INVENTORY MANAGEMENT IN THE UNITED STATES MARINE CORPS’ WAR RESERVE: IMPACT OF MARGINAL COST ANALYSIS THROUGH A MODIFIED NEWSVENDOR MODEL

The United States Marine Corps (USMC) Installation & Logistics Command (I&L) seeks to store appropriate inventory levels of war reserve materiel (WRM) to meet future operational needs under surge demands of uncertain environments. The research of this capstone sought to understand the factors affecting appropriate inventory level for USMC WRM under the premise of using the newsvendor model framework. Through a systems engineering approach, the classic newsvendor model was modified to analyze the appropriate inventory levels using marginal cost and marginal benefit concepts. The modified model is demonstrated through a developed tool called the WRM marginal cost analysis tool (WRMMCAT). The WRMMCAT considers equipment, cost of materiel, storage and maintenance costs, materiel intrinsic value parameter, and conflict intensity factor for one Marine Expeditionary Unit (MEU) with an option to customize results for multiple MEUs. The modified variables in the model provide USMC planners with an output of predicted appropriate quantity of the specified materiel, the expected marginal cost of shortage/overage, and a probability of shortage/overage given a set of user-defined cost and demand data. The WRMMCAT enables a repeatable model for anticipating demand that will add value to the USMC in managing appropriate WRM inventory levels as well as future acquisition and pre-positioning decisions.Captain, United States ArmyCaptain, United States ArmyCaptain, United States ArmyCaptain, United States ArmyMajor, United States ArmyApproved for public release. distribution is unlimite