er a period of years have not succeeded in
accomplishing the basic task of ensuring a dependable supply of material
resources to industrial producers. As a result, the economy has been
officially reported to suffer enormous losses through production
shutdowns, substitutions of materials that lower quality and increase
costs, and hoarding of scarce materials. Heavy losses have also been
incurred through improper storage of materials, careless use that
entails excessive waste, and pilferage.

Adequate information on the organization and functioning of the
industrial supply system has not been available. The latest
reorganization of the supply system was undertaken at the end of 1971
with a view to providing a normal flow of supplies for the economic
trusts beginning in 1972. Until 1971 the supply organizations had dealt
almost entirely with individual enterprises. The reorganization was
accompanied by extensive consultations with producers of raw materials,
importing organizations, and industrial consumers. The consultations
were held in order to clarify the needs of consumers, ensure the
availability of the needed supplies, and agree upon specific measures
for timely deliveries of materials and supplies.

Particular attention in the reorganization was paid to the problem of
reducing the inventories of materials in enterprises and concentrating
them in the supply organizations. Decisive measures were taken to halt
the former practice of making deliveries of materials large enough to
cover requirements for three months or longer. Under the new system,
supply organizations are required to make periodic deliveries to
consumers on guaranteed time schedules, at short intervals, and in
quantities that do not exceed one month's requirements. Adherence to the
regulation is to be used as a standard in evaluating the performance of
supply organizations.

One of the basic elements in industrial consumer-supplier relations has
been the annual contract for estimated material and equipment
requirements needed to complete the annual production quota. For a
variety of reasons both suppliers and users have often failed to honor
these contracts, and the penalties provided for breach of contract have
not been sufficient to deter this practice. Breaches of supply contracts
have been an important cause of economic difficulties. Supply
difficulties have been particularly disruptive because of the
traditionally stringent nature of the produc