Dollars and Sense: Process Improvement Approach to Logistics Financial Management

By Marygail K. Brauner; Ellen M. Pint et al. | Go to book overview

Appendix A
THE BENEFITS OF STOCK FUNDING

The purpose of working capital funding is to create financial incentives to reduce support costs while maintaining readiness. During the FM PIT's process walks, however, members often heard a longing for the days before DLRs were stock funded. This appendix documents some of the benefits the Army has realized under stock funding of DLRs. Briefly, logistics customers have responded by reducing demands for DLRs, increasing return rates relative to demands, and seeking alternative sources of supply and repair.1

From the provider perspective, working capital funding has resulted in significant reductions in costs and civilian personnel. From fiscal year 1993 to fiscal year 1999, the logistics infrastructure costs of all DWCF activities—including the Defense Logistics Agency (DLA), DFAS, etc.—fell from $53.6 billion to $44.2 billion, a 30 percent reduction after accounting for inflation. Civilian personnel in DWCF activities fell from 290,000 to 184,000 over the same period, a 37 percent reduction. As part of these total personnel reductions, supply management personnel have been reduced by 39 percent and depot maintenance personnel have been reduced by 43 percent.2

Evidence of declining demands for reparables since 1992 can be seen in the Army's Operating and Support Management Information Sys-

____________________
1
See Brauner et al., ISM-X Evaluation and Policy Implications, for a discussion of alternative sources of supply and repair.
2
Office of the Under Secretary of Defense (Comptroller), A Plan to Improve the Management and Performance of the Department of Defense Working Capital Funds, September 1997, pp. 18–19.

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Dollars and Sense: Process Improvement Approach to Logistics Financial Management
Table of contents

Table of contents

  • Title Page *
  • Preface iii
  • Contents v
  • Figures ix
  • Tables xi
  • Summary xiii
  • Abbreviations and Acronyms xix
  • Chapter One - Introduction 1
  • Chapter Two - Defining the Unit Financial 9
  • Chapter Three - Measuring the Financial Management Process 29
  • Chapter Four - Improving the Financial Management Process 51
  • Appendix A - Velocity Management 65
  • Appendix A - The Benefits of Stock Funding 75
  • Bibliography 79
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