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Department of Defense

Leverage Gov. Buying Power to Cut Cost, Inventory, Time

In the late 1990's DoD demonstrated it could reduce delivery time and cut costs of purchased goods to support the military (this could apply to any agency purchasing goods) by grouping the items in purchases by their common manufacturing processes. Reducing the time to obtain what the government procures, especially critical items, can improve the government's ability to respond to demand surges. Currently the government does not apply this sort of logic to its buying patterns...often buying a single item at a time or haphazardly grouping items together on a procurement that has no natural benefit to a supplier than just increased sales. These types of legacy procurements frequently misjudge demand patterns of the ultimate user of the ent item. By grouping items by common manufacturing process, demand for the group of items levels demand for the manufacturing line, thereby making it more efficient and responsive.


This aligns procurements with the objective of promoting the efficiency and effectiveness of the supplier too--allowing them to streamline cash flow, and develop more cost effective and competitive ways of supporting both government and commerical demand.


If the government can slash the leadtime to obtain items (times which can average over 6 months), they could also slash the costly, inflexible inventory it must stock to cover the time it takes to replenish stocks. It would also serve to reduce the mountain of backorders ofprocured goods that is managed by a number of 'expediters'.


At the time Government bureaucracy kept the idea from spreading and it eventually withered as wartime spending became more of a focus. But it demonstrated a 60% reduction in leadtimes and a 30% reduction in price...but lost momentum and has been oterhwise forgotten. it also demonsrated groupings that work even for small businesses.


See "Going Lean Fieldbook" by Stephen Ruffa where this technique is further detailed.



Idea No. 5535