Material and Technical Supply

the process of planned distribution and organization of the circulation of means of production, including the sale for production use of the products of socialist enterprises and the supply of the products to users. The material and technical supply should be such as to ensure coordination between the production and consumption of products in interrelated sectors of the national economy. This coordination is one of the important conditions for a high rate of economic development. In turn, the planned organization of the circulation of means of production has a large influence on the efficiency of social production and on the results of the economic activity of enterprises. The steady production of output, growth in labor productivity, and better use of the fixed and circulating assets of enterprises depend on a timely and complete supply of material resources to users.

Material and technical supply has played an important part in expanded socialist reproduction in all stages of building socialism. In the very first months of Soviet power the government began using economic agencies to organize the production and material and technical supply. In November 1917 the Workers’ Control system was formed, followed in 1918 by the Use Commission. Special subdivisions on supply and marketing of output were established within the Supreme Council on the National Economy; as the socialist economy advanced, the subdivisions were developed and changed as necessary to perform specific economic tasks. In 1920 the Council on Supply and Distribution was formed as part of the Supreme Council on the National Economy, and in 1921 it was converted into the Central Administration for Supply (Tsentrosnab). During the period of national economic restoration and the first years of industrialization (1921-29), supply and marketing were organized primarily through trusts and syndicates, whereas during the years of the prewar five-year plans this was done through the supply and marketing administrations of sectorial associations and the supply and marketing bodies in the local areas (1929-36).

With the establishment of people’s commissariats for industrial sectors a sectorial system took shape within the supply and marketing organizations; the system included main supply administrations (glavsnaby) and main marketing administrations (glavsbyty) with a far-flung network of supply and marketing offices, bases, and warehouses in areas where industry was concentrated. The system was basically completed in the prewar period (1940); it functioned during the Great Patriotic War of 1941-45 and continued in the postwar period until the transition to industrial management on the territorial principle (1957). During the war years and in the first postwar years (1941-47), the supply of the country with lumber, petroleum products, coal, and metal was centralized at appropriate government bodies in order to concentrate stocks of the most important types of output for defense and economic restoration. When industry was being managed through the councils of the national economy (1957-65), the organization of the supply of materials and machinery was revised according to the territorial principle. Economically self-supporting supply and marketing administrations were set up in the economic regions, and the offices, bases, and warehouses of the former ministries were transferred to them.

With the transition to a sectorial structure of industrial administration in accord with the decisions of the September 1965 plenum of the Central Committee of the CPSU, a nationwide intersectorial system of supply was formed. The State Committee for Material and Technical Supply (Gossnab SSSR), a Union-republic committee subordinated to the Council of Ministers of the USSR, was formed to direct national economic supply. The Gossnab system was assigned to carry out plans for material and technical supply and for marketing of output. This supply plan includes providing intersectorial cooperative deliveries; establishing rational economic links among enterprises; and developing wholesale trade in the means of production. Under the plan, the production output ratified by the appropriate ministries instead of Gosplan SSSR is distributed to the users; the timely fulfillment of plans for output deliveries by ministries, departments, and enterprises is monitored, and measures are developed and implemented to improve the system and bodies organized for the supply of materials and machinery. Orders by Gossnab within its jurisdiction are mandatory and must be carried out by ministries and other organizations.

The nationwide system of material and technical supply combines the territorial and sectorial principles of structuring supply and marketing agencies and is based on close interaction among its primary elements, the territorial supply bodies in the local areas and, in the center, nationwide main administrations for supply and marketing and nationwide main administrations to coordinate supply of complete sets of equipment. The system in 1973 included 58 administrations for material and technical supply in the Union republics and regions of the country, 24 nation-wide main administrations for supply and marketing of output, and 12 nationwide main administrations to coordinate supply of complete sets of equipment, instruments, and other articles to enterprises being constructed or modernized.

The territorial agencies of Gossnab include economically self-supporting specialized and general supply administrations and bases, wholesale stores to sell products destined for use in production, enterprises to deliver and process secondary raw materials, container repair organizations, and lumber marketing organizations. In addition, petroleum supply and marketing organizations are included in the system. Research and designing organizations, computer centers, and machine accounting stations have been established for the scientific improvement of the administration of material and technical supply.

In 1973 the national supply system served more than 130,000 users, which was twice as many as in 1966; all petroleum products for the national economy were supplied through the system. The commodity turnover of the system is almost 140 billion rubles a year, which is more than 60 percent of the total turnover of products destined for use in production. In 1973 the main administrations for supply of complete sets of equipment to construction sites supplied more than 4,500 construction sites with capital goods worth more than 16 billion rubles.

Material and technical supply has taken shape organizationally as the system controlling the circulation of means of production. Owing to its intersectorial position it stands at the junction of the vertical and horizontal administration of the economy and acts as a centralized system for regulating flows of materials in the country. The nationwide system of material and technical supply makes it possible to organize the circulation sphere without the hindrance of departmental restrictions while at the same time taking advantage of the benefits of sectorial management of industry. As a rule, the sectorial ministries and departments maintain only central administrations for material and technical supply; the administrations handle the planned distribution for the most important types of output among subordinate ministries (departments) and enterprises without a peripheral network of supply organizations in the local areas. Some sectors, in view of their specific characteristics, have networks of peripheral economically self-supporting supply offices, which have supply bases and warehouses.

Material and technical supply is planned on the basis of the balance method. The supply plan is a system of material balances and plans for the distribution of output. The material balances reconcile resources and the distribution of output by economic designation (for production and operating needs, for capital construction, for market allocations, for establishing reserves, and so on). Distribution plans ensure directed allocation of material resources to the asset holders: ministries, departments, councils of ministers of the Union republics, and the like. For the most important types of output, those included in the products list (approximately 1,900 items) of the State Planning Committee of the USSR (Gosplan SSSR), the material balances and distribution plans are developed by Gosplan; the Gossnab system performs this function for the broad list of remaining products (more than 13,000 items). In addition, the individual ministries and departments work out balances and distribution plans for the numerous types of output that basically are produced and consumed within sectors. In order to improve material and technical supply, work is being done to resolve the problems of plan balance, find more thorough solutions to intersectorial problems, develop better methods of determining national economic needs for means of production and of defining technically sound norms of material expenditures, and promote extensive use of intersectorial, interproduct, and regional balances of the production and distribution of output.

Continuous and complete material supply to production and construction enterprises requires a precise system for carrying out supply plans. Such supply is accomplished through identifying specific needs for material resources (done by territorial supply bodies), finding the optimal assignment of suppliers to consumers (done by the nationwide main administrations for supply and marketing), issuing schedule-orders to industry for the production and delivery of output, concluding economic contracts, and organizing checks on deliveries. Mutual relations between parties in this area are regulated on the basis of the statute called Delivery of Products for Use in Production and by special delivery regulations for particular types of output that are ratified by Gossnab jointly with the State Arbitration Commission of the USSR.

Selecting the optimal form of supply, transit or warehouse, is very important. Where large volumes of materials are consumed, the most efficient form is transit supply, in which the materials are delivered directly to users from the manufacturing enterprises, bypassing intermediate bases. The warehouse form of supply is preferable where small amounts of output are consumed; in this case products move through the bases and warehouses of supply and marketing bodies, ensuring optimal maneuvering of material resources. The use of warehouses raises the problem of optimal siting of material stocks. Establishing economically sound mobile stocks in the circulation sphere at bases of the Gossnab system makes it possible to improve material and technical supply to consumers, reduce the consumers’ production stocks, speed up the rate of turnover of all stocks in the national economy, and bring a significant quantity of additional material assets into economic circulation. For example, during the eighth five-year plan (1966-70) the rate of turnover of capital in industrial stocks accelerated by 5.2 days. This was equivalent to bringing an additional sum of more than 5 billion rubles of material assets into economic circulation. The improvement is continuing in the ninth five-year plan (1971-75); in 1971-72 alone the rate of turnover of capital increased by about three days.

One of the main trends in improving management of the supply process is developing economically expedient, direct, long-term economic links among enterprises. Such links create more flexible conditions for supply and marketing, ensure the required timing for deliveries of products, increase production efficiency and labor productivity, improve the use of production assets by the consuming enterprises, and at the same time help give the suppliers regular portfolios of orders.

Another important task is expanding and improving wholesale trade in the means of production through territorial supply and marketing bases, warehouses, and stores. Wholesale trade involves the sale of products, which are delivered by direct economic links, through the bases, warehouses, and stores of territorial supply bodies and also the sale of surpluses from particular enterprises on a commission basis. Through this system more flexible conditions for supplying customers in accordance with their orders can be established and the true need for the materials and articles of the supplying enterprises and organizations can be better determined, in terms of volume and assortment as well as time. Gossnab has turned over the distribution of more than 12,000 product groups to territorial supply bodies in order to develop wholesale trade. The first organizations switched to supply through wholesale trade have been research, planning, and technology organizations and other customers who receive products in small quantities. The range of customers and list of products handled through the wholesale trade system will be increased steadily.

In 1972 the Gossnab system had about 750 wholesale stores in operation. They served 142,000 customers and sold products worth more than 4 billion rubles. The forms of service to customers and the range and quality of specific services offered by supply and marketing organizations are being expanded and improved. Foremost among these is centralized delivery; more than 70 percent of the total volume of deliveries from bases, warehouses, and stores is already delivered on a centralized basis.

Other improvements to the material and technical base of the supply and marketing organization include the construction of modern, highly mechanized, and automated warehouse facilities and reconstruction and technical modernization of existing bases and warehouses. Mathematical economic methods and computers are used extensively in managing the supply of material and machinery; and automated control systems are being introduced for the supply of particular types of output, for complete supply to construction sites, and for management of territorial supply agencies and bases.