The computation of military materiel requirements

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Content THE COMPUTATION OP MILITARY MATERIEL REQUIREMENTS by Harry Clarke Archer A Dissertation Presented to the FACULTY OF THE GRADUATE SCHOOL UNIVERSITY OP SOUTHERN CALIFORNIA In Partial Funlfillment of the Requirements for the Degree DOCTOR OF PHILOSOPHY (Economics) June 1955 UMI Number: DP23259 All rights reserved INFORMATION TO ALL USERS The quality of this reproduction is dependent upon the quality of the copy submitted. In the unlikely event that the author did not send a complete manuscript and there are missing pages, these will be noted. Also, if material had to be removed, a note will indicate the deletion. UMT Dissertation Publishing UMI DP23259 Published by ProQuest LLC (2014). Copyright in the Dissertation held by the Author. Microform Edition © ProQuest LLC. All rights reserved. This work is protected against unauthorized copying under Title 17, United States Code ProQuest ProQuest LLC. 789 East Eisenhower Parkway P.O. Box 1346 Ann Arbor, Ml 4 8 1 0 6 -1 3 4 6 ? K 0 E«i. 'SS A<‘11 This dissertation, w ritte n by H&r j^ . . .. G ia r .k f t .. Archer....... ..... .... under the direction of..hl&G uidance Comm ittee, and approved by a ll its members, has been p re sented to and accepted by the F a cu lty of the Graduate School, in p a rtia l fu lfillm e n t of re quirements fo r the degree of D O C T O R O F P H I L O S O P H Y Date. Dean n sr W ot > \ \ m j Guidance Comnir, Chairman TABLE OF CONTENTS CHAPTER PAGE I. THE PROBLEM OF MATERIEL REQUIREMENTS . . . 1 Statement of the problem ............... 2 Justification of the problem ........... 3 Effects upon society ................. 4 Defensive war....................... . 6 Non-military aspects ................. 9 Compensatory procurement ....... 11 The problem justified ................. 12 Plan of presentation................... 13 Body of the study..................... 14 Detailed analysis ..................... 15 Other chapters....................... 16 Method of procedure..................... 17 Interviews............................ 18 Empirical d a t a ....................... 19 Definition of terms..................... 20 II. REVIEW OF THE LITERATURE................. 23 Literature of the Industrial College . . 23 Typical lectures ..................... 24 Less specialized addresses ........... 27 iv CHAPTER PAGE Additional speech material ........... 29 Student reports ....................... 30 Specialized papers .... ........... 31 General student reports ............... 33 Faculty publications . ............. 35 Other military schools ............... 37 Non-military contributions ............. 37 Causes of earlier disinterest ........ 38 Treatises considering requirements . . 39 Similar treatment of requirements . . . 41 Typical treatment of requirements . . . 43 The Requirements Survey . ............. 45 Scope of the survey................... 46 Current and mobilization planning . . . 47 Organization and workload ............. 48 Learned journals and dissertations . . . 49 III. THE REQUIREMENTS PROCESS................. 52 Planning at the national level ..... 53 Role of the NSC....................... 53 Execution of national policies .... 55 Planning by the Joint Chiefs of Staff . . 56 Composition of the p l a n s ............. 59 , Problems created by assumptions .... 59; V CHAPTER PAGE Assumptions in the mobilization plan . 6l Feasibility testing ........... .... 62 Planning at the Army l e v e l ...... 63 The Army p l a n s ................ 64 Translation of plans into programs . . 66 The impact of programs on requirements 69 Other effects of location...... 70 Impact of mobilization planning .... J1 Conclusions regarding planning .... 73 The requirements process ............... 75 The ingredients of requirements .... 75 Initial issue ............... ..... 76 Replenishment . ............... 77 Stock levels and pipeline...... 79 Special projects ..................... 8l Mobilization reserves ................. 82 Computation of net requirements .... 84 Procurement....................... 85 Purpose of examining procurement . . . 85 The budget c y c l e.............. 86 Supply control studies ............... 88 Conclusions on the budget cycle .... 90 Effects of procurement upon requirements 93 vi CHAPTER PAGE IV. REQUIREMENTS FOR INITIAL ISSUE ........... 96 General principles on initial Issues . . 97 Technique of computing initial issue . 98 Authorization documents ............... 99 Modifying documents ................... 100 Difficulties arising from TO&E's .... 102 Revision of TO&E's............... 102 Discretionary allowances ............. 104 Difficulties arising from T/A's ..... 106 Lack of precision in T / A ' s...... 107 Other problems with T/A's........ 108 Other difficulties................. 109 The troop l i s t ................... 110 Logistics policies and priorities . . . 112 Additional considerations ............. 115 V. REQUIREMENTS FOR REPLENISHMENT .......... 117 General principles ..................... 118 Applying the straight line method .... 121 ■ Assumptions regarding assets ........ 122 Problems of types and models.... 124- Determining the replacement factor . . 126 Future validity of experience data . . 128 The actuarial method ................. 130 vii' CHAPTER PAGE Lack of d a t a .......................... 130 Accuracy of the actuarial method . . . 131 Major objections..................... 133 Other methods............................ 137 Function of use........................ 137 Planned service l i f e ................. 140 Additional problems ..................... 141 Adequacy of guidance ................. 143 More assumptions..................... 144 Conclusion ....................... 147 VI. SPECIAL PROJECTS.......................... 149 Computation of Class IV needs ........... 151 Strategic logistic studies ......... . 152 Technical service annexes ............. 153 Conversion to T/A's................... 154 Problems connected with Class IV .... 156 < \ Time-phasing................. 156 Assumptions and guidance ............. 157 VII. PIPELINE REQUIREMENTS..................... 160 introduction ............................ 160 General principles . . . .......... 161 How computed.......................... 162 ! Effects of inadequate guidance ..... 165 viii CHAPTER PAGE The troop l i s t ....................... 166 Duration of combat................... 167 Other considerations................... 168 Automatic issue ....................... 170 Computation of factors ............... 171 VIII. MOBILIZATION RESERVE MATERIEL REQUIREMENT . 174 Composition of the MRMR................. 175 Items to be stocked................... 175 Modernization .......................... 176 Perishability .......................... 177 Quantities to be stocked............... 178 Present methods....................... 179 Production lead t i m e ................. 181 Floating M-Day ............ 182 Problems................................ 185 Programming............................ 185 Guidance....................... 188 Urgency of requirements studies .... 191 Conclusion............................ 192 IX. CONVERSION TO NET REQUIREMENTS.......... 196 Influence of receipts ................... 196 Receipts from repair................. 197 Receipts from production ............. 199 CHAPTER PAGE Influence of demands ................... 200 Discretionary and special allowances . 201 Replenishment .......................... 202 Other considerations................... 203 Distribution of assets ............... 203 Miscellaneous .......................... 204 X. ECONOMIC IMPLICATIONS..................... 207 Criteria............................. . . 208 Maximizing utility . . ............... 209 Basis for judgment ........... 210 The minimum needs..................... 214 Other possible approaches ............. 214 Economic advantages ..................... 215 "Peaking" production ................. 216 Other favorable features ............. 218 Balanced f o r c e ....................... 219 Economic disadvantages . ............. 221 Excessive detail ..................... 222 Techniques involved ................... 224 Counter-cyclical potentialities .... 224 Lack of realism....................... 226 Findings................................ 229 X CHAPTER PAGE XI. ALTERNATIVE APPROACHES ............. 231 Summation methods ....................... 234 Basic principles..................... 234 Electronic computors ................. 236 Speed of operation................... 238 Other versatile characteristics .... 239 Findings on'computers ................. 240 Graphic method .......................... 241 Graphic theory............ 242 Curve characteristics................. 244 Effectiveness .......................... 246 Advantages..................... 247 Disadvantages .......................... 248 Conclusion............................ 250 Division slice method ................... 250 Development of the s l i c e ............. 251 Use of the s l i c e ..................... 253 Advantages of the slice method .... 254 Disadvantages.......... 255 Other approximation methods ............. 257 Empirical formula.......... 258 Statistical method ........... .... 259 Survey or sampling method ............. 261 xi CHAPTER PAGE Estimate method ....................... 262 Control method............ 263 Advantages of approximations ......... 265 Disadvantages of approximations .... 266 Feasibility testing ..................... 268 General theory ........................ 269 Method......................... 270 Effectiveness of implications testing . 272 Selected year method................... 273 Conclusion......................... 275 XII. COUNTER-CYCLICAL CONSIDERATIONS ...... 277 Introduction ............................ 278 Historic practice ..................... 279 Basis for comparison................. 281 Weak relationship............ 282 , Possibility of counter-cyclical phasing . 283 Versatility of military needs ........ 286 Time phasing.......................... 287 Other demands.......................... 288 Authenticity of needs ................. 289 The cycle of innovation............... 291 The deciding authority ............... 293 Economic desirability ................... 295 xii CHAPTER PAGE The level of employment.................. 296 General opinion .......................... 298 Other desirable features ................ 300 Economic and military disadvantages . . . 303 The state of readiness.................. 303 Impact on the production base........... 305 Conclusion .......................... 307 Unit c o s t s ............................... 307 Social c o s t s ■ . 308 Summary............ ...................... 309 XIII. CONCLUSION................................... 313 Accuracy and facility ...................... 314 Accuracy................................. 314 | 1 Facility................................. 316 Need for alternate methods............. 317 . Possibility of understatements........... 319' Foreign aid............................... 320 Shipping losses.......................... 321 , Bomb damage............................... 322 , Impact of political decisions ............. 324, Lines of authority ........... 325 , Position of the Chief of Staff .... 325 ' Proposed policy change .................. 328 xiii CHAPTER PAGE Other considerations...................... 330 Penalties of overstatements .............. 330 Counter-cyclical phasing ................ 332 Academic attention...................... 33^- i Recommendations .......................... 336 BIBLIOGRAPHY ......................................... 339 LIST OP FIGURES FIGURE PAGE 1. Interrelationship of Plans ................ 58 2. The Planning and Budget C y c l e........... 87 3# Neutralizing Relationship of Mear-out and Accident Loss Curves................... 136 4. Determination of Size of Mobilization Reserve Materiel Requirement ■:......... 183 CHAPTER I THE PROBLEM OF MATERIEL REQUIREMENTS The second World War generated broad academic and political interest in the problems of industrial mobiliza tion. The techniques of procurement and manpower utiliza tion received widespread attention as did the intricacies of maintaining a stable domestic economy. In fact, practically every aspect of modern war economies has been subjected to searching scrutiny. The only significant omission from this general rule has been the problem of computing the military requirements for an intensive war effort. There are no theoretical nor prac tical grounds to justify this neglect. Nevertheless, both scholars and military writers have habitually regarded the bill of requirements as datum that need not be questioned. It would be--or should be— less surprising if all treatises on mobilization began with an analysis of the method by which military requirements are computed. The success of a nation at war depends upon many things and not the least of these is the ability of the military planners to know exactly what is needed and when it will 2 be needed. The entire process of equipping a modern army must begin with such a time-phased statement of all materiel requirements. I. STATEMENT OF THE PROBLEM This study has several distinct but related pur poses. First, an attempt will be made to present a criti cal analysis of the Army's present method of computing requirements for end items. There is, of course, a pre sumption that the current method represents a workable solution to the problem and hence that method is the best point of departure for further research into the subject. Second, an effort will be made to discover or evolve different and perhaps better methods of arriving at the sum of military requirements. Here the criteria as to the superiority of one method over another will be ac curacy and facility. Third, the economic implications of the various techniques will be assessed. This sequence of steps should permit realization of the ultimate purpose of this study--determination of the process which will best meet the needs of the military while minimizing the impact of defense requirements upon the economy. II. JUSTIFICATION OF THE PROBLEM It may be objected that computation of military needs is not, in fact, a study in economics. It could be . pointed out that this process is largely independent of the forces of the marketplace and hence the normal eco nomic considerations are not brought to bear upon this l I allocation. However, economics is, in its broadest sense,! the study of the means by which scarce resources are alio-: cated among their several possible end uses. While it is true that the area under study does not give primary consideration to the forces which operate in a free economy, it is, nonetheless, a system by which a significantly large portion of the nation's resources is allocated. Not only does this technique allot resources between their many possible uses within the military, but ■ it also greatly affects the allocation between the civil ian and military needs. Thus, even if there were no ; 1 further economic implications than this allocation phe- j nomenon, the present problem would be justified as a study in economics. | However, the significance of this subject does not j rest solely on the point that a vital allocation process j is involved. While that process is of primary importance | (and will receive greatest attention), there also is the question of the time-phasing of requirements in relation to the business cycle. The economic stability of the nation can be affected greatly by the readiness with which military expenditures can be adapted to compensatory ; spending policies. i The detailed justification of this problem rests, i i then, on the economic importance of assuring that each re i ; source is used! in an optimum manner and upon the over-all ' effect upon the economy of military demands. These points . will be discussed separately below. | Effects upon Society It is not sufficient merely to demonstrate that i i economic phenomena are involved in a problem. The justi- 1 fication also must show that the economic issue is of ; substantial consequence to society. In the present case, it is felt that the implica- i tions of the problem are considerably more far reaching I than many other issues that are deemed appropriate for economic analysis. For example, the allocation of fixed costs in multi-purpose dams is considered to be quite fitting for scholarly research. The same is true of the regulation of transportation industries and the management of investment portfolios. This writer agrees that the above subjects and many i other specialized fields are entirely appropriate for economic study. Yet, on the whole, they tend to concern fewer resources and to have a less profound impact upon , society than the analysis of demand for war and defense ' readiness. The problem of military requirements is in creasing steadily in both its economic importance and its significance to society in general. A study of prior major wars will indicate that each successive conflict tends to place progressively | greater demands upon the resources of the warring nation. World War II was the ultimate example of this tendency ; for the United States, yet it cannot be said that the optimum war use was achieved for American material re sources even then. However, research and development in , the past decade suggests that any future war will place I the most extreme demands upon the American economy. In such circumstances, It would be imperative that each resource be devoted to its ideal wartime use. There i would be no room for precautionary over-statement of military needs. Each stockpile built up to allow for margin-of-error, safety factors and such contingencies r ; would mean denying the nation some other needed asset. Only the most scrupulous statement of requirements can achieve the optimum allocation of resources. Unfortunately, it is not enough merely to imbue each technical service of the Army with a spirit of con scientious honesty. Even with the best of will and inten tion, the personnel computing requirements cannot produce a balanced bill of goods unless the techniques and organi zation lend themselves to that end. A very wide variety of errors can be generated unless the proper management tools are available and such imbalances could well mean the difference between victory and defeat. Not only are simple overages and shortages possible, but there is the question of the proper distribution of the materiel geographically and over various periods of time. Assets in one theater of war cannot be applied readily in time of war against the requirements of another theater. Similarly, late delivery of weapons for a given operation may jeopardize the enterprise and create sur pluses, while premature delivery creates unnecessary storage and maintenance problems. Defensive Mar Logistical planning for an aggressive war is a formidable task, but it is nothing as compared with the difficulties of computing requirements for a defensive war. 7 The aggressor has the choice of enemy, time and place while the defender has none of these choices. The in herent advantage of attacking, aside from the element of surprise, is in the field of economic mobilization. The aggressive nation knows exactly when to freeze design and go into mass production; it knows the date by which each production line should reach maximum output; it knows the date for achieving complete and balanced mobilization reserves. Despite these advantages of initiating a war, it appears most unlikely that the United States will do so. The moral character of Americans would not permit such a solution to the nation's security problems. Being committed, then, to a defensive war, the na tion must possess a dynamic mobilization plan capable of being implemented at any time. Historically, the military has tended to meet this problem by endeavoring to stock pile huge quantities of munitions against the day of need. This- is a most unsatisfactory solution in that the pur chase of these materiel reserves places a severe strain upon the economy. At the same time, the stocks are costly to store and they start to deteriorate and become obsolete immediately. Vastly superior, both economically and militarily, 8 i is the current Army theory. An effort is now heing made to keep stock-piles at a minimum while placing great em phasis on building up the nation's ability to redirect production quickly in times of emergency. This practice possesses many advantages, but it makes logistical planning 1 tremendously complicated. Those responsible for the com- ' putation of requirements must keep in mind the constantly |changing industrial capacity of the nation. 1 It would appear, then, that sound planning for a defensive war is a most complex and difficult operation. . It also seems evident that the success of the logistical plan will depend upon there being an efficient and highly adaptable means of determining military needs. Such ; being the case, an academic analysis of the process may make a contribution to the body of economic knowledge. In addition to the mobilization materiel require- i ments, there are the problems of computing the needs for , peacetime military operations. The latter requirements ’ i : are of twofold importance. First, they permit the Army . to carry out its currently assigned missions and, second, ! : * these statements of current needs are the basis for equip- ' j ping the Army up to the level that is believed necessary ; ' upon the outbreak of any future war. These demands do not approach the magnitude of ; those that occur in wartime. However, it should be noted that, in periods of international tension or during "small wars, the current requirements of the military can consti tute a very significant portion of the gross national product. The accuracy with which these requirements are computed will bear very directly upon the efficiency with which the nation’s resources are allocated. Non-military Aspects Aside from the military necessity of obtaining accurate statements of requirements, the same end is highly desirable from a purely economic standpoint. There is, of course, an inherent conflict between the military and economic objectives of national policy. The latter objectives are concerned with securing a high and stable standard of living. Any resource or energy devoted to defense is necessarily diverted from some potential use in the civilian economy. It follows, therefore, that any over statement of military needs results in a futile diversion. Despite this incompatibility of military and eco nomic objectives, it may be said that the two are recon ciled if the meeting of Army needs interferes as little as possible with civilian programs. The military has become increasingly aware of the need for a strong economy in a major war and no longer takes the fulfillment of every wartime need as a matter of course. The importance of requirements in this struggle between civil and mili- i ' tary needs was stressed by Roger M. Kyes shortly after j taking office as Deputy Secretary of Defense. He said: t; | Unrealistic requirements, poor planning and ! inefficient execution all combined with the short | span of time to cause waste of money, poor utili- ; zation of manpower, unnecessary drain of materials from the civilian economy, and the inefficient use | of tools, equipment and facilities.! There is, unfortunately, as implied in the above ; statement, a strong tendency to inflate military needs. ■ Every echelon feels a compelling need for a "cushion" or safety factor and these factors tend to grow in geometric rather than arithmetic proportions. Only the most effi cient techniques and the closest review can overcome this unnecessary drain upon the economy. Thus, quite apart from the military importance of | requirements computations, this subject is of consider able economic significance. Roger M. Kyes, "A Positive Approach to Peace," . speech before the United.States Chamber of Commerce, Washington, D.C., April 27, 1953* Compensatory Procurement The economic justification of this problem thus I far has been based upon the assumption that accurate state- j ments of military needs can minimize the harm done to the j civilian economy. However, the student should not over- ( : i j look the possibility that the phasing of service needs could be so arranged as to be a stimulus to the economy j in times of recession. It is not the intent of this study j ! to argue the merits of public investment theories, but it I ; ■ I seems proper to inquire whether the time-phasing of mili tary requirements could and should be arranged in a counter-cyclical manner. ! Certainly, military procurement affects a very { ; broad cross-section of American industry and such procure-| ment reaches the heavy and basic industries in a most ' direct manner. Such being the case, the synchronizing of ' military requirements with the troughs in the business cycle, if possible, would serve as a decided stimulus to the depressed economy. I In short, it appears desirable to assess the various means by which the basic conflict between military and civilian requirements might be reduced. Further, it is possible that the business cycle might be one of the in- * gredients considered in phasing Army requirements over * 1 i i various time periods. If such a course is practical, the conflict may, at times, be changed to a condition of ; near-harmony. I i i I The Problem Justified , i ! Prom the above discussion, it may be concluded ; that the computation of requirements is properly a part | of demand theory. It has a prominent (if not a dominat- | ing) role in the allocation of resources between civilian i and military needs and, within the military, it is the l decisive factor in determining how those resources are to be shared among their several end uses. Thus, the accuracy with which this economic process ; is accomplished determines whether or not a substantial ; portion of the factors of production are being used in an optimum manner. Further, the time phasing of the statement of requirements can contribute to or detract from the stability of the economy. Lastly, and far from incidental ly, the success or failure of the nation in solving this : economic problem may well determine the security of this country. While this subject thus appears to be established as a valid field of inquiry in economics, that fact, alone, does not make it suitable for a study of this ; 13 : nature. It would be a completely inappropriate subject if, for example, it had received such widespread attention from highly competent economists that there was little chance for the student to make any original contribution. Such is not the case in the present instance. As will be brought out in the following chapter, very little academic attention has been focused on this subject. Hence, the computation of Army requirements appears to be an entirely suitable and commendable subject for a treatise such as , this. III. PLAN OP PRESENTATION While it has been stated that scant academic atten- ; tion has been given to this subject, it does not follow j that there is no body of literature dealing with this problem. The subject is included in the curriculum of all . ( 2 the senior military schools and particular stress is j placed upon it at the Industrial College of the Armed Forces. There is, therefore, a small group of unpublished i i I studies and lectures which is available to the student. ; The second chapter of this paper will consist largely - Reference is made here to the Army War College, the National War College and the Industrial College of the Armed Forces. 14 ! of a review of this military literature. The remainder of the chapter will present references to the subject con tained in academic works. Unfortunately, the latter ref erences will serve largely to emphasize the neglect of i this subject by non-military scholars. , i Presentation of the review of this literature will j I not be in such detail as to constitute, in itself, a sum- I , ! i mary of the present techniques of computation. Instead, 1 major works will be reviewed with the purpose of present ing the scope of each study, its prime contribution or contributions, and the approach to the problem that was used. | Body of the Study i The first and second chapters are here considered i as introductory passages. The body of the report will ; open with a somewhat detailed description of the process I I by which gross Army requirements are currently computed. Particular importance is attached to this chapter despite i , the fact that it will be repetitive of some of the materi- : al appearing in other chapters. Its main purpose will be ■ ; to acquaint the reader with present practice so that he will have some perspective for the later critical and ; more detailed analysis. Any appreciation of the parts of I this process would be impossible without having the entire ; 15 theory presented briefly. i I The general descriptive chapter will trace the , generation of ...requirements from its inception in the Na- i | tional Security Council to the point where a procurement i action is initiated. It is here, for the first time in ; this study, that an effort will be made to be critical. i This criticism will be centered on the planning and budget cycles in that those steps will not be considered in de- ! tail in later chapters of this study. Detailed Analysis Succeeding chapters will consider the theory and practice of computing the various ingredients that go to make up gross requirements. Individual chapters will be I I devoted to initial issues of equipment, replacement fac- 1 tors, stock level and pipeline requirements, special , projects and mobilization reserves. These discussions, which will be as much critical as descriptive, will be followed by a brief ehapter de scribing the method by which gross requirements are re duced to net demands. The criteria for judgment, up to this point, will be accuracy and facility. With those criteria in mind, an effort will be made to bring to light the conditions which contribute to errors and cumbersome i i !procedures. 16 In discussing a subject of this nature, there is a tendency for the student to become lost in the labyrinth of mechanics, mathematics and blank forms. A distinct effort will be made here to avoid this pitfall which re duces an academic study to the level of an instruction manual. While detail must be included for illustrative purposes, the general contents will be confined to broad principles and theory. Other Chapters A separate chapter wil-l be devoted at this point to summarizing the net economic effect upon the economy, of the present Army practices. It is-hoped that such an intermediate summary will lay the groundwork for the dis cussion that will follow concerning the merits of alter nate theories and practices. The early chapters, it will be recalled, are to be confined to the current Army method. However, any effort to suggest improvements would be less than satisfactory if no examination were made of different , methods which have met the test of experience. Similarly, the literature on this subject contains occasional sugges tions of novel and untried techniques. A brief effort, therefore, will be made to survey these alternatives in i order that the findings may have the benefit of the j 17 thoughts of others who have considered these problems. The following chapter will examine the possibilities of reducing the conflict between military and economic 3 objectives of this society. It was suggested earlier that the wise time phasing of requirements might greatly reduce this friction without substantially lessening the nation's defense readiness. A concluding chapter will summarize the preceding passages. Jkny shortcomings of present theory and practice will be stressed here with particular emphasis on the prob lems created by artificial assumptions, the counter cyclical potentialities of this subject, and the use of cumbersome and time-consuming techniques which do not contribute substantially to accuracy. Finally, an effort will be made to suggest an approach which might be worthy of further study as a means of eliminating the difficulties encountered. IV. METHOD OF PROCEDURE i In view of the dearth of academic material on the subject of this dissertation, it was necessary to under take some original research. This research was not of the 3 Cf. ante, p. 11. clinical or experimental nature as much of the material does not lend itself to mathematical or inductive proof. : Interviews | Instead, wide resort was made to the judgment and j opinion of those military and civilian officials who I possess "broad experience in this field. An effort was ! made to gain the benefit of the thinking of people at all | levels. To do so, meetings were held with the Assistant i 1 Secretary of Defense (Supply and Logistics) and with members of his staff. Still at the Defense Department ' level, appropriate officers working with the Joint Chiefs of Staff were interviewed. ! Within the Army, very wide use was made of the 1 opinions of the Under Secretary, who was responsible for logistical matters, and the Chief of the Requirements ; Branch of the Under Secretary's office. At the General Staff level, considerable assistance was received from the Requirements Division under the Deputy Chief of Staff, Logistics. Finally, consultations were held with the personnel of the several technical services of the Army where the actual computation is initiated. This approach, even when combined with reference to the literature on the subject, still leaves much to be de sired. Both the reader and the student are left with the 19 uncomfortable feeling that proof of the findings is lack ing. Unfortunately, much of the critical part of this study does not allow scientific treatment. The only actual proof of the conclusions would require large-scale experimentation and much historical data under controlled conditions for comparisons. As such data are lacking, the merits of this paper must be based largely upon the reasonableness of the conclusions. Empirical Data The literature and consultations on this subject were supplemented by empirical data. This writer spent two months in the Office of the Chief of Transportation computing the requirements for Army aircraft. The major ity of this period was devoted to the problems of initial issues and replacement factors. That assignment was followed by two years of duty as Military Assistant to the Assistant and then the Under Secretary of the Army who, at this time, had responsibil ity for all procurement matters including the statement of all Army materiel requirements. These two assignments permitted some personal judg ment as to the reasonableness of the conclusions. As was mentioned immediately above, the element of judgment is considered to be of particular importance in a study of _ | 20 ! . I this nature. , It is also considered highly desirable to observe the process of computation at different levels ; in the Army organization as was done in this case. ! 4 ] V. DEFINITION OF TERMS i The vast majority of terms employed in this paper i j are self-explanatory and require no definition here. ! However, in some instances the Army has ascribed some i i special meaning to a word or phrase and, in other cases, this writer has done the same for the purpose of brevity or convenience. These terms are: Class IV supplies: Material required for a special I operational or logistical project. Consumption: The using up of expendible supplies. End item: A Final combination of components and parts which is ready for its intended use. Feasibility testing: The examination of require- 1 ments to determine if the nation is capable of fulfilling them. ■ - G-4: Office of the Assistant Chief of Staff, G-4, : Ij * Resort was made to the following publications in . ; defining terms: Department of the Army, Dictionary of ; 1 United States Army Terms (Washington, D.C.: U.S. Govern- i . ment Printing Office, 1953); Department of Defense, Economic Mobilization Studies, Requirements (Washington, | D.C.: Industrial College of the Armed Forces, 1952). i Army General Staff. This office, which is in charge of logistical activities, has been redesignated as the Office of the Deputy Chief of Staff, Logistics. Implications testing: The examination of require ments to determine what demands their fulfillment would place upon the nation, both militarily and economically. Initial issue: The provision of non-expendable equipment not previously issued to the receiving unit or individual. M-Day: The day when mobilization is started. This may differ from or coincide with D-Day, the day when hostilities commence. Pipeline requirements: The materiel needed to be in transit or in depot stocks in order to assure continu ity of supply. Procurement secretary: The member of the Army secretariat responsible for procurement. In the past, this function was performed at different times by the Under Secretary or by an Assistant Secretary and hence the use of this term is frequently convenient. Production lead time: The time elapsing between the initiation of a procurement action and the receipt of the materiel procured. Replacement: The resupply of non-expendible 22 materiel. Replacement factor: A number, expressed as a decimal which, when multiplied by the quantity of the item in use, gives the replacement needs during a given time period. Replenishment: The generic term covering both con sumption and replacement. Requirement: The need for specific quantities of personnel, materiel and services for specific periods of time. Mobilization Reserve Materiel Requirement: The quantity of materiel required to be stocked to support the mobilization plan until acquisitions after M-Day are ample. Technical Service: One of the seven branches of the Army supplying equipment and related services, such as Ordnance and Quartermaster. CHAPTER II REVIEW OP THE LITERATURE As was suggested earlier in this paper, the subject ; under study has been neglected by those writers concerned j with the problems of industrial mobilization. The only ] ! substantial exceptions to this general rule are the fac- I ; ulty and students of the Industrial College of the Armed Forces. Of necessity, then, the major part of this chap ter must be devoted to the lectures and reports of that ; College. ! I. LITERATURE OP THE INDUSTRIAL COLLEGE A distinct portion of the curriculum of the Indus trial College is given over to the problems of computing i military requirements. As a result, there are three types of publications on requirements available to the ! student. The first of these is the series of lectures ! . given by military and civilian authorities. These lectures are not repetitive for any one class. In fact, a considerable effort is made to avoid duplication from year to year. The more outstanding of these addresses are reproduced and are available to suc ceeding classes. As a result of this practice, lectures on requirements tend to explore the more specialized facets of that field without any substantial effort being made to cover the broader aspects of the problems. As will be pointed out later,1 this deficiency in the lec tures is overcome by other aspects of the curriculum. Typical Lectures In order to give some idea as to the scope of these addresses, a few have been singled out to illustrate their specialized nature. The first of these is a talk dealing with the influence of item characteristics on the 2 determination of requirements. In this paper, General Montgomery divided all characteristics under the headings of physical, usage, and productibility properties. Under the heading of physical characteristics, the general pointed out that a white parka is of limited use in that it can be utilized only by troops in snow. If, however, that parka is reversible with white and green 1 ££* post, p. 3^* 2 Brigadier General Edward Montgomery, "Influence of Item Characteristics on Requirements Determination (Army)" (speech before the Industrial College of the Armed Forces, Washington, D.C., November 15, 19^8). 25 faces, the requirement might well be army-wide. Thus, the addition or deletion of just one physical characteris tic might make the difference between an item with limited usefulness or one with broad acceptability. Usage characteristics are best illustrated by reference to replacement - factors. Obviously, the more durable an item is, the less frequently it will be in need of replacement. The lower replacement factor, in turn, makes’for a lower requirement over a period of time. * Produetibility characteristics enter the require ments picture when the need for reserve stocks is consid ered. If an item is easily produced, there is a less urgent need to stockpile it, the assumption being made that production can catch up with emergency demands at an early date. Throughout his talk, the general emphasized that careful design could greatly reduce total military re quirements. He also stressed the fact that total require ments would be lessened if commanders asked for equipment possessing only the minimum characteristics necessary for the task at hand. For example, there would be little use in having a parachute capable of making one hundred drops if it is to be used only once. This address, then, made : ' a substantial contribution to the thought in this field in that it focused attention on issues other than the mechanics of computation and addition. , The present Under Secretary of the Army, John < 3 j Slezak, also has addressed the Industrial College. In | | his talk he outlined many of the problems faced by indus trialists in meeting military requirements. While he did not confine himself to the impact of these problems upon army needs, he did go into that subject to a considerable i i ' extent. At one point he stated: i My survey indicates that the question of re- ; quirements was one of the very important problems ! that troubled industry. Said one of the manufac- i turers, perhaps slightly exaggerating: i j "In the morning you were told to produce i 1,000,000 of certain fuzes; in the afternoon you 1 were told to double it, and perhaps the next day, j in the morning, you were told that.these were not needed at all and to cancel them."4 i j Many other manufacturers who were questioned by ) i Mr. Slezak also singled out "unrealistic requirements" as 1 the problem most in need of attention. Largely as a re- i suit of these opinions, the speaker added: 3 Colonel John Slezak, "Problems Confronting Indus- , try in Planning for War Production" (speech before the i Industrial College of the Armed Forces, Washington, B.C., ■ March 4, 1949). 4 1 Loc. cit. 27 ! . . . If we had unlimited resources of men and materials, this type of situation would be foolish and in time of war would be of relatively small importance; but with our limited resources, un realistic requirements are not only wasteful but can cause tragic consequences.5 ! Less Specialized Addresses s I While many of the speakers devoted their attention I to some specialized facet of requirements, there were others who considered the broad aspects of the problem. I One of these was Brigadier General Hinrichs of the Office 6 of the Chief of Ordnance. In his discussion, he traced ; the entire process of developing a statement of require- j ments. He considered the influence of initial issues, ! replacement factors, stock levels and reserve needs and ; pointed out the difficulty of obtaining accuracy in many 1 of these areas. However, no detailed description of his ! address will be given here as later chapters will be de- i i 1 voted to those specific subjects. t j ! However, it was believed desirable to mention General Hinrichs' lecture in order to show that general, Loc. cit. Brigadier General John H. Hinrichs, "Computation 1 of Military Requirements" (speech before the Industrial College of the Armed Forces, Washington, D.C., December 9, 1953). ■ ’ 28 broad discussions are available to the student. In addi tion, the general, in his introductory passages, brought up a problem that has been neglected by many of those writing or speaking in this field. This problem is the distinction between a "requirement" and a "budget esti mate." In this connection, the general stated: The point I want to make is that a requirement . . . is what we say we need in order to do an assigned job. It is not dependent on a budget; it is not dependent on the political climate; it is not dependent on anything except the troop bases and the mission that we have been given to do.7 The difficulty arises from the fact that the Army, in presenting its request for funds, often must consider things other than the true net requirements. Before World War II, political considerations and the desire for economy far outweighed the realities of the world situation. Hence, the executive branch of the government, in drawing up the budget, paid more attention to what Congress might be willing to appropriate than to the real defense needs of the country. This conflict between the true bill of needs and the requirements as stated in the budget is thus properly emphasized by General Hinrichs. It will be discussed Loc. cit. 29 : 8 further at a later point in this paper. Another of the less specialized lectures was | given by Brigadier General Booth who spoke on the part ; 9 j played by planning in determining requirements. As sug- i i gested earlier, the assigned mission of the Army and the | i method of accomplishing that mission constitute the basis for arriving at the needs of the Army. General Booth, j then, described the origin of the war plans and the method! by which these plans are translated into requirements. Additional Speeeh Material The war colleges of the three services and the National Mar College all include similar lectures in their curricula. In general, these other schools devote less attention to the subject of requirements due to the less i specialized nature of their courses. The address by ! Brigadier General Cotulla at the Army War College is 10 i typical of those to be found in this category. , ----------g---------- Cf. post, pp. 86 et^ sqq. 9 Brigadier General Donald P. Booth, "The Role of . JCS in the Generation of Material Requirements" (speech ; before the Industrial College of the Armed Forces, ! Washington, D.C., October 13, 19^8). I 10 Brigadier General Louis E. Cotulla, Determina- ; tion of Requirements in the Department of the Army"(speech' j before the Army War College, Carlisle, Pennsylvania, ! ■ ■ November 19, 1952). ! No attempt has been made here to cover the entire scope of the lectures on this subject which are available i to the student, in the first place, any detailed discus- f i j sion would duplicate, in part, the contents of succeeding j chapters. In the second place, the lectures do hot con- I stitute the major source of material on this subject. Hence, it was deemed sufficient to indicate here the gen eral types of lectures and to cite appropriate examples. I j Other speeches used in the preparation of this paper are ! ; included in the bibliography. Student Reports i t i Every student at the Industrial College is assigned 1 ! i to a committee during his course. The various committees I ■ thus formed are assigned research projects. At least one I committee per course is assigned a subject dealing with i ! the determination of materiel requirements. The resulting i ' reports are quite valuable for two reasons. In the first I ' place, the reports constitute a synthesis of opinions i held by senior officers from each of the armed forces. They are, to varying degrees, familiar with the advantages : and shortcomings of Army, Navy, and Air Force techniques. In addition, these officers are drawn largely from : the technical services and bureaus of the armed forces and hence the majority of them tend to be more familiar 1 than the average officer with the logistical activities. • Lastly, the officers attending the Industrial College are selected from among the most outstanding officers of the services. They are all considered to be potential , general or flag officer material. Hence, their findings I tend to reflect seasoned thought and good judgment. I The second advantage of these reports is derived ; I from the extensive bibliography appended to each. Every effort is made by the students to become familiar with j the literature on this subject during the research phase 1 and the resulting bibliographies are among the most com- i plete that are available on this subject. j The actual subjects covered by the student reports ' i . | are quite similar to those found in the lectures. Some are broad and general in their treatment while others i I deal with some one specialized facet of the problem. ; Specialized Papers ; i A typical example of the reports of limited scope ' i j . is to be found in the paper submitted on requirements I 11 : during the 1948-1949 academic year. The committee i 11 Capt. P. K. Loomis, U.S.N., et al.,The Effect . • of Concurrent Planning on the Determination of Requirements "(Washington, D.C.: Industrial College of the Armed Forces; ■ 1948). ; devoted its attention to the time-consuming processes that have been typical of the requirements cycle. Earlier techniques had called for an orderly series of steps, each one contingent upon its predecessor. Briefly, the national strategic plan would be drawn up which would determine the mission of the three services. The materiel needed to accomplish that mission would then be computed by the services and the resulting bills of goods would be sent to the Joint Chiefs of Staff. There, a test would be made to determine the logistical feasibility of the plan. The strategic plan was then revised in the light of these tests and the requirements were next recomputed on the basis of the revised plan. The committee pointed out that this was a very time-consuming process and it prevented strategic plans from being rapidly adaptable to changing world conditions. To overcome this difficulty, the technique of concurrent planning was developed. This method provided for limited feasibility testing at an early stage in the requirements cycle in order that major errors in the plan could be eliminated before the detailed requirements were computed. While the committee report did not question the accuracy of stated requirements, it did examine the equal ly important aspect of the facility of the methods. The 33 : ' committee noted that success in modern warfare depends in part upon how current are the hasic plans and statements of requirements. Even the most accurate bill of needs i i becomes worthless as soon as it is outdated. Hence, the speed with which a plan can be translated into require ments is a pertinent subject to the Industrial College : and to this study. Another example of the reports of restricted scope 12 was issued the following year. In this paper, the com mittee examined the methods by which requirements could 13 be checked for feasibility. Still another studied the organizations involved in the determination of materiel needs. General Student Reports ! A large number of the reports submitted by student ; committees examined the entire process in some detail. | An outstanding example of this type of study is that sub- 14 mitted by a committee in the 1947-1948 academic year. 12 col. Chester G. Martz, et al., Feasibility Tests ' and Checks of Material Requirements X^asJ:iinS'ton, B.C.: Industrial College of the Armed Forces, 1949)* ; 13 Col. W. A. Steiner, e_t al., Organization for the J Determination of Material Requirement¥~under the NaljTTonal , Security Act of 1947 (Washington, D.C.: IndustrialCollege1 ! of the Armed Forces, 1948). ! ^ Col. J. W. Holsinger, et al., Determination of : Requirements (Washington, D.C.: Industrial” College of the Armed Forces, 1947).___ This particular report and a similar one the following : 15 year warrant special attention because of the competent | examination of alternative methods of computing require- I ; raents. It is generally believed by many authorities that present methods of arriving at future needs attempt to reach a mathematically exact figure, even though the basic ; data are somewhat speculative. If mathematical precision is thus impossible due to the number of assumptions in volved, it is desirable to examine the approximation methods of computing requirements. These methods are more readily applied'and some might prove to be no more inexact than those attempting much greater precision. 1 In addition, these two reports examine the merits and shortcomings of the steps presently employed in deter- i ' mining requirements. One of the steps, as has been I | pointed out, is that of arriving at a realistic replace- ■ ment factor and the discussion of that ingredient will be : used here as an example of the detail in which these re ports are prepared. Not only do the studies describe | how the replacement factor is now obtained but they also t i : 15 Col . G. E. Sorley, ejt al., Methods of Determin- ing Material Requirements (Washington, D.C. : Industrial College of the Armed Forces, 1948). go into the merits of straight-line versus actuarial tech niques and the relative advantages of Army-wide experience f data versus limited, controlled tests. i It is thus evident that the students do not confine t themselves to a mere description of the present methods. Each factor is subjected to critical examination and every possible alternative is considered. These reports, then, are a valuable contribution to the literature on , this subject. Faculty Publications Our foremost task in the preparation of indus trial mobilization plans, as you so well know, is now, as it always has been, to develop a comprehen sive statement of the probable wartime requirements 1 of the Army, the Navy and the Air Force. . . . Had we been able to do this fully in time for World War II, we could have saved more than a full year of hostilities. The above passage serves as an introduction to one ' -» r - r ! of the faculty publications on requirements. This vol- iume, in the main, presents an uncritical description of the I i i Secretary of Defense Louis Johnson (speech before the American Ordnance Association, New York, City, September j 21, 19^9) . 1 2,7 ! Department of Defense, Economic Mobilization {Studies, Requirements (Washington, D.C.: Industrial ■ College of the Armed Forces, 1952). 36 i various steps involved in computing requirements. Some of the major shortcomings of the process are pointed out and mention is made of some alternative methods. However, the principal value of this study is the completeness with which the entire cycle is described. ; Despite the thorough treatment of <th'is subject in the sources mentioned earlier in this chapter, The Indus- 1 trial College made no mention of requirements computations, 18 in its earlier six-volume study of wartime economics. These books give great attention to such techniques as priorities, allocations and the Controlled Materials Plan which are designed to assure the fulfillment of require ments, but the needs, themselves--the actual requirements— are accepted as data and their accuracy is not questioned.' 19 However, this omission was corrected in a later revision. As will be brought out later, this earlier attitude is typical of the vast majority of works on the economics ; of war. i 18 Department of Defense, Emergency Management of the National Economy (6 vols.; Washington, D.C.: The Industrial College of the Armed Forces, 1950). 19 Department of Defense, Emergency Management of the National Economy. Requirements (Washington, D.C.: Industrial College of the Armed Forces, -195*0* Vol. II. 37 Other Military Schools Although the other senior schools of the armed forces also devote attention to the problems of require ments computations, no special review of their literature will be attempted here, as it is less complete than the literature already discussedj furthermore, such a review would be repetitious. II. NON-MILITARY CONTRIBUTIONS 20 As was mentioned earlier, this portion of the review of the literature will serve largely to illustrate the paucity of material to be derived from other than military writers. Prior to World War II, the few econo mists that gave detailed thought to wartime economics were largely concerned with stabilization measures. There was no comprehensive body of literature dealing with the prob lems of industrial mobilization and the material that was available gave disproportionate attention to the govern mental structure needed to effect full mobilization. This condition was largely due to the recent origin of mobilization economics as a distinct subject. Although 20 Cf. ante, p. 13« the First World War might have stimulated interest and specialization in that field, it failed to do so for sev eral reasons. ■ Causes of Earlier Disinterest In the first place, the United States was never really hard pressed during the First World War. Controls and shortages were short-lived and mobilization never ; achieved totality. Furthermore, the controls and regula- i tions of that war were not systematic. The nation crept into the war and, at the same time, into a somewhat unco ordinated method of meeting problems on a haphazard, improvising basis. As a result, the lessons to be learned from that mobilization effort were largely negative in nature. In the second place, the domestic and international environments were not conducive to great academic effort along these lines. After World War I, the national temper i • ament was largely isolationist and the depressions of the early 1920's and 1930's tended to divert attention to those phenomena. Even the outbreak of war in 1939 did little to stimulate wide interest in the complexities of mobiliza tion. Pearl Harbor, thus, found the nation partially mobilized, but with little idea of the direction in which 39 It should move nor the means of accomplishing that move. On this occasion, however, the United States was longer engaged, harder pressed and, ultimately, more systematic in its effort. It was thus that a comprehensive body of economic literature on mobilization problems was almost completely lacking until the war and postwar years. The writings to be reviewed in this section must, therefore, of necessity be confined to the postwar era. Treatises Considering Requirements One of the volumes which gives passing attention to the problems of computing needs is that by Lincoln, Stone 21 and Harvey. While their book is an academic text, the authors are Army officers and this may account for the somewhat greater attention devoted to requirements. The authors place this issue in its true perspec tive by stating, "The first phase of industrial mobiliza- 22 tion is the determination of requirements." They go on to stress the need for a program that is balanced both in 23 total quantities and in point of time. Later, in this 51 George A. Lincoln, William S. Stone and Thomas H- Harvey, Economics of National Security (New York: Prentice-Hall, Inc., 195^T 22 Ibid., p. 202. . 23 Ibid., p. 203. 40 1 connection, they state: Too much of one thing will almost inevitably mean unnecessary shortages of other items. Air craft and tanks without fuel, artillery without ammunition, fully equipped troops without landing craft (which are just as bad as landing craft without fully equipped troops) all spell delay and invite set-backs or disaster.24 I f This discussion of requirements also describes the sequence of events which leads from a strategic plan ! through the development of requirements to procurement ' 25 1 and eventual issue to troops. ! The view was expressed earlier that requirements are not dependent upon budgets or politics or on "anything 26 except . . . the mission that we have been given to do." ; . The book now under discussion is the only academic work i ; found that appears to appreciate this distinction. Speak- ; ; • 1 ing of capabilities, the authors state: A revision of requirements downward because of limited capabilities does not eliminate the original estimated need for resources. The revi sion merely amounts to accepting a greater calcu lated risk.27 It has been pointed out above that the task of 24 hoc. cit♦ 25 Ifrid.* P- 204. pfi Cf. ante, p. 28. 27 Lincoln, Stone and Harvey, op. cit., p. 74. , computing requirements is much more difficult for the 28 nation that is committed to a defensive war. Lincoln, : Stone and Harvey also display their understanding of this issue by stating: The advantage of basing procurement on a long- range projection of requirements that are reason ably certain both as to type and quantity is readily apparent. Hence the procurement organiza tion of the aggressor has a relatively simplified ! task and a great advantage.^9 i i i On the whole, then, it is felt that this book shows i : a great undertanding of the importance of sound require ments computations. Nevertheless, the authors do not question the technique by which these requirements are derived. This same attitude will be found among almost i all other academic writers in this field. i Similar Treatment of Requirements Although John Perry Miller also fails to scrutinize ■ the methods by which needs are determined, he, like the ■ authors discussed immediately above, emphasizes the impor- i tance of this subject. In fact, his discussion of the r , issue is one of the best presentations found on the eco nomic implications of requirements computations. The ; . _ _ Cf. ante, p. 6. 29 Lincoln, Stone and Harvey, op. cit., p. 306. 42 pertinent passages, although somewhat lengthy, are thus considered appropriate for inclusion in this paper. He said: An overestimate of requirements in terms of end products . . . may jeopardize victory through leading to unnecessarily cautious strategic plans. It will most certainly lead to waste of resources through the production of unnecessary goods, building of unnecessary facilities, and recruiting and training of unnecessary labor forces. It will also magnify the need for controls over the economy. An underestimate of requirements may likewise jeopardize military operations. It may mean pro duction plans which have to be abandoned or delayed and this in turn may necessitate revision of stra tegic plans. Such revisions in procurement plans will inevitably lead to confusion and waste. Finally, failure to estimate requirements realis tically will by exposing the ineptitude of the military and civilian mobilization agencies create suspicion and disunity at a time when unity of pur pose is especially necessary.30 The above statement brings out in a most satisfac tory manner the economic as well as the military aspects of this subject. Even Miller's last point--that concern ing disunity and suspicion— can have its economic implica tions. Under Secretary Slezak, whose lecture was discussed 31 earlier, found many instances where production was hurt because management and workers lost confidence in those 30 John Ferry Miller, Pricing of Military Procure ments (New Haven: Yale University Press, 1949}, p* 18. Cf. ante, p.26. 43 computing requirements. Slezak quoted one producer, speaking of "these false procurement alarms," who de clared, "a contractor so treated could usually be molli fied once, or even twice, with the 'song and dance' about the fluidity of war, but after that he began to lose con- „32 fidenee, and with it, respect. Typical Treatment of Requirements The two volumes just reviewed are among the few giving weight to this economic area. The vast"majority give the subject scant attention, if any. Chandler and 33 Wallace, for example, when they touch upon requirements, consider only the conflict between needs and capabilities in time of war. This appears to be a one-sided approach. The authors are correctly concerned about the means for increasing the total economic resources available for dis tribution, but they give small attention to the means for insuring that those resources are put to their optimum use. The second shortcoming of that book--and this 32 Slezak, op. cit. 33 Lester V. Chandler and Donald H. Wallace, Economic Mobilization and Stabilization (New York: Henry Holt and Company, 1951). applies to the majority of such works— is the fact that no attention is paid to the problems of requirements com putations in anything less than a large-scale mobilization The problems of peacetime planning and limited mobiliza tions are ignored. This attitude also seems inappropriate even when current capabilities are not a limiting factor. Despite these deficiencies, the book does devote some space to the computation of needs and it emphasizes the importance of a program that would give a balanced 34 quantity of goods that would meet military requirements. Another example of the neglect of requirements by authorities on wartime economics is found in the work by 35 Jules Backman and others. Over 1,200 subjects are in cluded in the index to this work, but the word "require ments" does not appear there. The issue of expanding production to meet military needs is discussed at great length, and this is proper. However, the allocation of those resources appears to be an equally appropriate sub ject for inquiry. Although this paper has been rather critical of the _ Ibid., pp. 63 £t sqq. 35 Jules Backman et al., War and Defense Economics (New York: Rinehart andTTompany, Inc., 1952}• k5 I ; academic treatises selected for review here, it seems proper to point out that those books were.selected be- j cause they are outstanding in their field and the authors 1 are correctly esteemed. t ; III. THE REQUIREMENTS SURVEY f The greatest single source of material on the problems of computing requirements is the Requirements Survey conducted in 1951 by the Graduate School of Business 3 6 Administration of Harvard University. This survey was made on behalf of the Munitions Board and covered the De partment of Defense and the Army, Navy and Air Force. Unfortunately, this study is not available to the average student in this field. As has been pointed out earlier, the actual mobilization plans for the three ser vices are among the basic documents that must be employed : in determining military needs. Those plans, of course, ! are highly classified and data gained from them appears I repeatedly throughout the survey. It was thus necessary j : to classify the survey as a whole as "secret," which puts • it beyond the reach of the scholar. ' 36 I Requirements Survey (4 vols.; Boston: Harvard ; University Graduate School of Business Administration, : 1951). 46 ' i This writer was fortunate to have access to the Survey and great reliance will be placed upon it, although it is now somewhat outdated. It is believed that all secret material can be deleted from this paper without obscuring the survey team's basic views and findings. j Scope of the Survey After describing in great detail the means by which requirements are computed in each of the services, the survey team examined the conditions which made for unreal istic requirements or cumbersome procedures. The Survey then goes on, in each case, to make specific recommenda tions as to how these shortcomings might be corrected. In general, it was found that four broad categories of de ficiencies existed in the Army approach to requirements computations. In the first place, it was found that those respon-■ i sible for the computation often did not receive sufficient guidance from higher echelons. This meant that one Techni- I eal Service might use one set of assumptions and estimat- ; i ing techniques while another service might employ an en tirely different approach. Such a condition, of course, I i could lead to an unbalanced program and it caused the sur- i vey team to point out the need to "keep firm control over ; I l both assumptions and methods and at the same time avoid | 47 ' 37 straight-jacketing the Technical Services." Current and Mobilization Planning ; In the second place, a breakdown was discovered in ' the relationship between current and mobilization planning ; Any mobilization plan is based on the assumption that an ! Army of some specified strength and composition will exist upon the outbreak of war. The current plan has, as its first objective, the attainment of that M-Day strength. However, due to changing world conditions and the great complexity of drawing up new plans, it was found that "the objective of current planning was no longer the M-Day 38 force of the mobilization plan." A condition such as this implies that the statement ' of requirements is out of tune with either the current or the mobilization plan. During this same period, there i were considerable fluctuations in troop strength so that ; the requirements became outdated before their computation ! had been completed. These problems point to the need, . where possible, of having relatively stable, related pro- : grams upon which the needs of the Army may be based. 37 Ibid., Vol. II, p. 6. 38 Ibid., Vol. II, p. 47. 48 : Still a third source of possible error was found in the basic, raw data that must be employed by the tech- . nical services. Authorizing documents were often vague 1 or incomplete; replacement factors had to be derived from insufficient data; current assets were difficult to deter mine accurately and there was some question as to the stock and pipeline levels that were being employed. In - addition, it was found that the methods of making these computations 11. . . are in many instances much too cumber some and detailed when related to the purpose for which 39 the requirements information will be used." In the same connection, the team reported: It seems a waste of effort, for example, to re fine mobilization requirements by using detailed methods when the basic assumptions are subject to such wide error. Yet, given enough time, the Gen eral Staff and the Technical Services typically attempt to provide a detailed computation for all purposes.40 i Organization and Workload i 1 ■ ! The last general category of problems falls under the heading of organization and workload. The Survey re ported that the individuals responsible for making the 39 1 Ibid., Vol. II, p. 9. | ' 40 ! Ibid., p. 10. computations were subjected to a tremendous strain and, during a three-month period, "the Technical Services worked on at least eleven major requirements studies. . . . In addition to these major reports, there were a large number of special studies and flash estimates not listed here. This condition was greatly aggravated by the fact 1 that those responsible for making the reports often had other areas of responsibility including procurement and distribution functions. It was thus impossible for them to devote the time and care necessary to obtain a realis tic statement of needs. IV. LEARNED JOURNALS AND DISSERTATIONS The learned journals have relatively little to offer on the specialized problem under review in this paper. The majority of the contributions touching upon materiel requirements are largely concerned with industrial capabil.-' i ; ities or economic stabilization. There are rare and brief * i 1 exceptions to this general rule and such contributions ! i have been cited in the text or bibliography to this work. ! ' Graduate students appear to devote little attention ‘ 41 # _ " 7 7 - r - r Cr, Ibid., Vol. II, p. 67. 50 to the problems of military requirements. Only two dis sertations dealing with the subject could be discovered among the thousands submitted during the past ten years. Both of these were filed at Harvard University. 42 The first of these was concerned largely with the translation of the final statement of needs into the requirements for raw materials. The accuracy of the re quirements, themselves, was not questioned in detail and no effort was made to analyze the problems inherent under conditions other than full mobilization. 43 The second of these dissertations closely ap proached the objective of the present work. Although the methods of computation were not scrutinized in detail, the main emphasis was placed upon end items rather than raw materials and industrial facilities. Here again, however, the analysis was confined largely to conditions of full mobilization. John H. Kaufmann, "Estimation of Requirements for War" (unpublished Doctor's dissertation, Harvard University, Cambridge, 1952). 43 Richard U. Sherman, Jr., "The Formulation of Military Requirements for Munitions" (unpublished Doctor's dissertation, Harvard University, Cambridge, 1953)* CHAPTER III THE REQUIREMENTS PROCESS An effort will be made in this chapter to describe the entire process leading from a national strategic plan through the determination of requirements to a procurement action. Understanding of this sequence of steps is of prime importance in appraising the military use of nation- . al resources. Presentation of this over-all picture is essential i ; from two standpoints. First, it will serve as a preface to the subsequent critical analysis of the actual computa tion techniques. Later chapters will examine the ingredi- ; ents that make up gross requirements and that examination I : can be more readily followed if the relative position of j the parts is known. I Second, passing judgment on any technique requires | ! understanding of the ultimate objective for which that technique was devised. Applying that thought to the pres- ! ent case, one cannot appraise the method of computing re- i | quirements without knowing the purpose for which the re- i I quirements were computed. Unfortunately, it will be found that the national military objectives do not provide any hard-and-fast standard of judgment such as is found in the profit and loss statement or cost accounting methods of commerce and j industry. Instead, there are tremendous areas of vague- ! i ness which would permit any two experienced men to come up with widely differing conclusions as to what the objectives should be or how efficiently they are being accomplished. ' The fact that judgment and experience play such a tremendous part in national military planning is of great significance to this study. For one thing, it opens the door to the possibility of decisions being made on the basis of political expediency rather than military neces sity. For another, even if political expediency is not ! an element, there is always the possibility that miscalcu lations at the planning level can create vast misstatements of military needs. The fact that planning and requirements are intimately related is testified to by one speaker who j stated: "These national war objectives as approved by : i the President after being formulated in the NSC have great over-all effect upon the generation of requirements."^ I Brigadier General Donald P. Booth, "The Role of JCS in the Generation of Material Requirements" (speech before the Industrial College of the Armed Forces, , Washington, D.C., October 13, 19^8). I 53 : I. PLANNING AT THE NATIONAL LEVEL The lack of any single coordinating agency in mat ters of national security was recognized after World War II and led to the creation of the National Security Council. This body was directed to "advise the President with re spect to the integration of domestic, foreign, and military 2 policies relating to the national security." Its member ship includes the President and Vice President, the Secre taries of State and Defense, the Foreign Operations Admin istrator and the Administrator of the Office of Defense Mobilization. The President may appoint certain addition al members. Role of the NSC ! Although the Council has only an advisory role, it is, in fact, the vehicle for shaping and phrasing national policy in thie area. Although the Defense Department plays a leading part in this function, it is in no stronger posi tion than any other participant in proposing or opposing j courses of action. , However, the Secretary of Defense has an additionalj and unique function in advising as to the practicality of j i | 2 I National Security Act of 19^7* Section 101. j 54 : i 3 many national objectives. In theory, of course, a desir able national aspiration should be a stated objective without regard for its feasibility. However, in practice, there is no advantage in setting goals for the nation which cannot be realized. I On the contrary, the establishment of unrealistic aims could have a decidedly adverse effect. The national objectives are more than just desirable goals. They con stitute the basic policy for deciding the actual courses , of action that are to be followed. An illustration of this distinction might be helpful. For example, it is desirable that freedom be re stored immediately to those nations which have had commun ism imposed upon them. That is desirable, but it is beyond the present capability of the United States. If the imme- i diate restoration of that freedom were one of the national ' objectives, the country's diplomatic, military and economic resources would be directed to that end. As matters now stand, it seems likely that such an aim could be achieved only by the use of armed might. ! It is here, in this hypothetical illustration, that , ■ i 3 „ „ Col. A. W. Steiner, et al., Organization for the Determination of Material Requirements under the National : Security Actof 1947 (Washington, D.C.: Industrial Colleg^ of the Armed Forces, 1948), p. 3. ; ; the Departments of State and Defense, among others, would introduce the question of practicality. No matter how worthy and advantageous this course might be, the United States lacks both the armed strength and the international support that would be necessary to effect this end. To j follow such a course, then, might prove to be disastrous I and hence it would be urged that it not be included in the ' national objectives. , ■ ’ I ! Thus capabilities are introduced at the earliest | i I ' ! ; stages in the formulation of basic policies. The Secre tary of Defense, with guidance from the Joint Chiefs of Staff and the Secretaries of the Army, Navy and Hir Force, is in a key position to advise on many points of practi- I | cality. In effect, then, the military establishment plays : three distinct but related 'roles at the national policy level. i | First, advice is given as to which courses of action; are desirable. Second, advice is given as to which courses; i : ! are practical. Last, the military establishment is one ! \ of the instruments for carrying out those policies. | Execution of National Policies Once the objectives for the country have been i ; i enunciated, they become the basic directives for the * ; i i Executive departments concerned with national security. ■ . 56 I ! The writer of this paper did not have access to these ’ highly classified documents, but their broad scope and general nature are well known. For example, one of the national policies appears to be support of the Nationalist Chinese as a possible vehicle for the eventual restoration of democratic government to China. Another might be par ticipation in the defense of western Europe. Still an- ! other of historic origin is the protection of the entire i ! western hemisphere against encroachment from Europe or Asia. Such policies become the foundation for all mili- t ' tary planning. In addition, of course, the approved I ; papers of the National Security Council form guidance for ; the diplomatic efforts of the State Department. That | subject, however, is beyond the scope of this paper. 1 II. PLANNING BY THE JOINT CHIEFS OF STAFF ! ; On the basis of these national objectives, the Joint Chiefs of Staff draw up three separate but related ; i ; plans. These are the Joint Long-Range Strategic Estimate,: the Mid-Range Joint Strategic Objectives Plan and the Short-Range Joint Strategic Capabilities Plan. For the ; sake of convenience in this discussion, they will be re ferred to as the joint long-, mid- and short-range plans, j 57 ■ respectively. The relationship between these plans is illustrated in Figure 1. The joint long-range plan is: ... . general in scope and is based on broad re quirements covering a five-year period, beginning approximately five years hence; it is particularly cognizant of research and development programs and their relationship to military strategy.4 Another publication describes the joint mid-range plans as having: . . . assumed D-days three to four years in the future and including requirements for weapon sys tems which may not yet be in procurement, but which are obtainable during the pre-D-day period. These mid-range plans are the targets towards which peacetime programs and budgets initially are aimed.5 The joint short-range plan provides guidance as to what will be done in the immediate future. Essentially, j it envisions no significant change in weapons systems other than those already under procurement and its scope covers "conditions of peace and limited military conflict as well as global war."^ 4 Department of Defense, Economic Mobilization Studies, Requirements (Washington, D.C.: Industrial College of the Armed Forces, 1952), p. 13* 5 Air Force Manual 27-1, Program Procedures (Washington, D.C.: U. S. Government Printing Office, 1954), p. 3- 6 Department of Defense, op. cit., p. 16. Army Plans Joint Plans P rovides Arm y P osition P rovides Army P osition P rovides Army P osition JOINT STRATEGIC O B J E C T I V E S PLAN ARMY MOBILIZATION O B J E C T IV E S PLAN ARMY M OB IL IZA TIO N C A P A B I L I T I E S __________STUDY JOINT LONG RANGE STRATEGIC E S T IM A T E ARMY C A P A B I L I T I E S PLAN MID RANGE ESTIM ATE OF THE ARMY ARMY MOBILIZ ATIO N PLAN MID RANGE ES T IM A TE CO M MITTEE __________R E P O R T __________ ARMY LONG RANGE S T RAT EG IC E S T IM A T E JOINT STRATEGIC C A P A B I L I T I E S PLAN FIGURE 1 I N T E R R E L A T IO N S H IP OF PLANS 1 Composition of the Plans The Plans of the Joint Chiefs do not spell out the details of forces needed to accomplish the national ob jectives. They concern themselves only with the major units such as Army divisions, air wings and the larger i : combatant ships. It is left to the several services to i translate these general plans into detailed programs. The published plans also describe the assumptions I that were made in conjunction with the planning process. I I This is a necessary part of each plan as the Army, Navy i , and Air Force must continue under identical assumptions i if a balanced force is to result. j Problems Created by Assumptions 7 It has been suggested earlier that assumptions, although necessary, introduce a large element of potential i error into all requirements calculations. Here, at this j ; stage of planning, it will be seen that assumptions must i ' be made which are highly questionable. In the first place i t the Joint Chiefs must make an assumption as to the prob able enemy or combination of enemies that are most likely 1 to confront the nation. ! 7 Cf. ante, p. 17. In the second place, there is the assumption as to where and in what strength the enemy might strike. The weapons that might be used against us, the amount of surprise that might be achieved, and even the season of the year at D-Day could have an effect on the speed and direc- . tion of American deployment. Then, too, the nations that are apt to be allied with the United States are to be taken into consideration. This supposition as well is subject to error. The only alternative to making these assumptions is to prepare the nation to defend itself alone against any conceivable com bination of enemies. This, of course, would lead to a preposterous over-statement of requirements. In addition, ; it appears to be economically and militarily impossible. 1 ! The assumptions that are made in this regard are not sheer speculation. All the intelligence facilities of the nation are available to make -the estimate of the l situation as realistic as possible. A separate committee , of the Joint Chiefs of Staff is devoted to estimating 8 enemy capabilities and the intelligence branches of the 9 three services contribute to this same end. — ................ i Q I ° Steiner et al., op. cit., p. 8. 9 Capt. F. K. Loomis, et al., The Effect of Concur- ! rent planning on the Determination of Requirements- (Wash- : ington, D.C.: Industrial College of the Armed Forces, j 1948), p. 5- 61 Assumptions In the Mobilization Plan It may be seen, then, that the raw data with which the Army must work contain room for considerable error. This is regrettable, but unavoidable. The discussion thus far of this possible error has been confined largely I to miscalculations of enemy intentions and capabilities. i j The joint short- and mid-range plans are also based upon | assumptions as to American capabilities. It assumes that certain improved types of weapons will become available as anticipated and it also assumes that no unexpected 1 new weapons will be introduced during the period covered ! by the plan. Last, there is the supposition that a given 1 political climate will exist in the eountry--that the ! Congress and the public will not demand radical changes ! in the composition of the Army. i The mobilization plan is thus clouded with uncer- : tainties from its very inception. One volume describes j this condition in the following terms: i In war planning for possible global conflict in a rapidly changing world, large staffs of mil itary officers and civilian analysts are required to attempt one of the most difficult of delibera tive and speculative tasks--forecasting the mili tary, political and economic situations of tomor row. . . . The world is so filled with divergent forces that are continually changing in strength and relation to each other that their variations : and permutations create an almost unlimited num ber of possibilities. 1 Feasibility Testing Under the present system of planning at the level i i | of the Joint Chiefs, it is less likely than in the past j I i that a plan will be grossly beyond the capabilities of the: nation. It will be recalled that a general estimate of j capabilities is made when the national objectives are I 11 . formulated in the National Security Council. In other ' words, the general objectives are at least possible, if . not probable, of attainment. I At the next lower echelon--that of the Joint Chiefs I i | of Staff--a similar semi-automatic screening of plans for j | i , feasibility takes place. The Joint Chiefs know in general ! i ‘ I ; terms what their own branches of the service are capable ■ of doing and what knowledge is available when they sit as the Joint Chiefs of Staff to develop plans designed to : I : achieve the national objectives that have been established. ; j | Even so, before the plans are passed on to the three j Department of Defense, Economic Mobilization ; Studies, Requirements (Washington, D.C.: Industrial I College of the Armed Forces, 1954), pp. 7 et s<%q. 11 Cf. ante, p. 55- 63 i services, a rough estimate is made as to whether they are economically feasible. A special staff under the i Joint Chiefs examines the implications of the plans in certain major categories of goods such as ammunition, i . | aircraft, transportation, and so forth. In a sense, of course, this feasibility testing is a determination of general requirements. This testing technique will not be examined here because the tests do not lead to a procurement action except in a most indirect i manner. Hence, while these steps are a significant part ! of the process, they have no tangible economic impact, i 12 I At a later point in this study, feasibility test- ! ing techniques will be examined briefly as possible alter- i native methods of determining actual requirements. For j I the moment, then, the discussion will pass on to the I ; action taken in the Army upon receipt of the plans from | the Joint Chiefs of Staff. ! III. PLANNING AT THE ARMY LEVEL t 1 It has been seen that the formulation of national objectives necessarily involves very speculative methods which do not lend themselves to formulae or other mathe- 1 2 Cf. post, pp. 268 et sqq. 64 i ! matically precise techniques. Those objectives * with all their potential error, then become the basis for de fense planning. That planning, in turn, creates the need for many assumptions which are also somewhat speculative. It is upon this foundation that the three services are expected to draw up a realistic and detailed list of the resources needed to defend the country. The above passage is not intended to be critical of the planning cycle as a means of allocating resources. i i It is infinitely superior to the alternative of having no plan at all. It is intended merely to emphasize the areas of vagueness that are inherent in this process. i j Such a condition, when billions of dollars are involved, | is significant in itself. It will gain further signifi- ! cance when later chapters demonstrate the extreme degree : of precision the Army attempts to achieve on this impre- ! cise foundation. i ! The Army Plans | Upon receipt of the plans from the Joint Chiefs of ! Staff, the Army draws up parallel and more detailed plans I of its own. Its long-range plan, like that of the Joint I Chiefs, concerns periods up to ten years in the future and this fact precludes detailed planning. Instead, this long-range plan is used mainly for such broad policy 65 : guidance as the future research and development of new weapons systems. As the plan does not generate require ments, it will not he considered further here. It is the short- and mid-range plans that generate j requirements and lead to procurement, and main emphasis will be placed on these two plans. It should be realized that it is a vast over-simplification to refer to "these two plans." There are several mid-range and short-range plans in process of preparation and execution at any one time and each of these has supporting plans and programs. For the purposes of this study, it is not considered necessary to describe the planning process in detail. Entire books could be--and have been-~written solely on 13,14 the military planning structure. Of course, attention tends to be focused on the short-range plan because the Army "lives" in the short range. It never catches up with the mid-range plan as i the period covered by that plan is moved forward in time each year. However, the mid-range planning is important to this study in two regards. First, as parts of that plan — Department of the Air Force, op. cit♦ 14 Department of the Army, 5^1 101-51, Planning and Programming Manual (Washington, D.C.: U. S. Government Printing Office, 1953). 66 are accomplished, they become ingredients of the Army's current capabilities and are embodied in the short-range plan. Second, and even more important, the current activ ities of the Army are shaped by the mid-range plan, j It is obvious that a mid-range plan calling for an | Army of certain strength, equipment and mobilization re serves at some future date would never be realized unless the short-range plan were aimed in that direction. Thus, ! the current statement of requirements must include items i ; which, because of their production lead time, must be I 1 ordered now if they are to be available when needed to accomplish the mid-range plan. Without going further into the formal Army planning ‘ process, it is evident that there are plans for the peace time development of the Army and for its expansion and de- ; ployment in time of war. For the sake of convenience in i this paper, future reference will be made simply to peace time and mobilization plans without regard to the formal documents from which they come. Translation of Plans into Programs It is these peacetime and mobilization plans that lead, at last, to the generation of detailed requirements. This phase is described by one writer as follows: 67 Based upon these plans, the departments, through their procuring services and bureaus, prepare de tailed requirements estimates . . . These require ments are in terms both of end items and of raw materials, components, and other resources.^5 This transition from plans to requirements is ac complished in the Army through its series of programs. The distinction between the plan and the program has been given in these terms: A plan is a proposed course of action for the purpose of achieving a definite objective. Pro grams are derived from a plan. A program in a time-phased breakdown of a,plan according to spheres of management responsibility in line with special ized fields of activity.16 The same source compared an Army plan with the blueprint for a house and a program with the contractor's time schedule for construction. There are fifteen such programs in the Army covering such specific fields as intelligence, training, National Guard, and reserves, and so forth. From the standpoint of requirements, one of the most important of these is the current troop program. It is important to realize that this program does not confine ^5 Colonel William Whipple, Jr., The Planning Cycle and Its Effect on the Determination of Material Require ments (Washington, D.C71 Industr 1 al~TJoI~iege of the Armed Forces, 1951)> P* 3* 16 Department of Defense, Economic Mobilization Studies, Requirements, 1952, op. cit., p. IT itselfj as did the plans of the Joint Chiefs, to major ; organizations--divisions, corps and armies. It shows the : exact composition and location of all units and organiza tions of the Army during the period covered. Thus, i planned activation and deactivation of units, as well as i 1 geographic transfers, are reflected in this program. ! j A somewhat similar document is available for imple mentation upon the outbreak of war. The activation and : deployment of units for each time period after M-Day is given in considerable detail. This mobilization troop program is based on the assumption that on M-Day the Army will be composed of certain specified units that will | be located in specific geographic areas. It is one of the I purposes of the current troop program to see that those : assumed conditions do exist when M-D'ay arrives. ; It may thus be seen that abrupt changes in the cur- 1 rent composition of the Army will influence the readiness with which the mobilization plan can be followed. Con versely, unilateral changes in the mobilization plan will mean that resources are being wasted through misdirection of the peacetime programs. The two programs are so inter related that it is most difficult to change one without having an impact on the other. Conditions of such imbal- ; ance have existed in the past and may be expected to recur 69 17 in the future. The wars in Korea and Indo-China as well as changes in the attitude of Congress can alter peacetime programs and thus upset the mobilization plans. The Impact of Programs on Requirements The derivation of the peacetime and mobilization troop programs has been traced in such detail because they are probably the two most important factors in determining Army requirements. The plans and programs influence the computation of needs at every step of the process. The discussion immediately following is designed to show how close this relationship is. Briefly, then, the current plans affect the bill of needs in a number of ways. The troop program deter mines how many units must be equipped over different time ' periods. Not only the active Army, but the National Guard and reserve forces will vary in their composition. Units from these reserve forces enter and leave the active forces and both active and reserve organizations are con stantly being formed and deactivated as the mission of the Army changes. 17 Requirements Survey (Boston: Harvard University Graduate School of Business Administration, 1951)* Vol. II, P. ^7. ; Active and reserve units are equipped differently, largely because of the inability of the reserve components 1 to provide adequate storage and maintenance for their full j issue of material. Even within the reserves, units are equipped to different levels, depending upon how early in j a future war they would be mobilized. At the same time, i I | recently activated units do not receive the same level of I equipment as those that are fully manned and trained, i It is thus seen that the requirements for the ini- ; tial issue of the Army are in a constant state of flux and j the current troop program provides the guidance on this 1 point. The planned troop program also affects requirements in another manner. The geographic distribution of troops, as shown in this document, has an influence upon require ments in several ways. In the first place, climatic condi tions and terrain obviously will have a bearing on the needs of units stationed in different areas. Those in the Arctic will require special protective clothing, snow tra versing vehicles and special lubricants, to mention but a few items. Those in the desert or tropics also will have specialized needs. Other Effects of Location In the second place, the geographic location of ! I Army units will influence the "pipeline" requirements. i It is evident that the number of troops overseas will • have a bearing on how much is needed in transit at any given moment. Hence the planned troop program also will i have a profound effect on the quantities of materiel that will be required for in transit stocks. The more troops ! there are in remote areas, the greater the total require- i ment. In the third place, replacement and expenditure rates also vary with different regions of the world. As a result, the planned disposition of troops will influ ence the quantity of goods needed for resupply. Impact of Mobilization Planning The above passages have described in brief form the influence of planning upon the computation of require ments for more-or-less immediate projects. The mobiliza tion plans introduce needs that differ not only in magni- 1 tude, but also in nature. t For the most part, industry can supply the current needs of the Army. The planning-requirements-procurement cycle being examined here permits those needs to be met and to be met on time. Upon the outbreak of war, however, the requirements for a time exceed the ability of industry to produce. This condition creates the need for stock- .72 piles of equipment to bridge the gap between D-Day and the day'that production catches up with the needs. The stockpile, known as the Mobilization Reserve, consists of varying quantities of different items. The quantities to be stocked depend upon many con- i siderations, including the speed with which units are activated, the areas to which they are deployed, how soon they will be engaged in combat and the intensity of that combat. Equally important is the speed with which industry can be mobilized. The speed with which industry can be mobilized depends, in part, upon, whether the munitions industry is in existence at M-Day or must be largely created after that day. If already in existence, that mobilization depends partially upon whether the plants are actually producing when war breaks out or are in a standby condition. These factors, in turn, depend upon the time-phasing of Army requirements and procurement before M-Day. This chain of dependencies actually makes a com plete circle. The statement of requirements must include mobilization reserves which vary with industrial capabil ities and those capabilities are influenced by the state ment of requirements. : 73 I i ! Conclusions Regarding Planning I Prom the above passages it will be evident that ! there is a most direct and intimate relationship between I t | planning and the computation of requirements. Experience and judgment play a vital part in these calculations, but i | planning dominates the scene. At each level, the guidance i contained in the plans is the very cornerstone for the succeeding phase. The objectives promulgated by the National Security Council form the framework for the decisions of the Joint Chiefs of Staff. The plans of the Joint Chiefs dictate the general shape of the Army staff planning. Finally, the General Staff's mid-range and short-range plans and the current programs are the things that give shape and meaning to the statement of needs drawn up by the Techni- ; cal Services of the Army. ! This relationship between planning and requirements must be understood by the student in this field. With | that understanding established, it is equally important 1 to appreciate the vast uncertainties that surround the . planning process. When both of these points— the rela- j i tionship and the uncertainties--are recognized, it becomes i ; apparent that the computation of requirements is on inse- ; cure ground before the first calculation is made. 7^ I i The uncertainties mentioned thus far have all been i found in the pre-M-Day period. The changing fortunes of i war, itself, greatly magnify these chances for error. Shipping losses, enemy air attacks and unexpected assaults such as that in the Battle of the Bulge and the German in vasion of Norway all contribute to unexpected needs. Even ; good fortune can make for similar confusion. For example, after a long advance against the enemy, the operational plan might call for a period of relative quiet for re grouping and re-equipping. Defensive materials such as mines and barbed wire would then be called for and an ef fort would be made to furnish fresh rations to the troops. Then a sudden opportunity such as capturing the j Remagen Bridge might present itself unexpectedly. The defensive materials and fresh rations would be useless while assault equipment and combat rations were being re quired in considerable quantities. I In short, war is characterized by unpredictable situations. This fact is commonly recognized and will not be belabored further here. It is mentioned here only to show the impact of these conditions upon the calcula- j tlon of Army needs. IV. THE REQUIREMENTS PROCESS I I The relationship between planning and requirements i ; has now been established and the discussion will pass on i to a more detailed consideration of the requirements pro cess. The discussion of requirements immediately preced ing was fragmentary and considered only those parts of the Army's needs that were.most directly connected with plans and programs. The following examination will attempt a more systematic analysis of the factors that make up the total needs. The Ingredients of Requirements The gross requirements of the Army consist of i items needed for initial issue, replenishment, distribu- 18 tion or pipeline, special projects, and reserves. The available assets are then subtracted from the total thus i obtained in order to arrive at the net requirements. Each : of these factors will be covered briefly in the following passages as an introduction to the succeeding chapters. ! 18 ; Department of Defense, Economic Mobilization 1 Studies, Requirements, 1 9 5 op. cit., p. 23* 76 Initial Issue Requirements for initial issue are those items needed to equip the existing Army up to authorized levels. The term "initial issue" includes both the active and re serve components. The total needed at any one time for this purpose is obtained by reference to a variety of documents. If, for example, the item in question is a fixed-wing reconnaissance aircraft, reference is first made to the list of units and organizations which are authorized to have that :item. The current troop program will then indicate how many of each of those units and organizations will be in existence at any given time. Finally, the various author izing documents will reveal how many of those aircraft each of the units is permitted to have. The process is then purely a mechanical one consisting of multiplication ' and addition. While the above procedure is relatively simple in ; theory, it can be enormously complex in practice. The ; introduction of punch cards and business machines has served to speed up the purely mechanical steps, but there are many considerations which do not lend themselves to tabulating machines. Many authorizing documents are con- : stantly in the process of revision and others are somewhat 77 \ vague. Units of the same type are sometimes organized differently and some units simply have no authorizing ; documents at all. I I The National Guard and reserve units create i further complications. These units are organized under the same tables as the active Army, but their authorized levels of equipment are modified. These modifications also tend to be somewhat flexible in their application. All of the above complicating factors do not indi cate poor staff work within the Army. They are natural but unfortunately unavoidable consequences of its constant ly changing mission, composition and capabilities. It will be noted from the above description that i ,the Army approaches the problem of computing the initial issue requirements as if none of the equipment were on hand. This approach is realistic only when an entirely new piece of equipment first becomes available for issue. In other instances, however, materiel in the hands of troops is subtracted later so that the total requirement includes I only the.net initial issue needs. Replenishment --------------------------------------------- i Equipment in the hands of troops will, of course, ' 1 be worn out, damaged beyond repair, lost and, during hostil- I ities, captured or otherwise eliminated due to enemy action.; Such losses make it necessary for the statement of re- | quirements to include quantities sufficient to permit replenishment. Army publications indicate the various percentages that may he added for replacements and hence it would appear that this process, too, is mainly a mechanical one. Applying the replenishment factors is largely mechanical. Deriving them is not. Sufficient experience often is lack ing to compute the loss rate and, when experience data are available, there remains the question as to which data should be included in the computation. For example, ! should the combat replacement factor for medium tanks be based on Korean experience or World War II or a combina- ! tion of both? There is also the problem as to whether a straight- ; line or actuarial replacement factor should be employed. In general, the former is used. Even when this question ; is settled, there is the question as to whether the : straight-line should be a function of months in the hands ! I of troops or some element of use such as flying hours or rounds fired. In addition, there has been the problem of i ; determining how many replacement factors there should be for each item. There could be one for the Army as a whole 1 throughout the world or there could be special ones for geographical areas or functions such as the European Command and Far East Command or Active Army and National Guard and so forth. The above discussion of this factor has been con fined thus far to items which have an appreciable life span in use. The problem is somewhat different when ap plied to expendible supplies such as food, ammunition and gasoline. Taking the case of ammunition, it is found that the number of shells that can be expended profitably in a day is by no means the governing factor. There are other restraints such as the difficulty of moving ammuni tion forward during combat. As a result of these and other considerations, the Army has established what is known as an authorized "day of fire” per piece of artil lery. Again, as in the case of other replenishment fac- i tors, these elements are relatively easy to apply, but most difficult to devise. Stock Levels and Pipeline 1 The present writer has seen the statement that there was more materiel in stocks and pipelines at the , end of World War II than was consumed during the entire i 1 course of that war. While this is a somewhat misleading i j statement due to the unexpectedly abrupt end to the war in the Pacific, it does give some idea of the requirements 80 : generated by distribution needs. The pipeline requirement for an item in an overseas : theater is obtained by first determining the total monthly requirements for that equipment in the area concerned. If it is then found that it takes three months to process that item from the depot in the United States to its overseas destination, three times the monthly consumption must then be procured to assure that the pipeline is filled and flowing at all times. The same type of calculation must be made for each item for each area being supplies. The word "flow" as used above is somewhat de- ' ceptive. It creates a mental picture of equipment pouring daily from the pipeline into the area being served. While this may be true in general, it is far from true for each individual item of equipment. Some types of materiel are shipped at widely spaced time intervals and, hence, there must be a stock to permit resupply between shipments. In ! addition, stock levels must be maintained to compensate for the normal fluctuations in demand and to meet emergen cy conditions. j While this discussion has been confined to overseas 1 theaters, the same problems apply to installations within 1 the United States. Furthermore, it should be realized I that the maintenance of stock levels is a "layering" j 81 process. That is, several different supply echelons from the main depot in the United States to the forward supply installations in the field are each authorized to stock certain quantities of goods. The problem of stock levels is further complicated by the necessity of determining just which items are to be stocked. Obviously there is no need to maintain a high level in the United States on goods that are readily avail able in the civilian market such as corn flakes and ping- pong balls. Such commodities are "off the shelf" items and can be sent as needed from the producer to the con sumer or to the port of embarkation. At the other end of the spectrum are purely military goods which are produced only in response to Army demands. Machine guns and mortar shells are examples. Here, in the absence of any reserve supply within the civilian economy, the military must cre ate the necessary stocks. In between these two extremes are large groups of commodities which do not fall auto matically into either category and resort must then be made to judgment. Special Projects The requirements for special projects are created by one-time activities, i.e., operations that are not re peated on any periodic basis. For example, the Army took part In the establishment of the base at Thule in Green land and vast quantities of equipment were either expend ed or delivered for use at that base. The future resupply of the Army at Thule will appear as parts of the replenish ment or replacement factors. The original stock of equip ment, however, would come under the heading of a special project. When such an operation is approved, one of the sup porting documents to the plan lists the supplies and equipment that may be devoted to that purpose. The amounts to be included in the gross requirements are thus known with a fair degree of precision. As might be imagined, war plans provide for a large I number of special projects. However, requirements for wartime special projects do not appear in the statement of peacetime needs, but are computed separately as part of the requirements for mobilization. Mobilization Reserves Perhaps the most difficult and most controversial of all requirements are those computed for use after M-Day.; This stockpile is known as the Mobilization Reserve Ma teriel Requirement (MRMR) and Its size and composition will vary greatly depending upon a large number of differ ent factors.' i In brief, the MRMR,.for an item will be the quan tity required to bridge the gap between the outbreak of war and the time when production catches up with demand. If production after M-Day of a given item can be expanded so rapidly that it can always keep up with wartime needs, the MRMR would be zero. More commonly, with military type items, it is found that units can be formed and be ready to receive their equipment faster than industry can provide it. However, this conditions does not prevail throughout a war of any considerable duration. As the Army approaches its peak strength, the de mand tends to increase at a decreasing rate, the require ments then being confined largely to replacements and replenishments. Supply, on the other hand, tends to in crease at an increasing rate as newly created industries . come in to production. A balance between,supply and de mand is then struck sometime after M-Day. At some point between M-Day and the achievement of this balance, there is a point where there is the greatest vertical distance between the supply and demand curves. That vertical dis tance measures the size of the necessary mobilization reserves. It is obvious, then, that it is the relative shape of the two curves that governs this factor of requirements 84 j If a large portion of the necessary industry for an item is already in existence at the outbreak of war, the supply curve can rise sharply. If a given item, such as landing craft, will not be needed until a late phase of the war, j the demand curve will rise slowly at first. These and j many other things can influence the shape of these curves. i ! Computation of Net Requirements j After the five types of requirements discussed i * I above have be'en totalled, it is necessary to subtract : the assets in order to arrive at the net needs of the Army. These assets not only include those goods presently in use or in the supply system, but also those which should be received during the time period under study. Quantities already contracted for and items which will be rebuilt or rehabilitated are included among the total assets. One of the problems in computing assets is deter mining which items may be substituted for others. Let it be assumed that there is a mortar Mark II which is author- i I ized for every infantry rifle company. If the Mark II Is merely an improved version of the Mark I already in the hands of the troops, this question is created: Should ■ the large existing stock of Mark I mortars be counted as an asset in reaching the net requirements for the Mark II 85 mortar? Decisions on such questions which can be made only on the basis of experience and judgment can vary the total bill of needs to the extent of millions of dollars. V. PROCUREMENT The present chapter opened with a fairly complete examination of the planning and programming process, and continued with a comparatively brief analysis of the in gredients that make up the Army's net materiel require ments. The cursory treatment of the latter subject was appropriate in view of the more detailed and critical study of those ingredients in chapters that are to follow. However, the procurement which follows the statement of needs, like the planning that precedes it, will not be analyzed to any great extent in the remainder of this study. With that thought in mind, a somewhat comprehen sive discussion of some aspects of procurement will be appropriate. Purpose of Examining Procurement The complex phases of planning and computing require ments have, in themselves, no economic impact other than the rather considerable number of man-hours consumed in 86 accomplishing those steps. The substantive economic activity is not generated until procurement action is taken to satisfy the requirements. Before such action can take place, of course, the Army must prepare its budget estimate which includes a request for funds to procure the needed end items and other supplies and equipment. The Budget Cycle Although the budget cycle is not one of the major subjects under review in this study, it is of sufficient implication to warrant some discussion here. The first significant point is the duration of the cycle. The bud get cycle is initiated nearly two years before the time when the funds are first needed. These funds, in turn, are required to purchase equipment, some of which will not be delivered until a year or more after the contract is placed. Figure 2 illustrated the extent to which future requirements must be anticipated under current planning and budget procedures. These considerations, taken together, mean that the actual detailed statement of requirements for some items must be initiated several years before the anticipated need. Even under normal and stable conditions such anti cipation of requirements would be most difficult. It borders on the impossible when cold wars and small wars 1 July 1 July 1 July 1 July 1 July 1 July 1 July 1953 1954 1955 1956 1957 1958 1959 National Security Council Action and JCS Guidance i Preparation of Arm y M id-Range E stim ate Com pilation of Service E stim ates into Joint Strategic O bjectives Plan Preparation of Army Strategic O bjectives Plan and M ateriel R equirem ents Guidance D evelopm ent of Arm y P rogram s M ateriel R equirem ents Computations and Preparation of Budget C ongressional R eview and Action and Army Recom putation of R equirem ents Obligation of Funds D elivery of M ateriel FIGURE 2 THE P LANNING AND BUDGET CYCLE 00 - ■ 3 intervene during the cycle and when budget guidance from the Bureau of the Budget and from the Department of De- i fense keeps changing virtually up until the time when the budget is being considered by Congress, i Supplementary estimates are sometimes in the pro cess of preparation before the main budget has been com- j pleted. Vital assumptions are altered suddenly and, in \ some instances, the Army has been allowed less time to I compute its needs for funds than was allowed for the De partment of Defense to review those needs. Supply Control Studies Prom the above discussion it will be apparent that the Army’s need for any item is not expressed in terms of any absolute, inviolable quantity. Instead, the require ment is set at a certain amount under certain specified ; conditions. The budget guide-lines, coming from higher ! authority, establish exactly what conditions will be as- * sumed. These assumed conditions are then employed in i I ; drawing up the Supply Control Study for each major item and it is desired to digress for a moment here to explain the significance of those studies. The Supply Control Study is employed for three i I major purposes. First, it is the blank form used to i arrive at the requirements for many items and, as such, it 89 1 is one of the major documents in determining the amount of procurement funds that should he requested in the budget. Second, after the funds are made available, it serves as the guide to what materiel should be procured and when. Last, when the equipment is actually received, it is one of the documents employed in effecting the proper distribution through the supply system. Now, in that budget guidance from outside the Army is one of the governing elements in these vital Supply Con trol Studies, it is evident that the Army can be literally forced to ask for more or, most frequently, for less than it actually believes to be the proper amount. This is not a hypothetical situation. During the widely publicized Congressional hearings 19 concerning the supply of ammunition in Korea, Army wit nesses were asked if the Army had received all the funds it had requested for ammunition. The answer, invariably, was in the affirmative. This was quite true. The Army had received substantially the amounts requested. It was never clearly brought out in these hearings, however, that ■ the budget guidance imposed upon the Army had indirectly 19 U. S. Senate, Ammunition Supplies in the Par East (Washington, D.C.: U. S. Government Printing Office, 1953). 90 but severely limited the funds that could be requested. This limitation was accomplished very simply. The budget guidance directed that the Army would "assume" that the war in Korea would not extend into the following fiscal 20 year. Therefore, the Army could not request funds to procure ammunition at combat rates of consumption. Shortages inevitably resulted and Congress and the public attributed these conditions to the Army’s understatement of requirements. Conclusions on the Budget Cycle The budget process is an essential part of the American system of government. It not only establishes the supremacy of the President over the various executive' departments, but also reenforces the basic concept of ci vilian control of the military. One alternative would be to permit the armed services to determine how much of the nation's resources should be devoted to defense, but such a practice would be entirely foreign to the American phi losophy of government. However, despite the necessity of having this budget process, there is no question but that it has a most dis- 20 Ibid., p. 112. ! ruptive impact on the accurate calculation of Army needs. The budget system makes it mandatory to compute require- | ments unreasonably far into the future. It creates changes ; in the basic data with such speed and frequency that ac curacy is hampered and the review process is stunted, i These difficulties are aggravated by the fact that they I often are introduced in the latter stages of the require- : ments cycle, thus partially nullifying whatever careful ; planning and calculating had taken place up to that point. Finally, and most seriously, this process tends to prevent the Chief of Staff from presenting the Army's re quirements as seen by him and his staff. The budget guide lines that occasionally create this distortion are quite different in character from the assumptions made by the National Security Council and the Joint Chiefs of Staff. The latter assumptions are made for the purpose of provid ing guidance which is as accurate and realistic as possible Some of the guidance incident to the preparation of the budget, on the other hand, is obviously unrealistic and appears to be motivated by political rather than military considerations. | The present writer has no criticism of the concept i ;that the civilian secretaries of the departments must be in a position to control how much of the Army's needs are 92 to be filled during a given year or period of years. The same thought applies to Congress with its inherent con trol of the national purse strings. Granting something less than that requested by the military is not only the right of Congress and the Cabinet, but it is their duty, if they feel that other considerations outweigh the need to fill military requirements. A decision to follow such a course is perfectly legitimate and it merely increases the calculated risk that already exists in all defense planning. However, the actual statement of requirements, it is believed, should not be influenced by these considera tions. The Army, that is, the military leaders, should be able to compute and state what they believe is needed to accomplish the mission that has been assigned to them. The history of the War Production Board states that the view prevailed in that agency that "it would be improper for the WPB, as a civilian agency in time of war, to ques- 21 tion military requirements." Donald Nelson, as head of that Board, wrote to the White House that "the War Produc- 21 Industrial Mobilization for War (History of the War Production Board and Predecessor Agencies, Vol. I; Washington, D.C.: U. S. Government Printing Office, 19^7)j p. 760. 93 ; tion Board has always taken the position that the determination of the supplies the military services need 22 is a direct function of the Chief of Staff." There is, then, some support for the view that the , Supply Control Study should be independent of budget i | guidance. Alternatives to the present practice will be ' 23 ; discussed at a later point in this study. j ' Effects of Procurement upon Requirements Once the funds have been made available through the ■ budget cycle discussed above, procurement action finally 1 translates requirements into economic activity. The prob lems and techniques of military procurement constitute an entirely distinct subject which is beyond the scope of this paper. However, there is one field of interdepend ence between requirements and procurement that is worthy of note here. This is the effect of the time element on both factors. It should be realized at the outset of this discus sion that a statement of requirements is almost meaning less unless it embodies an indication of the time periods involved. While some goods are desired to fill existing 22 ! Loc. cit. 23 Cf. post, pp. 324 et sqq. 94 deficiencies,, others are not needed until some future date to meet a forthcoming commitment or to adapt the Army's stock of equipment to planned changes in composi tion, disposition or mission. As a result, the Army makes no attempt to obtain immediately all of its foreseeable requirements. To do so would entail, in the first place, completely unnecessary storage and maintenance charges. In the second place, urgent procurement generally necessitates bringing in less efficient producers with consequent increases in cost. The fact that the cost curve can rise sharply is illustrated by a recent ammunition contract. The low bidder offered a price of $14.28 per round, but he was unable to contract for the entire quantity desired. The second low bidder charged $14.52 per round, and the next contractor bid $24.21. Even with these three contractors, the quantity desired could not be obtained in time and, hence, a fourth plant was brought into production. Here the charge was $33*36 per round or about 233 per cent of 24 the lowest bid. These penalties for undertaking what is called 24 Interview in the Ammunition Branch, Industrial Division, Office of the Chief of Ordnance, March, 1954. 95 "crash" procurement seem self-evident, yet until recently the Army endeavored to fill as much of its requirements as possible by some entirely hypothetical future M-Day. Then, when the needs were satisfied for the moment, the production lines would be shut down, the machines placed in storage or stand-by, and the working force either dis banded or diverted to some non-military pursuit. The present more realistic time-phasing of require ments statements thus permits procurement to be conducted in a more economical manner. Production is spread out without the previous peaks and valleys. Conversely, as 25 has been indicated, this more consistent level of produc tion greatly enhances industrial readiness for war and thus reduces the requirements for mobilization reserves. Proper time-phasing is thus a vital consideration in computing requirements and in accomplishing procurement. 25 Cf. ante, pp. 82 et sqq. CHAPTER IV : REQUIREMENTS FOR INITIAL ISSUE j This is the first of a series of chapters which j will analyze in some detail the various elements that make I ; up the total requirement for a given item. These chapters : will venture into fields which border on the mechanical i rather than the academic areas of study. However, the methodology of requirements computations warrant such de tailed examination on two scores. First, they are largely unknown to the military and almost completely strange to academic audiences. Second, their effectiveness--or lack of effectiveness--has a most immediate and direct bearing on a very substantial portion of the gross national prod uct. These two factors--tremendous impact plus widespread unfamiliarity with the subject--appear to make these processes a most suitable field for academic inquiry. Despite the conviction that these techniques should be subjected to detailed and critical analysis, the pres ent and following chapters will confine themselves to the ! general practices making for accuracy or inaccuracies. 97 It is felt that such minute details as the methods of entering data on punch cards would serve only to obscure the higher economic implications of this subject. I. GENERAL PRINCIPLES ON INITIAL ISSUES There are certain governing principles that have been established for the computation of initial issue needs. First, the requirements for initial issue are confined to the needs of units already In existence or units which will be activated in the immediate future. Post-M-Day materiel required for units created or called into active service after the outbreak of war is not con sidered under this heading. These wartime needs are met wither from production or from the mobilization reserve. Second, a supporting authorization document is necessary for every stated requirement and for every issue of government property. This applies not only to such troops units as divisions, regiments and battalions, but also to such "tailor-made" organizations as theater headquarters, arsenals and schools. Third, the Technical Services responsible for com puting requirements will do so only on the basis of guid ance provided by higher authority. This means that the 98 published troops lists and supplementary policy direc tives^ of the General Staff take precedence over the views of the several Technical Services in determining what units will be included in the calculations and the level of equipment they require*, To permit a great de gree of latitude in these matters would result in a com pletely unbalanced statement of needs. Technique of Computing Initial Issue On the surface, it would appear that this particu lar computation presents no particular difficulties. To take an over-simplified case, let it be assumed that an infantry division is authorized 50 tanks and an armored division includes 300 tanks. If a given operation called for three infantry and one armored divisions, the tank requirement for the task would be: 3 infantry divisions x 50 = 150 1 armored division x 300 = 300 450 On a much greater scale, this same process can produce all of the initial issue requirements for every 1 The main document referred to here is: Department of the Army, Logistics Policies and Priorities (Washington, D.C.: Office of the Assistant Chief of Staff, G-4, 1954). ■item of equipment authorized for every unit in the Army. However, it should be realized that, after a certain point, changes in just the scale of a problem constitute a change in the nature of the problem. It is felt that i such is the case here. There are nearly 1,500,000 items ! in the Army supply system and there are just under 2,000 types of units organized under just one of the several types of authorization documents. i 1 It is true that separate computations are not made j on many of the above items, but some idea of the tremendous proportions of the problem can be gained from these fig ures. In practice, the purely mechanical portion of these calculations is brought into manageable bounds through the use of punch cards and other business machinery. Authorization Documents The nearly 2,000 units referred to above are or ganized under documents known as Tables of Organization and Equipment (TO&E). These show, first of all, the structure of the unit, i.e., how many platoons in the company, how many companies in the battalion, the struc ture of the various headquarters, and so forth. They next show the personnel to be assigned to each of these sub-units and these figures are broken down by rank and 100; military specialty. Finally--and most important for the purposes of this study--the table indicates the non-expen dible, organizational equipment that is authorized for each part of the unit. These tables apply, in general, to units and or ganizations which are designed to operate in the field. That is, that govern operating, non-static groups ranging all the way from a field army headquarters to the rifle squad. Requirements generated by this class of documents constitute the majority of military (as distinct from industrial-type) equipment. For the static organizations, there are two tables vshich cover the data found in the TO&E's. These are Tables of Distribution (t/d ) which cover the personnel and organi zational aspects and Tables of Allowance (t/a ) which gov ern the issuance of equipment. In addition, T/A's are published to cover a wide variety of expendible and per sonal equipment for a wide variety of units. Here again, as in the ease of TO&E's, the basic problem is simply one of multiplication and addition. Modifying Documents In addition to the above two basic tables, there are various publications which modify the normal initial I issue requirements. These include Equipment Modification j 101 Lists, TO&E Augmentations and Appendices and special issue authorizations which might be in the form of an ordinary military letter. No useful purpose would be served by describing these documents in detail. It is sufficient for the purpose of this study to point out that there, are these additional papers which might alter the needs under a rather wide variety of circumstances. The life of the requirements computor is further complicated by the fact that movement orders or orders activating a unit might contain further modifications. These additional changes from the normal requirement generally are designed to permit the unit to accomplish some special task or to carry out its normal function under unusual conditions. It may thus he seen that reference must be made to a rather wide range of documents before the raw, basic data are at hand to begin the calculations. As might be anticipated from the brief descriptions of them given above, the documents do not appear in any one volume or set of volumes. These complications, however, are rela tively minor. A study of the differences between the theory of computing initial issue needs, as described above, and the actual practice will bring to light prob lems of much greater complexity. 102 II. DIFFICULTIES ARISING FROM TO&E'S ; The approved TO&E will be accepted here as a com- i | pletely accurate statement of the needs of the unit to ; which it applies. To do otherwise would entail a most i i comprehensive study of the techniques employed in drawing ! up the equipment portions of those documents.. Even if ! such a study were made, it would be inconclusive as the decisions are based very largely on combat experience and sound military judgment. There can be no set formula or a . priori process of reasoning which will indicate whether a tank company should be included in an infantry regiment. While this study will tfeus accept the' TO&E's as data, it should be realized that the responsible staff agencies do not. These documents are under constant review and modification. As an example of how critically the Army examines its own TO&E's, a recent survey reduced the ini tial issue equipment authorized for each infantry division . by $500,000. : r | Revision of TO&E's ; This very process of review and revision is one of \ the complicating factors in using these authorization 1 documents. The cycle for the publication of a new TO&E 103 1 can consume anywhere from three to eighteen months. The Army Field Forces, army commanders, the Technical Services , and the Assistant Chiefs of Staff, G-3 and G-4, are all i involved in this process. , The Technical Services, then, knowing that a given » ; TO&E is in the process of revision, must decide whether i to use the allowances contained in the old document or I those that are likely to appear in the revision. To ac cept the old requirement will almost certainly create an error in the statement of future needs. To accept the probable new requirement before it is approved involves : the possibility that the document might go through further substantial revision before publication. In practice, some Technical Services endeavor to keep up with the probable changes. Ordnance, with about 400,000 items in its supply system, would find it most difficult to keep current in this manner. An instance of the imbalance which might be created by such varying prac tices is found in the field of Army aviation. The Trans portation Corps, which computes the requirements for air craft, is able to keep current with pending revisions. :The Quartermaster Corps, which purchases the flying clothes ;and aviation gasoline, uses only the published TO&E's. 1 There is thus a potential imbalance between these two 104 aspects of the Army aviation program. This problem is particularly acute when some hew item of equipment is being introduced for the first time. It might take several years before all the appropriate TO&E's have been revised to include the new item. The adoption of an entirely new family of small arms is cur rently under study and, if accepted, these new weapons will appear eventually on nearly every TO&E of the Army. The Harvard ^survey team emphasized this problem by point ing out that "new items of equipment, often of extreme importance, are not included in the basic documents. In computing allowances for these items, the Technical Ser- , , 2 vices must make estimates on some other basis. Discretionary Allowances Some authorizations for equipment listed in TO&E's are qualified by phrases such as "when authorized by the theater commander." In other words, a requirement cannot be said to exist for items so annotated unless some spe cific commander takes positive action to authorize it for issue. This introduces vast areas of vagueness insofar as these items are concerned. 2 Requirements Survey (Boston: Harvard University Graduate School of Business Administration, 1951), Vol. II, P..5^. 105 There is, of course, no way of knowing in advance which discretionary items the theater commander will authorize. Furthermore, one such commander might approve a given item for issue, only to be reversed by his succes sor in that command. In instance of this difficulty arose in regard to arctic clothing which is a relatively long production lead time item. This equipment was author ized for issue to troops in Korea at the discretion of the local commander. The Quartermaster General, on the basis of prior experience, estimated that only 25 per cent of the troops would have need for arctic clothing. How ever, during the exceptionally cold winter of 1950-51 in Korea, the theater commander authorized 100 per cent of 3 the personnel to draw these items. Similar difficulties were encountered by the Harvard survey team on quite a number of items. In actual practice, of course, the commanders exercising these discretionary powers realize that sudden and unusual demands may be impossible to meet. In their " i own interest, then, they endeavor to advise the appropri ate Technical Services as far in advance as possible re garding the use they intend to make of this authority. 3 Ibid*. P-. 75- 106 The Technical Services, on the other hand, know that forewarning of increased requirements is not always possible and different services adopt different means of meeting this contingency. The Quartermaster, as stated i above, made an effort to estimate the exact amount. The ' Quartermaster Corps, in another case, assumed that the j | entire discretionary allowance would be authorized for one I type of material handling equipment. Either method has i 1 the possibility--if not the probability--of misstating the requirement. Furthermore, the existence of differing prac tices again creates the potentiality of an unbalanced bill of needs. III. DIFFICULTIES ARISING FROM T/A'S Tables of Allowance, as already indicated, generally cover the more static installations. Training centers, proving grounds, research and development boards and the permanent staff at many posts, camps and stations are . among those affected. Many of these organizations, by their very nature, do not lend themselves to precise 'authorization documents. The T/A's must, therefore, be \ ! somewhat indefinite in many instances. I i 107 Lack of Precision In T/A '. s Typical entries in these Tables of Allowance might be "1 per 5 officer students," "3 per 10 bed patients," "5 per class room" and so forth. The T/A itself gives no indication of how many students, patients or class rooms there are at the installation concerned. This lack of precise information is, of course, regrettable, but any attempt to make the document more precise would prevent it from adaptation to the changing personnel strengths or missions of these installations. In lieu of an exact authorization paper, the Tech nical Services are furnished data regarding the planned number of trainees, students and other variables upon which the authorizations are based. These, however, are subject to at least moderate error. The present writer, for example, was selected to take one advanced course which was cancelled on the day the course was to begin. It is also found frequently that commands authorized to select students for military schools do not use their full allotment of vacancies. In these instances, the actual requirement'is below the anticipated one. Extreme examples of the vagueness of some T/A's found by the Harvard team included one for an amphibious vehicle which was authorized on the basis of "1 per post, 108 ! ,4 , camp or station near a swampy or marshy area. Another, T/A 1-75j granted 1 bus, 29 passenger, 4x2 "per 3 1/2 miles or major fraction thereof of scheduled shuttle bus 5 i routing maintaining an approximate 20 minute schedule." j Referring to the first of these authorizations, it may be i ; seen that the computor of this requirement would have to I i j determine how close "near" is, what constitutes a marshy ! area and, finally, how many posts, camps and stations qualify under these definitions. In actual practice> of course, these particular requirements probably were not computed at all in the usual manner. A rough estimate could be made and this could then be corrected as requisi tions came in from commanders of installations concerned. Other Problems with T/A1s The problems created by the Tables of Allowance being under constant revision are substantially the same 6 as those already covered in the discussion of TO&E*s. They will not, therefore, be repeated here. On this score, the Harvard team remarked: "The Technical Services' 4 Ibid., p. 55. 5 Loc♦ cit. 6 Cf. ante, pp. 100 et sqq. 109 rarely get adequate information concerning the projected activities for these T/b units, and in many cases, cannot •7 obtain T/D's and T/A's if they exist." A final complicating factor concerns the lack of guidance on the activation and closing of these static installations. The troop list provides such guidance for TO&E units, but the comparable data for t/d organizations is much less reliable. For example, 17 supply installa tions were recently closed. While it had been known that some post-Korean adjustment of this sort would be neces sary, those responsible for computing requirements did not learn of the final decision until shortly before the cut-back was implemented. IV. OTHER DIFFICULTIES Aside from the problems inherent in the authorizing documents themselves, there are other complexities arising from the auxiliary publications that are used in conjunc tion with requirements process. The troop list and Logis- , tics Policies and Priorities are among the papers coming 1 * under this heading. Requirements Survey, op. cit., p. 55* 110 The Troop List Initial issue needs are mildly obscured by the fact that the troop list sometimes shows units having exactly the same designation, but different forms of organization. In other words, publication of a new, approved TO&E for an infantry division does not mean that all such divisions are then organized under the new table. Organizations in the United States, for example, might be kept for some time under the old table while those overseas might come imme diately under the new one. Prevention of errors due to this practice is relatively simple, but it makes for one more consideration in calculating initial needs. Much more critical are the rapid and substantial changes that can take place in the troop list. For ex ample, during a period of four and a half months ending in February 1951> there were eight changes in the strength and composition of the Army. It was found that "as a re sult of these changes in plan, G-3 was unable to prepare 8 a detailed troop list for all the forces of the Army." The same report on these conditions went on to point out ! as follows: Q Ibid., p. 50. Ill In lieu of a detailed troop list, Technical Services were provided with various kinds of guid ance from the General Staff. The Technical Ser vices received, for instance, the objectives of the NSC-68 plan only in terms of total numbers of troops and number of divisions.9 It has already been stressed that the troop list is a vital document in computing initial requirements. When it is rendered obsolete by rapidly changing events, the entire basis for accurate computations is lost. At a later point, the Harvard Survey reported: 10 The Troop List and Supply Supplement could not be kept current during this period. The constant changes in troop strength forced the Technical Services to use rough back-of-the-envelope compu tations . 11 In-short, each of the Technical Services had to devise its own assumptions on such critical issues as what additional service units would be needed and the overseas deployment of some units. Not only is this almost impos sible without adequate guidance, but it also creates the now-familiar problem of imbalanced statements of needs. It would be too much to expect that each of the individuals 9 hoc. cit. 10 The Supply Supplement has since been redesignated as Logistics Policies and Priorities to which further ref erence will be made. Cf. post, pp. 112 et sqq. ■ Requirements Survey, op. cit., p. 51- 112 faced with the need to make an assumption would independ ently make the identical assumption. Logistics Policies and Priorities A considerable number of modifications in initial issue authorizations are contained in the Logistics Poli- cies. and Priorities (LP&P). This document, like the troop list, is classified as secret and hence cannot be quoted in detail. However, the security restriction does not preclude certain generalizations which are quite suffi cient for the purposes of this investigation. In the first place, National Guard and reserve units are generally organized on the identical TO&B's as the Active Army. However, the LP&P specifies the levels to which these units will be; equipped. This would be a complication, but not a substantial one, if all of these units were equipped to the same level. Such, however, is not the case. Some receive two or more times the quanti ties authorized for others. In general, the importance of the unit to the nation's mobilization plans is the governing factor. Even this would not be an insurmountable problem if each unit and organization were authorized the same level of initial issues throughout its own structure. 113' Again* such is not the case. One part of a National Guard infantry regiment might be authorized* say* one- half of its organizational equipment and another part of the same regiment or another type of equipment might be approved up to the 100 per cent level. An utterly un classified unit will be used as an example--the regimental band. Even though the regiment as a whole might receive something less than its full complement of equipment* the band is generally fully equipped. These conditions* taken together* mean that those making the initial issue computation for the reserve com ponents cannot (1) use the Active Army authorizations i throughout the Army as a whole* (2) apply any one per centage as a reduction factor after the total initial needs of the reserve components have been calculated on the basis of the normal TO&E's* or (3) apply any one per centage as a reduction factor after the initial needs of any one organization have been computed. It is not intended here to suggest* even by impli- i cation* that the Army is remiss in having such varied standards for equipping the reserve forces. These appear to be realistic approaches to the problems of meeting vailed needs. However* it does greatly complicate the task of i t making the necessary calculations. ; 114 Another modification of the normal procedures im posed by the LP&P is found in the section of that publi cation dealing with distribution and supply. It states in part: "/National Guard/7 ^ units will be equipped under approved reduced TO&E allowances and in accordance with the capabilities of the unit to receive, store, maintain 12 and utilize the materiel . . . Substantially the same provision applies to reserve units. These same provisions, however, do not appear in the section of the LP&P dealing with the computation of initial issue requirements. This slight inconsistency could be interpreted to mean that the Technical Services should list the requirement for all authorized equipment and should procure that equipment at the earliest possible moment. Then, when it came to distributing this materiel, the services should consider for the first time whether the unit was capable of using and maintaining it. In actual practice--and particularly for major items--the Technical Services consider the ability of the unit to utilize and care for its equipment at the time the requirement is being calculated. As an instance, a large number of National Guard and reserve units are authorized 12 Department of the Army, op. cit., p. 48. 115 i either fixed or rotary wing aircraft. It was found, how ever, that the pilot and mechanic training program would i be unable to produce all of the necessary trained per sonnel for a period of several years. Accordingly, the i : Transportation Corps reduced its immediate requirement i for Army aircraft and then built up the time-phased future requirements in consonance with the training program. I ; Any other course would have created completely unwarranted storage and maintenance problems. Additional Considerations There are a very large number of further conditions which contribute either to complexities or inaccuracies in determining initial issue needs. No attempt will be made here to list them all, but a few additional illustrations,, briefly cited, might give some idea of the wide range of the problems involved. The Quartermaster General's office faces a somewhat i unique problem. For many items of equipment, it is nec- | essary to have strength figures, both present and future, i broken down into three separate categories--by grographic i : and climatic zones, by sex, and by grade. Clothing, in signia, and mess equipment are among the many items that make these breakdowns necessary. 116 The Quartermaster, however, is the only service ; requiring such data and hence it is not supplied in the • troop lists or other supporting documents. As a result, , the Office of the Quartermaster General must devise an i entirely separate set of assumptions to meet this problem. Another difficulty is faced by the Signal Corps, : among others, in certain categories of equipment. For i , example, a separate tank company might eventually become part of any one of a number of larger organizations. Unfortunately, this still undetermined future assignment governs to some extent the type of radio equipment the company should receive. If it is to operate as part of an armored division, it should receive radios AN/GRC - 3; if with an infantry division, it should have AN/GRC - 7- In the absence of firm data, the Signal Corps must make some assumption as to the future employment of each such : unit. i i These additional considerations add to the com plexity and time-consuming nature of computing initial ’ issue requirements. However, it should be realized that 1 problems such as that cited immediately above do not lead ! to any gross misuse of resources as the quantities of equipment involved are limited. i i CHAPTER V REQUIREMENTS FOR REPLENISHMENT Brigadier General Cotulla, when he headed the Requirements Division of the Army General Staff, pointed out that any schoolboy could do the arithmetic involved in computing replenishment needs, but it takes someone with experience, sound judgment and a crystal ball to de- 1 vise the factors that are used. Unfortunately, this chapter must serve, in part, to document that statement. The mechanics involved are extremely simple, but judgment and speculation are required in resolving the many other ( i aspects of this problem. Before going farther into the subject, it would be well to examine the terms used by the Army in connec tion with the replenishment factor. The word “replacement'' is employed when dealing with resupply of non-expendible equipment, e.g., tanks, guns, etc. "Consumption rates" 1 Brigadier General Louis E. Cotulla, "Determina tion of Requirements in the Department of the Army" (speech before the Army War College, Carlisle, Pennsylvania, November 19* 1952). i 118' ; apply to the resupply of expendibles, e.g., ammunition, food, etc. "Replenishment" is the generic term covering both replacement and consumption. As this study is more largely concerned with the major items of equipment, major emphasis will be given to 1 the replacement factor. The importance,of these factors in determining requirements may be established by study ing wartime replacement rates. The annual combat replace-' ment factor for some items is over 150 per cent of the initial issue requirement. I. GENERAL PRINCIPLES As in the case of initial issue needs, the Army's statement of current needs under this heading includes I only the peacetime replenishment. Wartime factors are, of course, computed, but the replacement needs after mo bilization are covered in the Mobilization Reserve Materiel Requirement (MRMR). Also, as was found in the study of initial issues, j every requirement for replenishment must be based upon an J t authorization document. The principal publications in this field are the Department of the Army Supply Bulletins and the Logistics Policies and Priorities. As typical ex- i , j amples, the Bulletins would provide the replacement factors 119. ! for vehicles while the LP&P includes the "day of fire” for each type of weapon, i.e., the number of rounds of ammuni tion that will be supplied for each piece of artillery, rifle, mortar, and so forth. For the most part, replacement factors are applied ; by use of the straight line method. The factor, expressed as a decimal, is multiplied by the number of the item in use in order to obtain the monthly replenishment needs. ! For example, if an organization has 1,000 trucks with a monthly replacement factor of .015, the quarterly replen ishment requirement would be: 1,000 trucks x .015 x 3 months = 45 trucks. From this brief description it can be seen that two somewhat questionable ingredients are ! employed in the replenishment formula. First, there is I , the need to.know precisely what equipment is in use during i ! the time period being covered and this, as will be brought i i out shortly, is most difficult to determine. Second, the 1 replacement factor, in itself, is always open to some doubt. The straight line method discussed above is almost I invariably applied to military type equipment, as distinct from civilian materiel utilized by the Army. In the latter case, actuarial factors have been developed and are now applied to such commercial items as port and harbor 120 equipment, etc. This, of course, requires the construc tion of survivor curves and the maintenance of age data on each type of materiel in use. In addition to the actuarial and straight line methods, both of which make replenishment a function of calendar months or years, there are other techniques that have been explored by the Army. One of these associates replacements with the intensity of use, such as the number: of flying hours or the number of rounds fired per gun barrel. Another, like the Navy's system for aircraft, makes provision for retirement of equipment due to obso lescence. Although all of these approaches will be covered in the following passages, main emphasis will be placed here on the straight line method as it is most commonly used. Throughout this portion of the study, the problems of replacement of Army aircraft will be cited frequently. 2 The writer conducted an extensive survey on that subject and hence can draw upon it with most familiarity in pre- 1 i senting illustrative material. _ _ Lt. Col. Harry C. Archer, "Establishment of Re placement Factors for Army Aircraft" (unpublished mem orandum, Office Chief of Transportation, 12 May 1953)* 121 II. APPLYING THE STRAIGHT LINE METHOD In order to compute replacements, lack of ade quate asset information necessitated the assumption that all units in the theater possessed the amount of equipment authorized in their respective Tables of Organization and Equipment.3 The above statement indicates one of the major difficulties in computing replenishment requirements. Any approach to resupply must begin with a reasonably accurate understanding of the types and quantities of equipment in ; use. This information is difficult to obtain in peacetime and almost impossible to accumulate in war. Under the latter circumstances— combat--it will be realized that shipping losses, action on the battlefield and all the other uncertainties of warfare can cause wide and rapid fluctuations in assets. Troop.commanders are naturally concerned primarily with the tactical situation and often, out of necessity, neglect to report the data upon which replacement needs are computed. This condition prompted : f t the Harvard team to declare that the reporting system: Requirements Survey (Boston: Harvard University ' Graduate School of Business Administration, 1951)» Vol. II, Appendix D, p. 8. 122 . . . evidently breaks down under combat condi tions. World War II experience also suggests that adequate loss information is extremely dif ficult to obtain from combat commands.^ Assumptions Regarding Assets In the absence of detailed information, those re sponsible for the calculations must make various assump- 1 tions or develop alternate techniques. The most common ! I of these assumptions was reported at the beginning of ! this section. It is described elsewhere by saying that "the general method of computing consists of the applica tion of replacement factors or consumption rates to the total amount of authorized allowances and other initial 5 issue equipment." There are obvious shortcomings to this method. First, computing replacement needs on the basis of initial ! issue authorizations injects into the calculations all the ■ potential error surrounding initial issue requirements. i : These possible errors were described in Chapter IV, and i ; their presence in the replenishment formulae tends to ; compound any discrepancy that.already exists. Second, the assumption that all troops have all of ^ Ibid., Vol. II, p. 58. Loc. cit. 123 their authorized equipment often is open to grave doubt. The uncertainties created by war have been discussed j i | immediately above. Even aside from combat conditions, i ! however, there can be fairly wide differences between i ■ authorized and actual issues. The assumption that all ! I units have their complete initial issue generally results, j then, in an overstatement of replacement needs. The i overstatement is created in this manner. If a unit is authorized 100 items having an annual replacement factor of .10, the replenishment need should be stated as ten per year. If, in fact, the unit possesses only 80 of the i j item, it should lose eight rather than the ten that was | anticipated. I j To overcome these shortcomings, some Technical Services endeavor to make interpolations. For example, working from the latest adequate report on assets, they might add known shipments to the theater since the date of the basic report. Then, from their knowledge of the supply pipeline, they could estimate how many of these additional items reached the using units each month. To these monthly interpolations they could then apply the predicted losses that appear in the published tables of replacement factors. This, of course, requires the assumption that actual and predicted losses were 12k identical. It can be seen that the potential error in j this method becomes greater each month and that the error I i i might increase in geometric rather than arithmetical pro gressions. Problems of Types and Models | Even where the precise assets in the hands of using I i organizations is known, there are further complicating conditions. For example, equipment and loss reporting is done frequently in terms of type rather than model. As an instance, such a report might refer to "aircraft, fixed- I wing, command." This general category includes the L-23, the preferred model, and the L-26, the substitute. One answer to this problem was described as follows: The commodity specialist preparing each work- i sheet estimated the portion of total estimated J losses which would be of the preferred (or j standard) item as opposed to the substitute (or non-preferred) item.6 ! I Obviously some such calculation must be made. Ex- 7 cept in unusual circumstances, the preferred items should ! be replaced in kind while the substitutes should not. ^ Ibid., Vol. II, Appendix C, p. 15* 7 An exception might be found when, for example, a new model tank is accepted as the preferred item some time before it will be available for issue. The substi tute would then continue to be issued to replace all losses for a time. Nor can it be assumed that losses of the two items will be in proportion to the quantities of each that are in i use. It is sometimes found, for example, that a new model contains mechanical flaws or "bugs." These create higher initial losses. Similarly, a new aircraft might i I i require new pilot techniques and, until those are devel- ! J oped, the new model may have a higher attrition rate than i I I | the outmoded model. J On the other hand, it is more commonly found that new models are introduced because, in part, they do have i J a longer life expectancy. Taking again the case of a new | tank, its attrition rate might be lowered by a vast number i ! of features including greater speed, heavier armor, lower silhouette, more powerful armament, better fire control equipment, greater fording ability, stronger engines, more fuel capacity and so on almost indefinitely. The assump tion that losses of preferred and substitute models will i be in proportion to the quantities of each that have been j issued is thus quite questionable. j It was found in one case that this entire problem J i | was easily avoided by assuming that all losses would be of j 8 the substitute model, even though new models were in use. j ( ___ Requirements Survey, op. cit., Vol. II, Appendix C, pp. 16 et sqq. 126 Of course, this is a highly unrealistic practice. Determining the Replacement Factor Once the quantities of equipment in use have been computed, there is still the substantial difficulty of determining the factor that should be applied. It is ob vious that experience supplies the best guidance in this regard and a considerable effort is made by the Army to develop accurate experience data. This enterprise is hampered by three conditions. First, it is difficult to get reliable current statistics. Second, a great deal of ) speculation is involved in determining exactly which past experience data furnish the best guide to future attri tion. Third, in the case of entirely new equipment, there is no body of experience from which to draw. These three difficulties will be discussed separately. The problem of obtaining accurate experience data was illustrated by one observer by reference to the rate used for general ordnance supplies during the war in Korea. He found: . . . the published World War II replacement factors were used rather than actual experience from the theater. In general, very little loss data had been received . . . and that which had been received .was considered fragmentary, inaccurate and unreliable.9 ^ Ibid., Vol. II, Appendix D, p. 8. The difficulties here are closely related to, if ; i not identical with, those encountered in obtaining accur- i ate asset information. The latter problem already has 10 been discussed and no useful purpose would be served by repeating it here. j i i However, an alternative solution is possible. If the using units fail to report their losses by cause, it might be possible to have the issuing depot or installs- ; I tion report the reason for each issue, e.g., initial issue, replacement, special project, etc. The Harvard team recommended this method for use within the United States, saying that any system of keeping realistic re placement factors requires: . . . some means of identifying issues made for purposes of replacement and separating such issues from those made for initial equipment, non-recur ring demands and other types of issue.H They went on to say that "present methods . . . are ,.12 not very satisfactory. As an illustration of the prob lem, the present writer found, for example, that a heli copter would be reported as being transferred from operat- i ing status to the status of an unflyable training aid for Cf. ante, pp. 122 et sqq. Requirements Survey, op. cit., Vol. II, p. 59. 12 128 the instruction of mechanics. However, there would be no j I indication of whether this transfer took place because of i i i an accident or because a training aid was needed. If the former were true, the loss should have been included in the accident experience data; if the latter, it should I not have been so included. As a result of these and I other conditions, this writer was forced to conclude: I Army experience is extremely limited both as I to the number of aircraft and the length of time j that present types of equipment have been in use. i I Furthermore, the reporting of losses has not been in such form as to permit accurate prediction of future losses.13 Future Validity of Experience Data ! J The development of a sound statistical base for 1 i replacement factors requires the use of a broad band of ! experience. Atypical incidents must not be allowed to have disproportionate influence and all types of probable conditions must be included. This requirement for a good statistical base means, in practice, that several years are needed to arrive at the probable loss rate due to ac cidents and enemy action. Losses due to wear-out, of course, cannot be determined until a fair quantity of a particular item has reached the end of the service life. 13 Archer, op. cit., p. 4. 129 Then, when reliable data finally are available, there is often a new or modified model of the equipment available so that the derived replacement factor is no longer strictly applicable. Similarly, the type of operations involved can make a great difference in the loss rate. In discussions regarding the validity of Korean experience as the basis of future wartime loss, expectancies, the writer found: Korean experience is not considered typical of that which may be encountered in a general war. Training of pilots is now better than might be ex pected under general mobilization. Secondly, losses to enemy fighters have not been a major considera tion in Korea nor has enemy anti-aircraft fire been as effective as might be encountered in some thea ters. Lastly, EUS.AK fixed wing aircraft have been operating in recent months from well prepared air fields which might well be unavailable in a new theater or in a more fluid type of warfare.14 In deriving the replacement factor for Army aircraft};, it was thus found that Korean operations were not typical of those to be expected in a general war. At the same time, World War II experience was rejected because: Current types of Array aircraft are more durable and a large proportion of them will be operating on missions differing from and safer than those of the World War II observation aircraft. Thus the high attrition rates of that war need not necessarily be anticipated in the future.15 14 Ibid., Vol. II, Appendix E, p. 2. 15 Loc. cit. i 130 It was thus concluded after examining several j 1 other collateral considerations that "there is, then, no I 1 ? firm guide for the establishment of future wartime re- i 16 ■ ' placement factors." As a result, judgment must supple ment fact in establishing these rates. i III. THE ACTUARIAL METHOD ' The actuarial method contains all of the diffi- ! culties ascribed to the straight line technique. Total assets in use must be known and these must be broken down "by type. Similarly, there are the same problems in ob taining experience data and determining which experience l I is applicable. In addition, there are difficulties which j j 1 are peculiar to the actuarial method. Lack of Data It will be recalled that, in the case of the straight line method, the absence of accurate asset data ! could be overcome to some extent by assuming that each unit possessed all of its authorized equipment. This same assumption does not afford a basis for proceeding along actuarial lines because it gives no indication of the age groupings involved. The matter of age, of course, is an 16 Loc. cit. 131 essential ingredient in this method. In short, assumptions offer no reasonable alterna tive to accurate reporting in this field. Furthermore, it seems logical to expect that the more complicated re ports involved in the actuarial method would be even more difficult to obtain than those required for straight line computations. A record of age data has been attempted in j i the case of vehicles and guns and here it was found: j These ^/actuarial methods/7 essentially involve keeping detailed records on a sample number of a given item throughout its life. Past experience with Motor Vehicle and Gun Books indicates that the problem of obtaining accurate detailed reports from field units is a major one.1? Not only is it more difficult to obtain the basic j asset data by age, but it is also more complex to main- j i tain an age-profile chart within the Technical Service responsible for each item. Similarly, survivor curves by age are more complicated to derive and maintain than the loss information required for the straight line. Accuracy of the Actuarial Method j These additional problems should be no bar to the employment of the actuarial method if it could be shown that it would make for substantially greater accuracy. Requirements Survey, op. cit., p. 59* 132 Such does not appear to he the case, particularly when dealing with strictly military equipment. For one thing, there are several reasons to believe that such losses are not a major function of age. In the first place, enemy action tends to create losses that have no immediate relation to age. One authority has remarked, "We will continue to expect losses comparable to the straight line „18 at the combat rate. in addition, it was mentioned that new models, on occasion, have a.higher mortality rate at first due to unexpected mechanical difficulties. While, in theory, this higher attrition rate during the first year of use could be incorporated into an actuarial curve, it cannot be done in practice. Irregularities in a survivor curve must be predictable and mechanical "bugs" are, by their very nature, unexpected deviations not subject to fore casts . These are major objections to the use of the actuarial method for military equipment, but there are other and more substantial objections. In the first place, the significance of the actuarial technique decreases in importance if procurement is fairly constant over a period l8 Cotulla, op. cit. 133 ' of years. In the second place, in the case of military j i equipment, the various ingredients of attrition, which \ i I i j deviate individually from the straight line, tend to can- I cel each other out and to produce an over-all loss rate . I approximating the straight line. These problems will be | j discussed separately below. I | Major Objections Let it be assumed that the Army has a constant need for 1,000 of a given item which has a total life of ten years. If the entire need were procured in one year, there would be very substantial annual differences in re placement needs during the ensuing years. There might be I . no such requirements during the first year and 600 in the eighth. If, on the other hand, one hundred were bought ■ every year, there would be a constant age profile and the actuarial curve for the entire body of equipment would be a straight line. In practice, of course, procurement is never quite that constant. Neither, on the other hand, is procurement generally accomplished in a single year. The impact of this consideration was analyzed as regards Army aircraft. That study reported: Secondly, par. 6, App. C, noted the identity between straight line and actuarial techniques 134 when procurement was constant. .Admittedly, pro curement is not constant for any one model of aircraft (e.jg., L-19)» However, neither is pro curement for an entire class of aircraft » observation, fixed wing) normally accomplished in a year or two. Using the observation, fixed wing, as an example, deliveries have been or will be made every year from 1947 through 1957 with the exception of 1949* • • • Thus, when the re placement factor is based on a general category of aircraft rather than upon a specific model, •{'the error between actuarial and straight line methods is further reduced.19 This observation is believed to be generally applic able to military equipment. As will be brought out 20 later, procurement activity will tend to become even more constant in the future and this will tend to further reduce the significance of the actuarial approach. The second major objection to the actuarial method is found in the tendency of the two types of loss curves to complement each other. If all losses were due to acci dents, natural phenomena and so forth, the attrition curve would slope down and to the right. Specifically, let it be assumed that 1,000 items have been procured and one- tenth of the remaining stock will be lost annually due to accidents. This would mean that, during each of the first 19 Archer, op. cit., Appendix D, p. 2. 20 Cf. post, pp. 178 et sqq. | 135 three years, the losses would be 100, 90, and 81, respec tively. During the eighth year, when actuarial losses might be at their highest, accident losses would be down to 48. On the other hand, losses due to wear-out produce an entirely different curve. It tends to slope upward to the right for the first two thirds of three quarters of the line, after which it declines rapidly. In short, when wear-out losses are at a minimum, accident losses are at their highest. When wear-out losses are at their highest, accident losses are approaching their lowest ebb. When applying this phenomenon to Army aircraft, it was j concluded that "the two curves tend to be complementary „21 and, to an impressive extent, counteract each other. This compensating relationship is illustrated in Figure 3. It Is realized that the actuarial curve can embody losses from both accidents and wear-out. So many types of military equipment tend to have such high attrition from causes other than wear-out, however, that the sig nificance of the age ingredient is greatly reduced. This finding appears to be contrary to the reasonable expecta tion of having a higher accident rate as the age of the 21 Archer, op. cit., Appendix D, p. 2. 136 Quantity A ssu m ed n o n -cu m u la tiv e rep la ce m en t c u r v e s for A rm y a ircra ft: (a) If a ll l o s s e s due to w e a r-o u t (b) If a ll lo s s e s due to a c c id e n ts (c) If l o s s e s due to both a c c id e n ts and w e a r -o u t S traigh t lin e r ep la c em e n t — r Y e a rs F I G U R E 3 N E U T R A L I Z I N G R E L A T I O N S H I P OF W E A R - OUT AND A C C I D E N T LOSS C U R V E S equipment advances. However, the Civil Aeronautics ; Administration informed this writer that accidents seemed more closely related to "the use of civil air craft rather than their age,” and that "accidents attrib uted to personnel unsafe acts predominate, whereas those attributed to materiel or maintenance difficulties are „22 greatly in the minority. IV. OTHER METHODS While the basically sound principle of actuarial methods is here rejected for computation of military re plenishment needs, there are other alternatives to the ordinary straight line which are entirely suitable to Army problems. These include the method which makes re- placement a function of use and the approach which is termed the "planned service life." ! Function of Use Perhaps the best example of relating replenishment to use is that employed by the Air Force. In time of i peace, that service makes replacements of aircraft a func tion of flying hours and in wartime it is a function of 22 Ibid., Appendix D2. 138 i sorties, i.e., missions flown. The sortie or mission j concept does not lend itself to the non-combatant type ! i of. aircraft used by the Army, but the flying hours con- j t cept is entirely applicable. Without going into labori ous detail, it seems completely reasonable to expect both accidents and wear-out to increase with the actual use of i i the equipment in question. However, employment of this technique as a means of computing future replenishment needs requires a very accurate forecast of what future flying hours will be. This has been accomplished by the Air Force which expects an annual error of five per cent or less. The training and operational flying hours are now fairly well pre dictable within the Air Force and form a sound basis for resupply computations. However, this writer compared the estimated flying hours with the actual number of hours flown by Army air craft during four successive quarters. Here it was found that the error ranged from a low of 29.3 per cent to a 23 high of per cent. It is obvious that this is an un acceptable margin of error and that flying hours cannot be used as the basis of computing replacements until the Ibid., Appendix Dl. I 139 forecasting is greatly refined. In that future use is j I not programmed in detail for the majority of other types ‘ i of Army equipment, it does not appear that it is practi- ! cal to relate replacement to use for the present. j There is, of course, a substantial objection to predicting flying hours or other types of use on the basis\ I i of past experience instead of future programs. When fu- { I ture use is predicted from historical data, there is an j j element of circular reasoning involved. If 10,000 flying I I hours were flown, or 10,000 rounds were fired during some past period, it would be assumed that the same demand would recur in the future and the necessary spare parts, fuel, rounds of ammunition or other supplies would be procured to support that amount of use. Any attempt to exceed the predicted program is hampered by the fact that there would be insufficient supplies to permit any great excess in use. Thus, actual use is, of necessity, held close to predicted use regardless of any increase in de mand. This artificially reduced usage then becomes a part of the experience data upon which future use is pre dicted and the error is thus perpetuated. It is thus found that relating replenishment to use is practical only when future use is accurately programmed. As such programming is attempted on a relatively small 140 number of items in the Army., this technique does not j f appear to offer a reasonable alternative to the straight ; j line method. ' Planned Service Life ! The Navy, on some items, attempts to predict in advance how long a given model of equipment will be kept in use. This practice is based on the assumption that obsolescence can be predicted with reasonable accuracy some time in advance. Research and development projects are relied upon to give an indication of material that can be expected in the future and potential enemy progress i ! in the same field reveals the degree of need for more up-to-date equipment. Thus, when a new model aircraft, for example, is made operational, the Navy endeavors then to forecast when i a still newer model will begin to force the retirement i of its predecessor. Wear-out, therefore, is not a signifi cant consideration and losses due to accident and enemy action create the only other replenishment requirement. This method can be employed only on the few major items that warrant such detailed attention. For the most part, it is impractical if not impossible to predict exactly when obsolescence will occur. Even when an _ ; ■ — - 1 2 + i attempt is made to do so in the Navy, it is never entirely satisfactory. The degree of error in predicting when 24 materiel will be retired often exceeds 50 per cent. It would appear, therefore, that this Navy technique does not afford a satisfactory alternative to present Army methods. j t V. ADDITIONAL PROBLEMS There are a number of additional problems that ob scure future replenishment needs. For example, there is the question of the number of different replacement factors that are to be used for each item of equipment. It is obvious that wartime replacements must be made at a much higher rate than in times of peace, so there must be a different factor for each of those two conditions as a very minimum. Moreover, in time of war, units actively engaged in combat will incur much higher losses than those in the United States or within inactive overseas theaters and hence the wartime factor must be broken down into combat I j and non-combat ingredients. This latter breakdown would j not be necessary if the same proportion of the Army were 24 Ibid., Appendix B, p. 1. 142 engaged in combat throughout the war but., in fact* the J | proportion varies rather considerably from time to time. j j ■ Similarly, in peacetime it has been found that the I i I reserve components and training centers experience a I I different attrition rate than the remainder of the Army. j ! This affords a further opportunity to establish different j i ; replacement factors. Climatic conditions, topography or the local proficiency in pilfering also can make substan tial variations in the loss rate. The Army is thus confronted with an unhappy choice I i whenever experience data indicate consistent and substan- I j | tial deviations from the normal loss rates. The choice | is between obtaining more accurate total replacement re- 3 quirements or maintaining a relatively simple system of loss reports and replenishment calculations. Every time an additional replacement factor is established to provide for an additional variable, it becomes necessary to have a further breakdown in the experience data and an addi tional series of computations in applying that factor. In practice, of course, it is impractical to devise a factor for every single variable and hence a compromise is reached between accuracy and facility. Again, then, the element of judgment must be introduced into a process that would appear to be purely mechanical. Adequacy of Guidance Prom the earlier description of how replacement factors are applied, it will be realized that the Troop List must be used to determine how many of each kind of unit will be in each geographic area during each time I j period. However, during periods of abrupt and substantial change in the Troop List, the Technical Services are not always supplied with this detailed information. It was found on one occasion that the services were given these data "only in terms of total numbers of troops and numbers , £ 5 of divisions. Furthermore, it was announced that a given build-up in strength would be accomplished during the period of one year, but no indication was given of the time-phasing of this increase in strength. In that the formula for replenishment appears to be initial issue X replacement factor X the number of months, it is evident that the Troop List must be accurate and detailed to derive the initial issue part of the formula. In the absence of such guidance, the Technical Services must make their own assumptions regarding all the non- divisional units that are to be activated. These assump tions, made separately in each of the Services, open the Requirements Survey, op. cit., p. 50. ' 144 j I door to inaccuracies and imbalances in the statement of replacement requirements. Similarly, lack of guidance as to the time-phasing j | of the build-up creates the need for assumptions as to j the date each unit will be activated. If four new divi- j sions were to be formed during the course of a year, it would be possible for all of them to be established in the first or last quarter or for one of them to be created in each quarter of the year. The requirements for re-sup- ply of the new organizations would be stated differently in each case. In practice, it is customary to make the latter assumption--that the new units will have an average I life of six months during the year in question. Again, however, there is room for error and imbalance. More Assumptions It was brought out in an earlier chapter that budget guidance, on occasion, directs that assumptions be made as 26 to the duration of hostilities. Guidance of this nature, when not based on realities, creates the greatest error in the area of replenishments. As the combat replacement rates can be over ten times the peacetime rate, it can be seen that a gross inaccuracy can be created by imposing Cf. ante, pp. 88 et sqq. 145 the peacetime rate in defiance of all probabilities. When this has been done, some Technical Services have followed the guidance while others found it so unrealistic and intolerable that they computed requirements at the 27 wartime rate of consumption. Again an imbalanced state ment of requirements resulted and those that followed the guidance on this point grossly understated the real re placement need. Another assumption that is sometimes made also leads to potential error. That assumption was described 1 ; by the Harvard team thus: i I With respect to tanks, estimated Korean loss | figures also included all of a group of tanks as signed /to a special operational project/'. It I is a standard Ordnance assumption that all equip ment assigned to such special operational projects be considered lost.2o It is evident that constant use of this assumption will lead to an overstatement of needs. As this creates a relatively minor discrepancy, it will not be discussed further here. The introduction of foreign military aid program has generated replenishment problems, not only in re supplying foreign armies, but also in connection with Requirements Survey, op. cit., Appendix C, p. 70. 28 Ibid., Appendix C, p. 15* 146 replacements for the United States Army. When allied forces are given equipment, a large portion often comes from Army stocks. These withdrawals from American assets can reach very substantial proportions. The Army is then faced with the choice of replacing these losses with identical equipment or taking advantage of the sudden turnover in stock and procuring more modern equipment. Where possible, the latter course is followed. This means that the Army is faced with a relatively sudden modernization program with old equipment being re- i i J j placed long before it is worn out or lost through other i i j normal attrition. Ordinarily, when foreign aid is not in volved, modernization is accomplished by replacing ma terial as it is lost or ceases to be useful. The net effect of this development is described by one authority i in these terms: In the past, we have assumed that our inventory would approach average age. Since Korea, however, we have engaged in a vigorous program to modernize our equipment. . . . Our actual losses where modernization has been accomplished therefore will be much lower than the straight line for the next few years.29 29 Cotulla, op. cit. VI. CONCLUSION I ! I There are many other conditions which detract from i i i the accuracy of replacement computations. However, the j i major difficulties have been covered and it is undesirable ; to devote a disproportionate amount of attention to this j i one element of requirements. Therefore, an attempt will now be made to reach some general conclusions. First, it has been found that replenishment needs, like those for initial issue, are not subject to precise statements. Second, the basic guidance is occasionally inadequate. Third, there are large areas where judgment must dominate. Last, the experience data from which the analysts must work often are open to some doubt. The importance of the resulting discrepancies has been de scribed as follows: If our factors are too high, we have no alter native but to reduce our forces with the consequent risk such action entails; if the factors are too low, then we face the possibility of denying needed equipment to our 4 t,roops.30 The Harvard team concluded, "Obviously, the esti- J mation of realistic requirements demands constant review. Lo c. cit. The mechanism now used for this purpose is inadequate i i i 31 Requirements Survey, op. cit., p. 58. CHAPTER ¥1 j i I SPECIAL PROJECTS I i i i In both war and peace, the Army has requirements j beyond those covered in the regular series of authoriza- j tion documents. These needs arise when equipment or ma terials not issued under TO&E's or T/A's are required for some special mission; ’ A typical example of this type of operation might be the establishment of new line of communications. This j might include construction or improvement of a port, erection-of a staging area for troops, building of depots, roads and railroads and installation of long-line tele phone and teletype facilities. The placing of such a communications zone into operation would give rise to two ! types of initial requirements. In the first place, a port battalion, signal com- ! { ! panies, truck and railroad units and so forth would be i j needed to operate the facilities once they were construct- t ed. These troop units would possess their own organiza tional equipment issues under the appropriate TO&E's and, perhaps, under additional modification documents. Such I 150 i equipment would, normally be sufficient to operate the facilities once they were established and the computation j of these requirements completed, as described in Chapter ; IV, Requirements for Initial Issue. In the second place, the actual construction of the line of communication would involve equipment and j 1 1 I supplies not organic to the operating units. However, j not all such materiel would come under the heading of ' special project issues. The Signal, Engineer and Trans portation Corps units encharged with erecting the line I of communications also would possess much of the eonstruc- ! I'tion equipment needed. ! j I The special project requirement in this case, then, ; i | 1 would consist of the supplies and equipment needed to construct the facilities beyond those items which are normally organic to the constructing organizations. This special project requirement, in turn, would be broken down into two categories of materiel. One would be construction t equipment such as bulldozers, etc., which could be returned) to depot stocks once the task was completed. The second 1 would be supplies used in the project such as lumber, ! concrete, telephone lines, railroad tracks, and the like. Equipment required for special projects Is known as Class IV supplies and the two terms are used here interchangeably. The Class IV needs that are listed as such in requirements studies are those created by the peacetime operations of the Army. While a vast number of special projects are planned for different combat operations, those needs appear in the Supply Control Study under the heading of mobilization reserves. I. COMPUTATION OF CLASS IV NEEDS While special project equipment is not covered in the authorization documents previously discussed, it does not follow that the types and quantities of materiel to | be used are left to the whim of the local commander. A precise and prescribed series of steps must take place before any requirements of this sort can be said to exist. Special projects are not ends in themselves. They are designed to support some military operation. Thus, the allocation of materiel for the construction of j trenches, fortifications and barbed wire entanglements would be authorized only if an approved operational plan existed and the plan called for defenses at the time and place in question. For example, an operational plan was drawn up for the withdrawal of troops behind the demili tarized zone in Korea and the establishment of a new ! 152 defense line along the southern border of the zone. It was this operational plan that generated the requirement j for the Class IV supplies. Strategic Logistic Studies Once an operation has been conceived and approved in general terms, it becomes necessary to conduct what is ! known as a Strategic Logistic Study. The purpose and scope of these studies is officially described thus: The immediate purpose of each study is to de velop realistic materiel . . . requirements for support of specific operations with forces of given size and composition in a particular area. The areas, operations and forces are those pre- | sdribed in an approved plan. . . .1 Each Strategic Logistic Study consists of two volumes with appropriate annexes. The first volume de scribes the proposed operation while the second contains i the Base Development Plan. It describes in great detail j l such environmental factors as climate, terrain and in digenous resources of the area in question. The discus sion of local resources normally would contain data on roads, railroads, pipelines, power facilities, sanitation, j i cold storage, housing, water supplies, and so on. The 1 Department of the Army, Strategic Logistic Studies (Washington, D.C.: Office of the Assistant Chief of Staff, G-4, 1952), p. 2. base plan also lists assumptions that are to be used and ' it contains planning factors such as the average number j of feet of each type of bridge that will be required for each mile of road net. I j j Technical Service Annexes On the basis of the data contained in the Base Development Plan, each of the Technical Services prepares an Annex. This gives a time-phased listing of all Class IV materiel needed to accomplish the operation. These computations, if started afresh each time an I f ' operational plan was conceived, would consume the full j | j j time efforts of a very large staff within each of the j Technical Services. In practice, however, the gross Class | I IV requirements are put together in what might be called i prefabricated increments. The Chief of Engineers, for example, might be called upon for the requirements for a staging area designed to process 5*000 men per month in a temperate climate. That office has already computed the needs for the construction of different sized staging ! ; areas in different climatic regions and would simply add the appropriate total to his other Class IV require ments . Even where the pre-calculated installation is not j identical with that called for in the operational plan, j ; 1541 i the Technical Services may avoid a completely new study 1 by interpolating from a similar computation. Thus, in- J structions given in Strategic Logistics Studies are: | i Changed requirements to conform to moderate ! changes in variables may be computed by factoring J the original requirement according to the change j in the variables which entered into their deter- | mination.2 J i However, there are many parts of the Base Develop ment Plan which do not lend themselves to pre-calculated "building blocks" of this sort. The building of roads, i for example, can vary tremendously in its complexity. Swamps, permafrost, mountains and rivers can cause large deviations in any construction task. In these cases, the computation does not lend itself readily to any formula and reliance must be placed upon experience and judgment. - Conversion to T/A1s Special operational projects, by their very nature, i are not intended to be continuing projects. The Class IV ! materiel devoted to their accomplishment normally will be converted into fixed facilities or will be available for other uses when the construction phase is completed. However, the supplies and equipment embodied into the 2 Ibid., p. 3• 1 ~ ~ ~ 155 I I project will require replacements and pipelines to keep j them in operation, and hence, it is desirable to.convert j these projects to.a status where their logistic support will become more purely automatic. With this in mind, it is desirable to pick up on | I new T/A's all the multitude of non-expendible materiel | that will require replenishment support. Generators, | harbor craft, X-ray machines, laundry equipment and camou- | 1 flage nets are among the items that might be included in j such a project. Accordingly, it is directed that "so far as possible, non-expendible items will be included in theater T/A's rather than in peacetime projects.1 ' ! This policy does not mean that replenishment is i | | not provided for Class IV supplies until they are picked 1 i up on a T/A. On the contrary, the General Staff directs: I "All non-expendible items charged to a peacetime project will be considered to be in use, and therefore will re ceive replacements and spare parts support similar to 4 TO&E and T/A items." However, as t/a authorizations are published and recorded on punch cards, it is much simpler \ 3 Department of the Army, Logistics Policies and Priorities (Washington, D.C.: Office of the Assistant Chief of Staff, G-4, 1954), p. 8. 4 _ Loc. ext. 156 to compute replenishment needs when the permanent Class j IV equipment is converted to come under a T/A. ; j i i II. PROBLEMS CONNECTED WITH CLASS IV i | | The needs for special projects create problems that J i ; are quite different from those found in other ingredients of requirements. For instance, the time-phasing of any j one project or series of projects can have a substantial i impact upon the total Class IV needs. Time-Phasing During the course of a year, an overseas theater i i ! might have three different special projects, each of which j j requires the use of five road graders. If, for some reason, all three projects must be carried out simultane ously, there is a requirement for fifteen graders; if consecutively, the need is five. Of course, every effort would be made to avoid the higher demand, but consecutive scheduling might create a situation where a delay in one ! i i would create a delay in all. Time-phasing is thus of particular importance if economy is to be obtained, but, being new enterprises, it is often difficult to estimate the time periods for each step of each project. Assumptions and Guidance i i While Strategic Logistic Studies gives the Techni- j cal Services every possible type of guidance, each problem) is generally so unique that many of the assumptions must j be left to the Technical Services themselves. For example], it was pointed out in the previous section that the j j studies listed known indigenous resources. Each of the j services must then make assumptions as to how much of those local resources will be usable. This step must be taken, of course, in order to arrive at the net requirement that must be met from the United States. Not only does this situation lead to possible error, but there is also the chance that two or more of the services will plan to use the same indigenous resource or facility. On occasion, the pressure of events may prevent the accomplishment of a detailed study and, in such a j i case, the Technical Services have little or no guidance. In one such case it was found that the special project needs were computed as follows:^ | Requirements Survey (Boston: Harvard University Graduate School of Business Administration, 1951)> Vol. II, Appendix D, p. 27. 158 The Class IV requirement was calculated by j taking 20 o/o of the /initial issue requirement/. ; The 20 o/o figure was the Signal Corps estimate ! of the relationship of Class IV to TO&E and T/A j allowances in World War II. I { i A final difficulty is created by the fact that j i special projects are one-time operations and, hence, in j | general, not requiring a supporting pipeline. The fact ! i - ; | that a pipeline is furnished when the project is estab- j ! lished under a T/A seems to Indicate that some measure of I i i i j stock level and in-transit suppobt is needed throughout. j Nevertheless, it is directed that "quantities to J j j | be in the pipeline from the Zone of Interior are not in- j ; 6 ! I eluded in requirements developed in the study." The fact: : that this type of support is needed is also substantiated ‘ } by the fact that replenishments are provided. The omis sion of any supplies in transit or in stock thus seems to result in an underestimation of the true requirement. To all of these uncertainties, which exist in peacetime, must be added the much greater ones created by war. The planned use of indigenous resources might be pre-j eluded by enemy action or by American action before seiz ing the area in question. Despite the areas of vagueness ^ Department of the Army, Strategic Logistic Studies, op. cit., p. 6. 159 that surround some aspects of this subject, the possible ; error is of relatively minor importance. It has been j i estimated that Class IV supplies and equipment constitute ! I 7 I something less than three per cent of all requirements. j 7 Brigadier General Louis E. Cotulla, "Determina tion of Requirements in the Department of the Army" (speech before the Army Mar College, Carlisle, Pennsyl vania, November 19, 1952). CHAPTER VII PIPELINE REQUIREMENTS The fourth and final requirement created by current j I peacetime operations Is that designed to assure a steady flow of materiel to the using troops, where ever they may be in the world. This element is known as the "pipeline1 1 ■ requirement, and it is described in one document as follows: I For requirements planning purposes, a quantity ! estimated to be in-transit is added to all levels. | Authorized levels include those items and quanti ties necessary to maintain a steady flow of ma teriel from continental United States Depots to the ultimate point of use, sufficient to support the planned current operations of the organiza tional units or personnel supplied.1 I. INTRODUCTION As In the case of requirements for initial issue, replenishment and special projects, there are certain general principles governing the quantities and types j of equipment that may be included in the pipeline. 1 Department of the Army, Logistics Policies and Priorities (Washington, D.C.: Office of the Assistant Chief of Staff, G-4, 1954), p. 6. These principles will be discussed after an explanation of the terms commonly used in these computations. I General Principles The pipeline requirement is composed of two ele- ! ments. The first of these is the stock level or reserve of supplies that may be kept on hand in the various depots. This stock level is identical in nature and purpose to ; the inventory commonly maintained in ordinary business. | There are fluctuations in both receipts into and withdraw- i als from the usual stock of goods and there must be some i i "cushion" in the form of an inventory to assure that de- ! : ! mands will be met. Also, as in sound merchandising prac- I I tices, this cushion must be big enough to meet any reason able demand without being so huge that vast sums are need lessly tied up. Unnecessary warehousing and maintenance costs are also incurred when stock levels are unrealisti- i cally large. The second element of the pipeline consists of those goods actually in transit at any given time. If, for example, a unit in Europe has a monthly requirement for ten tanks and it takes two months for a shipment to reach the unit from the United States, it is then necessary to ! !have twenty tanks en route at all times. ! 162 The computation of pipeline requirements, like all other types, is surrounded hy fairly rigid authorization documents. It is correctly feared that the Technical Ser vices would produce widely differing pipeline factors if such guidance were not imposed. Thus, the level of stocks and the in-transit time are specified by the General Staff of the Army. ! It should be realized that the stock levels re ferred to in this discussion are the operating inventories and have no relation to the stocks held for mobilization or other contingencies. It should also be understood that there is a distinction between the requirement for in transit stocks and the actual quantities of goods that are in transit. The flow of materiel that actually moves in the pipeline includes items intended to meet initial issue needs and for special projects. These are non-recurring demands and hence there is no need to maintain in-transit j i and stock levels for them. The pipeline requirement, ! i then, is based on the anticipated recurring demand created by the replenishment needs. i How Computed The computation of pipeline needs is based upon two different sets of figures. The first of these, as already indicated, is the replacement requirement for each area. 163 The method of determining that need was described in Chapter V and needs no further elaboration here. Before I leaving the subject, however, it is interesting to recall ! | that there were many factors discovered in the discussion in Chapter IV which made for potential error in the com putation of initial issue requirements. j These initial issue needs then became the basis i | for computing replenishment requirements and so any error | contained in the first step was compounded by deficiencies that surround establishment of replacement factors. Now the replenishment requirement, with its possibility of | double error, is found to be one of the ingredients of the pipeline needs. Thus, any shortcomings of this com putation will further aggravate the chances of error. It is a chain of steps, each dependent upon the accuracy of its predecessor and each containing some grounds for inaccuracies. The second set of figures involved in calculating the pipeline consists of the numbers of "days of supply" authorized for each geographic area. The day of supply i is simply another way of expressing stock turn-over. ! It is the average daily consumption of an item within the theater in question. The authorized days of supply for in-transit and stock levels are published periodi- 2 cally and these figures must be used in the computation. The General Staff directives might establish the total pipeline for the European Command by authorizing, for example, a 60-day stock level within the theater, a 60-day in-transit time, and a 30-day level within the | United States depots supporting the theater. In this hypothetical case, the pipeline would be said to consist of 150 days of supply. The actual mathematics involved is comparatively simple. Using the'pipeline factor arrived at in the ex ample immediately above, it will be seen that the days of supply equal five months. Hence, if 5*000 rounds of a particular ammunition are consumed per month in the theater the equation would be 5*000 rounds times 5 months of supply, which equals 25*000 rounds required for the pipe line. The same process is repeated for each theater for each item in order to arrive at the total pipeline require-! ment. It will be noted that this need is stated as an t absolute quantity and not in terms of an amount needed \ I t per month or per quarter. In this respect, the pipeline 2 The principal documents referred to are Logistics Folicies and Priorities, op. cit.; and Department of the Army, Supply Control System (Washington, B.C.: Office of the Assistant Chief of Staff, G-4, 195^')• 165 i requirement is like initial issues--once the need is j i filled, the requirement is non-recurring. Of course, I changes in the numbers or types of units in the area or in the equipment they are authorized will necessitate changes in the pipeline requirements. Similarly, altera tions in authorized stock levels or in the transit time will have an impact upon the requirement. Once the adjust ment has been made, however, the new pipeline remains adequate indefinitely or until the next alteration. II. EFFECTS OF INADEQUATE GUIDANCE I The same Troop List guidance that was found so t j vital in previous chapters is also a requisite in comput ing the pipeline needs. Similarly, information or assump tions also are needed regarding the duration of hostili ties, the use made of discretionary allowances and other such variables. The Harvard team found this to be a problem and reported: Generally the assumptions to be used in__ applying these /Tn-transit and stock level/ fac tors are specified in the Supply Supplements and occasionally in other documents. In many cases, however, requests for requirements studies did not include specific assumptions for use in ap plying pipeline and stock level factors. In such cases, it seemed doubtful whether uniform ity existed in the manner in which the Technical 166 3 Services applied these factors. j ! The Troop List ! | In that the pipeline needs are based, in part, ; upon the replenishment requirement, it would seem reason able to expect that no additional guidance from the Troop ! List would be necessary beyond those already used in com- ! puting replenishments. In fact, however, different-'assurap-j I tions are often called for in applying the pipeline fac- j tors and these will be discussed here. \ j In one instance, for example, it was found that j there was inadequate guidance regarding the time-phasing | of a build-up in Army strength over a period of one year. j j In computing the replacement needs under these conditions, i the Quartermaster decided to assume that this increase would be evenly distributed over the four quarters of the year. However, in calculating the pipeline requirement, the same office decided to assume that the entire increase j 4 I took place on the first of the year in question. This j assumption, of course, did not affect the total net re quirement, but it did make it necessary to obtain some of 3 Requirements Survey (Boston: Harvard University Graduate School of Business Administration, 1951)> Vol. II, p. 60. 4 Ibid., Appendix D, p. 11. the assets earlier than necessary. Similarly, it may be seen that inadequate data on ! the geographic distribution of units or the speed with | which cuts in strength are to be made will have a profound j effect on the pipeline needs. For the most part, however, i the analysts employ the.same assumptions here as were used ! in the computation of replacement requirements. j i Duration of Combat • ! There have been occasions when, for planning pur poses, the Technical Services find themselves in a position I " * S where they feel they must knowingly ignore the guidance 1 ! I | that is provided. Such an instance occurred when the ser- j i ' ' 1 vices, were told to assume that hostilities in Korea would not continue beyond the end of the fiscal year. The change from a combat to a peacetime replenish ment rate has a considerable impact on the pipeline. An amount of ammunition, for example, sufficient to last one day at combat rates of consumption might be enough to last half a month at peacetime rates. By the same token, if-' the total in-transit and stock level authorized for Korea had been six months of supply, the change to peacetime con sumption rates would mean that the same assets in the pipeline would be sufficient for seven and one half years | 168 of supply. Obviously, the pipeline, under these condi- ! I tions, would have to be allowed to "dry up" until the assets were down to authorized levels at peacetime rates j of consumption. i | Faced with this very problem, the Quartermaster , i decided that the guidance was too unrealistic for planning I i ! j ' ■ purposes. The result of this conflict of opinion has been described as follows: Although this assumption was understood by the Quartermaster to mean that it would be unnecessary to continue a full combat pipeline, they felt they would be in an impossible position if they did not do so . . . and accordingly the Quartermaster in cluded the pipeline ^/at combat rates/.5 It was difficulties such as this that forced the same study to conclude that "the handling of these prob lems becomes increasingly difficult when there are inade- ! „6 :quacies in programming information and guidance. i i i i ! III. OTHER CONSIDERATIONS As in the case of the replacement factor, there is the problem of deciding whether the pipeline requirement should be based on actual assets in use or upon the quanti- 5 Ibid., Appendix C, p. 70. 6 Ibid., p. 61. j 169 j ties the troops in question are authorized to have. Gen- j I I eral Staff instructions on this point are quite specific, i i They state: "Both authorized level and in-transit current; requirements will he computed based on the quantity of I 7 I items actually in use." j f The difficulties of determining what assets are j j g ; ! actually in use have already been described. 1% is not too surprising, then, to find the following description of how the pipeline needs were arrived at in actual prac tice. In this case, the figures have been altered for i i I security reasons. i ; For instance, using the example of tanks, the j replacement factor of .05 would be multiplied by, | say a six months level, and in turn be multiplied ! by the initial allowance of 1000 to give a supply level of 300.9 This use of initial issue authorizations instead of actual assets in use is recognized as being an unsatisfac tory substitute. However, when asset information is lack ing, there is no other course open. It is thus seen that deficiencies in asset reporting have an impact not only upon replacement requirements, but also upon pipeline 7 Department of the Army, Supply Control System, op. cit., p. 22. — 8 Cf. ante, pp. 122 ejt sqq. ^ Requirements Survey, op. cit., p. 32. Italics added. | 170 needs. The same difficulties will reappear for the third time in the subsequent discussion of converting gross I ■ requirements to net requirements. Automatic Issue j When a new operation or a new geographic area is j ! first involved, military planners are confronted with a j most difficult problem. Not only are there no first-hand experience data as to what consumption will be under these new conditions, but there is also a deficiency of informa- j tion as to how long goods will be in transit and what S ' f ! stock levels are necessary. i j | To meet this situation, particularly in the case of i j spare parts and secondary items, a system of automatic I | issue is established. This technique is designed to fill up the newly created pipeline so that operation may pro ceed while experience data are being accumulated. Materiel is shipped in pre-planned proportions without waiting for requisitions or other indications of actual needs. It should he realized that this system of automatic i issue is not part of the requirements computation process; it is a function of distribution. It concerns the use to be made of assets that are already on hand In depots. However, this urgent need to establish a new pipeline does have an impact upon requirements. Almost inevitably some 171 of the materiel forwarded under this system is an excess of actual needs and it is thus tied up in an overseas theater where it cannot be effectively applied against stock level requirements of other areas. Computation of Factors Up to this point in the present chapter, the authorized stock levels and in-transit factors have been accepted without question. The number of days of supply allowed for each of these ingredients is, however, subject to some error. In the first place, the present in-transit factor for all overseas areas is now listed as a flat 10 60 days of supply for all parts of the world. It is obvious that, in fact, it takes goods longer to go to the Far East Command than to the Pacific Command, e.g., to Hawaii. Similarly, the location of the shipping depot in the United States will influence the in-transit time. Establishing a universal in-transit time of 60 days is evidently a compromise between realism and practicality. One alternative to the present practice would be to estab lish a different in-transit time for each different destin ation, even different destinations within the same theater. 10 Department of the Army, Supply Control System, op. cit., p. 22. 172 For example, it would seem reasonable to expect quicker deliveries to troops on the coast of France than to those i J now on duty in Austria. In the same manner, the transit time could be made to vary with each group of commodities, depending upon the geographic location of the shipping depot. | While such practices might make for greater accur- j i acy, it would not be difficult to imagine its leading to an accumulation of a thousand or more factors. While the present system creates some error, it need not be a sub stantial one. In fact, if the pbesent world-wide average in-transit time is 60 days, the only error would result from the fact that all goods are not sent in exactly the | same proportion to all overseas destinations. The authorized stock levels are not subject to proof or disproof. Their computation would be a more-or- less mechanical process if they were designed solely to meet normal or seasonal demands, as in the case of merchan dising. However, where the merchant would find it unprof itable to hold stocks capable of meeting erratic changes ! in deliveries and demands, the Army has what might be called a "captive" consuming public for its depot system. It cannot ignore any potential legitimate demand because there is no other source of supply for many items. Hence, 173 while the depot levels are greatly influenced by reference ! to turn-over data, those levels cannot be governed solely i ! l by that consideration. Human judgment must be applied to j i the problem and the end result is, of course, something less than a precise figure. t The stock levels and in-transit factors discussed in this chapter are not designed to accommodate the sudden changes in demand that would be incident to the outbreak of a war. They are intended only to meet current opera- | tions and the wartime pipeline requirements are included j in the Mobilization Reserve Materiel Requirement. The i j latter requirement will be the subject of discussion for i j the following chapter. i i CHAPTER VIII MOBILIZATION RESERVE MATERIEL REQUIREMENT The Mobilization Reserve Materiel Requirement (MRMR) is the fifth and final ingredient of gross requirements. Reserves, in general, have been defined as the "supplies accumulated in excess of immediate needs for the purpose ! of insuring continuity of an adequate supply or for a particular purpose."1 Working from that basic definition, it may be said that the MRMR consists of those supplies required to be in stock on M-Day, in addition to those needed for normal peacetime operations, in order to as sure continuity of supply after mobilization. The wartime Army, like that in peacetime, has re quirements for initial issues, replenishment, special projects and pipelines. The computation of these various needs is accomplished in the same manner as has been de scribed in the previous four chapters; hence, those 1 Department of Defense, Economic Mobilization Studies, Requirements (Washington, D.C.: Industrial College of the Armed Forces, 1952), p. 3* 175 processes will not be repeated here. This chapter, there fore, will be confined to problems peculiar to the MRMR. | I. COMPOSITION OF THE MRMR j There are two basic questions that must be answered in arriving at the composition of the MRMR. First, a de cision must be made as to the exact types and models of l equipment that are to be stocked. Second, there is the problem as to the quantities of each that must be on hand for each time period. Items to be Stocked As was pointed out by one authority, the mobiliza tion reserves should not include all items needed by the l i i Army which might be in short supply during a war. Cer tainly, guns and ammunition should be on hand when re quired, but he pointed to the folly of stocking waste baskets, even though they might be completely unavailable . 2 in wartime. In other words, each item must meet the test of essentiality. The two groups of supplies cited--munitions and 2 Brigadier General Louis E. Cotulla, "Determina tion of Requirements in the Department of the Army" (speech before the Army War College, Carlisle, Pennsyl vania, 1952). 176 | t waste baskets--present no particular problem. In between i ) these two extremes, however, there is a large and poorly j i defined area where the decision Is not so obvious. For I i example, there is no ready answer to the question of J whether there should be stocks of off-duty low-quarter ! shoes or mobile pulpits for chaplains or cooking and eating utensils for training centers. j I Of course, it would be advantageous to have many I j or all of these borderline items in reserve. That is, it ' would be advantageous from a purely military standpoint, but the economic disadvantages far outweigh the benefits ) i in many instances. Even where there is a definite need for a given item in wartime, there are several other considerations in determining whether or not it should be stockpiled. j For example, there is the question as to the probable speed with which it is apt to become obsolete. Modernization It might be argued that large quantities of tanks or tank hulls should be stockpiled in time of peace against the day when they would be needed in war. While such a program would definitely save vital man-hours in time of emergency, it would commit the Army to fighting a substan tial part of any future conflict with outmoded equipment. I 177 Past experience indicates that major items of materiel are constantly undergoing modification and redesigning, and it seems probable that this trend will continue. As an instance of how rapidly improvements are generated in time of stress, there is the experience of World War II in the modifications on a particular tank. The producer received from Ordnance a design change on an average of once every forty minutes while he was 3 getting into production. I ! " It can be seen that stocking items which can be I | produced in ample quantities after the outbreak of war | has two adverse effects. Economically, it ties up re- ! sources in goods which might never be needed. Militarily, it commits the Army to freezing design and going into pro duction long before it is necessary to do so. Perishability Aside from the desirability of storing a particular type of equipment, there is the question of whether it is practical to do so. Many goods have a short storage life and, hence, there would be tremendous expense involved in keeping a usable stock of such items. 3 John Slezak, "Problems Confronting Industry in Planning War Production" (speech before the' Industrial College of the Armed Forces, Washington, B.C., 19^9)* 178 Other materiel can be stored successfully, but j only with great difficulty. Constant maintenance is oftenj i involved or, on occasion, it is found that controlled conditions of humidity and temperature are required. When such circumstances prevail, the decision generally is against inclusion in the MRMR unless the item is extremely vital to the war effort. II. QUANTITIES TO BE STOCKED After a decision has been made as to the items that are to compose the MRMR, the issue of how much of each must be resolved. Until recently, the technique called for the establishment of an assumed M-Day by which time all of the MRMR should be on hand. This method has been criticized on the following grounds: Under this policy, we would proceed with full steam ahead to acquire the supplies required by this plan. However, if we did not go to war on that date and if we acquired the supplies required by such a plan, we would stop all buying, disband the production capacity and wait in a stand-by condition for something to happen.^ There were many disadvantages to this course. Storage, deterioration, and obsolescence all created Under Secretary John Slezak (speech before the National Security Industrial Association, Old Point Com fort, Virginia, October 29, 1953)- 179 expenses. Furthermore, the closing up of production lines greatly extended the length of time that would be required to get back into production in time of emergency. Not only would production equipment have to be taken back out of mothballs when next needed, but the experienced \ t | working force often would disband and drift into other pursuits. Aside from the military disadvantages of these i practices, there were severe economic implications. There tended to be peaks and troughs in procurement and 5 the expense of erratic production has already been cited. The Harvard team found this to be the case, saying, "The plan peaked production to an extent that might have seri- 6 ous effects on the economy if war did not break out. Present Methods Realizing the disadvantages of these earlier tech- i niques, a new approach to mobilization reserves was de vised. It has been described thus: The new concept was that the reserve should consist of two parts: (l) goods on the shelf, ^ Cf. ante, pp. 94-95* 6 Requirements Survey (Boston: Harvard University Graduate School of Business Administration, 1951)* Vol. II, p. 48. 180 and (2) productive capacity tooled up and idling ! on a one-shift or partial shift basis.7 j This method overcomes most if not all of the objec- | * i tions that applied to the earlier theory. It minimized j i the actual stocks of materiel that were held in readiness ! and relied more heavily upon the nation's ability to con vert economic resources into military strength quickly and effectively in times of emergency. j t The fact that the operating plant is equivalent to ! i I a stockpile can be demonstrated easily. For example, as- i ' I | sume that there is no plant in existence for the produc- I j tion of a given tank. The MRMR might then be (and this is t t I again purely hypothetical) about 15,000 tanks. However, i j if the plant has been built and production equipment is j in place, the MRMR- drops to 8,500 tanks. If the plant is producing, even on a minimum basis, the reserve require ment would be reduced to 3.»500 tanks. In short, the ex- i isting and operating plant is equal in defense readiness to 11,500 tanks worth approximately $1,500,000,000. The same general considerations prevail in connec- j i i tion with other types of materiel. The producing line of j s 155mm guns is equivalent to a stockpile worth $10,000,000 and, when atomic artillery is considered, the active 7 Loc. cit. factory is worth $126,000,000 in reserves. 181 Production Lead Time The substitutability of productive capacity for reserve stocks is made possible by the differences in j i production lead time. To understand why this is so, it is necessary to examine in some detail how the quanti ties in the MRMR are determined. Essentially, the process consists of two steps. First, a determination must be made of how rapidly after M-Day the Army will require each major item of equipment. Against this requirement .is t ' placed the quantities that are expected to be in the hands i | I of troops at the time of M-Day. These two figures give j the time-phased post-M-Day needs. Second, it is necessary to discover how rapidly industry can produce the materiel in question after mo bilization. This productive potential is subtracted from the net requirement to arrive at the size of the MRMR. In general, it is found that military needs far exceed productive capacity during the early days of an emergency. Then, at some point after M-Day, production catches up with demand and, thereafter, is capable of Interview with Industrial Division, Office Chief of Ordnance, August, 195^. 182 exceeding it. This means that, from M-Day until this balance is achieved, there is an accumulating deficit of supply that must be met by reserve stocks. This relation ship between the supply and demand curves, on the one * hand, and the MRMR, on the other, is illustrated in Figure 4. In other words, the Army avoids the two extremes that are open to it in this regard. It does not endeavor to stock enough materiel in advance to carry it through an entire war. Neither does it rely entirely on post-M- Day production to meet the accelerated demands of war. Reverting, now, to the problem of production lead time, it is evident that the speed with which production can catch up with demand will depend in a very large measure upon the condition of the munitions industries at the time of M-Day. If the facilities have been dis banded or are in mothballs, it will take a considerable time to get back into production and the reserve require ment is accordingly quite large. If, on the other hand, the productive capacity is being employed on M-Day, supply will equal demand at an early date and the MRMR is reduced or even eliminated. Floating M-Day The new concept is based upon what is called a Quantity P o st M -Day M ateriel R equirem ents (Cumulative) M -Day M ateriel R equirem ent M obilization R eserve M ateriel R equirem ent P eacetim e F orce M ateriel R equirem ent G reatest V ertical D istance Between P o st M -Day Supply and Demand Curves P o st M -Day M ateriel P rocurem ent Capability (Cumulative) ► Months M -Day F i g u r e 4 D e t e r m i n a t i o n o f s i z e o f M OB ILIZ A TIO N R E S E R V E M A T E R I E L R E Q U I R E M E N T H 00 U) "floating M-Day." Instead of rushing ahead to acquire the! I mobilization reserves by some assumed D-Day* the Army re- j cognizes and admits that the outbreak of a war is largely j j unpredictable. Hence* an effort is made to postpone the day when the MRMR for any item has been procured. As the total MRMR is approached, further cut-backs are made in production and these cut-backs increase the lead time and therefore the requirement for mobilization reserves. i Considerable attention is given to the impact upon i j mobilization plans when selecting the plant to be closed i | when cut-backs are in order. For example* two plants j i * > might have a minimum efficient rate of production of ! 1 j 1,000 rounds of ammunition per day. It does not follow* j however* that the two plants are of equal importance to the mobilization effort. One might be capable of increas ing production to 5*000 rounds per day on a multiple 1 shift basis and the other might be capable of rising to i 7i500 rounds. Hence* the plants to be closed and the size of the MRMR depend in part upon maximum capacity of the factories that are continued in operation. The relationship between minimum and maximum rates is* therefore* studied very closely in reaching these decisions. The ideal plant is the one that can remain economically operational at very 185 low rates and, at the same time, is capable of expanding { Its production very substantially in time of war. It is thus apparent that the current floating M-Day concept I involves continuous study of the highly variable produc tion rates of a considerable number of producers. While this complicates the calculation of requirements consid erably, the economic and military advantages more than offset the disadvantages. III. PROBLEMS | Aside from the complex studies that must be made to arrive at a realistic MRMR, there are also many other dif ficulties that are more apparent in practice than in theory. These difficulties are created largely from the lack of specific guidance and from the speed with which programming must be accomplished in times of considerable stress. Programming Without repeating the somewhat detailed analysis 9 that has gone before, it is appropriate at least to re call the relationship existing between the peacetime and 9 . Cf. ante, pp. 66 et sqq. 186 mobilization programs. It has been said that "essential ly, the current requirements program is supposed to pro vide an Active Army of the size necessary to implement 10 the Mobilization Plan when war breaks out." More spe cifically, the same source declares: "The M-Day Army re quired by the Mobilization plan is an objective of the current program. In addition, the current program is supposed to provide the Mobilization Reserve Materiel 11 Requirement." In short, any mobilization plan is based upon the assumption that a given stock of materiel will be in the I hands of units and in the pipeline when the plan is implemented. Hence, the current programs and the mobili zation plan must be synchronized so that the latter begins where the former ends. Chapter III contained several references to instances where such synchronization did not exist. When such conditions prevail, a number of improvi sations have been tried. One of these is known as the ! "division slice method." Under this technique, the total, world-wide materiel requirement might be taken for any 10 Requirements Survey, op. cit., p. 36. 11 Loc. cit. I 1 8 7 | given number of months after M-Day in World War II. 1 That requirement would then be divided by the number of divisions that existed at the same time. Thus, at M plus 12 months in World War II, it might be found that there were 40 divisions in existence and that the divisions, training centers, stock levels, special projects and so forth required 4,000 tanks. In I j such a case, while the average division might be author- i ized only fifty tanks, the division slice would be 100 I ■ tanks. The Harvard Survey team found in at least one j instance that programming was so outdated that: 1 i j A division slice method of calculation was } used in computing mobilization reserve require- . ments. Essentially, this method assumes that 1 deployment, composition and equipment of the forces for which the slice is used will be the same as the composition, deployment and equip ment of the forces from which the slice was ob tained. 12 There are obvious drawbacks to such an approach to mobilization requirements. In the first place, the as sumption cited above is almost certain to be in error. In the second place: The slice method used resulted in the inclusion of the requirements of typically Zone of the 12 Ibid., Appendix C, p. 15* r 188 Interior installations (such as schools and training centers) in the calculation of the combat replacement requirement and in the over seas pipeline for combat support.13 While it is thus evident that major discrepancies can be created by imbalances between the peacetime and wartime programs, they will not be discussed further here in view of the earlier analysis of programming cited at the beginning of this subsection. Guidance Even where there is complete synchronization be tween the two programs, considerable difficulties are generated if the implementing guidance is lacking or inadequate. As an example, it was found in one instance that "no guidance was provided by the Office of the Sec retary of Defense for periods following /the assumed 14 M-Dag/. " In fact, guidance has been found to be lacking in all of the various aspects of mobilization requirements at some time during the postwar period. For instance, it was found that initial issue needs for post-M-Day pro grams were far from clear. In one case it was found that 13 Ibid., Appendix C, p. 16. 14 Ibid., p. 48. 189 j i only currently published Tables of Allowances were used 1 In computing mobilization needs, even though it was ! evident that many new tables would be authorized during ; a general mobilization. In another instance, World War II; > t/a documents were used in calculating future wartime i i needs. It was admitted that this constituted the making i j l I of an artificial assumption, but this was found necessary I "because of lack of suitable troop programs for T/A units j 15 j j In the mobilization plan." ! j Similarly, guidance has been found inadequate in | the case of special projects. Here it was found that i s [ "there were not Strategic Logistic -Studies for the conti nental United States which would adequately serve the pur- 16 pose of determining Class IV requirements." Turning to the stock level and in-transit allow ances, the same type of difficulty is found. As a case in point, the following situation has been described: The budget directives apparently did not include provision of pipeline and replacement levels for /pertain forces/ contained in the mobilization reserve. In the 20 January meeting, G-4 repre- ^7 sentatives rules that no pipeline would be included. Ibid., Appendix C, p. 15. 16 Ibid., Appendix C, p. 46. 17 Ibid., Appendix C, p. 7* 190 i In the same vein, even when guidance is provided, the Technical Services have occasionally found it neces sary to put their own interpretation upon it. For example,! one plan specified the pipeline for each area, but "there was some doubt as to the adequacy of these pipeline pro- i t visions . . . and the Quartermaster used a straight pipe- 18 line factor for all areas." I i This subsection has demonstrated that guidance is j sometimes insufficient to compute the mobilization require ments for initial issue, pipelines, and special projects. The same must be said of replacement factors. In one case, the replenishment guidance was not provided in terms that could be used by at least one of the Technical Services. Hence, while the General Staff guidance called for employment of active and inactive replacement rates for each area, the Harvard Survey team found: The European active factor in the Quartermaster Corps was based upon the composite experience of units in combat and units not in combat during World War II. /Hence the QMCdid not follow the specific instructions-jgn the various rates of com bat in various areas. y 18 Ibid., Appendix C, p. ^8. 19 Loc. cit. 191 i i Urgency of Requirements Studies One of the principal differences between theory i and practice in computing the MRMR lies in the urgency with which these studies must be produced. Even where programming is synchronized and guidance is adequate, the Technical Services sometimes are forced to short-cut methods due to the lack of time allowed for the process. Such time pressure is particularly regrettable in view of the many other difficulties surrounding this particular field. The complexity and importance of the MRMR has been testified to by one authority who stated: "It is one thing to get ready for a major conflict within one year and it is quite a different matter to achieve the 20 same degree of readiness over a period of five years." In considering the impact of this urgency, one study found that no attempt was made to determine "to what extent mobilization could be supported by production dur ing the first twelve months or to determine the deficiency .,21 which will have to be on the shelf on M-Day. In this same connection, the study went on to declare: 20 Cotulla, op. cit. 21 Requirements Survey, op. cit., p. 47. 192 Under more normal circumstances, the amount of the mobilization reserve would be determined for each individual major item through the examination of capacity, production lead times, material shortages and other factors. No such item by item analysis was made. Thus, although the con cept of the Mobilization Reserve Materiel Require ment was not abandoned, it was changed consider ably.22 Conclusion Of all the ingredients of gross requirements, the MRMR is probably surrounded by more assumptions and un- | certainties than any other. For one thing, it is project- | I ed farther into the future 'than any of the elements which comprise the needs for the current program. It begins in time where the latter ends and, hence, there is a much greater possibility of changing conditions and events rendering it inaccurate. Even aside from the time element, there is a much larger opportunity for error. The Joint Chief of Staff, when considering the peacetime program, determine the size force currently necessary in order to be prepared for a general mobilization. Within reasonable limits, those force goals are capable of attainment. The computation of requirements for peacetime operations at least starts, then, upon a reasonably firm and predictable basis under 22 Ibid., p. 47 ! ' “ 193 normal circumstances. Not only is the total size of the Army forecast i with some degree of accuracy, but many other significant j variables can be foreseen. Some approximation can be made as to the quantities of rifle ammunition that will be needed to train recruits and the quantities of wolverine fur required to trim arctic parkas. The planned size and deployment of the Army provide approximate answers to these and many other current problems. Although the post-M-Day expansion is supposed to be projected with the same degree of detail, it has been pointed out that, in practice, such is not always the case. In addition, this chapter has brought out several diffi culties of Implementation that are peculiar to the MRMR. Finally, this distinction should be appreciated: Whereas i the peacetime forces and deployment are largely subject j to American control, wartime conditions are influenced very substantially by the enemy. Under the latter circumstances, assumptions must be given equal stature with plans and programs. The enemy effort in arctic regions will determine the demand for wolverine fur and the need for rifle ammunition must in clude a calculation that has been described in the fol lowing manner: 194 A chart prepared by G-4 showed for each geo graphic area the estimated amount of combat to be expected in each period. This chart was to be used as a basis for determining replacement demand. If, for example, during the period M plus 6 to M plus 9 the chart indicated that one quarter of the units in England would be in ac tive combat, the replacement demand was to be figured on the basis of one quarter combat re placement and three quarters overseas inactive replacements.23 Without belaboring this point further, it seems safe to conclude that the MRMR is subject to wide error as a means of determining what will be required to pre pare for some hypothetical future war. However, It does not follow from this conclusion that the computation proc ess is wasteful and should be abandoned. An intelligent estimate is still better than no estimate at all. Ibid., p. 48. CHAPTER IX j i CONVERSION TO NET REQUIREMENTS The discussion thus far has been concerned with the computation of gross requirements of the Army. How ever, before budget and procurement planning can be ac- j j complished, it is necessary to convert the gross needs into net requirements. This is done, of course, by sub tracting the time-phased assets from the time-phased gross r"™l"n"r-1r - ■■■>-. i n , , ^ ; ! I requirements. It will be realized that assets vary over I I < ; l I time as do the needs of the Army. ; i i The problems of determining assets are as complex and as critical as those discussed in any of the past five chapters. The comparative brevity of the present chapter is not, then, a measure of its importance. It is brief because earlier discussions have already gone into consid erable detail on the problems of computing existing and future assets. In particular, Chapter V, "Requirements for Replenishment, dwelt at some length on the difficul ties of determining exactly what equipment was held by the 1 Cf. ante, pp. 122 et sqq. 196 i various units and organizations of the Army. In view of the earlier discussions, the present chapter will he confined to those considerations which have not been developed earlier. Specifically, main at tention will be devoted to factors making for increases in assets and to those which create unanticipated drains upon stocks. A final section will deal with miscellane ous considerations bearing upon the conversion of gross requirements into net needs. I. INFLUENCE OF RECEIPTS Assets in overseas areas come under the juris diction of the various theater commanders through whom all reports of assets in overseas areas are transmitted to Washington. The Technical Services have continually found it difficult to interpret these asset reports and to reconcile them with 2 available records of shipments to overseas areas. The above quotation correctly suggests that the reporting of receipts of assets is not entirely satisfac tory. Deficiencies in the reporting system have been covered earlier, but there are other influences which create difficulties in this regard. These include the Requirements Survey (Boston: Harvard University Graduate School' of Business Administration, 1951), Vol. II, P* 5^. unpredictability of receipts from repair and from pro- I J cureraent. i j i Receipts from Repair At the time a requirements study is initiated* there is, theoretically, a known stock of assets which may be applied against gross requirements. However, ma teriel which is unserviceable at the time of the study i j will subsequently be repaired and will be available for j j reissue. The volume of these receipts from rebuilt opera tions can have a substantial effect upon the.available assets in future time periods. It is thus important to j determine how accurately these particular projected re ceipts are computed. In studying this problem, the Harvard team found i i I some area of doubt and reported: i j | In determining net requirements, the Technical Services make use of forecasts of assets to become available through the repair of equipment by the Army maintenance system. . . . There were indica tions that the requirements people in the Techni cal Services were somewhat doubtful as to the re- liability of these estates.3 j Thus, there is some question as to the accuracy | of these forecasts. This question may be due in part to 3 Ibid., p. 64. 198 the fact that the Army disregards quantities not actually under repair when requirements are being computed. The General Staff directs: Anticipated rebuild of quantities which it is estimated will become unserviceable after the date of the study may be shown parenthetically for in formation purposes only but will not be added into the total.4 The Harvard survey drew attention to this same direc tive, saying: "In computing requirements, these forecasts are limited to the number of items actually reported as 3 being in the process of repair." This seems to be a highly unrealistic practice. If, in some past time.period, a given number of items have been found to be unservice able but repairable, it is reasonable to expect that there will be some correlation between those figures and future time periods. It appears that assets will be underesti mated by excluding those items which will become unservice able and which will be repaired and returned to stock dur ing the time period covered by the requirements study. 4 Department of the Army, Supply Control System (Washington, D.C.: Office of the Assistant Chief of Staff, G-4, 1-954), p. 27. 5 Requirements Survey, op. cit., p. 64. Receipts from Production i t i The stock of assets will be in a constant state of j i flux as new items are added upon receipt from production. In theory, this does not represent any particular problem j in that production is accomplished according to a pre- j arranged schedule. In practice, however, the production schedule is subject to substantial variations, some of which are due to unforeseen circumstances and some to the Army's rescheduling activities. The unforeseen influences require no deep examina tion. They include such factors as strikes, material shortages, transportation shortages, and, in time of war, enemy action such as bombing. Any one of these can throw a production schedule into arrears with the result that anticipated assets will exceed actual future stocks. In general, the Army is not plagued by production that so i far exceeds the schedule that the surplus of assets is a problem. In addition to the disruptions created by unfore seen events, there are other influences which are the 6 results of decisions. As was pointed out earlier, ef forts to keep an active production base in times of peace 6 Cf. ante, pp. 179 et sqq. often result in production schedules being cut back to the minimum efficient rate. While such a practice creates a better long run readiness for mobilization, it does result in less-than-anticipated receipts. In such cases, assets are below those which were programmed. Similarly, unexpected reductions in appropriations can have an identical effect. This particular influence requires no explanation. A third circumstance which may lower the stock of assets on hand can arise, oddly enough, j when production techniques are vastly improved. An item which, initially, was considered to have a production ] | lead time of one year might be the subject of substantial | improvements in production techniques. The better tech- | j niques, in turn, might lower the production lead time to half a year with a consequent lowering of the stock on hand required for the mobilization reserve. II. INFLUENCE OF DEMANDS Not only do variations in expected receipts have a bearing upon assets, but unexpected demands also can cause similar discrepancies. While irregularities in re ceipts generally result in shortages, irregularities in demands can create either shortages or surpluses. Dis cretionary allowances, replenishment, and Class IV 201 projects are among the factors contributing most to such j i variations. i At first glance, it will appear that the present discussion is counting for a second time the potential errors that were covered earlier in Chapters IV, V, and VI. Such is not the case. Those chapters dealt with discrepancies resulting directly from the methods of com- I puting discretionary allowances, replenishment, and spec ial projects. They did not consider such secondary factors as the maldistribution of assets throughout the world. As will be brought out in the following section, the distribution of stocks can have a bearing on the quantities of assets that should be applied in arriving at net requirements. | Discretionary and Special Allowances. [ Although the requirements analysts make every ef- i fort to compute the future needs for discretionary allow ances and Class IV projects, these two items are among the most difficult to estimate. There is no certain method of predicting what the theater commander will authorize, and special projects are conceived and approved frequently between the periodic requirements studies. The unpredictability of these decisions means that a theater might well be supplied with too much or too [ . 202 I little. Not only will there be excess or undersupply to meet the initial demand, but the supporting replacements and pipeline also will be incorrent in some proportion to the original error. If the theater is undersupplied as a result of such miscalculations, the error is con fined to that discussed in.earlier chapters. If, on the other hand, too much materiel is sent abroad, the error is, in a sense, compounded. Not only is the gross re quirement overstated, but assets needed in one theater are, in effect, immobilized in another theater where they are not needed. Replenishment The difficulties discussed immediately above are created by the unpredictability of certain command deci sions. Discrepancies arising out of the replacement fac tors, however, are not generated by decisions (which can be controlled), but by conditions that are very largely independent of any direct control. The supply discipline of the particular troops that happen to be in the theater can have a considerable influence. Of course, the will ingness of the enemy to surrender or to continue combat has the most drastic effect upon this factor. These and many other variables are in addition to those discussed in Chapter ¥ on replenishments. As was | 203 found in the case of discretionary allowances and special j i projects, such errors resulting in oversupply of a theater! | lead to the "freezing" of assets where they are not re- ! j quired. This aggravates existing errors, even when the- j I i j net requirements are determined by theater rather than I | world-wide considerations. i III. OTHER CONSIDERATIONS The decision as to whether all assets throughout i | the world should be applied against world-wide gross re- i j quirements is a significant matter in reaching net re- ! quirements. That and other considerations will be covered i I in this concluding section. Distribution of Assets The Harvard Survey team reported that instructions are sometimes given to determine net demand by area and I at other times world-wide assets are applied against 7 world-wide demands. Taking an extreme hypothetical case, let It be assumed that assets and gross requirements are exactly equal. In such a case, if net demand is not de termined by area, stocks would have to be moved from one 7 Requirements Survey, op. cit., Appendix G, p. 3* part of the world to another every time there was a shift I j in demand. Such a condition might arise if troops were with drawn from Korea to the United States. Not only major items such as tanks and guns would have to he shifted, but short-life items such as gasoline, ammunition, and light bulbs would also have to be moved. It would be much more practical and economical to allow the theater a temporary high stock level with the idea of bringing the . ; assets down to the correct level by attrition. j In actual practice, the latter procedure is gen erally followed. However, computing net requirements according to one theory and distributing assets according to another means that some pipeline or stock level else where in the world must suffer. Miscellaneous In many of the computations of requirements studied during the period of observation, the application of assets was complicated by the ex istence of stocks of substitute items. In the years since World War II, a substantial degree of modernization of Army equipment has taken place with the result that there are in exist ence several models of different items.8 8 Ibid., pp. 62 et seq. 205 The problems created by substitute items were 9 I discussed earlier in connection with replenishment rates. : However, there is another complication which was not ! brought out at that time. Modernization must be carried out by degrees and Logistic Policies and Priorities estab lishes the percentage of new equipment to be held by each category of troop unit and in the Mobilization Reserve Materiel Requirement. i Thus the simple fact that a model is declared to be an authorized substitute does not automatically mean that all assets of that model should be applied against gross requirements for the preferred model. It is fre quently found that there is a shortage of the preferred model and an overage of the substitute. To determine whether or not this condition exists, it is necessary to examine the supply status of each model separately, and this places an added burden on those responsible for the computation. It also opens the door to additional poten tial error. A final complication is to be found in the fact that the Technical Services have been known on occasion to com- i i pletely abandon the effort to calculate the world-wide g Cf. ante, pp. 124 et sqq. 206 asset position. This is most likely to happen when there are frequent and substantial changes in troop strengths, consumption, and planned operations. Thus it was found that the difficulties in obtain^ ing accurate asset information: . . . have led at least one Technical Service to abandon its attempts to carry out asset accounting on a world wide basis. Instead, the service fore casts all requirements in terms of anticipated issue from continental United States depots and applies against these anticipated issues only those assets available or expected to be available in CONUS depots.10 Although this practice is much simpler, it involves a vast number of assumptions which may or may not be sound. For example, some assumption must be made as to whether in-transit and stock level authorizations have been filled and others must be made regarding the fulfill ment of initial issue and special project needs overseas. 10 Requirements Survey, op. cit., p. 61. CHAPTER X ECONOMIC IMPLICATIONS The past six chapters have brought to light a number of deficiencies in the computation of the Army's net requirements. Some of them have been relatively minor when considered as a percentage of the total mili tary needs while others represented a possible major diversion of the nation's resources. On the whole, the preceding analysis has been critical In that it dwelt more largely upon the potential discrepancies than upon the merits of the system. It is felt that this emphasis, although in accord with the pur-r pose of this study, might tend to leave the impression that the theory and practice in this field are completely inadequate. Such is not the case. It is felt by this writer that there are benefits as well as disadvantages in the present techniques. The present chapter is de signed to reach some conclusions as to the net economic impact of the factors that have been considered in the preceding chapters. 208 i I. CRITERIA j | Before any facet of the present problem can be j l considered economically beneficial or harmful, some sort ! i of criteria must be established. Unfortunately, this is no ordinary economic issue. In the first place, it im- j i pinges upon two of the major fields of that science. It concerns government planning and it concerns the basic theory surrounding the allocation of resources. In view of these related but dual characteristics of this study, it is deemed necessary to establish clearly | the criteria for judgment. As a problem in basic theory, ! it is obligatory to determine whether or not resources are being allocated to their optimum uses. However, this is not an examination of some relatively mechanical phe nomenon that occurs in the market place. The allocation is made by governmental decision and not by the free play of economic forces. i Hence, the question of individual short-range utility cannot be established arbitrarily as the basis for judgment. It is extremely doubtful that the average man would freely and willingly allocate as much for de fense as he does under the compulsion enacted by his own j elected representatives. Such being the case, the j 209 economist examining this problem is faced with an un- ! pleasant choice. i Maximizing Utility He may say* for example, that the individual is not the best Judge of how his resources and energies should be expended. In that case, the economist is free to deter- | i mine whether the allocation in question is in accord with what he conceives to be an optimum distribution. The advocates of this approach must, of course, prove that the \ individual can be better served by compelling him to give up money that he would not give up freely. This proposi- J S I | tion has not lost any of its interest because of its age. I Alternately, the economist can adhere to the view that there is a loss in total utility when the market mechanism is disrupted. This opinion appears to be only partially true. Classic economic theory accepted the fact that the proper sphere of governments included the collective provision of those necessities which could not be provided by each individual for himself. Roads, schools, and the common defense are among the items traditionally considered proper for governmental control. With these considerations in mind, the present writer suggests that the problem under study is not part of the controversy between planned and unplanned economies. 210 He suggests that the Individual is the best judge of his own short-range interests, but is not necessarily the I best judge of his own long-term interests. He suggests j t I that man recognizes his own short-sightedness and organizesj t | into societies and creates governments partly because of j | that recognition. In short, this paper rejects the con- I ! cept that there is a maldistribution of resources simply because the distribution is accomplished by the govern ment. This view, of course, is far from identical with the opinion that the distribution of resources must be j j presumed efficient merely because the government accomplish!- es it. Even if the resources allocated to defense are used in their optimum manner, there is still no proof that the best possible distribution was made. Perhaps more or less should have been devoted to this purpose. Basis for Judgment Thus far, in this study, individual problems have been judged on the basis of accuracy and facility, while such criteria may be adequate for detailed analysis, a ! study of the total economic impact requires some broader standard. Hence, the following basis for judgment will be established: the computation of requirements will be considered to be efficient if it arrives at the minimum 211 demand on resources necessary to prevent a war. j Particular emphasis is placed upon the prevention | of war as distinct from winning one. While it is admit tedly necessary to win a war if one should break out* this is considered to he a poor alternative, economically, to having no war at all. The cost of deterring aggression may be high, but it generally is insignificant when com- j pared with the cost of modern warfare. Of course, it might be argued that it would be less demanding upon the nation's energies, in the long run, if i | the United States launched a preventative war at a time j 1 most favorable to America. This might be true in view of j the possibility of a huge defense effort being required for years, perhaps decades, unless a war does occur. j j This argument is here rejected, however, on two grounds. First, the waging of an aggressive war is so patently against the moral character of this nation that such a course is almost inconceivable. The United States is bound to defense rather than to aggression, no matter what the economic advantages might be. Second, the economic advantages of an aggressive war are apparent only if it can be shown that little or no defense effort would be required thereafter. Despite the fact that wars are older than recorded history, this 212 nation has habitually regarded them as isolated, atypical phenomena which need not be anticipated in the future. t Until some happier day, however, it must be assumed that weakness invited aggression. Aside from these somewhat philosophical considera tions, there are practical reasons for not judging the I requirements process solely on the basis of victory in combat. There are many different ways of winning a war and they place vastly different demands upon the economy. However, it cannot be said that the method requiring the least resources is the best one. Taking the case of one engagement, it might have been possible to capture Iwo i Jima without advanced air and naval bombardment of the island. Unlimited and ruthless employment of infantry men alone might have accomplished the same end. The death toll, in the latter case, would have been many times greater than that actually suffered in the operation. However, before the economic advantages of the two methods could be compared, it would be necessary to determine the economic value of a human life. Conversely, it cannot be said that the optimum allocation has been made when a war is won with the abso- t lute minimum loss of life. While the value of his own life to the average man is infinite, it has some indef- — inibe—but finite- value- to society.— In other -words,— the--- | 213 disutility suffered by a man when he loses his life might be outweighed at some point by the disutilities required of society to save his life. It thus appears advantageous to link the criterion I i * j to prevention of wars rather than to the winning of them, : Although considerable emphasis has been placed on this distinction, it should be realized that the allocation of resources necessary to prevent a war would be of the same general magnitude as those needed for victory. If it can be assumed that the waging of war is a rational proc ess, it would seem that the possession of the requisites for victory by one nation should deter a potential enemy from aggression. While this conclusion should tend to be valid, it is not universally so. Wars can grow unexpectedly out of small incidents and national pride can outweigh good judg ment. Nevertheless, there must be some level of prepared ness attainable by the United States that would make an attack upon this nation almost inconceivable, and that same level would be high enough to assure victory in the event of an irrational act by some other country. If there is a difference between the two levels, it seems likely that more materiel is needed to prevent a war than that required to be on hand at the start of a war. 214 I I ! The Minimum Meeds Discussion of the criterion has been confined thus far to the phrase "prevent a war." Attention will now be directed to the term "minimum demand on resources." This term does not refer alone to minimizing the total stocks held by the Army. While it is true that the rounds of ammunition and miles of wire and gallons of gasoline should be held as low as practical, minimization in that sense is only half of the problem. In addition, it is essential that the equipment - and supplies be obtained with as little economic cost as possible. For example, it has already been pointed out that a given artillery shell can cost around $15 or over $30, depending upon the circumstances under which it is bought. It is in this sense--the total demand on re- I sources--that the word "minimum" is used in this paper. Other Possible Approaches Although a criterion has now been established as the basis for further discussion, it should be realized that there are a number of alternative criteria which could have been adopted. Hitch, for example, has sug gested an analysis basdd upon marginal utility. Under this system, each new increment of defense, stated in 215 terms of dollars, would be considered in each of its many possible end uses.'*' The increment would then be devoted-to the use which added most to total defense utility. This is, no doubt, a useful theoretical device for analysis, but it has two deficiencies for the purposes of this study. First, it explicitly begins with the as sumption that the budget is fixed. Thus, it is an allo cation technique rather than one for determining require ments. Second, although the author denies it, this analysis involves the solution of a vast number of equa- 1 j tions, all of which would require some sort of cardinal I j measurement of "units of defense." ) 1 II. ECONOMIC ADVANTAGES It is felt that present computation methods reflect fundamentally sound economic theory. Furthermore, it is believed that the net result of the entire present process is a reasonably close approximation to the criterion that has just been established. In short, the Army appears to be resolved to make the minimum demands upon the national economy consistent with its mission. ^ Charles Hitch, "Planning Defense Production," American Economic Review, 40:191-98, May, 1950* 216 "Peaking1 1 Production ! Probably the greatest economic accomplishment of the military in recent years is the development of the present mobilization concept. Reliance upon productive | capacity rather than upon huge stockpiles has many mili- j S tary advantages which have been developed earlier. A summary of the economic implications might, however, be appropriate at this time. Implementation of this theory entails creation of j productive capacity rather than the manufacture of end ! | items. This is advantageous in two respects. First, ! many of the plants and machine tools are multipurpose i assets. Hence, when a decision is made to build a muni- j tions production line instead of the munitions themselves, the capacity of the nation to make consumer goods is also enhanced. While, in general, government owned machine tools are not used in support of the civilian economy, there are significant exceptions to that general rule. For example, some of the government owned industries need ed in any war effort are producers of basic materials that are required in peacetime. A part of the nation's | chlorine capacity serves to illustrate the dual nature of f such industries. The government chlorine facilities, 217 which are considered vital to any war effort, are cur rently producing a very significant portion of the peace time needs for that commodity. The second advantage of this concept is directly and closely related to the military benefits. It was found militarily desirable to avoid huge stockpiles of equipment which are costly to procure and store and which suffer deterioration and obsolescence. The penalties of entering a war with obsolete equipment are obvious. It is equally obvious that, by avoiding such penalties, the nation is able to conserve resources that would otherwise be devoted to defense. This technique, as has already been explained, is based upon the concept of keeping the munitions industries in operation as long as possible at the lowest practical rate of production. Thus, aside from reducing the total mobilization requirement, the present theory avoids the former peaks and troughs i.n production which can prove to be so costly. The net result is that fewer war goods are bought and those that are procured cost less. The saving to the nation, although unestimated at present, must be enormous. j~ ' " ~ ' “ " “ — ' 218" Other Favorable Features Present Army practices in connection with comput ing requirements are in accord with sound theory in many ! other respects. For example, it is commonly accepted that stock levels should, in general, be related to turn- j over of the merchandise in question. By stating author ized pipeline levels in terms, of days of supply, the Army is accomplishing the same end. Changing consumption rates will be reflected immediately by changes in the quantities in-transit and in stocks. The economic merits of this sys-- | tem are much superior to any other that might be devised. I j | For example, many more resources would be wasted if the j pipeline levels were stated as absolute quantities inde pendent of consumption. Similarly, the replacement factors appear to be computed on as sound a basis as is possible under the circumstances. There is a growing effort to use the actuarial method in the same manner that it is used in civilian industry. Conversely, the straight line method that is used in the majority of cases by the Army has re- \ j ceived broad acceptance in theory and in practice under comparable conditions in civilian life. In short, it is felt that the Army is being realistic In its basic theory in this regard. Despite the potential error that can j enter into this ingredient of requirements, the tendency is to arrive at the minimum workable stock for replenish ment. Balanced Force Present practice is in accord with economic theory in many other respects. However, it is believed that the foregoing points serve to illustrate the more important issues that are generally considered by other writers and lecturers. In addition, there is one favorable factor which seldom receives consideration, even though it is of the utmost importance. Reference is here made to the fact that current methods of calculating needs tend to result in the pro curement of a balanced stock of materiel. In conducting a study in this field, there is a great and natural tendency to become so involved in the examination of indi vidual items that little attention is given to the rela tive quantities of items that are procured. It is not intended to suggest here that the Army logistics personnel give no thought to procuring a balanced stock, but rather, that the majority of papers, studies, and lectures are remiss in this regard. It was pointed out in many earlier passages in this paper that there are a number of conditions which create potential imbalances. This is undoubtedly true and quite severe shortages or overages can and have de veloped. Nevertheless, the tying in of requirements to \ a troop list tends to result in equipment items being obtained in the correct proportions to each other and, what is more important, in correct proportions to the actual and planned troop units. Thus, even if a future war does not develop as expected, the United States will still have a balanced force to meet any new threat. While the field armies might be composed and equipped somewhat differently in light of the actual and unexpected conditions of war, those armies will have approximately the correct number of tanks, artillery pieces, laundry units, field bakeries, and so forth, that are required to support such a force in the field. In brief, while the present and planned troop lists and the statements of requirements are designed to meet a particular anticipated threat, they are also calculated to meet a wide variety of other dangers. As an example, in World War II, the nation learned to expect the unex pected. A vast number of unplanned redeployments and modifications of plans were constantly necessary. Having 221 , noted those conditions, one authority commented: Probably few military planners will assert that• one or two ships, planes or divisions, more or less, will certainly mean the difference between : peace or war, survival or extinction. Parentheti- | cally, the provision of army divisions in World i War II is probably the most successful adjustment ! of estimated over-all requirements to actual needs. ' Of the eighty-nine formed, all went overseas, eighty : seven were committed to battle.^ | Thus, it can be seen that all of the uncertainties ; and vaguenesses of the planning process do not necessarily . entail large discrepancies from what will actually be needed in some future war. The plans are intended to be flexible and, while the planned wartime composition of the Army is based on specific assumptions, it is also based on the possibility that those assumptions might be wrong. III. ECONOMIC DISADVANTAGES Despite the merits that have been discovered in the present system of calculating needs, there are noteworthy economic disadvantages. It will be the purpose of subse quent chapters to discover how these deficiencies may be remedied without substantial loss of the present beneficial aspects. 2 George A. Lincoln, "Planning Military Require ments," American Economic Review, 47:450, May, 1952. Excessive Detail Possibly the largest single factor contributing to the uneconomic use of resources is the excessive amount of detail that is currently employed in the requirements cycle. This problem has been singled out by practically every person who has made a critical analysis of present methods. For example, the Harvard survey team found: Methods of computation are in many instances much too cumbersome and detailed when related to the purposes for which the requirements informa tion will be used. Different purposes require different degrees of accuracy. It seems a waste of effort, for example, to refine mobilization require ments by using detailed methods when the basic as sumptions are subject to such wide error.3 In economic research and, for that matter, in commerce and industry, it is axiomatic that no attempt should be made to arrive at an answer that is more precise than the data from which it is derived. Yet this very thing is done repeatedly at almost every stage of the pro cess in computing requirements. There are several economic consequences of this practice, all of them harmful. In the first place, there is the not inconsiderable waste of manpower in developing, applying, and reviewing the formulae and systems for 3 Requirements Survey (Boston: Harvard University Graduate School of Business Administration, 1951)> Vol. II, p. 10. determining materiel needs- As can be seen from the pre ceding chapters, the present techniques are enormously complicated and large, skilled staffs are required to apply them. In the second place, and even more important, these methods require considerable time. As a result, the planning cycle and budgetary processes are more remote in time than they need to be, from current conditions and realities. It seems obvious that the misdirection of re sources and energies will be greatest when their utiliza tion is determined far ahead of the actual need. Not only are there likely to be errors in procure ment as a result of the time-consuming processes involved, but decisions affecting the industrial mobilization pro duction base are also involved. Modernization of govern ment-owned production equipment, closing of munitions plants and arsenal facilities and many other kindred matters can be influenced adversely by the time differen tial between a plan and its implementation. This consid eration led one student officer to declare that even the expedited processes were "still too slow to provide timely 4 data needed to guide industrial mobilization." ^ Col. William Whipple, Jr., The Planning Cycle and Its Effect on the Determination of Material Requirements "(Washington, D.C.: IndustrialCollege of the Armed Forces, 1951), P. 1. In the third place--and this is admittedly based on speculation rather than on fact--the very complexity of the process and the precision of the stated requirement must tend to discourage the reviewing process at different levels. It is felt that rather significant savings could be effected if the review could be accomplished easily and quickly. Techniques Involved Aside from the time involved, a considerable number of deficiencies in the actual techniques employed have been discovered and discussed in earlier chapters. Many of them, although of minor consequence in themselves, tend, in the aggregate, to create a rather significant distortion of the Army's actual needs. No useful purpose would be served by recapitulating those errors here. How ever, it was thought desirable to point out that these discrepancies have economic repercussions, in addition to their military impact. Counter-Cyclical Potentialities It will have been noted that efforts to minimize the economic impact of defense spending have not included the phasing of the Army's stated requirements in a counter cyclical manner. On the contrary, as will be pointed out in subsequent passages, procurement tends to coincide to a limited extent with the cyclical curve. This coincidence of curves is harmful to the economy throughout the cycle. On the uprise, it creates inflation ary pressures and, by adding to the competition for re sources, it forces the Army to pay a higher cost for the things it gets. On the downgrade, this parallelism adds impetus to the recession. While criticism might be levelled against the Army on this score, there is some defense against such criti cism. The lower procurement budgets during times of re cession or depression are due very largely to restraints imposed by the Executive or the Congress. Spending ceil ings are imposed and the "statement of requirements" is more of an allocation process. While the Army thus has not been permitted to phase its requirements in a counter-cyclical manner, there is no evidence that the Army would do so if allowed. Insofar as this writer knows, there has never been a comprehensive military or scholarly analysis of this eventuality. Of course, even if it were found to be advantageous economi cally to introduce such phasing, it might well be found 5 Cf. post, pp. 279 et sqq. that military disadvantages were more imposing. Further more, it is far from obvious that counter-cyclical phas ing of requirements would be helpful to the economy. There are moderately severe penalties that would be incurred from such a course. Chapter XII will examine the feasibility and de- ' sirability of such counter-cyclical spending for military materiel. However, it was deemed desirable to mention this subject briefly in any discussion of the economic implications of present practices. The health of the economy is, of course, of profound military importance as well as being a matter of social consequence. Lack of Realism This chapter has already directed attention to the economic and military disadvantages arising out of the laborious techniques employed in computing requirements. Those criticisms appear to be valid at all times, even in times of peace and relative world stability. An effort will not be made to show that there are additional defi ciencies that come to light in times of partial or full mobilization. In fact, it would appear that the present methods of computing requirements are primarily designed for peace- time use. While unnecessarily cumbersome, they could work with rather a high degree of accuracy if the compo sition, disposition, and mission of the Army were not subject to sudden, frequent and substantial change. At present, however-, there is no credible reason to believe that conditions of stability are apt to prevail for some time to come. Such being the case, it is neces sary to ask whether a system that is workable only in times of peace is of much worth at all. This writer feels that any system, to be acceptable, should be applicable at all times. If that is not possible, then the method must be suitable for use in times of limited or full emergency. There are distinct and important penalties attached to this particular difficulty. They are quite apart from errors that creep into a process when the planning phase is greatly separated in time from the phase of execution. In the latter case, there is the presumption that the authorized process is followed, albeit unsatisfactorily. Under current unstable conditions, the authorized method of calculating needs has been partially abandoned. While it is realized that the "folklore" of the Army has no place in an academic study, there is one fable that is highly illustrative of the present problem. A legendary supply officer said, "We had the best supply system in the Army until the war came along and ruined it." Almost the same thing is true of the requirements system. It is an excellent system of meeting the dangers of war until those dangers actually present themselves. The need for urgent decisions finds the requirements techniques deficient just when they are needed most. Lack ing an adaptable and responsive method of arriving at quick decisions, resort must be made to opinion and judgment. The resulting opinions may be excellent. On the other hand, they may be far astray without the benefit of some expeditious method of submitting the facts to realistic t analysis. As an example of the way in which "snap decisions" must be made in time of emergency, one volume cites the aircraft program In the early days of World War II. The requirement for aircraft was not reached by going through any predetermined and orderly series of steps. Instead: Mr. Bullitt /the American Ambassador to Prance/ emphasized the need of greater production of air craft. . . . Mr. Hull then suggested to the Presi dent that plane production be stepped up to 50,000 per year. The President, wrote Mr. Hull, was, for a moment, "speechless," but he accepted the figure. On 16 May the President announced: "Our imme diate problem is' to superimpose upon this produc tion capacity a greatly increased additional production capacity. I would like to see this nation geared up to the ability to turn out at least 50>000 planes a year."6 In this manner, for apparent lack of a better tech nique, requirements may be determined in times of great stress; the normal processes are not adaptable to abnormal times. This fact, of course, is of tremendous military significance. It is of equal import to the economy. When a system is cumbersome to the point where it must be aban doned in times of emergency, then reliance upon that sys tem creates false confidence and leaves room for consider able misdirection of the nation's resources. This is particularly true, as in the instant case, when the emer gency decisions are of vastly greater importance than those of normal times. IV. FINDINGS It is the conclusion of this chapter that present Army methods of computing requirements rest, on the whole, on sound theoretical grounds. However, they appear to be impractical under the stressful conditions which now prevail and which show promise of continuing to prevail f . u Department of Defense, Emergency Management of the National Economy, Requirements (Washington, D.C.: Industrial College of the Armed Forces, 195^), Vol. II, p. 19. c 230 for some time to come. Thus, despite the considerable merit in current requirements techniques, there seems to be an urgent need for some more practical method of ! arriving at approximately the same solution to the ' problem. The chapter immediately following will examine some of these alternative solutions. There are many such alternatives which show promise of producing reason able approximations. Ideally, the method used should pro vide a substantial degree of accuracy, a high degree of facility and flexibility, and a high level of harmony with other aspects of the national economy. CHAPTER XI ALTERNATIVE APPROACHES As has been pointed out frequently in this study, particularly in the preceding chapter, there is a press ing need for an approach to the problem under considera tion which will satisfy both the military and the economic requirements. In all likelihood, there is no single solution that will meet either of these needs completely, let along both of them simultaneously. Nevertheless, considerable thought has been given to alternative methods of determining materiel requirements and some of these alternatives show promise of being much more satisfactory than the present method. Before examin ing these other techniques, there are several conclusions reached by this writer that might here be considered profitably. In the first place, it does not seem likely that a new method will be discovered that holds promise of any greater accuracy in times of reasonable international stability. Hence, there will be little if any military or economic advantage in these alternatives, if It is assumed that the time available fob the requirements i process is unlimited. However, as has been mentioned, time is normally quite limited in these days. It is against this background that other approaches to the requirements problem must be considered. In the second place, analysis of the problems in volved has indicated to this writer that the only economic advantage of one system over another is to be found in its relative accuracy and facility of application. The more accurate and facile a system is, the smaller are the chances of maldistribution of resources. In that none of the present and proposed solutions embrace counter-cyclical phasing of requirements, they are all on an equal footing on that score. As a corollary to these two thoughts, the present discussion will find a technique economically advantageous if it produces reasonably accurate results and if it can do so under fluid conditions. The possible merits of ad justing the statement of needs to the phase of the business cycle will not be considered here. A detailed discussion of that aspect of the problem will be presented in the following chapter. The fact that alternatives to the present method are needed has been attested to by a rather imposing body of authorities. Literally all of these individuals have based their criticism on the thought bhat current pro cedures are too complex and time-consuming under today's conditions. As an example, the Harvard survey team advo cated the development of short-cut methods for use during the early planning and budgetary phases. Their report declared: Conditions can be expected to change and to outdate requirements rapidly. Here, again, ex cessive detail would seem to defeat the purpose. On the other hand, requirements which will be the basis of procurement or supply within the next few months require much more detail i_f detail means accuracy.1 An earlier and less well known study on the same subject was conducted in 1950 at the direction of the Joint Chiefs of Staff. Again, the conclusion was substan tially to the same effect. The chairman reported: Since the basic outline plan of the Joint Chiefs of Staff is based on probabilities and estimates of a broad and variable nature, it appears entirely logical that the logistics planning and requirements computations be developed in a similar broad manner. This type of approach indicates the necessity for continual development of broad planning aggregates such as the division slice computations . . .2 1 Requirements Survey (Boston: Harvard University Graduate School of Business Administration, 1951)> Vol. II, p. 10. 2 Rear Admiral B. B. Biggs, "Recommendations for Reduction of Requirements Determination Time" (unpublished study, Department of Defense, Washington, D.C., 1950), p. 1. There are a number of alternatives that have been examined to determine their possible application to the problems of the military. Some appear to be almost com pletely unsuitable while others hold considerable promise. The remainder of this chapter will be devoted to a com parative study of the suggested methods. I. SUMMATION METHODS The arithmetical summation methods are typified by the procedure described in Chapters IV through VIII of this study. They are mentioned here as an alternative to present practices because of the introduction of electronic computors. These devices operate on the same basic prin ciples as those now in use, but their versatility and speed are so outstanding as to warrant considering them as a distinct approach to the problem. Basic Principles Fundamentally, the arithmetical summation method consists of multiplying the number of each type of troop unit using an item of equipment by the quantity of that item authorized for each of those organizations. The prod ucts thus derived are added to find the total requirement. This is now being done in some instances by hand, by the 235 use of adding machines and, more commonly, by the use of punch cards. No matter which method is used, the basic problem is still the same. A separate entry must be made for each piece of equipment and for each individual military or ganization using it. Whether by hand or by machine, each unit's authorization must be- added, one by one, to the authorizations of all other units. To these totals, of course, must be added the replenishment, pipeline, and other types of requirements. This step-by-step solution of complex problems is time-consuming and wasteful of manpower. One group of ' student officers pointed out in this connection that: The Department of the Army initially consumed two years between the initiation of planning and the receipt of any recommendations for change of strategy due to infeasibility . . . Of this two years, ten months pertained directly to determina tion of materiel requirements and industrial' capabilities.3 In the same connection, it was found that between 500 and 600 people are required to accomplish the Quarter master quarterly revision of requirements on 70,000 4 different items. ' These figures serve to illustrate the 3 Col. M. E. Sorley, et_ al., Methods of Determining Material Requirements (Washington, D.C.: Industrial College of the Armed Forces, 1949), P* 40. 4 Interview with Lt. Col. Seaton F. McDaniel, Office of Assistant Secretary of Army (Material), January, 1954. ' 236 ;cost to the nation* both economically and strategically* !when the summation method is accomplished by either me chanical or manual means. 'Electronic Computors The Air Force and Navy are now using electronic computors and similar equipment will soon be in use in Ordnance materiel within the Army. The factor that justi fies their consideration as a distinct alternative to present methods is not* as has been stated already* their employment of different basic principles. Nor is it solely ia matter of the speed with which different operations can !be performed, although the speed* alone, almost justified separate consideration of computors. The truly distinctive feature is the ability of electronic devices to solve problems that cannot be solved in any other way. Of course* in theory* any equation that can be worked out on a computor also can be handled with pencil and paper. In practice* however* the resolution of many problems entails such enormous amounts of time and energy that they are* in effect, unsolvable. This is particularly true of solving simultaneous equations which appear with moderate frequency in the computation of requirements. At present, such equations are avoided by the adoption of short-cut methods that are less accurate. 237 This report has cited several instances of circular i I problems, the solution of any one part requiring the 5 solution,of its predecessor in the circle.- The best :example, is that concerning the Mobilization Reserve Ma~ i ! teriel Requirement. The net need for any item depends, in part, upon the size of the MRMR. That, in turn, de- :pends upon the production lead time for the item in ques- .tion. The amount of time required to achieve a given t volume of production depends upon how many plants will be in operation and how many will be in stand-by condition , at each future time period. The proportion of productive |capacity in use will depend, ultimately, upon the size f of the net requirements for each of those time periods. This is a relatively simple problem as simultane ous equations go. Yet its resolution would require the solution of an almost infinite number of equations con sisting of all the possible different combinations of variables. It has been found, however, that various types of electronic computors can handle problems of this sort with relative ease.^ Of course, the solutions when using 5 E.g., cf. ante, p. 72. 6 Commander Harold B. Goodwin, Adaptability of Electronic Computors to Problems Affecting EconomicT/fobili- zation ('Washington, D7TT. 1 Indus trial College of the Armed Forces, 195^)* P* 61. , 238 ; computors is no more reliable than the data that are fed i into them, but that objection applies to all other methods. i Speed of Operation 1 In one second, the UNIVAC computor can perform any i one of the following operations: (1) 1,905 additions or ' I subtractions; (2) 465 multiplications; (3) 257 divisions; i 7 or (4) 2,740 comparisons of data. As was suggested briefly above, speed in itself does not make one technique different from another. If, however, there is a large disparity between the times involved in i I two different methods, the time available might determine whether a given calculation can be accomplished at all. For example, heretofore the requirements for vari ous types of cargo vessels in time of war have been calcu lated on a relatively ''rough" basis, capacities and speeds of the different general categories of ships being aver- : aged. By use of the computor, however, much more refined results can be obtained. Practically every variable may now be introduced into the equation. This type of problem .has been described thus; 7 Ibid., p. 18. 239 There is often an almost infinite number of different routes and types of carriers that may be used. The use of more carriers (for example, seagoing tankers.) on one route means a reduction of these carriers on other routes. Thus, the use of all available carriers for transportation of the total cargo to be hauled is a closely inter related problem that must be solved for all car riers, cargoes and routes. By determination of the "saddle point" of maximum efficiency or mini mum costs and time, the problem may be solved realistically.8 Other Versatile Characteristics Although this study is largely confined to require ments for end products, it is desired to examine briefly the calculation of needs for components and basic materi als. It is in this field that the versatility of elec tronic devices can be more readily demonstrated. It has been pointed out that, in determining the materials needed for a particular refrigerator, for example, the informa tion on that piece of equipment does not need to contain all the materials required in all of its components. The computor is capable of selecting the proper number of each major component, note the materials required for those components, and arrive at the correct total for each type of material required for the entire assembly and then multiply those figures by the number of such ^ Ibid., p. 65. refrigerators needed during each time period. One of the earliest uses of computors in determin ing needs for a particular operation was that involved in the Berlin airlift. It was found highly practical to in troduce into the machine data on items such as aircraft* active crews* and nonactive crews. To this was added information on activities such as flying hours* storage hours* and hours for resting crews. As a result, it was possible to predict such matters as the number of runways needed* the quantities of aviation gasoline required* and 10 the manpower demand by occupational skill. Bindings on Computors In short* it is believed that electronic computors offer a vast improvement over earlier methods in two re spects. First* by making it possible to conduct more re fined calculations* it becomes possible to use more re sources in their near-optimum manner. Second* even if exactly the same calculations were done electronically as those being accomplished now by mechanical means, the additional speed of the former makes It possible to bring the planning phase of an operation closer to its execution. 9 Ibid-j P* 58. 10 Ibid.* p. 65. r - ~~2h~i~\ Thus, there are fewer changes in conditions that can inter vene to invalidate the plans. Despite these very obvious merits, it must be repeated that electronic devices are no more reliable than j the data fed into them. If that information is wrong or, more commonly, incomplete, then the decision must be based| i i upon judgment. Thus far, no computor has been able to display that quality. On the balance, however, electronic computors show promise of substantially reducing military requirements and thus lowering the demands upon the national economy. i | The potential saving in manpower is also a considerable j i economic gain. j I II. GRAPHIC METHOD 1 | i ! An untried method of determining requirements has j 11 been proposed by Colonel Philip Schwartz, USAF. His j study is now fifteen years old. Yet, so far as is known J i to this writer, his proposal has never been given serious ; j consideration. This lack of acceptability is not entirely1 Colonel Philip Schwartz, "Graphic Analysis of Procurement Plans Calculations" (unpublished study for the Industrial College of the Armed Forces, Washington, D.C., 1940). 242 due to the novelty of his proposal. Col. Schwartz has been most scholarly in presenting his views and has gone to considerable pains to demonstrate the known shortcom ings of his idea. Economists, like other scholars, are accustomed to comparatively conservative presentations. They expect a new theory or approach to be surrounded by any reason- . able doubts that might occur to the meticulous student. The colonel apparently is of that school. However, his apparent emphasis on the difficulties of applying his i theory may have discouraged others from examining it more thoroughly. i Graphic Theory Colonel Schwartz's theory has been described as "a method of determining requirements by means of the 12 similarity of curves ..." There appears to be a cer tain consistency among certain categories of items when considering their demand curves after the outbreak of war. Looking at the cumulative curve for non-expendible equip ment, it has been found that the curve slopes upwards and t i to the right, gradually at first, then rapidly and then gradually again. Sorley, et al., op. cit., p. 42. 243 The reason for the shape of this curve is readily explained. In the first few days of a war, there are relatively few new units that are organized to the extent that they require their initial equipment. Then, as training centers are activated and the draft brings exist ing organizations to full strength, there is a sharp rise in the demand for equipment. In the meantime, some of the pre-D-Day units become engaged in action and the loss of their equipment through enemy action adds to the demand. After a certain period of time, it is found that the Army has reached its maximum strength, both in indi viduals and in number of divisions. From that point on wards, there is little or no demand for the equipment of new units. The only remaining requirements are for re plenishment and for the establishment of pipelines into new theaters of combat. At that point, therefore, the cumulative demand curve is found increasing at a decreas ing rate. Quite the contrary is true of such expendibles as ammunition. The cumulative curve, of course, slopes up and to the right, but its profile is entirely different. Presumably, in the early days of a war, a relatively small proportion of the ultimate American strength is apt to be engaged. Therefore, the curve will rise slowly at first, I 2kb reflecting only a gradual increase in the requirement for training ammunition plus the .change to combat rates of expenditure of those units actively engaged with the - enemy. i i Then, as the Army increases in strength and, at the same time, a greater portion of the Army becomes en gaged in combat, the curve will begin to rise sharply. This tendency will continue until the maximum number of troops are in combat, after which the cumulative curve continues to rise at a fairly constant rate. ! t Curve Characteristics I The distinction between the expendible and non- i i expendible curves serves to illustrate the basic concept j i advanced by Colonel Schwartz. In the former case, it was seen that the curve climbs slowly at first and then sharp ly throughout the remainder of the war. The. latter rises i slowly, then quickly, and then slowly throughout the re mainder of the war. Obviously, however, the distinction between expend ible and non-expendible supplies is not sufficient. Some ! types of non-expendibles, such as tanks, will incur a very heavy loss rate due to enemy action, while others, such as engineering construction equipment, might have a ! 245 | loss rate closely related to days of use. In the latter J case, enemy action would be reckoned as being of minor significance in computing the cumulative curve. In brief, predictability of future requirements by | the graphic method calls for the establishment of well chosen categories of equipment. Once empirical data in dicate the bounds to a category of equipment for this purpose, the graphic method is applied by: . . . taking cognizance of the similarities in curves. By computing the requirements of only one item, the requirements of all the items in the j particular category may be approximately determined. I After the requirements curve for one item has been j drawn, it is necessary to determine only one point j on the curve of each of the other items in that | category in order to draw in their particular re- J quirements curve. 3 j Colonel Schwartz has selected certain arbitrary groups of equipment and from those groups he has selected arbitrary samples. The time-phased requirements for these samples have then been computed for a given mobilization plan by using the current arithmetical summation methods. The results of these computations have then been plotted graphically. The colonel then selected the curve that appeared to be most typical of all the curves in that category of equipment. 13 Ibid., p. 43. ! " 2%5 For the sake of this discussion, let it be assumed that the category of equipment under consideration is bridging equipment and that the curve for pontoons is found to be most typical of all the samples examined. The computor's next step is to compute by the summation method the requirement for pontoons under an entirely different plan. This demand is then plotted on a new graph. Then one point--any point--is computed on the requirement curve for each of the other samples. Finally, a curve is drawn through each of these points parallel to the curve of the "typical" item. Colonel Schwartz then checked his findings by actu- i ally computing the phased requirements for each of his samples. Assuming the computed result to be correct, he compared that result with the one obtained by the graphic method for each sample. ! Effectiveness The results were not promising. While errors of less than one per cent were found in some cases, the dis crepancy ranged up to 76 per cent in other cases. The latter error, of course, is completely unacceptable. However, it would be rash to condemn this approach on the basis of the meagre data available. For one thing, it might well be that much greater similarity between ! 247 i curves would have been discovered if the broad categories j of equipment had been selected differently. For example, | one of Colonel Schwartz's categories was "Class IV j engineer equipment." This, of course, covers all initial I i issues for special projects and the category is thus apt to include just about every piece of equipment used by the Engineers. Perhaps it might be found that a much higher degree of parallelism among the curves within a category would- be i j discovered if different categories were arbitrarily se- | lected. For example, the groupings might be functional, such as "road building equipment," or it might be based upon some actuarial principle, such as "engineer equipment having a use life of less than one year." There are numerous classification systems that might be devised for this use and only experimentation based upon empirical data will reveal where the correla tion is to be found, if it is to be found anywhere. Al though it seems unlikely, it might be found that the classification system should be based upon cost or weight or production lead time, or some other apparently irrele vant factor. Advantages If satisfactory correlations can be established, 248 the graphic method would he a very useful device in many j i respects. First, it would obviate the necessity for j f computing complete time-phased requirements for the vast j majority of items. Only the items selected as being typical would have to have their complete curves plotted. The saving in effort should be substantial. Second, the graphic method might also prove to be most valuable in predicting requirements on items for which no experience data are available. This is typically the case when a new item is made available for issue. By placing such a piece of equipment in its correct category, the shape of its demand curve might be obtained with an I acceptable margin of error. Disadvantages The principle disadvantage of the graphic method, of course, is the fact that it has not yet been developed i to the point where it is usable. It may be that it never will be found sufficiently accurate. Only further analysis of large numbers of items will permit a decision in this matter. A substantial difficulty that will be encountered in this method is the selection of the correct typical curve within each category of items. At least part of the 249 error in Colonel Schwartz's graphs may be attributed directly to that cause. Hdd he selected different items for his master curves, the error would have been greatly ! i reduced in many instances. Hence, it appears that the development of this technique will entail not only the s selection of proper categories, but also the additional problem of selecting the key item within each group. It should also be realized that the curves, once drawn, are valid for only a single plan. As has been pointed out: The Graphic Method does not suppose that the curve of requirements for a particular item will be identical under all mobilization plans. The requirements curve for guns in a mobilization plan calling for the equipping of seventy-five divisions in twelve months would be different from the curve under a plan where one hundred di visions were to be placed in the field in eighteen months. Finally, any approximation method, as the name suggests, is admittedly less accurate than the arithmeti cal summation method. Hence, there would be-~and probably should be--some reluctance to use the graphic method as the basis for procurement action. An error of one per cent on a major procurement of tanks could cost the nation something in excess of $1,000,000. 14 Loc. cit. 250 1 Conclusion | Despite these disadvantages, it is felt that this I method holds promise of being of tremendous value in the j i early planning stages. Feasibility and implications testing require some ready reckoning technique to deter mine whether or not a proposed strategic plan is capable j of implementation. Similarly, even during the budget j cycle, there is no need for 100 per cent accuracy. The mere acts of requesting and appropriating funds do not cost the nation any resources. j Economic activity is not stimulated until the funds 1 j are obligated and it is at this point, for the first time, j ! that a high degree of precision is required. Hence, it ! j is felt that a determined effort should be made to develop the graphic method as a possible means of expediting the planning and budgetary phases of requirements calculations, III. DIVISION SLICE METHOD i i I For varying purposes and at different times, the j I military has examined a number of techniques for comput ing requirements which are known as "approximation meth ods." Probably the best known and most widely used of these is the division slice. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ i 251 In fact, the division slice method is the only method that has achieved wide acceptability as a short-cut approach to requirements determinations. It is the only one that has been refined to the point where reasonable accuracy can be obtained. The need for some such device was repeatedly stressed in one survey. It declared: A great deal more emphasis should be given to short-cut methods for computing requirements for mobilization planning, feasibility testing, bud getary and other planning purposes where the need for accuracy is only approximate, or where the need for speed in requirements determination is Important.15 The same report went on to recommend "that the division slice and similar methods now used by the Techni- 16 cal Services be used more extensively." It will be noted that, in the first of these two quotations, emphasis was placed upon the use of these methods during the plan ning and budgetary phases. They are still considered--and probably properly so--as being too Inaccurate for the im plementation stage. Development of the Slice The division slice is developed by starting from a real or assumed troop list. The procedure then has been Requirements Survey, op. cit., p. 11. 16 Loc. cit. 252 described thus: The total number of personnel and the items of equipment are calculated by reference to appro priate tables of organization and equipment and other allowance lists. The end product is then divided by the number of divisions in the troop list and the result is the division slice for that troop list.17 To illustrate, the average division during World War II had a strength of about 14,000 men. However, aside from the men assigned to combat divisions, there were large numbers assigned to corps, armies, supply in stallations, and so forth, within the European Theater of Operations. It was thus found that the total theater strength divided by the number of divisions in the theater 18 produced a figure of 45,000 men. That figure is the theater division slice of manpower within that theater. There were over twice as many outside of divisions as there were within them. After adjusting for changes in the strength of divisions, it was found that the similar 17 Department of Defense, Economic Mobilization Studies, Requirements (Washington, D.C.: Industrial College of the Armed Forces, 1954), p. 24. 18 Department of Defense, Emergency Management of the National Economy, Requirements {Washington, D.C.: Industrial College of the Armed Forces, 1954), Vol. II, p. 24. 253 19 slice in World War I was 39,000 men.- It should be realized that the slice need not necessarily be based upon the division. As has been pointed out by one group of students: Conceivably, the common denominator could be the Infantry Regiment, Armies, or even Theaters of Operation, but since the Division is the basic i combat element, it provides a more utilitarian i I base from which the strength or requirements of 1 a force of more or less divisions can be approxi mated . 20 The illustration given here concerned numbers of men. However, the identical process can be followed for I any item of equipment. By dividing all the 155mm 5 i ; howitzers in the hands of troops within a theater by the number of divisions in that theater, a division slice for j i } 155mm howitzers can foe obtained. Use of the Slice The basic premise in employing the division slice is the existence of a relationship between numbers of divisions and requirements for equipment. For example, let it be assumed that Plan I called for fifty divisions and a detailed calculation revealed that implementation Colonel Carl T. Schmidt, "The Division Slice in Two World Wars," Military Review, 31:52, October, 1951* 20 Sorley, et al., op. cit., p. 48. 254 of the Plan would require 5,000 tanks within the same theater. The division slice would then he 100 tanks, including both divisional and non-divisional equipment. If the succeeding plan, Plan II, called for only forty divisions, the division slice would be applied to that figure during the early stages of developing the plan. It would be assumed that 4,000 tanks would be re quired. In short, the implications of such a plan can be approximately determined with relative ease. Advantages of .the Slice Method One of the biggest advantages of the slice method is its general acceptability throughout the forces. When high level guidance is lacking regarding a given plan, the chances are strongly in favor of the Technical Ser vices independently adopting this one rule-of-thumb tech nique for arriving at the solution of their requirements problem. Thus, if an error is developed, the same error in the same general magnitude will be made throughout the Army. A balanced force, therefore, is apt to result. This may, at first glance, appear to be a small consolation. Actually, it is a matter of rather consider able significance. It is bad enough, for example, to have too many tanks. It would be even worse to have an excess' of tanks and a shortage of radios to communicate with them. I 255 Thus, having the proper proportions of equipment leaves a certain amount of flexibility, even when the total quantities are in error somewhat. ; Of course, the greatest advantage of all in this technique is its relative accuracy. Although simple to develop and easy to apply, it provides results that are i well within the acceptable tolerance. For the most part, it has not been suggested that the slice technique be used for actual procurement, but it holds great promise for the planning and budget phases. Thus far, the discussion has been concerned with such matters as tanks and divisions within an active theater of combat. It should be realized that the same technique can be applied with almost equal ease to such activities as training installations within the United States, depots within inactive theaters, and so forth. In fact, the Air Force is now employing this device in constructing air wing and division slices. Disadvantages One of the basic assumptions in using the division slice concerns the general level of support and services involved. In general, it has been found that, say, one field Army consisting of two corps and six divisions will 2 5 6 require a fairly stable and predictable amount of support ; i activity. In this connection, use of the division slice j i is complicated, as has been pointed out: i . . . by the partially unified support of both Army and air units. General Bradley commented, j in one of his speeches, that every increase of ! 100,000 men in the Air Force requires an increase of 15*000 men in the Army to provide those types of support which the Army gives to both its own and air units.21 Another disadvantage stems from the reluctance of i reviewing authorities to accept statements of requirements based upon the slice method. Congress, in particular, and the Bureau of the Budget have been very skeptical of figures derived by this approach. The arithmetical sum mation method naturally inspires greater confidence and those reviewing bodies insist on this more time-consuming j method of calculation. j j ! j The Harvard survey team drew attention to this i lack of acceptability outside the Army. The portion of the report dealing with this matter stated: Suitable shortcut methods should be published. . . . This move would give shortcut methods a stature they do not now enjoy and should go a long way toward gaining them acceptance in the Army and by outside reviewing a g e n c i e s .22 21 George A. Lincoln, "Planning Military Require ments," American Economic Review,,47:442, May, 1952. 22 Requirements Survey, op. cit., p. 12. 257 A final disadvantage has appeared which is more the fault of the persons applying the technique than the fault of the technique itself. By using an Army-wide di- vidion slice, instead of a theater or combat slice, the i * implicit assumption was made that the same proportion of the Army would continue to be in active operations. This, i of course, was false, and the assumption resulted in a 23 distortion of the replacement and pipeline allowances. In short, while the division slice offers an opportunity for simplified procedures, it is dangerous to carry that simplification to an extreme. IV. OTHER APPROXIMATION METHODS Aside from the division slice, there are a number of other methods which are classed under the heading of approximation techniques^ Included in these are systems i known as the empirical formula, statistical,- survey or : sampling, estimate and availability control methods. Some of these are more closely related to the allocation proc esses than the requirements cycle, but it is possible to determine needs under any of them. 2 3 Ibid., Appendix C, p. 16. Fundamentally, all of these methods start with a specific, known force for which the requirements have been calculated with the greatest possible degree of accuracy. Starting from this firm base, an effort is made to project those requirements for a force of different composition. Of this technique, it has been said: It Is obviously not a purely scientific deter mination, since each element in the basic data will not necessarily continue to bear the same relationship to the other elements as the projec tion process takes place.24 Hside from the similarity of approach contained in these methods, they are grouped together here for another reason. None of them approaches the arithmetical summa tion or division slice techniques in versatility and, hence, in usefulness. Nevertheless, some of them are valu able in attacking certain specialized problems. Such is the case with the empirical formula method. Empirical Formula This method, as the name implies, is based upon a broad base of experience under a wide variety of condi tions. This approach to the requirements problem has been used most successfully by the Quartermaster General on the — Sorley, et al., op. cit., p. 47. 259 , ' basis of the varied experience gained during World War II ! and during the Korean War. On the basis of those data, his office has been able to develop very accurate formulae ' for such elements as subsistence requirements per 1,000 ' men per month or gasoline needs per vehicle per day. ; These factors or formulae are, of course, based I on the assumption that such conditions as deterioration ; rates, handling losses, and the like, will be relatively constant or, at least, predictable. These formulae must be reviewed constantly and a good element of experienced i ! judgment must be introduced when applying them to new i ' operations or under new conditions. There is always the danger that such printed factors will be used with implicit faith when the circumstances do not warrant. Statistical Method This technique has been described in the following terms: It makes use of statistical concepts in analyz ing accumulated data and in projecting past ex perience. It employs such concepts as central tendency, standard deviation, and correlation, and, like all statistical analyses, is founded on the law of chance.25 The statistical method is of rather limited use in 2 5 Ibid., p. 49. ■ 2 6 0 military service. This condition is largely due to the fact that the statistical data must he obtained under rigid controls and by highly skilled personnel. Attempts to rely upon untrained military personnel to gather and report the desired data have been unsatisfactory. Results that appear to be variations when the statistics are re ported often are not true variations, but are the result of the lack or unreliability of the information being re ported through military channels. The difficulties in obtaining relatively simple 26 reports from the field have already been noted. It is understandable, then, that the highly refined statistical data would be almost impossible to obtain from personnel not trained in that field. As a result, use of this method has, of necessity, been confined largely to activi ties where highly trained personnel can operate under well controlled conditions. A typical use is to be found in projecting materiel requirements on the basis of experimentation or simulated user tests. An example would be the estimates of mainten ance needs for new equipment emerging from the development and test stage. 26 Cf. ante, pp. 122 et sqq. 26! ; Survey or Sampling Method The "opinion poll" type of approach to requirements has relatively little military significance. For the most ( i ’ I part, individual or group preferences are of little im- ‘ portance in determining needs. Equipment is selected and procured on the basis of its efficacy in performing a , given function. Nevertheless, the survey or sampling method does . have some minor significance in calculating needs. Matters ; of food, clothing, entertainment facilities and so forth : can and should be directed toward the taste or preference f of the individuals eoncerned. Of course, there are se vere limits as to how far such choices can dictate require ments, but, within those limits, a great deal can be done. An outstanding example of this type of approach was the recent selection of the new Army uniform. A scientifically selected cross-section of the entire Army was polled as to preference on color, cut, accessories and so on. Rank, age, racial origin, and many other factors were considered in forming the sample. Similarly, while a balanced diet is the main con sideration in selecting menus, opinion polls have been used in order to cater to taste as much as possible. This technique was used quite extensively before adopting the new series of combat packed rations. Presumably the same method could be used on a wide variety of other require ments ranging from the selection of motion pictures to the determination of the proportion of Catholic, Jewish, and Protestant chaplains' equipment. While the monetary value of items susceptible to this type of determination is relatively low, the items themselves are of considerable importance as far as the morale of the troops is concerned. Estimate Method While the estimate method may appear, at first sight, to be similar to the survey technique, there actu ally is a considerable difference between the two. With the former, an effort is made to obtain only the judgment of experienced personnel. In the latter method, the Army seems the preference of all personnel. The resort to informed opinion does not mean that historical data are ignored. On the contrary, experience statistics generally are the starting point of the in vestigation. The estimates are needed to interpolate those statistics in order to apply them to some new opera tion where novel conditions are apt to be encountered. This type of judgment is used constantly in the routine development of such items as replacement factors 263 and pipeline levels. The responsible personnel in the Technical Services introduce their own professional opinions as a matter of course. When this is done, the process is not dignified with a distinct title such as "the estimate method." However, it is considered to be a separate procedure when a more-or-less formal appeal for such judgment is made. As was pointed out earlier, senior commanders throughout the Army were asked for their opinions as to which equipment could now be considered 27 nonessential. Similarly, the Quartermaster General has found this approach useful in predicting usage and wear factors for new or modified equipment. Control Method The control method, in the strict sense, is not a requirement computation process; it is an allocation technique. This technique is described thus: In this method of approximating requirements, the procedure is deductive rather than inductive. Here the requirements determination is conducted within some over-all limiting control such as funds, or utilities, or raw materials.2° This type of control can be used to adjust absolute 27 Cf. ante, p. 102. 28 Sorley, et al., op. cit., p. 50* 264 requirements after they have been presented, but in that case it is not a requirements calculation method at all. However, control methods also can be used as the starting point for the computation. It often has been suggested that the first step should consist of allocating steel, for example, among its claimant agencies. The Army, then, would devote its share to the production of a bal anced stock of materiel. Such a technique would also call for the alloca tion of additional future raw materials as the productive facilities were expanded. Plans such as this have two grave and inherent short-comings. First, unless they are ante dated by some genuine requirements computation process, the allocation process is apt to be highly unresponsive ! i to the actual needs of the services. Second, there is the problem of determining which of the basic industries should undergo accelerated expansion in times of emergency and which should experience only limited expansion. Before any such expansion takes place, it is theoretically possible to take all of the nation's uncom mitted multi-use resources and devote tham to the expansion of any one or any combination of basic materials. However, if the expansion program is decided ahead of the require- : I raents process, the resources become committed, specialized ; and unversatile. In short, there Is a substantial danger in any such control method that resources will be used in j a less-than-optimum manner. i i Thus, while the Controlled Materials Plan of i I ! World War II and the peacetime budget process are widely | considered to be "the control method of computing require- i l j ments," this writer does not deem them to be true require- ! ments techniques. The contention of this study is that i requirements are entirely independent of any controls or : other limitations. Perhaps limitations frequently may ■ prevent the fulfillment of the stated needs, but that ; condition does not alter the needs themselves. ; Advantages of Approximations 1 These other approximation methods, with the excep tion of the control method, offer valuable and versatile : tools for meeting specialized problems. However, none of them discussed in this section is capable of such broad application as is found with the division slice. These approaches to the requirements problem possess many merits. First, they provide various means of deter mining needs when data are lacking to make the determina tion by the arithmetical summation method. The latter ; system, as has been shown, requires quite complete in formation on a wide range of matters before it can be used 2 6 6 ' successfully. Second, they offer a vehicle for introducing judg ment and taste into a process that otherwise tends to be a purely mechanical one. Instances have been given in this section where opinion is more valuable than formulae. This will often continue to be the case as long as novel situations and conditions are encountered. Third, these methods afford a means of making rela tively quick estimates of requirements. While they do not possess the necessary accuracy to form a basis for pro curement, they can be highly valuable during the planning stage when details are not essential. In times of extreme emergency, when time is lacking for the more prolonged processes, the approximation methods may even become the only means of reaching vast and consequential decisions. In this connection, it has been pointed out: . . . it is conceivable that one or two persons possessing the requisite experience and judgment could produce a flash estimate or approximation in a matter of days or even hours, since the basic empirical data would already, to a large extent, be a part of their own subjective knowledge.29 Disadvantages of Approximations The disadvantages of the various approximation 29 ^ Ibid., p. 54. 267 methods already have been indicated to some extent in the earlier discussion of them. Primarily, their shortcoming is to be found in the degree of accuracy that can be se cured. While a relatively small error is obtained with some of these approaches, even a small error can be a matter of one or more millions of dollars. Hence, the arithmetical summation method probably will and should continue to be the technique utilized for arriving at the final statements of requirements. For the most part, of course, approximations are not intended to substitute for the summation method. They are intended to complement it. The survey or opinion poll type of approach, for example, could never replace the summation technique. The survey is of great value within its sphere, but that sphere is a limited one. Finally, even approximations can be consuming in time and manpower. A large number of highly trained statis ticians are required to accomplish the work presently being done in that field. Broad surveys and samples of opinion also can consume a great deal of time if a sufficiently broad base is to be obtained. V. FEASIBILITY TESTING Feasibility testing is, in the strict sense, another approximation technique for arriving at require ments. However, its method, purpose, and product are sufficiently distinctive to warrant its receiving separate consideration. 30 As was mentioned earlier, the Joint Chiefs of Staff give their plans a preliminary logistical screening before passing them on to the services for implementation. The purpose of this screening is not to arrive at some estimate of the detailed equipment that will be required by the plan; it is, rather, to examine the traditional bottlenecks that might interfere with the success of the operational concept that has been decided upon. This process is appropriate to the present study in that, in a very broad way, it is an attempt to deter mine requirements. It is true that this determination Is not done by items, but by selected categories of items. Nevertheless, if developed and refined, it might be found that preliminary budget work could be done on the same basis. " 3 0 Cf. ante, p. $2. 269 General Theory As has been pointed out elsewhere, "the strategic plan is not a detailed operational plan, but rather an outline war plan, giving the broad general concept of 31 operations." Thus, it is not only unnecessary but im possible to compute the number of rounds of ammunitions hy type and the quantities of radios, rifles, and tents that would be called for by the plan. The purpose is rather to evaluate at an early stage in the planning cycle whether there are any flagrant impracticalities in the outline. If this were not done at an early stage, it would be necessary for the mobilization concept to be forwarded to the three armed forces for translation into detailed plans from which detailed re quirements would be computed. Then, many months later, the needs of each of the forces would be forwarded to the Joint Chiefs of Staff to be reviewed and added up. Were it not for this limited feasibility testing, all this valuable time and effort on the part of the services might be expended before discovering that the plan was Col. Chester G. Martz, et al., Feasibility Tests and Checks of Material Requirements "(Washington, D.C.: Industrial College of the Armed Forces, 19^9)* P- 3. 270 impractical. The categories selected for examination by the Joint Chiefs of Staff are personnel, tonnages of supply, transportation, petroleum, aircraft, and overseas con struction. These logistical areas have been selected because they "have been found to be the major limiting 32 factors for any plan." A special group of the joint staff conducts these tests which are now known as "implications" tests. Their purpose is to determine whether the materiel and facili ties likely to be available are adequate to permit the overseas deployment called for in the plan. Here, of course, consideration is given to the. time-phasing of the deployment and the probable increase in the supply of materials and facilities after the outbreak of war. Method In general, the various sections of the staff work from accepted formulae to arrive at the requirements. For example, an established division slice method is used in determining the number of troops for which logistical provision must be made. While these figures are hypotheti cal, the staff might find that a total overseas strength 32 271 of 45*000 must be expected for each division called for • in the plan. The numbers of men involved are not* in themselves* ; a logistical problem. However* the troops overseas create | logistical problems. The numbers of tons of food* cloth- ; ing* and other items that must be transported are related I in a most intimate way with the troop strength. For this I 1 reason* the computation of personnel is one of the first | steps involved in the testing cycle. i , The succeeding areas examined fall into a rather : natural sequence. For example* "supply tonnage data is • //sic7 essential for studying transportation requirements, ' 33 which in turn partly determine petroleum requirements." Each of the six groups is studied by use of formulae that have been developed over considerable periods of time. The number of tons of shipping required per thousand men per thousand miles overseas can be estimated by fairly adequate rule-of-thumb methods. The amount of harbor facilities needed per thousand tons of shipping per month may also be reduced to formulae. By employing such rough approximation methods* the Joint Chiefs of Staff can determine in a matter of a few 33 Loc. cit. i weeks whether or not a given plan is apt to be entirely : beyond achievement. To arrive at such a decision* of ; course* a means must be found to estimate the assets that j may be applied against the requirements. That step of the , process is of considerable importance* but it is outside ! the scope of this study and .will not be examined here. I Effectiveness of Implications Testing I It has been found that this process is reasonably \ j effective as a preliminary screening for logistical impli cations. However* one group of students declared that "some of the information upon which the current planning factors are based is not too accurate. The tendency is 34 to be overly conservative ..." This criticism* it should be noted* appears to be directed more against those using this method than against the method itself. The importance of this testing cycle to the present study must not be judged on the basis of its adequacy in feasibility testing* however. It is important because it appears to offer a means of arriving at certain categories of net requirements within a matter of weeks. With this in :mind * it might be profitable to study it further and to at- 1 tempt to determine whether expansion and improvement of ! Ibid.* p. 6. this technique might not make it possible to use it within the Army in drawing up.preliminary budget esti mates and in giving general direction to logistics plan ning. VI. SELECTED YEAR METHOD The selected year method of determining require ments will be discussed briefly here mainly for the pur pose of demonstrating its unsuitability for the computa tion of military requirements. This method of determining needs is mainly associated with civilian consumption in times of national emergency, and the most outstanding ex ample of this approach is the "Bedrock" Civilian Require ments Study conducted, during World War II by the Office of Civilian Supply. As the name of this method implies, an effort is made to select some particular year when consumption conditions were known and interpolate from there into some period in the future. In theory, as has been pointed out, the selected year could be "a depression year, an average year, a peak year or a year in which the smallest portion^of the national product was available for civilian „35 needs. Whatever the period, might be, it must bear some demonstrated relationship to the future period being examined. The purpose of the study is to determine the minimum civilian requirements. While it is granted that certain broad conclusions on this score may be reached by comparisons of this sort, there appear to be too many in tangibles to warrant the use of this method as the basis for detailed planning. Disruptions of the economy, shifts in population, and the ability of the population to live for a time on existing durable goods all tend to throw doubt on any such findings. Furthermore, the fundamental purpose of these studies is to find the minimum amount that will suf fice for support of the civil population and economy. Military requirements, on the other hand, are based more largely upon the most efficient quantities of resources for the mission at hand. Furthermore, the statement of military needs must be broken down into certain broad categories of resources in order to be useful.' There are many reasons, which are beyond the scope of this study, to question the efficacy of.the selected year method of determining minimum civilian requirements. There appear to be even more compelling reasons for re jecting it as a method of arriving at military needs and it will not be considered further. 275 VII. CONCLUSION The various short-cut methods of computing military requirements are of great theoretical and practical value in the distribution of the nation's resources. In gen eral, they permit the achievement of two very desirable ends. First, techniques such as the division slice method make it possible to make reasonable approximations of future needs with a minimum of time and effort. While these approaches might hot be adequate as the basis for effecting procurement, they are particularly adaptable to the planning and programming phases which are dominated by assumptions, judgment, and broad generalities. Second, these alternatives to the summation method are extremely useful to supplement the more precise means of computing needs. Where guidance from higher echelons or historical data are lacking, the various approxima tion methods constitute the only systematic means of reaching a solution. It is thus seen that the techniques examined in this chapter can, on occasion, complement or substitute for the present arithmetical summation method. With further study and development, it seems likely that their 276 usefulness could be increased still more. CHAPTER XII COUNTER-CYCLICAL CONSIDERATIONS Thus far in this study it has been found that present methods of computing Army requirements lead to some maldistributions of resources. These dislocations do not arise out of misdirection or poor intent. They are created by the very nature of the process. There are inherent gaps in the data from which the conclusions must be drawn and the guidance from superior echelons is often, of necessity, vague and general. It is true that certain improvements can be made in this process in order to reduce the degree of error. How ever, such refinements will not transfer requirements computations into the category of precise sciences. It is and likely will remain, a system of approximations. Hence, while optimum use of resources depends in part upon the techniques employed, it seems unlikely that the ideal allocation will ever be achieved. Assuming, then, that some misuse of the factors of production is almost inevitable, it seems appropriate to examine the 278 ' means of minimizing the harm to the economy resulting from such misuse. Such an inquiry would be desirable even if the optimum allocation already had been achieved. Perhapsj for,example * the man-hours of labor and tons of ore devoted to defense could be extracted from the economy at a time when they were least in demand. For example, it might be possible to meet security requirements from unemployed energies and resources during recessions and free those factors of production for other pursuits when there is great competition for them. I : Counter-cyclical phasing of ^requirements statements would achieve this end. Not only would it relieve the inflationary pressures of spending during periods of rela tively full employment, but such a course would act as a | ready stimulus to a depressed economy. Unfortunately, however, there are other military and economic implications of such counter-cyclical spending which must be given serious thought before any conclusions are reached. It is the purpose of this chapter to examine all of these impli- ; cations. i I l I. INTRODUCTION ! I , . ! i Vain Cost isshunri'd as much as Fraud; j They have no Forces kept Abroad; ; Laugh at th' Esteem of Foreigners, j 2 7 9 i And empty Glory got by Wars; . . . ' twas not only that They went, By whom vast Sums were Yearly spent; But Multitudes that liv'd on them. Were daily forc'd to do the same.l As suggested above, defense spending can be a power-, ful stimulus to the economy and the absence of it, under some circumstances, can have a depressing effect. An effort will now be made to determine which, if either, of : these influences has predominated. In particular, this i chapter will examine a sequence of three related questions. First, a determination must be made as to whether military expenditures have been arraigned with or against the business cycle. Second, if it is found that such spending tends to fluctuate with the cycle, it will be necessary to inquire as to whether this tendency can be reversed. Third, if such a reversal is possible, there remains the question as to whether it is desirable. Both military and economic considerations must be dealt with in answering the latter question. Historic Practice Historically, there appears to be only a rather j .......... — I ' »■ - i 1 • ' Bernard Mandeville, The Fable of the Bees (Oxford:; Clarendon Press, 1924), p. 32. I 280 remote relationship between the business cycle and the level of defense spending. This finding, however, is only a half truth. In times of war, of course, both the gross national product and military procurement rise sharply. There is a most intimate and direct relationship between the two curves in such cases. The procurement action of the military is largely responsible for the upswing in productivity and, at least in recent years, wartime spend ing dominates the entire economy. However, the converse does not hold true. In times of peace, the business cycle can fluctuate widely without there being any marked change in defense spending. The most outstanding example of this phenomenon is to be found in comparing Army expenditures with national Income during the period 1921 through 1939* During these years, the business cycle went through some of Its widest gyrations, but actual spending by the Army remained very constant, not varying more than 25 per cent throughout that entire span of time. Efforts to trace this relationship back into the earliest days of the nation were made difficult by the lack of reliable statistics as to income or national prod uct. The only completely accurate data that could be found in this connection were the Treasury's reports on 281 Imports and customs duties. While imports tend to vary with the business cycle, that relationship is too remote to form the basis for any such comparisons. Instead, resort was made to a series of estimations that have been made of the business- cycle during the nine- 2 teenth and twentieth centuries. The trends noted there checked against other estimations such as that compiled by 3 the National Industrial Conference Board. It is believed that the general outline of business cycles over a period of 150 years could be established in this manner. Basis for Comparison Against the trends discovered by the above procedure it was necessary to place some indication of military pro curement expenditures. While procurement could not be separated accurately from other types of expenditures for that entire span of time, data were available as to total Army expenditures. It is assumed in this study that "index of American Business of the Cleveland Trust Company, 1790-1939*" cited by Leonard P. Ayres, Turning Points in Business Cycles (New York: The Macmillan Com pany, 19^0), pp. 173 et seq. 3 Robert P. Martin, National Income in the United States, 1799-1938 (New York: National Industrial Confer ence Board, Inc., 1939)* ^ Department of the Army, The Army Almanac (Washing ton, D.C.: United States Government Printing Office, 1950) pp. 261 et seq. 282 procurement varies directly with total Army spending. ! Comparison of the two trends that were thus es- } jtablished confirms the finding made in regard to the period ! |from 1921 to 1939- National income tends to rise under I the stimulus of increased military procurement during war- I time periods. That is to be expected. However, there i J 1 appeared to be no firm correlation between the two trends in peacetime. International tension, isolationism, and other such considerations evidently were of greater impor tance in determining the level of defense. Weak Relationship j From the above analysis, it seems that peacetime [phasing of requirements is, at best, only loosely related I to the business cycle. If any tendency at all can be detected, it operates in a cyclical rather than in a ! . I counter-cyclical manner. i It may be concluded that the Army has not made a j 1 practice of phasing its peacetime requirements in opposi- j I tion to the business cycle. However, it cannot be con cluded automatically that the Army is remiss in this re gard. For this second conclusion to be warranted, it would have to be shown that such phasing is possible and desirable and these points are yet to be examined. It also would be necessary to show that the decision on this 283 matter rests with the Army. To deal with the last point first, it should be recalled that the economic implications of defense . spend- i ing are the responsibility of the President and his ad- ! 5 { visors and of the Congress. It was noted earlier that i the military leaders are not and should not be in a posi tion to determine what portion of the nation's resources should be devoted to defense. Hence, if there is a fault | in this regard, it does not appear to rest wholly upon | the military leadership. 1 ! ! I i | II. POSSIBILITY OP COUNTER-CYCLICAL PHASING | j . There are some inherent difficulties in the way of phasing military procurement against the business cycle. The largest problem, of course, arises out of the fact that the cycle itself is not entirely predictable. The procurement activity of the Army is based upon the time- phased statements of needs, and the process of preparing those statements often is begun two or more years in ad vance of the time the money is obligated. Such a laborious process is not readily adaptable to the problems of compensatory spending. Programs for arresting recessions should be capable of implementation p _________ Cf. ante, pp. 88 et sqq._______________________ ! ' ’ ” “ - ---- - 284 " in a much shorter span of time. This necessity arises j out of what appears to he a cumulative effect that sets I i . I I in once a marked recession starts. Keynes, at one point, , I j ! noted that depressions have a sort of natural course to i i ' i follow and he frequently invited attention to the ability j 1 i i of recessions to feed on themselves and become more acute | j i j if left to themselves. He stated, for example: • There are reasons . . . why the duration of the downward movement should have an order of magni- j tude which is not fortuitous, which does not fluctuate between, say, one year this time and ten years next time, but which shows some regu larity of habit . . .° This quotation does not mean, of course, that jKeynes believed such a course to be inevitable. He cer- ; tainly believed in government investment as a means of j overcoming declining private investment. Others also i ! | have suggested that a recession is something that is cumu- ^lative. Schumpeter, for example, referred to a depression i ! J i as that "vicious spiral" and declared: 11. . . it has a j way of feeding upon itself and of setting in motion a mech-j anism which, considered in isolation, could in fact run on 7 indefinitely under its own steam." 6 John Maynard Keynes, The General Theory of Employ- ment Interest and Money (New York: Harcourt, Brace and Company, 1956), p. 317* 7 Joseph A. Schumpeter, Business Cycles (New York; McGraw-Hill Book Company, Inc., 1939)> P~ 15l• \ ; ’ 285* ] j , ( In short, a recession, if left to itself, might be J j thought of as having a natural course to run. However, it j may be that there is a way of drawing a rein upon reces- | sions if they are anticipated or quickly recognized. j If an increasing anticipation as to the marginal I efficiency of capital cannot be relied upon to increase i investment as the business cycle takes a down-turn, gov- i ernmental investment may attempt to make up the gap in j order to avoid the full and "natural" course of the cycle. I As an instance of this line of thought, Clark declares: j j If efforts to stabilize private activity in j these fields fail, there is always the possibility j of using public works to redress the balance. If private activity expands too intensely let public works contract, and if private activity contracts, let public works expand.8 At the risk of cutting a discussion prematurely short, it will be assumed here that government spending can compensate for declining investment and thus soften ! j the severity of declines in business. This is not the I same as saying that the government should do so. j Returning to the rapidity with which compensatory spending can be initiated, it seems to be agreed that a highly responsive and sensitive system might fill the I 8 John Maurice Clark, Strategic Factors in Business ! | Cycles (New York: National Bureau of Economic Research, j 193TJ7 P. 198. ; 286 ! investment gap before serious consequences developed. 1 j If extreme degrees of government support to.the economy • i i are to be avoided, minor support should be forthcoming at the first signs of danger. ' Versatility of Military Needs Prom the foregoing discussion, it is possible to j draw several pertinent conclusions. First, the present technique of computing military requirements requires a considerable amount of time in order to arrive at a I reasonably accurate statement. Second, compensatory spending may be effective in straightening out the curve of the business cycle if applied promptly. Third, as a cohclusion in this syllogism, military procurement is not now a useful tool in countering the business cycle. How ever, with improvements in the computation process, such procurement might be made highly effective as a counter cyclical device. Although present practice does not encourage counter-cyclical phasing of requirements, it does not i [ I J ; 1 follow that such a course is impossible in peacetime. On i i the contrary, with relatively minor modifications, mili tary needs could be adapted to this purpose. To under stand how this could be done, it is necessary to examine in greater detail how the needs of the Army are. expressed j 287 in relation to time periods. i ! j Time Phasing ---------------- i ! Part of each year's needs are designed to meet ! | current requirements. This includes completing the initial ! I issue of all units and filling their replenishment demandsJ ; ' i i Another portion of the requirements are set aside to fill i ! the gap between supply and demand that is anticipated I ( after the outbreak of a war. The latter demand actually j ; could be met by having a stockpile big enough to fill the i ; gap or by having no stockpile, but enough productive ca- I pacity to keep up with sky-rocketing wartime requirements, j In practice, post-M-Day needs are met partly from | stocks and partly from production. However--and this is j the crucial point--there is no fixed proportion or "mix ture" of stocks and productivity that is obviously correct. There are any number of proportions that would prove to be satisfactory for this purpose. Hence, it would seem plausible in times of reces- i sion to build up the stockpiles with the intention of I relying less heavily upon productive capacity to meet wartime needs. This would not necessarily entail bringing stand-by plants into production. Such activation of moth balled factories, of course, would increase productive ' 288 “ readiness for war and thus reduce the need for stock- j i piles. | j On the contrary, wartime stocks could be built up by increasing the output of those plants already producing. In normal times, such plants are operating at minimum j ■ rates which are less than their most efficient rates and ! • ! hence an increase in output would tend to lower unit costs. Such a course would soon lead to the fulfillment of all mobilization reserve requirements. When that point I is reached, one of the producing plants could be closed. j This would have the effect of lowering industrial readi- ! | ness for war and hence a still larger stockpile would be j required. Such a process could continue until the reserve ! j stocks were large enough to require the closing of all j i i i ' i plants. Production beyond the latter point would not only j be useless; it would be a liability. I Other Demands Aside from the Mobilization Reserve Materiel Re- | ! I quirement, there are other demands that could be filled concurrently or consecutively. Re-equipping existing forces with more modern supplies and weapons could be i carried on at an accelerated pace during depression. j 289 Similarly, retooling of munitions production lines, even if they are in storage, could be carried out at the same time. Such retooling frequently is necessitated by im- j i provements in production techniques. There remains the question of facilities. Army posts, depots, arsenals, and ports are constantly in need of improvement and the accomplishment of such work could be concentrated in the depression years and, except for i , I urgent military reasons, receive less emphasis in times i approaching full employment. Communication facilities and defensive installations also could be considered under this heading. Authenticity of Needs It should be noted that all the production and \ f construction discussed in this section are designed to i meet completely legitimate requirements. There is no sug- j gestion here that unneeded equipment and facilities be ob-j ! tained merely for the sake of raising the level of employ- ■ j ment. It is felt that this is a vital point in this problem. The increased demand is created by accelerating the fulfillment of existing, or anticipated needs and not by generating new requirements by some arbitrary and specious line of reasoning. It will be objected, perhaps, that the'needs being 290 j discussed are non-recurring for the most part and hence ; do not offer a continuous avenue for achieving fuller em- I ployment. This is true, hut it does not constitute a j valid objection when considering counter-cyclical spending.! I A depressed economy also is discontinuous and hence j ! compensatory spending need not be linked only to those ! i . j activities which create constant demands. On the contrary; i I | the counter-cyclical phasing of requirements (and hence j { I procurement and construction) might well afford an ideal i j vehicle for compensatory spending. If, for example, these i j one-time needs of the military were largely met during a j period of low employment, there would tend to be only a minimum of such work during the early days of the ensuing era of prosperity. i I Then, depending upon the duration of the period of ! I j l - * I prosperity, more and more such projects would present j ! . I : 5 j themselves. Some of the equipment modernized during the ! ! previous depression would be in need of further modifica- j tion or replacement as innovation and invention generate I f I new needs. In addition, deterioration and changing mili- ( tary missions would create requirements for new or improved facilities. Some of these requirements would be non-deferable, but others would lend themselves to postponement. Thus, 291 a back-log of unrequired demands would build up and this build-up, due to the nature of the actuarial curve, would be greater in the latter days of the period of pros-! I perity than in the early days. Once a policy of compensa tory spending for this purpose was established, these deferrable requirements would tend to flow in a cycle j rather than in a straight line. Furthermore, this cycle I I j would tend to be in opposition to the business cycle. The Cycle of Innovation Aside from the cumulative and actuarial effects which, once started, would tend to make military spending j cyclical, there are the phenomena noted by Schumpeter re- j I garding the cyclical nature of invention and innovation. i After citing several instances, Schumpeter declares: "in such cases, innovation is carried out in steps each of which constitutes a cycle. While Schumpeter goes into considerations that are j not applicable to military procurement in accounting for the business cycle, these considerations do not affect the validity of applying his theory to evolution in the military. He deals, for example, with the expectations Schumpeter, op. cit♦, p. 167. 2 9 2 10 of entrepreneurs which have little place in the develop ment of munitions. I However* if his idea that one wave of improvement creates another is correct, it is not unreasonable to ex pect similar waves to influence progress in the weapons of war. What is more, this progress is in a non-competi tive field as far as any one country is concerned and j hence there is less tendency to.go into production pre- j I maturely or to commit other management errors dealt with 11 by Schumpeter. Civilian innovations and inventions, of course, j i often give rise to military developments. It must be as- ! sumed, to go along with Schumpeter, that these secondary military possibilities would be phased, at least initial ly, with, rather than against, the business cycle. While not wishing to underestimate the significance of these civilian developments, it is suggested that they have i i their greatest influence in areas which, speaking dollar- j wise, are of minor importance. Warfare has become so specialized that the major procurements are for items which, by necessity, grow out ^ Ibid., pp. 140 et_ seq. 11 j Loc. cit. of research conducted by or for the military. In fact, : a reasonable case could be made for the theory that mili- I tary inventions have a greater influence upon civilian production than the converse. If this is true, and if Schumpeter is correct, the military innovation that is | pushed forward during one recession would give rise to j civilian developments during the following period of low | employment. As a result, what might be called the ’ ’mill- j j | tary counter-cyclical cycle1 1 would be augmented rather than weakened by the link between civilian and military developments. The growth of jet and rocket propulsion is | an excellent example of munitions opening up a new field | for subsequent development In the civilian economy. The Deciding Authority The above discussion indicates that counter-cyclical phasing of requirements is possible from a theoretical j i standpoint. There remains the question as to what actual mechanics of the government might make it possible in prac- I : tice. The opinion has been stated repeatedly in this j study that the Army should not be the judge of the re- ! I sources that are to be devoted to defense. i j Before developing this point, there are two clari- : fying statements that should be made. First, attention 294 of the reader is invited to the fact that the above para- i 1 1 graph declared compensatory spending by the Army is pos- j sible. This is not the same as saying that it is desir- I ! able. Second, the present writer does not mean that the j i Army should be denied the right to declare what is neces- j sary to accomplish its mission. It is suggested only j that higher authority should make the decision as to the resources that actually will be allocated to this purpose. I i j With these qualifications in mind, the discussion * will return to administrative considerations. It would i ! i appear that no drastic change in administration would be ! I necessary. The degree of preparedness to be achieved I i I within any given fiscal year has, in the past, been deter- I mined by the guide-lines laid down by the Bureau of the Budget and by the appropriation acts of Congress. Hence, if compensatory spending were deemed necessary, this same mechanism could be employed. 1 Those presently responsible for deciding the alio- j cation for defense would continue to hold that responsibil-t ; ity and that control could be. exercised by existing pro- | cedure. While the same general technique thus could be i continued, there would remain the problem of making the statement of requirements more responsive to the needs of the business cycle. In particular, the present two-or-more! 295 years involved in generating an account of Army needs would be intolerably long for this purpose. ( However, it will be recalled that the time-con suming nature of the present practices was found to be highly objectionable on other grounds. Furthermore, alternative short-cut methods were outlined in the previ ous chapter. It is evident, therefore, that the counter cyclical phasing of needs does not create a problem that did not already exist. It is also clear that methods are | now available for reducing the time involved in the com- | putation process and thus make it more responsive to the ! broader economic problems of the nation. i III. ECONOMIC DESIRABILITY There is no single and simple answer regarding the economic desirability of using military procurement for compensatory spending. First, there is the problem of its effect on the level of employment during depressions. Second, it is necessary to inquire whether such phasing would lead to higher military costs in the long run or to inferior use of resources. These two Issues will be dealt with in this sec-, tion. The first of them--impact on the level of employ- ment--is fairly clear and has been discussed by a number 2 9 6 of very competent authorities. The second is more obscure and little academic literature is available. j i ; The Level of Employment ^ j There is broad agreement among scholars that the ; i severity of depressions can be lessened and their duration! I | i shortened by government spending. This is not the same ' i | | as saying that all agree as to the desirability of such a j 1 i course. Furthermore, many writers argue, with some justi-j t fication, that the most effective type of compensatory spending--deficit spending--cannot be used indefinitely as a means of assuring prosperity. i I This study will not explore the long-term effects of deficit financing. The adverse social consequences of j that technique and its influence on the expectations of investors and entrepreneurs constitute a related but different subject. Here, counter-cyclical phasing of re- I quirements will be deemed "desirable" if it is capable of raising the level of employment, at least temporarily. The methods of financing these expenditures and other t kindred matters will not be covered. i It appears that Keynes would support the use of military procurement funds in this manner. He has de clared: "Pyramid-building, earthquakes, even wars may J j ! 2 ; serve to increase wealth ..." More specifically, he finds public investment an excellent vehicle for in- J creasing employment during slumps. In discussing the i marginal propensity to consume, he says: j t It is also obvious from the above that the ! employment of a given number of men on public j j works will (on the assumptions made) have a much | j larger effect on aggregate employment at a time ■ ! when there is severe unemployment . . . Public j I works even of doubtful utility may pay for ' j themselves over and over again at a time of I severe unemployment. . . .13 Dillard also advocates public spending to raise i i the level of employment. He finds, for example, that "the chief burden for maintenance of high levels of em ployment falls on public expenditures designed to fill in the existing gap between income and consumption at full ..14 I employment. He reverts to this subject frequently and I refers to the period after 1932 as "a remarkable recovery j which was nurtured by fairly large scale government loan j i expenditure. Finally, he concludes his chapter on | 1 fiscal policy with the statement that experience seems to: ] ~r Keynes, op. cit. , p. 129* Italics added. 13 Ibid., p. 128. 14 Dudley Dillard, The Economics of John Maynard Keynes (New York: Prentice-Hall, Inc., 1948), p” 103. Ibid., p. 128. 2 9 8 . . . demonstrate conclusively that public spend ing on a sufficient scale will raise output and income quickly to a level corresponding to full employment. . . . National income increased not only by the amount of government spending but by several times that amount.16 Even the more conservative authorities recognize the ability of government spending to increase employment. J. M. Clark, for instance, suggests; Public works are a section of this entire field in which the worst disturbances lie and from which they spread, and they are a section of the field inherently susceptible to control, which could be | used as far as it will go to neutralize the move ments in the rest of the field.17 ! General Opinion It is felt that economic opinion is completely undivided as to the ability of public works to increase employment during recessions. Further documentation of this point would be of little use in view of this unanimity. However, there is something less than complete agreement as to the most effective means of putting new purchasing power into circulation. I While public works are recognized as being one : i method of accomplishing this end, there are some who feel ' that quicker and more effective results are obtained by Ibid., p. 131. 17 Clark, op. cit., p. 198. ! ' ‘ 299 I | placing the money more directly into the hands of con sumers. It is argued, for example, that the unemployed 1 have a very high propensity to consume and would exercise almost all of their new-found purchasing power. Public ' investment, on the other hand, is not only more indirect than relief payments, but it also is apt to encounter more leakages. Debt retirement and liquidity preference are among the factors which would tend to reduce the I i multiplier as money passes through the hands of firms i ‘ and more wealthy people. No great issue will be made here about this contro- : versy. For one thing, relief does not preclude public works, nor vice versa. It Is generally agreed that there is no single remedy for the ills of the business cycle and that a combination of tools must be employed. For another, as pointed out by Hansen, there,are 1 sound reasons for believing that public investment actual- i , ly is more effective in generating employment and income. Speaking of relief payments, he says: "Such expenditures, ( especially in a period of general depression, are likely 1 to be less effective in raising income and employment than I „18 expenditures on public works. In this connection, -I Q Alvin H. Hansen, Fiscal Policy and Business Cy- i cles (New York: W. W. Norton and Company, Inc., 1941'), pp. 90 et seq. 3 0 0 Hansen goes on to explain: In the case of relief expenditures, the addi tional purchases by reliefers is relatively small compared to the large volume of consumption ex penditures made by the community as a whole, even in periods of deep depression. The additional purchases are spread very thinly over the vast consumption industries, thus giving very little stimulus to increased output, and are, therefore, likely to induce hardly any increase in employ ment He then contrasts this condition with those found in the construction and heavy industries. These activi ties are affected with uncommon severity in times of de pression and, hence, a program of public works would stimulate a relatively large expansion and would create a very significant amount of new employment. Other Desirable Features As suggested in the preceding passage, the heavy industries are the ones most adversely affected by reces sions, and hence they are the ones most apt to react to new business by increasing employment. In this connec tion, it should be noted .that military requirements (when expressed in dollars rather than in types of items) are concentrated largely in the field of heavy industries. This fact is not only true of military needs in 19 T, . , m Ibxd., p. 91* ! general,, but it is particularly true of equipment that can be stockpiled. Guns, tanks, and ammunition are stocked ! against mobilization demands. Corn flakes and typewriter I ' • ribbons are not. In addition, facilities construction and ' I renovation also would lead in a most direct manner to a i i ; stimulation of the most depressed industries. It would thus appear that the counter-cyclical phasing of military procurement and construction would constitute a particu- i larly effective device for raising employment, all other 1 i : things being equal. | A final important and desirable feature of such a j | | course concerns its effect upon private investment. Many : I types of make-work public projects enjoy less than their i , i potential impact on employment because, for one reason or j ! i another, they regard private investment. For example, | the Tennessee Valley Authority program certainly added to i - ! j incomes, but it is equally certain that some of that in- j j crease would have taken place without the public works. ! j In this instance, then, the government investment substi- i 1 tuted for private investment and the net gain in employ- ! ' j ment was something less than the gross gain. | It is also possible for public works to discourage ! i private investment even where this substitution does not j take place. Keynes noted this possibility and declared: j 302 | With the confused psychology which often pre vails, the government programme may, through its effect on "confidence," increase liquidity-pref- j erence or diminish the marginal efficiency of ■ capital, which, again, may retard other invest- ' ment unless measures are taken to offset it.20 These phenomena are of importance to this study I because of the relatively unusual position occupied by military procurement. The armed forces, in a sense, ; constitute a monopsony. The procurement of 105mm howitzer | ammunition by the Army will not discourage a similar amount of investment by private capital. Only the government procures such items. Even where there is a civilian coun terpart for a military item, e.g., guns and trucks, it is hard to see how the government investment could substitute 1 for and replace any private investment. It is true that there are isolated instances where public works for the military could have an offsetting j I effect in the civil economy. Housing for married person- j nel dn military posts would be an example. However, by ; and large, it seems likely that the vast majority of mill- : | tary procurement would have a minimum of offsets and would ' not tend to lower confidence as to the marginal efficiency , of capital. It would appear again, then, that military j Keynes, op. cit., p. 120. 303 buying is particularly useful as a counter-cyclical mea sure designed to raise the level of employment. i III. ECONOMIC AND MILITARY DISADVANTAGES f | The economic disadvantages of phasing Army require- i ■ ■ i ments against the business cycle are quite apart from the i j influence of such phasing on the level of employment. A | finding that compensatory military spending would have a I levelling effect does not mean that its overall impact I would be beneficial. There may be disadvantages which more than outweigh the merits that have been discovered. An effort will now be made to discover and evaluate j these other implications. Briefly, the difficulties arise : out of the need for a constant state of defense readiness and the economic desirability of having a continuously producing industrial base for munitions. I The State of Readiness ! While it is true that the fulfillment of many Army i requirements can be deferred, there are many others that ' cannot. A school, a highway, a post office, a harbor i : dredging and any other type of civil project can be de ferred. Such postponement may cause inconvenience, acci dents, or a number of other undesirable" results. However, it does not endanger the safety of the nation. Hence, it might be said that, while civil projects i have degrees of urgency, they are seldom infinitely urgent Military projects, on the other hand, can be of unlimited urgency. It may be argued in opposition to this concept that it is impossible to say for certain that military disaster will overtake the nation if this aireraft is not built or if those two divisions are not activated. It is 1 true that the exact dividing line between safety and danger is hard to define. ! Nevertheless, the reader can conceive in theory , that there must be such a line. The difficulty in recog- . nizing that line does not mean that procurement decisions I might as well be purely arbitrary. It means that there 1 will be some error as to the state of readiness required ; and that error must be on the side of caution rather l : than recklessness. An excellent example of this type of decision is ' the development and building of the hydrogen bomb. This : work and the subsequent tests involved tremendous capital outlays and a rather considerable number of people re- i ' ’ ceived employment thereby, either directly or indirectly. ; From a purely economic standpoint, this project would have ! lent itself well to countering the business cycle. If it 305 had been postponed for such reasons, history might later prove that that decision was the fatal one which made the difference between success and failure in some subse quent war. Hot all military procurement and construction i falls into such a category. Moreover, there are many projects which lend themselves to deferment to the same I degree that civil projects may be postponed. Many con- j struction activities come under this heading. | To summarize this part of the discussion, it is i not felt that the mere existence of a legitimate military j I requirement necessitates its being filled immediately. On the other hand, however, some military needs are of j infinite urgency and economic considerations are of minor j importance in such cases. It may be that a substantial ; portion of all military requirements fall in this latter I I ' i ; category and, hence, on this point alone, the time-phasing i under consideration may be impossible on any substantial j i scale. ; { Impact on the Production Base The intimate relationship between reserve stocks and 21 ! the state of the mobilization base has been discussed at I 21 , ; Cf. ante, pp. 174 et sqq. ; length at one earlier point and has been referred to i often elsewhere. Therefore, no attempt will be made here to cover this same ground. \ \ { However, an attempt will be made to adapt those I i earlier discussions to the present problem. It will be | recalled that the fact that a munitions plant is producing i makes the plant equivalent to a stockpile worth up to a i billion or more dollars. In a sense, then, building:up 1 j i j the stockpile and then closing the plant substitutes one , I I | kind of readiness for another with no military gain and at considerable cost. ! Thus, from an economic standpoint, the replacement . of productivity by stocks of goods is roughly equivalent ! to Keynes' facetious suggestion of burying currency and i * < then digging it up. It adds to employment, but not to ; wealth except in a round-about way. j In addition to the absence of any economic benefit, j i | there are certain penalties inherent in building up stocks.1 t ! Economically, there is the cost of storage, maintenance, ; I and deterioration. Militarily, there is the handicap of i 1 / , obsolescence. These, too, have been mentioned before and , i they are brought up again here only because they bear so j i ' directly on the problem of compensatory spending. i s I It should be realized that the above line of reason-j 307] ing applies only to the build-up of the mobilization reserves. Accelerated programs to re-equip the Army with more modern materiel or to complete its initial issue for the peacetime force should prove advantageous both eco- , i nomieally and militarily in times of depression. j i IV. CONCLUSION There are a number of advantages in maintaining a fairly stable level of production. For example, all ; i other things being equal, dollar costs tend to be higher if procurement varies between zero and the area of increas ing unit costs. Some such fluctuations, although perhaps not of that magnitude, would be involved in phasing Army ; requirements in a counter-cyclical manner. In addition, j as has been mentioned, there are both military and economic penalties in opening and closing plants with the resultant i loss of intimate contact between buyer and supplier. The | i disbanding of the skilled working force is still another i handicap to such a course of action. ! i Unit Costs i While it may be that unit costs tend to be higher i when there is a widely fluctuating demand, it is wise not to overemphasize the significance of that phenomenon. ; 3 0 8 i i ‘ That tendency exists, as noted above, when all other things ! are equal. They are decidedly not equal when the procure-; j I ment in question is counter-cyclical. The factors of pro-j | duction tend to be less richly rewarded during a slump and hence costs in general are apt to be lower. Presumably there would be a number of factors which would determine j whether the net effect would be higher costs, due to flue-( j i | tuating procurement, or lower costs, due to increased > i ! purchasing power in times of depression. j i , The character of the industry would bear upon this ! problem, as would the degree of the variations in both the . volume of procurement and the severity of the business | cycle. There appears to be no obvious and universal re- j | suit that can be anticipated here. ! : i ! Social Costs I Dillard has said that "the marginal cost to society i | of employing labor which otherwise would be idle is zero ’ ! 22 : or virtually zero." Keynes and many others have ex- : , . . i pressed the same general idea. While the problem of costs,; economic or social, is not quite that simple, there is ! ' some merit in this view. Dillard, op. cit., p. 103. There is even more merit when purely military costs are considered. Dollar costs of munitions, which are so important in peacetime, are of relatively minor consequence in war. During actual hostilities, the limit ing factor is productive capacity. Hence, as matters now stand, the nation wavers be tween a frantic and somewhat unmet demand for munitions in time of war, on the one hand, and a productive capacity that is largely unused at other times. It might be argued therefore, that idle labor and productive capacity should be devoted to munitions when the social cost is lowest in order to level off the peak demands when social cost is highest. Put another way, the nation has to deny itself the smallest number of other useful things in order to get tanks If those tanks are made with plant and labor which otherwise would be unemployed. Summary The thinking of this writer on counter-cyclical military spending is dominated by two distinct and oppos ing concepts. First, it is axiomatic that national de- * fense is strengthened by strengthening the national economy. Time-phasing of requirements to this end is possible and should prove effective in building a sounder ! economy. i ! Second, and opposed to this thought, is the convic- 1 i | tion that military necessity must over-ride economic con- i ' , j siderations in many instances. Legitimate and urgent re- j 1 quireraents should not be deferred. The Army's primary , mission would be defeated if it were used largely as an j instrument of social and economic reform. i ■ Happily, there is no need to go to one extreme or j ■ I the other. A national policy on this point could be es- | ! tablished which satisfied both the military and economic i ! considerations. First, it should be agreed that legiti mate requirements of the armed forces should not be denied : | during prosperity. Second, it should be agreed that sup- ! plies and equipment of doubtful utility should not be : ; I I produced during depressions merely for the sake of raising : i the level of employment. I . Within that framework, it should be possible to pose the following question to the chiefs of the three armed forces during times of recession: With what equip- i ment and construction requirements will you be confronted during the next five years that could be filled as well . now as then? As long as the answers to that question were | i honest and not fanciful, the nation would not be called I upon to produce extra and unnecessary equipment. It merely; would be anticipating demand. 1 To that extent (and to that extent only) it would : appear that the cbunter-cyclical phasing of military re- i | quirements would be beneficial to the armed forces and to ' i I the economy. In short, it is suggested here that, while i . ■ i few legitimate requirements can be postponed with safety, many of them can be anticipated. Finally, it is felt that military spending is par- ; j ticularly suitable for employment in this limited counter- ; cyclical manner. It influences the basic industries in a ! | most direct manner; it does not have the weakness of sub- j stituting for and replacing similar private capital in- ! vestment; it appears likely to inspire rather than dis- | . : | courage the confidence of investors and entrepreneurs as 1 I I ; to the future state of business. ; 1 Thus, the counter-cyclical phasing of requirements ■ j might contribute to the solution of a problem discussed I ’ by John Perry Miller, who declared: i A more effective and direct system of minimizing the impact of military requirements upon the economy is necessary, not only in the interest of the preservation of our free economy and protection of our civilian standards of life, but also as a pre- ; requisite to the continuing confidence in the mili tary establishment.23 ■■23 John Perry Miller, “Military Procurement Policies!: j World War II and Today,1 1 American Economic Review, 42:474j ! ! May, 1952. . I If such a national policy were adopted, the timing ; of its implementation would be important to its success. j Military leaders, with their devotion to the security of 1 ! their country, might respond less than wholeheartedly to i j - the question, "Which of your requirements can be deferred i ' ■ i during this period of prosperity?" A much better response would be obtained from the statement, "Tell us what you expect to need in the future and we will give it to you now, during this recession." 1 I I I I I I i CHAPTER XIII i | CONCLUSION l | The preceding twelve chapters have presented a wide variety of problems arising out of the need,to calculate military requirements. Some of these problems are consid ered to be of major importance while others are of less : significance and were injected only to illustrate the enormous complexity of the process. I Unfortunately, in a study of this length, both the i i trivia and consequential alike tend either to be lost in ! ; a sea of data and facts and findings, or to have their ; true significance distorted. It thus seems appropriate to i summarize the major points and to place them in their 1 proper perspective. The present chapter will be devoted largely to that purpose. Then, on this basis of this recapitulation, an attempt will be made to make certain recommendations i | designed to create a process that is effective militarily | and helpful economically. ! I I X. ACCURACY AND FACILITY I ; No attempt will be made here to go over all of the E | ! merits and deficiencies that have been discovered in the 1 J present method of calculating Army needs. However, an i I ■ ’ j effort will be made to cover the more significant points and the conclusions that can be reached regarding the ; i ' process as a whole. j I : I Accuracy ■ j It is believed that the present method of computing requirements is reasonably accurate. It is not and never j will be a precise technique. The basic data often are | insufficient for exact summations and the vast number of ' : assumptions involved cast further doubt on the final | i i ; statement of needs. Despite these many and grave drawbacks, the present ' j technique is theoretically capable of producing an aeeur- ! . ate answer. This theoretical potential (as distinct from ; • i actual capability) is of considerable importance. It will i i be recalled that the various approximation methods were 1 1 theoretically capable only of approaching, but not actual ly reaching, the precise solution. j i j Hence, there is a presumption that the current tech- i ! nique comes closer to the Ideal or perfect answer than any ......... 315 j other known method. This theoretical advantage probably j is valid in actual practice. Not only do the approxima- : ■ ■ i tion methods suffer from the same lack of guidance and historical data, but they also have the added error that ; is inherent in any sampling or short-cut method. ! I This finding regarding the accuracy of the current technique does not mean that there is little merit in the i i alternative methods. Some of these, with further refine- ! I ment, may be capable of highly satisfactory products. j Neither does.this finding mean that there is no ■ room for improvement in the present system. There are a vast number of areas wherein greater accuracy could be achieved .with further thought and study. For example, < i substantial savings »ould be possible if all authorization^ i of equipment could be entered on Tables of Organization i and Equipment and similar documents as soon as the materiei i was adopted for general use. Similarly, better reporting on receipts, losses, and assets would permit vast improvements in such diverse j fields as replacement rates, reduction of gross demands ' to net requirements, and stock and pipeline levels. Com- 1 putation of the Mobilization Reserve Materiel Requirement I would be greatly facilitated by assuring harmony between ! the peacetime troop program and the mobilization plan. In short, it is felt that the present process contains a rather dismaying number of shortcomings, but that many of these can be eliminated. Further, it is believed that alternative methods, while promising for some uses, offer even a lower degree of accuracy. Facility Although the approximation methods were found j wanting in accuracy, they more than make up for this de- i i ficiency in ease of application. The mathematical suroma- S tion technique is slow and laborious. It does not lend itself to rapid readjustments when there are changes in ; the basic strategic plan or in the assumptions that are to bemused. i This characteristic results In inefficiencies from \ both the military and economic standpoints'. First, under normal conditions, the statement of requirements is long I delayed after a plan is adopted. Second, under emergency i conditions, there Is little assurance that a hastily com puted statement is accurate. As a result, the success of J an operation may be jeopardized, and there is the possibil ity of considerable misuse of resources through the crea- ; j tion of imbalanced stocks. J Meed for Alternate Methods Several conclusions may be drawn from these condi- i I j tions. This writer is convinced that the summation method must be abandoned as the basis for budgetary and planning actions. The need for great accuracy at those stages is j nominal and the need for speed (and, hence, responsiveness | to changing conditions) is paramount. i Use of the division slice method during the early I phases of the requirements cycle would not mean that ae- j t - i ! curacy would have to be neglected when it came time to I • ‘ implement the procurement program. On the contrary, it would seem entirely reasonable to retain the present sum- • mation method as the basis for final obligation of funds. J j . ! ! In short, it is felt that accurate and time- i i consuming techniques should be reserved for those occa sions where accuracy is essential. Furthermore, even ! when precision is of major importance, no attempt should ! ! ' 'I be made to obtain results that are more precise than the i I 1 basic data that were used in the calculation. The Army has' erred in both of these respects. i This matter of long and involved techniques would ^ 4 i | be of minor importance if the Army and its missions were ? i t quite stable. However, in actual practice, it is found ! 3 1 8 I |that the accepted approach is constantly being suspended ! under the pressure of compelling circumstances. In its [place hasty improvisations are used. Thus, there is a i I sort of double penalty associated with somewhat rigid ad- I jherence to the mathematical summation technique. First, the inefficiencies already noted create both economic and military problems. Second, although various :estimation methods are used in actual practice during the i i budget cycle, they are used each time as an emergency t [measure. They are not adopted officially for this purpose land, hence, although they are employed, they are not de veloped and refined as highly as they might be. The per- isonnel responsible for computing requirements do not gain ! great familiarity with any one approximation method and reviewing authorities regard them as unreliable expedients. Approximation techniques have proved themselves in the planning phase and there seems to be little reason why they could not be adopted as the approved means of drawing up the budget estimates. Such methods would prove i 'more satisfactory and, in time, they would become even t [more accurate. The present position regarding requirements compu- l itation is somewhat similar to the problem of the logisti- i 1cal organization of the Army. During each major war, the i 3 1 9 ! t | supply support has tended to break down and the Army has ! been faced with the need for a major reorganization during I | the course of the war. In short, the peacetime structure 1 | was inadequate to handle emergency demands. I I The Army now has an organization which, it is hoped, ! ^ will be effective in both peace and war. A like solution I is needed for requirements. It is wasteful and ineffi cient to employ a technique which breaks down every time j i ! there is an emergency. The time of crisis is the period ; i when a tested and proven method is of utmost importance. | i ; II. POSSIBILITY OP UNDERSTATEMENTS 1 1 | There is also the question as to how complete the ! I • 1 ( 1 statement of needs is under present conditions. It will j have been noticed that no mention was made earlier in this' i study of provision for bomb damage, shipping losses, or j foreign military aid. j If the statement of needs does not include allow- ! ances for such losses and demands,aa serious shortage is i i ( : certain to exist in time of war. Yet, aside from current 1 : peacetime aid projects, little provision is made for ' these wartime contingencies. It thus seems appropriate j to examine the implications of this policy. 3 2 0 j Foreign Aid ..... 1 1 ■ i At the present time the United States is providing arms for the forces of a considerable number of allies. At the same time, through off-shore procurement, an effortj is being made to build up the munitions industries of those ( allies. However, even the most optimistic observers do t I not believe that the affected nations will ever be able i i to supply their own wartime needs. i i In that the munitions are of American design, there is only one country to which these allies can turn | to make up the deficit--the United States. Professor | Lincoln, among others, has stressed the importance of making some such provision for these allies.1 Of course, s there is no way of determining Just which nations will be ' allied with the United States in any future war. Neither is there any accurate method of determining the net demand , that will go unrequited without assistance from the United States. Under these circumstances, it Is obviously impos- . sible to approach the requirements problem on the same ! i 1 Colonel George A. Lincoln, Factors Determining . Arms Aid (New York: The Academy of Political Science, 1953)1 ! basis as the needs of the American Army. There are in- j . : sufficient data available for even a reasonable estimate. ; i ; j However, the need certainly will exist in the event of ; [“another war and some provision should be made for it. i ! This could be done by creating stocks earmarked for for- I ! . ! | eign aid in general. There would be no compelling reason : to determine at this time exactly which nations would be ' i i the recipients in time of war. The size of any such stock would have to be set by a fairly arbitrary decision, j ' Shipping Losses It is equally certain that some of the materiel destined to American or allied armies overseas will be lost due to enemy action at sea. Again, allowances should I be made to cover such losses when computing the size of | I the Mobilization Reserve Materiel Requirement. This is not now done. ! i 1 Unlike the foreign aid requirement, the quantities lost through shipping can be estimated fairly accurately. ; Starting with World War II experience and then extrapolat- ; | ing for the estimated capability of the potential enemy, i i j a reasonable picture of what is to be expected can be ob- i ! • ! | tained. Unfortunately, however, this figure could con- | | eeivably be invalidated by the misfortunes of war. If, | let us say, five per cent of all materiel shipped is lost ;........................ " “ ■ ' ' 322; through such action, these losses will tend to be dis- i I tributed more or less evenly over all types of equipment. It is possible, though, for the losses to be unevenly distributed, e.g., eight per cent of one type of ammuni- ; I tion and three per cent of another. j However, such imbalances cannot be anticipated and the assumption must be made that they will not occur. While no provision is made to cover these losses in the j MRMR, it cannot be said that they are completely ignored. , ; The possibility of sinkings may well be one of the con- ! > siderations in deciding how-fast the MRMR will be built ! | up. However, that would be an inaccurate and "left-handed1 ; 1 I 1 way of approaching the problem. It is the opinion of the writer that omission of probable shipping losses from J the statement of requirements is ill advised and that serious shortages may develop as a result. Bomb Damage ! By far the most important of the conditions leading | to possible understatement of needs is bomb damage. Like ' i foreign military aid and shipping losses, no provision is i i i ( ! now made for losses due to enemy air or guided missile l | action against the continental United States. It is the j I conclusion of this study that this omission is one of the major weaknesses of the present system of computing 1 " " I | 3231 i j requirements. There is, of course, the possibility that military ’ I equipment in this country will be lost through enemy action. While this might be a major consideration for 1 J the Navy and Air Force, it should be of relatively minor j j consequence to the Army which has its equipment widely ' dispersed. Hence, it is not suggested here that the MRMR 1 i make provision for this item. j The importance of this factor arises out of the j likelihood of damage to industrial facilities. Several ; I earlier discussions have indicated the vital part played by industrial readiness in computing requirements. In : this connection, it will be recalled that the size of the i 1 MRMR varies inversely with the speed with which production J can be increased after M-Day. : In making this calculation, it is assumed that in- I dustry will not be disrupted or damaged by enemy action. 1 This is a most dangerous assumption to make, and each ; passing year increases the chances that the United States 1 i ; will suffer grave damage in any future conflict. 1 1 • i I In short, the present reliance upon productivity ; i ; in lieu of stockpiles is sound economics, but may be poor j strategy under present world conditions. During the entire! I history of this nation, the present thinking on military preparedness would have been most effective and probably i I would-have saved billions of dollars. Unfortunately, this concept was not developed until the present— just when enemy air capabilities make it dangerous to apply it. Of course, it would be unwise to go to the other extreme and assume that all industry will be wiped out I in any future conflict. Such a course would mean building up stock piles sufficient to last for the entire duration i j of the war. The mobilization reserves should be somewhere t between these two extremes. As matters now stand, it is j I believed that serious--perhaps fatal--shortages will occur in any future war due to reliance upon productive facili ties that are almost certain to be bombed by the enemy. | l ' III. IMPACT OP POLITICAL DECISIONS Ranking equally in Importance with the problems that have been presented in this chapter is the issue of i : the budget guide lines. It will be recalled that direc- i j tion from authority higher than the General Staff can and i does impose restrictions as to the items that are to be i included in the statement of requirements. It is the i . | conclusion of this study that this practice Should be i discontinued. i 3 2 5 | I 1 Lines of Authority 1 At the very outset of this discussion it is advis- : ! able to reaffirm the belief that civilian authority in 1 1 i the Army and in the government should determine what por- ' tion of the nation's resources are to be devoted to de- ! 1 , fense. The issue here is not one of civilian control, but rather the manner in which it is exercised. I i 1 In particular, this writer deplores the practice i i of imposing unrealistic assumptions upon the military as : the basis for the calculations. It is believed that the General Staff should have an absolutely free hand in de termining what is needed to perform the assigned missions J ! of the Army. There is, of course, a vast difference be tween having the right to say what is needed and having j those needs fulfilled. The former is considered to be a i i function of the military and the latter a responsibility ! of the civilian control. ' j i : I Position of the Chief of Staff j ' The source of difficulty seems to arise out of the I I | traditions that surround the Chief of Staff rather than ! | 1 j from his legal position. According to law, he must accept: J 1 | direction from the President and the Secretary of the Armyi l 1 I By tradition, he must appear to agree at all times with the direction given him. There seems to be a very strong feeling in the press and public that there should be com plete unanimity of opinion between the Secretary and the Chief. An example of this feeling may be found in the press coverage of General Ridgway’s opposition to the proposed cuts in Army strength during the winter of 195^- 55. It was front page news throughout the country when the Secretary decided to let the general complete his normal term as Chief of Staff, even though he had dis agreed on this issue. It had been expected by many that General Ridgway would be forced out of office because he had dared to oppose the views of his civilian superiors. There appears to be no valid reason for this state of public opinion. If the Secretary and the Chief of Staff actually did see eye-to-eye on every issue, there would be no useful purpose served in having both officials A civilian Secretary was superimposed on the Army organi zation because the very opposite is true. Inevitably, there will be differences of opinion between the Executive and the Chief of Staff, and the office of the Secretary was created for the specific purpose of seeing that the views of the former should prevail. Hence, the legal relationship between the Secretary 327 , and the Chief is entirely in keeping with the American philosophy of government. However, it is suggested here that the inherent conflict of opinion between these two offices should be recognized. The Chief of Staff should accept and support civilian control of the military, but, , at the same time, he should be free to express his own I views. Wow, applying this line of thought to the problem [ of requirements, the Chief of Staff should be completely free, as the highest military leader in the Army, to say what is needed to accomplish a given military task. He never should be in the position in which General Collins , found himself as Chief of Staff during the Congressional 1 hearings that arose out of the shortage of ammunition in Korea. It will be recalled that the Army had been direct ed to assume that the Korean War would not extend into l ; the next fiscal year and to compute its needs accordingly. The General Staff was then blamed when the war did not end as assumed and shortages developed. The question was asked, "The Army was given all the money for ammuni tion it asked for, wasn't it?" The Army did receive all that it asked for, but not all that the Army wanted to request. | I Proposed Policy Change As has been stated repeatedly in this study, a requirement is and should be entirely independent of political and economic considerations. It is a statement of needs. The willingness, or ability of the nation to satisfy that need has nothing to do with the requirement itself. This view raises the question as to how economic and political factors could make their weight felt in de ciding the allocation of resources between military and civilian end uses. It is proposed here that civilian control be exer cised in the following manner. First, as at present, the National Security Council should shape the defense poli cies and objectives of the nation. The Joint Chiefs of Staff would then break these policies down into Army, Navy, and Air Force missions. Second, each of the services would then compute its own requirements without the interference of artifi cial assumptions contained in the budget guide lines. It might well then be found that the needs of the military are in excess of what the nation is willing to supply. If such should be the case, the military should not be directed to ask for less in order to accomplish the as signed tasks. The missions, themselves, should be changed The National Security Council should lower the objectives and the requirements would be lowered automatically. If, on the other hand, it were felt that the objec tives could not be lowered safely, it would be up to the General Staff to defend its statement of needs before Congress. That body could then exercise its right to grant or withhold supply in the amounts requested. If less than the full amount were granted, Congress would be accepting a calculated risk--a decision which Congress certainly has the authority to make. It is felt that Congress and, to a large extent, the public are entitled to know what the military leaders believe Is necessary to provide for the national security. If the Secretary or the President are of a different mind, the Congress and public also are entitled to know why. This practice, of course, would bring to light the basic differences of view between the Secretary, representing the Executive, and the Chief of Staff, representing the military. These differences, as pointed out earlier in this section, are bound to exist and do exist. Civilian control of the military would not be endangered merely by recognizing a condition, such as this, that is already present. 330 IV. OTHER CONSIDERATIONS There are a number of other conclusions which may be made from the discussions in this study. They are not grouped together here because they are of any less impor tance, but merely because the discussion of them is more brief. Penalties of Overstatements There probably are few governments or other organi zations which are not plagued by either excessive demands or fear of excessive demands. The body controlling the purse--in this case, Congress— is suspicious of the stated requirements of the military and hence grants less funds than have been requested. The military, fearing these cuts, tends to inflate the requirements to compensate for the anticipated cuts. In peacetime, this is a game of wits that probably leads to no gross misuse of resources. The Army asks for more than it needs, knowing that Congress will grant some thing less. Congress suspects that this is happening and hence makes the cuts. The net result probably is close to what it would be without such maneuvering. However, when this practice is continued into war time, very serious consequences can result. It is not 331 unusual for the military to be supported openly in re questing more than it needs or, at least, more than Gan be produced. Civilian agencies have advocated such a course as a sort of incentive to increase production. Donald Nelson has described the consequences of setting the production targets too high in this manner. He said: Suppose, now, that your total munitions program is substantially higher than the country can pro duce— so much higher that . . . you are going to fall 20 per cent short of your goal. That does not mean by any stretch of the imagination that you are going to get tanks, heavy artillery and landing craft in the sequence you ordered with the sole drawback that you will get 20 per cent less of each item that you ordered. It means that all ef fective control over the synchronization of your program has passed entirely out of your hands. Furthermore . . . to shoot for a program bigger than you know you can handle would inevitably have the fantastic result of taking strategic decisions of the highest importance out of the hands of the Commander-in-Chief and the Chiefs of Staff and putting them in the hands of a few score obscure civilians in the operating divisions of your pro duction agency.2 This rather lengthy quotation gives a most precise description of the penalties of inflating wartime needs. The fact that emergency requirements were inflated is at tested to by other authorities. The official history of Donald M. Nelson, Arsenal of Democracy (New York: Harcourt, Brace and Company, 1946), pp. 379 et seq. the mobilization effort declares: The staff agencies that made detailed analyses of proposed programs for the Requirements Committee and the Program Adjustment Committee found it dif ficult to guage accurately the degree to which stated requirements of claimant agencies were in flated for bargaining purposes around the committee table.3 ] ' • Counter-Cyclical Phasing i Aside from the obvious misdirection of resources t t i and energies arising from errors in the computation of requirements, there are the separate and distinct economic implications brought out in the previous chapter which dealt with compensatory spending. It is the conclusion of this study that a limited amount of counter-cyclical ’ phasing of requirements is both possible and desirable. While it was found that many types of military procurements do not lend themselves to such time-phasing, ■ there are many other needs which do not have to be filled : at any one particular time. Construction, renovation, ' stockpiling, and modernization of equipment would be the ! fields offering the greatest opportunities along this line. Probably the crucial element that would determine 3 Industrial Mobilization for War (History of the War Production Board and Predecessor Agencies; Washington, D.C.: TJ. S. Government Printing Office, 19^7)> Vol. I, P. 758. whether or not a significant amount of counter-cyclical military spending is possible will be found in the time- ; phasing of mobilization reserves. If the concept of re- ' lying upon productive capacity in lieu of stocks is valid, ! | then it would be economically harmful to disrupt the t j steady production at minimum rates that characterizes j present procurement. The build-up of stockpiles in times j of depression might stimulate the economy,- but it would i I do so in a most wasteful manner. It would mean building up reserves that are completely unnecessary--reserves that' could be duplicated at a much smaller cost by maintaining the industrial potential of the country, i If, on the other hand, the present state of the art , [ i | of warfare makes it precarious to rely on productive ca- 1 I ; pacity, stockpiles are necessary to a much greater extent and a much higher proportion of the military needs could be ! expressed in counter-cyclical terms. It was suggested in ! I the second section of this chapter that the assumed abil ity of the enemy to wipe out American industrial centers ' casts grave doubts on the wisdom of relying too greatly : on productive capacity after D-Day. It thus appears to follow that stockpile objectives I are substantially lower than they should be under current world conditions. The finding that was contained in the opening passage of this sub-section can be modified ac cordingly. A limited amount of counter-cyclical phasing of needs is possible in any case; probably a much higher i percentage of military requirements would be found suscep- , tible to such phasing if the validity of present thinking i i on mobilization reserves were to be re-evaluated. The economic benefits of such a study could be very substan- I j txal. I 1 i Academic Attention The last, but not the least important, of these general findings concerns the need for much broader academic attention to the economic implications of this ' vital allocation process. The mere fact that academic writers could not question the validity of initial issue authorizations does not mean that they would be unable to improve on the way those documents are used. 1 Similarly, it is felt that scholars could make very :substantial contributions in refining such elements as replacement factors, stock levels, and the Mobilization Reserve Materiel Requirement. While improvement of such individual parts of the process is of considerable importance economically, it is felt that much greater contributions could be made by academic analysis of the process as a whole. National 335 : policies bearing upon the division of resources between military and civil uses would be a particularly fruitful , field. The impact of the enormous complexity of the bud- j get cycle affords another promising subject. | Of course, it may be felt^ that this is a subject too remote from normal supply and demand analysis to at- ■ tract the attention of scholars. However, it is believed i that deeper reflection would reveal- this part of demand i analysis to be most profitable to both economic theory and to military practices, Unfortunately, there probably are few if any mili- : tary men who are capable of building up a new and sound ; economic theory regarding- such requirements. In the first ; place, few career officers possess the academic back- ’ ground that would be required. In the seeond place, a theory on any subject as complex as this is not devised i by a small group of men or in a short space of time. ' Economic theory on a given subject is created over a period' of many years and it embodies the thought of both famed and anonymous scholars. It is given shape by contributions to the learned journals and by classroom discussions. Then, once a sound theoretical approach has been established, it should be possible to effect rather con siderable improvements in the practical methods of determining military demand. Actually, of course, the ! improvements in technique probably would be gradual as : the theory of demand gradually expanded to embrace this i ; neglected part of economic science. f i To this end, the present-writer intends in the | future to prepare contributions to the learned journals, I | inviting the attention of scholars to the need for more I j study in this particular field. In general, each of these ; efforts will be confined to a discussion of one particular ; aspect of requirements (e.g., replenishment rates, the ; relation of stockpiles to productive capacity, or approxi mation methods). It is hoped that such action will stim ulate broader interest in this subject. V. RECOMMENDATIONS As a result of these findings, certain general i ' recommendations appear to be in order. Those listed below ! are very far from being all of the steps that could be taken to effect a better use of resources or to help stabilize the economy. However, it is felt that imple mentation of these recommendations would overcome some of the major deficiencies and would lay the groundwork for further improvement and refinement of the computation process. 337 Accordingly, it is recommended: 1. That the early stages of the budget and plan ning cycle should be simplified and materially shortened ; by much greater use of the division slice and other prom- ; ising approximation methods. 1 2. That the present arithmetic summation method : continue to be used as the basis for requirements state- i ments that will result in the obligation of funds, but ! 3* That vigorous steps be taken to refine and ■ improve the summation method with particular emphasis upon (a) the rapid revision of authorization documents, (b) the development of better systems for the reporting of assets and the causes of losses, and (c) the provision of more i complete and more timely guidance to the agencies respon- i sible for the computations. 4. That the final statement of needs be based solely upon the military missions assigned without regard to the economic potential of the country, and 5. That economic and political considerations be brought to bear only by altering the missions assigned to the military or by the assumption of a calculated risk by Congress. 6. That those requirements not directly related to a particular time period be phased for fulfillment in a counter-cyclical manner. 7. That the statement of requirements be increased to provide for such wartime contingencies as foreign military aid, probable shipping losses and probable dam age to American industrial facilities, but 8. That particular care be taken to avoid purely precautionary inflation of demands. 9. That efforts be made by the armed forces to stimulate academic interest in this process. It is believed that implementation of the above recommendations would lead to a much more efficient allo cation of resources within the military establishment. At the same time, such implementation should make it possible to achieve a reasonable level of defense that can be maintained over a period of years without undue harm to the economy. j i B I B L I O G R A P H Y BIBLIOGRAPHY A. PUBLISHED MATERIALS Ayres, Leonard P., Turning Points in Business Cycles. New York: The Macmillan Company, 1940. 214 pp. Backman, Jules, et al., War and Defense Economics. New York: Rinehart and Company, 1952. 458 pp. Brodsky, Nathan, "A Proposal for Study of Military Dis tribution^’ The Journal of Marketing, 14:88-90, July, 1949. Chandler, Lester V., and Donald H. Wallace, Economics of Mobilization and Stabilization. New York: Henry Holt and Company,' 1951* 5T0 pp. Clark, John Maurice, Strategic Factors in Business Cycles. New York: National Bureau of Economic - Research, 1934* 238 pp. Department of the Army, Army Almanac. Washington, D.C.: U. S. Government Printing Office, 1950. 1009 pp. _______ , Dictionary of U. S. Army Terms. Washington, D.C.: U. S. Government Printing Office, 1953* 328 pp. _______ , Field Manual 101-31, Planning and Programming Manual. Washington, D.C.: U. S. Government Print ing Office, 1953. 118 pp. _______ , Logistics Policies and Priorities. Washington, D.C.l Office of the Assistant Chief of Staff, G-4, 1954. 109 pp. _______ , Strategic Logistic Studies. Washington, D.C.: Office of the Assistant Chief of Staff, G-4, 1952. 26 pp. 341 Department of the Army, Supply Control System* Washing ton, D.C.: Office of the Assistant Chief of Staff, G-4, 1954. 147 PP. Department of the Air Force, Air Force Manual 27-1, Program Procedures. Washington, B.C.: U. S. Government Printing Office, 1954. 105 pp. Department of Defense, Economic Mobilization Studies, Requirements. Washington, D.C.: Industrial College of the Armed Forces, 1952. 44 pp. _______ , Economic Mobilization Studies, Requirements. Washington, D.C.: Industrial College of the Armed Forces, 1954. 30 pp. , Emergency Management of the National Economy. 5”vols.; Washington, B.C.: Industrial College of the Armed Forces, 1950* _______ , Emergency Management of the National Economy, Requirements. Vol.' II; Washington, D.C.: Indus- trial College of the Armed Forces, 1954. 59 PP* Department of the Navy, Special Report on Operations and Organization of the German NavaT Supply System During World War II. Washington, D.C.: Bureau of Supplies and Accounts, 1953. 521 pp. Dillard, Dudley, The Economics of John Maynard Keynes. New York: Prentice-Hal1, Inc., 1948. 354 pp. Goodwin, Commander Harold B., Adaptability of Electronic Computers to Problems Affecting Economic Mobiliza tion. Washington, D.C.: Industrial College of theArmed Forces, 1954. 156 pp. Hansen, Alvin H., Fiscal Policy and Business Cycles. New York: W. W. Norton and Company, Inc., 1941. 462 pp. Hitch, Charles, "Planning Defense Production," American Economic Review, 40:191-98, May, 1950. Holsinger, Colonel J. W., _et al., Determination of ; Requirements. Washington, D.C.: IndustriaT”College of the Armed Forces, 1947* 102 pp. 342 Industrial Mobilization for War. History of the War Production Board and Predecessor Agencies, Vol. I; Washington, D.C.: U. S. Government Printing Office, - 1947. 1010 pp. Keynes, John Maynard, The General Theory of Employment Interest and Money. New York: Hareourt, Brace and Company, 1936. 403 pp. "La Politique de Rearmement: Erreur de Tactique des Etats Unis?" L'Economie, 10:14-20, July, 1952. Lincoln, George A., William S. Stone and Thomas H. Harvey, Economics of National Security. New York: Prentice-Hall, Inc., 1950. 601 pp. Lincoln, George A., Factors Determining Arms Aid. New York: The Academy of Political Science, 1953. 12 pp. _______ , "Planning Military Requirements," American Economic Review, 47:438-52, May, 1952. Loomis, Captain F. K., et al., The Effects of Concurrent Planning on the Determination- of Requirements.- Washington, D.C.l Industrial College of the Armed Forces, 1948. 65 PP. Macy, Lieutenant Commander Robert M., "Forecasting Demand for U. S. Army Supplies in Wartime," journal of Marketing, 10:136:64, October, 1945. Mandeville, Bernard, The Fable of the Bees. Oxford: Clarendon Press, 192W. 712 pp. Margolin, Julius, "Public Works and Economic Stability," The Journal of Political Economy, 57:293-303, August, 1949. Martin, Robert F., National Income in the United States, 1799-1938. New York: National Industrial Confer ence Board, Inc., 1939. 146 pp. Martz, Colonel Chester G., et al., Feasibility Tests and Checks of Materiel Requirements’ ! Washingtori’ , D.C.: Industrial College of the Armed Forces, 1947. 43 pp. 343 Miller, John Ferry, “Military Procurement Policies: World War II and Today,” American Economic Review, 42:453-75, May, 1952. : ' _______ , Pricing of Military Procurements. New Haven: Yale University Press, 1949. 292 pp. National Security Act of 1947. Washington, D.C.: U. S. Government Printing Office, 1947. 24 pp. Nelson, Donald M., Arsenal of Democracy. New York: Hareourt, Brace and Company, 1946. 439 PP» Requirements Survey. 4 vols.; Boston: Harvard Univer sity Graduate School of Business Administration, 1951. Schmidt, Colonel Carl T., "The Division Slice in Two World Wars," Military Review, 31:50-56, October, 1951. Schumpeter, Joseph A., Business Cycles. New York: McGraw-Hill Book Company, Inc., 1939* 448 pp. Sorley, Colonel M. E., jet al., Methods of Determining Materiel Requirements. Washington, D.C.:- Indus- trial College of the Armed Forces, 1948. 135 PP* Steiner, Colonel W. A., e_t al., Organization for the Determination of Materiel Requirements under the National SecurTFy Act of 1947. Washington, D.C.: Industrial College of the Armed Forces, 1948. 73 PP- U. S. Senate, Ammunition Supplies in the Far East. Washington, D.C.: U. S. Government Printing Office, 1953. 149pp. Whipple, Colonel William, Jr., The Planning Cycle and Its Effect on the Determination of Materiel Require ments. Washington, D.C.: Industrial College of the Armed Forces, 1951* 37 pp. Yoshbe, Harry B., "Economic Mobilization Planning between Two World Wars," Military Affairs, 15:199-204, n.d., 1951, and. 16':71-83* ri.d., 1952. 344 B. UNPUBLISHED MATERIALS Archer, Lieutenant Colonel Harry C., “Establishment of Replacement Factors for Army Aircraft." Unpublished memorandum, Office of the Chief of Transportation, Washington, D.C., 1953* Biggs, Rear Admiral B. B., "Recommendations for Reduction of Requirements Determination Time." Unpublished study for the Department of Defense, Washington, D.C., 1950. 8 PP* Booth, Brigadier General Donald P., "The Role of the Joint Chiefs of Staff in the Generation of Materiel Requirements." Speech before the Industrial College of the Armed Forces, Washington, D.C., 1948. Cotulla, Brigadier General Louis E., "The Determination of Requirements in the Department of the Army." Speech before the Army War College, Carlisle Barracks, Pennsylvania, 1952. Hindricks, Brigadier General John H., "Computation of Military Requirements." Speech before the Indus trial College of the Armed Forces, Washington, D.C., 1953* Johnson, Hon. Louis, "National Defense." Speech before the American Ordnance Association, New York City, 1949. Kaufmann, John H., "Estimation of Requirements for War." Unpublished Doctor's dissertation, Harvard Univer sity, Boston, 1952. 446 pp. Kyes, Hon. Roger M., "A Positive Approach to Peace." Speech before the U. S. Chamber of Commerce, Washington, D»C., 1953* Montgomery, Brigadier General^Edward, "Influence of Item Characteristics on Requirements Determination (Army)." Speech before the Industrial College of the Armed Forces, Washington, D.C., 1948. 3^5 Schwartz, Colonel Philip, "Graphic Analysis of Procure ment Plans Calculations.1 1 Unpublished study for the Industrial College of the Armed Forces, Washington, D.C., 19?0. 17 pp. Sherman, Richard U., Jr., "The Formulation of Military Requirements for Munitions." Unpublished Doctor’s dissertation, Harvard University, Boston, 1953* 386 pp. Slezak, Hon# John, Speech before the National Security Industrial Association, Old Point Comfort, Virginia, 1953. Slezak, Colonel John, "Problems Confronting Industry in Planning War Production." Speech before the Industrial College of the Armed Forces, Washington, D.C., 19^9- Tansey, Brigadier General Patrick H., "Army Procedure in Determining Supply Requirements." Speech before the Army War College, Fort Leavenworth, Kansas, 1951. DEPARTMENT OF DEFENSE O f f i c e o f P u b l i c In f o r m a t i o n W A SH IN G T O N 25, D . C. 21* March 1955 MEMORANDUM FOR: Lt. Colonel Harry C. Archer Office of the Under Secretary of the Army SUBJECT: Dissertation entitled "The Computation of Military Materiel Requirements" to be presented to University of Southern California (Department,of Economics) No objection is offered on military security grounds to publication of subject manuscript. Review of this material does not imply Department of Defense indorsement of factual accuracy or opinion. FOR THE CHIEF, SECURITY REVIEW BRANCH: R. A. CARR X/b • CoX *} Inf y g l l y ^ j r s i t y of Southerly Csllfomld L l b f G r j j r

Asset Metadata

Creator Archer, Harry Clarke (author)

Core Title The computation of military materiel requirements

Contributor Digitized by ProQuest (provenance)

Degree Doctor of Philosophy

Degree Program Economics

Publisher University of Southern California (original), University of Southern California. Libraries (digital)

Tag economics, general,military studies,OAI-PMH Harvest,operations research

Language English

Advisor Phelps, Clyde William (committee chair), Anderson, William H. (committee member), Guild, Lawrence R. (committee member), Phillips, E. Bryant (committee member), Pollard, Spencer D. (committee member)

Permanent Link (DOI) https://doi.org/10.25549/usctheses-c20-252374

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Identifier DP23259.pdf (filename),usctheses-c20-252374 (legacy record id)

Legacy Identifier DP23259.pdf

Dmrecord 252374

Document Type Dissertation

Rights Archer, Harry Clarke

Type texts

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Access Conditions The author retains rights to his/her dissertation, thesis or other graduate work according to U.S. copyright law. Electronic access is being provided by the USC Libraries in agreement with the au...

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