Production Reserves

raw materials, supplies, pur-chased semifinished products and complementary items, fuel, tools, and other means of production that have arrived at the consumer enterprise but have yet to be transferred to work-places. Some material resources are constantly tied up as production reserves. Planning and regulation of production reserves aim at lowering volumes of reserves to the minimum required to ensure continuous production and to speed up turnover of circulating assets, that is, to increase the efficiency of production. Reserves are measured by physical indexes (tons, meters, pieces) and cost indexes (rubles).

Depending on origin and purpose, production reserves are divided into the following groups: current, contingency, and preparatory. Current reserves permit continuous production during intervals between two regular shipments of materials to warehouses; such reserves are determined by amounts required daily in production. In establishing rates of current reserves, preliminary estimates are made of the average actual shipment and the interval between two shipments for each variety of material. It is assumed that this part of the production reserves will be completely expended by the time the next shipment arrives. In the USSR the estimated size of a shipment is determined by the amount of time required for transmitting the materials from the warehouse of the supplier or from the nearest depot of the State Supply Committee of the USSR to the consumer.

Contingency reserves are designed to ensure a continuous supply on occasions when the timetable is not observed or when shipments are less than anticipated in estimating rates of current reserve. Planned shipment periods and fluctuations in the operations of suppliers and transport are taken into consideration in determining amounts of contingency reserves.

Preparatory reserves are set up to provide for continuous supply. A preparatory reserve is generally sufficient for no more than three days. Seasonal supplies are set up at enterprises processing agricultural raw materials or located in regions where freight is shipped in only at certain times of the year. The level of such supplies depends on the period of the seasonal interruption of shipments. In socialist countries production reserves are calculated by individual types of consumed material resources, on the basis of group rates stipulated by the state plan for material-technical supply and accounted for in supply statistics.