. GAO found that the cost factors used to calculate the economic order quantity (EOQ) have not been updated for 15 years, and many procurement leadtimes have been set at too high a level. GAO also found that supply analyst and computer-generated procurement decisions do not always match. Analysts order stock at 30-day intervals, but the computer generates decisions randomly based on EOQ principles. Many computer-generated decisions must be reviewed although the information is seldom used. GAO believes that VA could achieve significant savings at many centers by updating the cost and procurement leadtime factors and eliminating the differences between computer and analyst ordering intervals.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: While VA is taking some corrective action the benefits to be derived from further followup would not be worth the cost.

    Recommendation: The Assistant Deputy Administrator for Procurement and Supply should clarify procedures to periodically update the costs used in medical centers' EOQ calculations.

    Agency Affected: Veterans Administration

  2. Status: Closed - Implemented

    Comments: While VA is taking some corrective action the benefits to be derived from further followup would not be worth the cost.

    Recommendation: The Assistant Deputy Administrator for Procurement and Supply should develop automated systems to consistently and accurately define and update medical centers' leadtime calculations.

    Agency Affected: Veterans Administration

  3. Status: Closed - Implemented

    Comments: While VA is taking some corrective action the benefits to be derived from further followup would not be worth the cost.

    Recommendation: The Assistant Deputy Administrator for Procurement and Supply should justify any ordering schedules not consistent with EOQ calculations.

    Agency Affected: Veterans Administration

  4. Status: Closed - Implemented

    Comments: While VA is taking some corrective action the benefits to be derived from further followup would not be worth the cost.

    Recommendation: The Assistant Deputy Administrator for Procurement and Supply should develop procedures for minimum operating levels and fixed interval ordering levels to eliminate differences between fixed ordering intervals and computer EOQ ordering intervals.

    Agency Affected: Veterans Administration

 

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