Review of GSA's Method of Supply Model
PSAD-80-7: Published: Nov 16, 1979. Publicly Released: Nov 16, 1979.
- Full Report:
The Federal Supply Service (FSS) has developed a model for determining the most effective way to provide commonly used items to federal agencies. An evaluation of the validity and effectiveness of this model was requested. Federal agencies and executive officers use four methods for filling their requirements for furniture, office supplies and other commonly used items. These methods are referred to as stock, nonstock, schedules, and agency local purchase. FSS has central control over stock and nonstock purchasing. For the schedules method, FSS contracts for items which the agencies then order directly from the conractor. In this case, FSS does not control the quantities purchased or keep records of the amount agencies spend. The agencies procure items directly under the agency local method. FSS keeps no records of these purchases.
The evaluation of the model found that the stock savings factors were used improperly in the equations, and the safety level stock was computed in an inconsistent manner. There were several minor errors and inconsistencies. In the equations, the unit purchase price was the same under the stock method as under the schedule method. It was felt that the schedules method unit price should be higher because of price discounts from buying larger quantities of goods in the stock program.
Recommendation for Executive Action
Comments: Please call 202/512-6100 for additional information.
Recommendation: FSS should obtain more accurate stock saving factors, especially for the schedules programs. Finer detail than group- or class-wide averages is desirable. These more accurate values should be applied properly in the equations. In addition, FSS should agree upon a uniform set of carrying costs, using separate charges for the cost of capital and warehouse space, for use in all areas of FSS inventory management; and recode the program to correct space costs and safety stock factors to agree with practices of the Inventory Management Division which constrain replenishments, use multiple depots, and base safety stock on variable demand. Finally, FSS should construct a work plan to operate the model regularly, more efficiently, and with a long-range goal of reviewing each item at a specified interval, such as once every two years; and use the model consistently with the Office of Federal Procurement Policy.