The Army's Safety Level Requirements for Secondary Items May Be Inaccurate and Excessive

NSIAD-85-160: Published: Sep 30, 1985. Publicly Released: Sep 30, 1985.

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GAO reviewed the Army's safety level requirements for its wholesale supply system to assess where safety level requirements exceeded procurement leadtime requirements.

GAO noted that instructions for determining variable safety levels provide that the services constrain safety level requirements to equal no more than the average procurement leadtime demand or allow up to three standard deviations of procurement leadtime, whichever is less. GAO found that: (1) the safety level requirements for six major subordinate commands exceeded procurement leadtimes requirements by a number of items valued at about $76 million; (2) the Department of Defense requires that safety levels be at least equal to the procurement leadtime requirements; (3) the economic order quantity/variable safety level (EOQ/VSL) formula used to compute requirements produced quantities that were erratic and excessive; and (4) the EOQ/VSL formula did not materially improve supply support. GAO also found that: (1) limiting the safety level requirements to less than three standard deviations of procurement leadtime would not significantly impact the command's ability to fill customer requisitions; (2) reducing the safety level requirements to equal procurement leadtime would have reduced the safety requirements by 41 units and would have had no impact on the Army's ability to satisfy customer requisitions; and (3) the technical review of the EOQ/VSL should include an evaluation of the Army's decision to use three standard deviations of procurement leadtime as its basis for safety levels since its use may have resulted in excessive safety level requirements.

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