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Exchange Pricing Improves Reparable Item Management

The Assistant Secretary of the Army for Financial Management and Comptroller has created a business process improvement tool to mitigate financial problems the Army has experienced by granting additional credit for secondary items through its current logistics systems. The program, known as Exchange Pricing, began in April 2008.

Exchange Pricing requires a one-for-one relationship. When an item identified for the Exchange Pricing program is issued, the Exchange Pricing tracking system will ensure that a similar, unserviceable item, as defined by Order of Use file item relationships, is returned to the supply system within an established time period.

Exchange Pricing is designed to provide a more disciplined system for returning reparable items to the supply system, provide greater national-level visibility of reparable items (which will enable the National Maintenance Program to more accurately compute requirements), and reduce the number of financial transactions currently involved in the issue and turn-in process (by not granting credit for the return of unserviceable items). Ultimately, Exchange Pricing will allow commanders to manage their budgets more effectively by eliminating the waiting period for expected credit for unserviceable items.

The Army began implementing the program by tracking issues and turn-ins against the established delay days period (DDP) for transactions of items identified for the program. [“Delay days period” is the specified time allotted that an issue is available to be matched to a turn in. The initial period is 60 days.] Three new data elements—the exchange price value, the delta bill value, and the serviceable exchange pricing return (SEPR) credit value—were added to the Army Master Data File (AMDF) of the Federal Logistics Data (FED LOG) catalog entries for those items. This initial implementation period will give logistics and resource managers opportunities to familiarize themselves with management information reports and assess the potential financial impact of the program when later phases are implemented.

In October, the Army will begin using a one-for-one credit policy for reparable items. Credit originally granted will be reversed if the turn-in transaction cannot be matched to an issue within the DDP. The Army Materiel Command G–8 will receive a monthly report of all unmatched serviceable and unserviceable turn-ins exceeding the DDP. The turn-in transactions included on the report will serve as candidates for credit reversal.

Recoverable Items Tracking is another segment of the October implementation. Under this initiative, the issue and turn-in of recoverable items, other than items already included in the Exchange Pricing process, will be tracked using the same logic employed for tracking Exchange Pricing items. There are no financial implications to Recoverable Item Tracking. The recoverable items reports displayed in Logistics Information Warehouse will take the place of the current Standard Army Retail Supply System overage reparable item list, providing the Army with one information source to manage the recoverable item turn-in process.

The Exchange Pricing program is expected to be fully functional in May 2009. If an Exchange Pricing item is issued and a similar unserviceable item is not returned within the DDP, an additional obligation adjustment will be created and processed to charge the customer the difference between the standard price and the exchange price value. No unserviceable turn-in credit will be granted for an exchange price-designated stock number. For a serviceable turn-in, SEPR credit originally granted can be reversed for a turn-in that is not matched to an issue within the DDP.

The Exchange Pricing processes will eventually migrate to the future Enterprise Resource Planning systems of the Global Combat Service Support-Army and the Logistics Modernization Program. Business rules and other information on Exchange Pricing are available on line at www.ssf.army.mil.

Army Logistician thanks Dawn LaFalce, Chief of the Transformation Integration Division, Army Materiel Command, at Fort Belvoir, Virginia, for her contribution to this news article.