Mr. PEARSON. I believe that the accomplishment of, say, only onehalf the normal commercial turnover of the things here stored which are commercial and semicommercial, would obviate the necessity for much of the construction done in the depot. There are, I think, two exceptions to that. The depot badly needs a noninflammable storage facility for inflammable things, and the other exception I would put in there is an industrial type of operation in their box shop. It is a producing operation. It produces things of value, and it is not sufficiently housed.

INDUSTRY INSPECTION OF COFFEE

Mr. BONNER. In these industrial enterprises of the services, in this coffee business, the services buy their coffee from a group of importers, and then they have the importers inspect the coffee to see if they get what they buy.

If I sold as an importer on this invitation, I would not inspect. Mr. X and Mr. B would inspect what I sell, and if they get the contract the next time, I inspect. What is your opinion of that kind of business operation?

Mr. PEARSON. I do not believe that would be a commercially acceptable practice.

Mr. BONNER. Not in business.

Mr. PEARSON. No, sir.

Mr. BONNER. And as I understand it here, we have three inspection centers, I think, one at New York, New Orleans, and San Francisco. Now, it costs the armed services $112,000 for this inspection, per year, at three places; they pay $0.08 a bag for the inspection of this coffee. Now, what would industry do in a similar case?

Mr. PEARSON. I just don't have knowledge enough of the factsMr. BONNER. They could have three $10,000 a year men, which would be $30,000 a year.

Mr. PEARSON. That is correct.

Mr. BONNER. To test and take samples of coffee they buy.

Mr. PEARSON. That is a field in which I have never had any experience at all.

Mr. BONNER. I haven't either, but you are a businessman.

Mr. PEARSON. I am only guided by common sense; we are taught early in life that independent and thoroughly unbiased inspection is the only sound basis of auditing or inspection.

Mr. BONNER. We are taking only one thing as an example, after all, and we find things like this all along our travels.

Mrs. Harden, any questions?

Mrs. HARDEN. Mr. Chairman, I should like to commend Mr. Pearson for his very fine statement, and also the informative statement of the officers and Mr. Ward. Mr. Pearson, in your opinion, how long do you think this test should continue?

Mr. PEARSON. As a test we divided it into three sections. We have completed section I, which was the establishment of the basic records which have the complete simplicity of fully informative background material on cards set up indicating different symbols below in different places the status of the stocks. When pulled out this far [pointing], this represents an overstock involved, and requires attention here and there, and different places through the record; a little shorter, and it

represents low stock, and still shorter, need for immediate replenish

ment.

That is accomplished, and has been accomplished for some time.

The second phase, as we plan the test, was to operate by passing through the daily flow of requisitions as they come to the depot, and by doing that to accomplish in the procedural phases all of the things necessary to prove the test. An improved procedure could then be expanded. The third phase we are just barely entering into. The first two have been accomplished. The third phase deals with the basic philosophy of clearly defined responsibility for merchandising a line of merchandise, establishing standards of turn-over, effective controls through stock control, and otherwise use of open-end contracts; use of direct shipments from the manufacturer to the using agency, and all those procedures we are just barely getting into.

I would be surprised if we reach a conclusive position in the third phase during the balance of this year, because it involves making contractual relationships with a great number of suppliers; it involves training a staff here, and doing the things that a merchandiser or a buyer does instinctively in a commercial situation.

I would be pleased, indeed, if we had encouraging results by the end of this year at this one place. The task then of evaluating and interpreting the results will involve, as it must, some time. The task of expanding it from this depot to the other Quartermaster depots, and from the Quartermaster Service to the other six services of the Army is a staggering task, and will have to have the attention of my successor's successor's successor, some place down in the future.

I think it is not so much the accomplishment of over-all coverage that should spur us in the effort as the fact that we are from day to day making progress, and that there may be ever-widening little ripples of understanding of a different approach to these things. It is from those that we get our encouragement.

CARLOAD SHIPMENTS VERSUS LESS-THAN-CARLOAD SHIPMENTS

Mrs. HARDEN. What percentage of shipments from this depot are carload lots?

Mr. ELMER WARD. I would have to get that information for you. On a tonnage basis, the truck shipments versus the carload shipments run approximately 65 percent truck, and 35 percent carload.

Mrs. HARDEN. Thank you.

That is all, Mr. Chairman.

Mr. HOLIFIELD. Mrs. Harden brought up that point, and I think it is important:

Are you availing yourself and your traffic management of the most economical method of shipment commensurate with the job to be performed?

Mr. ELMER WARD. Yes, sir. We take full advantage of in-transit. storage facilities of moving supplies to the East, or through either one of the ports of embarkation, the in-transit

Mr. HOLIFIELD. It so happens that traffic management is also a part of the interest of this subcommittee, and it is a subject that has tremendous possibilities of savings as the Government is spending over a billion dollars a year in transportation costs, and this subcommittee

has not been able to get to that phase of it, but it will, we hope, in the near future.

Mr. PEARSON. The traffic management starts at the date of the initial procurement action.

Mr. HOLIFIELD. That's right.

Mr. PEARSON. And everything subsequent to that is more or less developed depending on the soundness or unsoundness of the—

Mr. HOLIFIELD. This new phase of shipping document from the supplier is one facet which can save the Government millions of dollars in transrails shipments.

Mr. PEARSON. In our business we save millions, and it was somewhat different to the Army procedure.

Mr. HOLIFIELD. We had cases in our own business, I happen to be in the industrial district of Los Angeles where the Navy is sending their supplies back to Philadelphia and then it is shipped to the big Navy storage depots, and some of it is being shipped back out to San Francisco and Los Angeles and San Diego for utilization, and I know

that to be a fact.

If we handled this from the point of procurement, and from there on, a savings-a great savings could be made.

Mr. PEARSON. I think it would be wrong, although I hesitate to say so, I think it would be wrong to convey the impression that we are doing here a truly smart job of traffic management. There are areas of divided responsibility

Mr. HOLIFIELD. That's right.

Mr. PEARSON. There are areas of divided responsibility within the Army. The Transportation Corps has a different technique, but much yet can be done to improve performance.

Mr. HOLIFIELD. Mr. Kennedy has just mentioned to me a moment ago, General Feldman, that you are possibly the first man who spent your whole career in the Quartermaster Corps without other tours of duty.

General FELDMAN. Well, that is not exactly right. I must admit before all of these quartermasters that I was basically a Field Artillery man; I hope they will forgive me for that.

Mr. HOLIFIELD. But most of your career has been spent with the Quartermaster; has it not?

General FELDMAN. Yes, sir.

Mr. HOLIFIELD. And it was that point that I had in mind when I said specialists should be developed particularly in the housekeeping branches of the services, and their schooling and knowledge through the years utilized, rather than having them continuously interrupted by tours of duty in other fields of endeavor.

General FELDMAN. I think in all respective levels there is concurrence in that view.

Mr. HOLIFIELD. I know what you are up against, in the way of precedence to overcome that tour of duty system.

Mrs. HARDEN. We have discussed what percentage of outgoing shipments are carload shipments.

What would you say is the percentage of incoming shipments in carload lots?

Mr. PEARSON. Elmer, I will have to ask you to reply.

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Mr. ELMER WARD. I would say the percentage of incoming shipments would be just our reverse of those going out; about 65 percent inbound carloads, 35 percent outbound.

Mrs. HARDEN. Thank you.

Mr. BONNER. I don't know whether it was Colonel Cook or Mr. Davison who spoke about the efficiency of the men out in the warehouse who are civil service employees.

Someone spoke about it; did you, Mr. Ward? Did you speak about that?

Mr. ELMER WARD. Yes, sir.

USE OF CIVIL SERVICE PERSONNEL

Mr. BONNER. No question was asked about that, but you made some statement that the Civil Service assigned you people who were designated as qualified personnel who couldn't perform the duty; didn't you say that?

Mr. ELMER WARD. In our discussion here with regard to the standards program I said one of the products of the standards program points out the ability of supervisors to do their jobs, and if an employee is referred to us from the civil service register you have your card-your standards program and a means to evaluate his efficiency; to live up to your performance.

Mr. BONNER. When he is assigned to you, and he cannot carry on in accordance with your standards, do you have much trouble getting him relieved?

Mr. ELMER WARD. No, sir; we have all the facts to go into—— Mr. BONNER. So you are not having any trouble with these civil service personnel as to the quality of the personnel; is that right? Mr. ELMER WARD. No, sir; we are not.

UNIFICATION OF SUPPLY OF COMMERCIAL ITEMS

Mr. ROBACK. I wonder if we could have the benefit of Mr. Pearson's observation and philosophy which he has expounded to the committee in relation to supply unification in the field of commercial items.

In other words, is this thinking applying itself in such a way that it would facilitate the ultimate supply of this type of item from a single source, or by a single agency of the military establishment?

Mr. PEARSON. There is nothing in our knowledge which would impede or retard the program in that direction. The burning need of a merchandiser is a knowledge of the requirements now existing and which will exist in subsequent periods. Only through that can he prepare to meet those requirements. If knowledge, then, of requirements of the immediate and long-range future can be available to merchandisers in any one of the services, they can supply the other services, as effectively as they supply their own. Within a single organization of command that knowledge flows more freely and more certainly than where different command channels become involved, especially insofar as precipitate changes in plans are concerned.

A decision by the Navy to move a substantial portion of a base fleet for one reason or another from one place to a very, very remote place, if not conveyed to the supplier, say the Army, of things for that fleet,

will leave that supplier stranded with overstocks. Of course, the reverse applies on that if a heavy burden not anticipated is placed upon the merchandiser.

There are no difficulties in interservicing and cross-servicing supplies which cannot be overcome, in my opinion, by the accomplishment of fully informative data as to plans long enough in advance to permit the supplier to provide the things necessary to meet those demands, taking into consideration the lead time in procurement, manufacturing time, and transportation.

Our experience in a general way is that we have better knowledge of what is going on within our own service than we have of what is going on in other services.

Mr. ROBACK. It seems to be implied at this point, Mr. Pearson, that that committee's attention has been focused on possible economies of unification in the supply field. If you have to have miles of electrical accounting machines for one service, presumably you have to have miles for each of the other services, so that if it is simplified into one service, the application of those techniques across the board presumably would result in large economies, and that is a less tangible field that the committee has not given so much attention to, as it has to actual procurement and distribution of the supplies themselves.

COMMON LANGUAGE NEEDED AS TO REQUIREMENTS

Mr. PEARSON. The main problem lies in the exchange of information as to requirements. If that is available to the procuring and distributive agency, the balance of the process can, I believe, be performed with advantage to the combined services.

BUYING AGENCY CAN BECOME TOO LARGE

I think there are individual exceptions, however. I think a buying agency can become so big as to become cumbersome, and become such a single large force, in a limited market of supply, as to lose rather than gain efficiency.

Illustrative of that was the decision that shocked the merchandising world a few years ago when Sears Roebuck passed beyond what then looked like a lot of money-sales of $1 billion a year-and began to decentralize their buying activities.

Mr. HOLIFIELD. On the other hand, if the three services are competing in a limited market for the same item, let's say blankets or yardage textiles, whereby

Mr. PEARSON. That is both bad and foolish.

Mr. HOLIFIELD. Then that, again, becomes an evil; does it not?

Mr. PEARSON. Yes, sir; and if there is not unification, there certainly should be coordination on the closest level.

Uncoordinated buying in this last way

Mr. HOLIFIELD. It is going to affect our economy very badly.

Mr. PEARSON. Yes, sir.

Mr. HOLIFIELD. And particularly in view of the tremendous purchases that are being made by the Military Establishment.

Mr. PEARSON. Yes, sir.

Mr. WARD. It would be necessary, at least, to get the requirements together; wouldn't it, Mr. Pearson, and then see what is the best way