SURVEY OF MILITARY SUPPLY MANAGEMENT AND SURPLUS PROPERTY DISPOSAL PRACTICES

TUESDAY, OCTOBER 13, 1953

HOUSE OF REPRESENTATIVES,

MILITARY OPERATIONS SUBCOMMITTEE OF THE

COMMITTEE ON GOVERNMENT OPERATIONS,

United States Naval Supply Depot,

Mechanicsburg, Pa.

The subcommittee met, pursuant to notice, at 11:10 a. m., at the United States Naval Supply Depot, Mechanicsburg, Pa., Hon. R. Walter Riehlman (chairman of the subcommittee) presiding.

Present: Hon. R. Walter Riehlman, chairman of the subcommittee, and Frank Ikard, member of the subcommittee.

Also present: Paul J. Cotter, chief counsel, Michael P. Balwan, staff director, and Robert T. Morris, staff member.

Present from the Mechanicsburg (Pa.) United States Naval Supply Depot: Rear Adm. A. A. Antrim, Supply Corps, United States Navy, commanding officer; Lt. Comdr. J. D'Amico, Supply Corps, United States Navy, surplus property disposal officers; and George Eurich, chief civilian employee, Surplus Property Disposal Section.

Present from the Ordnance Supply Office, Mechanicsburg (Pa.) United States Naval Supply Depot: Capt. L. H. Thomas, Supply Corps, United States Navy, commanding officer; and Lt. Comdr. J. F. Tynan, Supply Corps, United States Navy, assistant planning officer. Present from the Ships Parts Control Center: Mechanicsburg (Pa.) United States Naval Supply Depot: Capt. T. G. Reamy, United States Navy, commanding officer; and Comdr. J. D. Custer, Supply Corps, United States Navy, assistant planning officer.

Present from the Bureau of Supplies and Accounts; Department of the Navy; Washington, D. C.: Comdr. D. H. Lyness, Supply Corps, United States Navy, head, Stock Finance Branch, Inventory Control Division, Office of Assistant Chief for Supply Management.

Mr. RIEHLMAN (chairman of subcommittee). The subcommittee will be in order.

Admiral Antrim, will you call on the first one who is to make a presentation this morning.

Admiral ANTRIM. The first presentation will be on stratification. That is the name for the program analyzing the layers of our stock, and the presentation on that will be made by Commander Lyness.

(NOTE. Asterisks denote deletions of classified security information.)

475

STATEMENT OF COMDR. D. H. LYNESS, SUPPLY CORPS, UNITED STATES NAVY, HEAD, STOCK FINANCE BRANCH, INVENTORY CONTROL DIVISION, OFFICE OF ASSISTANT CHIEF FOR SUPPLY MANAGEMENT, BUREAU OF SUPPLIES AND ACCOUNTS, DEPARTMENT OF THE NAVY, WASHINGTON, D. C.

Commander LYNESS. As the admiral has indicated, we popularized a new word, "stratification." Actually, the objective is to layer our inventory, trying to show what it is composed of, and the end purpose for which we hold it.

It is basically similar to the problem that any industry has. The problem of doing it is not quite as simple as the objective, and that stems from the basic difference between the military supply system and any commercial supply system.

We have in the military two supply requirements. We first have to supply the operating forces at whatever level they now exist or is planned for the immediate future, but then we have to be ready for the big Christmas sale that will come in the event of mobilization.

We are trying to divide, for our own information, the inventory into segments. As Admiral Fox (former Chief of Naval Material) said, we have an inventory problem in the Navy. We have $13 billion worth of inventory, and annual sales of approximately $22 billion.

One of our own deficiencies has been that over the past few years we have not presented our picture either accurately or properly. We have gone before various budget hearings and before Congress with the tremendous bulk of inventory and a low sales ratio, and haven't looked too effective.

In the process of stratifying our own inventory, we think we can prove to our satisfaction that we are not quite as bad as we looked before. At the same time, we can identify areas where we have faults and take steps to correct them.

I have a chart on the problem area of mobilization. If you are going to stratify your inventory, you must find out what your top requirement is. We do not want to dispose of any material for which there may be a demand in mobilization.

Basically, in the Navy supply system we have two ways of projecting a mobilization demand.

For a lot of our material we can estimate a future demand much as a civilian organization can, in terms of past demand, for instance. I can mention, for example, clothing, provisions, fuel, and so forth. This is the method used by the General Stores Supply Office, and we have others that took as the basis for estimates of future demand the demand they obtained for their material subsequent to Korea, which is indicated by this line on the chart. They took the Navy strength and developed various indices of steaming hours, and so forth. They had that index for the same period, and the relationship was indicated or considered as 100. For instance, if it took 100 brooms to satisfy a Navy of this size or any other, the relationship was 100. You can see that there is a sharp increase in this chart, and these are 3-month periods.

Similarly, we can predict what the activity level and demand will be in mobilization. I am, unfortunately, not a mathematician, but I am told that if you have three elements of a formula you can predict the fourth. We have three elements here, the post-Korean expansion, the demand during that period, the plan for expansion and mobilization, and we can predict X, or the fourth, the estimated demand which would be generated by mobilization. We have a lot of other types of material which lend themselves to this type of projection.

In other cases they may have no current or recent demand, and yet have equipment in reserve fleets which have not been used in recent years but may be called in mobilization. The problem is to start first by predicting what is the top level of your requirement, and what will happen in mobilization.

Mr. COTTER. Do you say that that is based on post-Korea requirements?

Commander LYNESS. That is right.

Mr. COTTER. You did not use World War II experience at all.

Commander LYNESS. In some places, yes. Our thinking in the Navy is that the more current we can keep our prediction the better it will be.

Mr. COTTER. I am wondering whether your period is long enough for that other projection to extend it up as far as you want, and secondly, do you know how it compares with how it went up in World War II?

Commander LYNESS. We will be very frank. We in the Navy do not have, did not have in World War II, the type of centralized inventory control that we have now, and while we have certain information as to usage and issue during World War II, it is not anywhere nearly as accurate as we would like it to be.

Mr. COTTER. Is that graph translated into dollars?

Commander LYNESS. Yes, sir, in the first instance into actual item predictions. If you use so many items during a recent period you will use so many more items at the mobilization level, and then it is converted into dollars, and then we have a dollar prediction which I will go into in a moment.

Mr. BALWAN. The figures on this chart are indices, based on 100 percent?