Nelson-Somervell Correspondence in 1942
Headquarters, Services of Supply
Washington, D. C.
15 May 1942
Dear Mr. Nelson:
1 am inclosing for your consideration the proposal which we discussed informally after our Tuesday morning meeting. Before this transmittal of the detailed proposal to you, I asked Dr. Gulick, Mr. Baruch, Judge Patterson, Mr. Eberstadt, and Mr. Forrestal to criticize it. All of us are agreed that the reorganization proposed will do much to streamline present procedure and make for effective action.
Our war munitions program has reached at this time an industrial rate comparable in dollar value to peak production in time of peace. Nevertheless, in many items, it would appear that this rate represents a war production peak due to shortage in critical materials. For instance, the copper supply allocated to the Army barely suffices now to maintain ammunition lines which are far from adequate to meet requirements. It is believed that this condition has resulted in large part due to (1) the absence of any strategic control or direction in the allocation of raw and basic industrial materials among the United Nations, other nations, and essential civilian requirements including indirect military requirements; and (2) inadequate control over the supply of critical materials available for allocation to United States production. No one can be sure that a specific allocation reaches the desired end product.
The allocation of raw and basic industrial materials is the responsibility of a combined raw materials board composed of Mr. Batt representing the United States and Sir Clive Baillieu, the United Kingdom. This Board does not operate on a formal basis. It reports directly to the President and to the Prime Minister and is in touch with the combined Chiefs of Staff only through a liaison agency established by the Munitions Assignments Board. Requirements submitted to this board by other nations are not subject to the same detailed review which United States requirements receive in the Requirements Committee, War Production Board. This board allocates materials to areas where the Munitions Assignments Board has refused to assign finished munitions.
It is proposed that the Raw Materials Allocations Board be made a Combined Resources Board operating directly under the Combined Chiefs of Staff and under the same chairmanship as the Munitions Assignments Board. Its composition should be extended to include not only representation of War Production Board and the British Supply Ministry but also of the Armed Services of both countries. The board should consider all available resources and
requirements in the light of known strategical objectives with a view to matching resources against requirements so as to best meet these objectives. It would follow the pattern established by the Munitions Assignments Board, utilizing the Requirements Committee, War Production Board as its working committee.
Weaknesses in the existing system are described in more detail in pages 6 to 10 inclusive, of the attached detailed report, remedial measures are discussed in pages 25 and 26, and an organizational chart is given in Exhibit I.
The Requirements Committee, War Production Board, in becoming the working committee of the Combined Resources Board, would be designated as a Resources Committee under a chairman appointed by War Production Board. Its membership would include representatives of our Armed Services Civilian Supply, Lend-Lease, and of the United Kingdom when requirements and resources pertaining to the latter are under consideration. This committee would examine all requirements for critical materials and recommend an appropriate allocation of available resources. Its recommendations would become final unless appealed immediately to the Combined Resources Board.
In order that this Committee could function effectively, major organizational changes would be required within the War Production Board. The Commodity Branches of the War Production Board do not adequately concern themselves with all of the raw materials and facilities resources which are already in a critical stage. Moreover, other Government agencies including the Army and Navy Munitions Board also are concerned with these problems. Consequently, there is no central clearing house for the correlation of all such data. In order that the Resources Committee may function more intelligently, it should create a Commodity Committee for each critical material. The Commodity Committee thus formed would be headed by a permanent chairman, also from the War Production Board, with permanent representation from Civilian Supply and for the Armed Services from the Army and Navy Munitions Board. A committee staff would include the best known experts available for the commodity in question and it would maintain constant liaison with selected representatives of the industry, also permanently located in Washington. The Army-Navy representation on the committee would reconcile any service differences prior to the action of the Commodity Committee as a whole. The Commodity Committee would be responsible for the analysis and forecasting of requirements, the determination and allocation of available resources, the scheduling of deliveries, and the enforcement of compliance. Each commodity presents a special problem, and the present system of priority control and enforcement under separate divisions with allocations on a hit-or-miss basis is falling down. Positive control over a commodity can be obtained only through the establishment of a Commodity Committee representative of all users including the Armed Services with a Chairman who is fully responsible for the administration and execution of approved decision.
Weaknesses in the present system are covered in detail in pages 16 to 24 of the detailed report, remedial measures are proposed in detail in pages 26 to 32 inclusive, and a proposed organization chart is given in Exhibit L.
Immediate and positive steps must be taken to control raw and basic industrial materials if production lines are to be maintained. Present control has proved definitely inadequate to insure the delivery of requisite materials on schedule with a consequent lag in
production. Remedial measures are essential. The priority system has functioned to preclude lower priority end products receiving any critical materials and balanced production cannot be maintained. The measures proposed herein can be undertaken within the existing framework with a minimum of change and delay and without destruction of public confidence in the existing organization.
I shall be out of town today, but hope that you will be able to give me some time either Saturday afternoon or Sunday to discuss the matter.
Lieutenant General, Commanding.
Report dated 5 May 1942
Washington, D. C.
May 21, 1942
This will acknowledge and thank you for your letter of May 15, 1942, together with an accompanying "Report on Certain Features of the Organizational Problems Involved in Developing Resources To Meet Strategic Requirements," setting forth certain proposals relating to the control of materials and to the correlation of strategic organization with production organization. Broadly stated, the proposals embody four principal elements, which I should like to discuss separately. All are important, but one has especial significance. I refer to the suggested over-all arrangement for the coordination of strategy and production. I should like to consider this at some length, after first dealing more briefly with other factors.
1. The Inadequacy of the Present Machinery for Controlling the Distribution of Materials.
The letter and the accompanying report describe certain weaknesses which have developed in the mechanism for controlling the distribution of materials. These weaknesses are real, and have been foreseeable for some time. (Your analysis overlooks certain of the contributing causes, such as the loose issuance and extension of PD-3A preference rating certificates by the procurement officers of the Army and Navy, and the failure of the Services to present accurate statements of their requirements.) For several months the War Production Board has recognized that, following substantial completion of the vital curtailment program and the effective launching of the program of conversion, it would be necessary to shift the primary emphasis of the entire organization to the development and operation of a new and uniform basis for guiding the distribution of materials. In the light of extensive analysis and developmental work, in consultation with the staff of the Army and Navy Munitions Board, and after preliminary testing of new devices, we have tentatively adopted a new system for administering the distribution of materials, to take effect July 1st of this year. The system will substitute for the present multiplication of devices, which have grown up more or less independently of one another, a single system for the distribution of materials based upon the importance to the war of the products of
the various applicants, accurate estimates of the material actually needed by them to make the products, knowledge of their inventories, and the scarcity of the particular materials and the possibilities of increasing the supply, or reducing the demand by substitution and conservation. By letter of May 13, 1942, I advised the Under Secretary of War and the Under Secretary of the Navy of the prospective institution of the new system; solicited their further advice and criticism; and indicated that we desired to be able to announce our decision at the earliest possible date, preferably not later than May 24th. A copy of the letter to Mr. Patterson, together with the enclosures, is enclosed for your information.
There is another aspect of the matter which must be emphasized. The control of the distribution of materials is not merely a matter of mechanism. It depends also upon the determination of the uses to which materials are to be put. Unless these uses are soundly determined, no mechanism will work, for the mechanism must be guided by the established purposes. It is with this in mind (and related considerations affecting management, labor and machine tools) that we have so drastically curtailed the production of consumers durable goods and other goods for civilian use, and that we are pushing our programs for the conservation and substitution of materials. But the determination of uses has more than a civilian aspect. It has the all-important military side. That is why I have pressed during the past weeks for the earliest possible determination of the production program. It also explains why, in the development of a comprehensive program, adjustments must be made in the light of production factors, as well as the strategic direction of the war. As you know, the War Production Board has been acting upon a recognition of these facts. I have in mind, among other things, the Committee on Facilities and Construction which I recently constituted with your collaboration and the collaboration of the Navy, in order to screen out all new facilities not really needed for the accomplishment of the munitions program.
I think I may also appropriately mention at this point our difficulties with the stated requirements of the services for nonmilitary items. You will recall, for example, that the Army's original stated requirement for additional new typewriters for the year 1942 was more than twice the total calculated to be adequate for the entire civilian economy during the same period.
2. The Situation With Respect to Civilian Supply.
There is another fundamental which I believe your suggested plan of organization violates. The War Production Board not only has responsibility for production of material for war, but also for the production of the necessary material for the essential civilian economy. It is a fact that no war program can go forward with the required speed unless the essential civilian services are maintained at the same time. Transportation and communication systems must be sound; the health, police and fire services of our municipalities must be maintained and the minimum needs for the economy must be met; otherwise no war program can be carried forward in any country. In my opinion, it would be a fundamental mistake to put the apportionment of materials for the essential civilian economy under the military.
3. Organizational Changes Within the War Production Board.
The War Production Board has recognized that the substantial completion of the curtailment program, and the adoption of the new system for controlling the distribution of materials, will require a radical re-
orientation of the work of the War Production Board, and corresponding changes in its organization. Related changes will be necessary in the procedure of the Army and Navy Munitions Board and the procurement arms of the Services. Your suggestion for the reorganization of the Requirements Committee, and for the formation of commodity committees, is helpful, and corresponds in certain aspects to plans which we have under consideration. I have asked Mr. Knowlson, the Director of Industry Operations for the War Production Board, and Mr. Batt, the Chairman of the Requirements Committee, to discuss this aspect of the matter further with you and Mr. Eberstadt.
4. Proposed Over-all Arrangement for Correlation of Strategy and Production.
As I have indicated, this phase of the proposal seems to me the most far-reaching and fundamental. With the need for perfecting the mutual co-ordination of strategy and production, I emphatically agree. For the rest, however, your proposal seems to me to be basically in error.
The report on page 2 refers to the "coordination of strategy and the utilization of available industrial resources." On page 6 it refers to the "formulation of strategic decisions on the basis of availability of industrial resources." At the foot of page 6 and on page 7, it states that the Combined Chiefs of Staff must "take into account not only purely military questions but also economic factors," and that the "responsibility for establishing policies to govern the mobilization, use and apportionment of resources is essential to the fulfillment of their primary mission." In my judgment, these statements, and other similar statements in the letter and report, taken together, reveal two fundamental misconceptions. They misconceive the nature of the "materials problem"; and they misconceive the relationship of strategy to production.
First, the letter and the report seem to proceed on the assumption that the management of "raw and basic industrial materials" can be ripped out of the process of managing production, segregated and handled separately. This overlooks the simple fact that the management of materials is one phase of the process of guiding production. The materials problem, the facilities problem, the management problem, the labor problem, all are inextricably intertwined. As a matter of fact, most of the acute "material shortages" are not shortages in raw materials, but in processed materials with respect to which the limiting factor is the amount of facilities. For instance, the limiting factor in aircraft production today is aluminum forgings; and increasing the supply of aluminum forgings depends not on finding more aluminum, but tools and dies and labor in the forging shops. Similarly, the limiting factor in shipbuilding at this time is steel plate; and the supply of plate is limited not by the availability of steel but by the availability of rolling facilities.
The report seeks to draw a parallel between the work of the Munitions Assignments Board and the work of a proposed Combined Resources Board which would occupy a corresponding position in the structure of the Combined Chiefs of Staff. In all candor, I must say that the attempted parallel seems to me to miss the point. The work of the so-called Combined Resources Board must be an integral part of the whole vast process of production, and must be subject to the direction of those charged with ultimate responsibility for production. The munitions assignment operation, on the other hand, is essentially a scheduling operation, dealing with specific completed military end products, and based upon military needs as of the time of the assignment.
Second, as I have said, I fully agree that strategy and production must be mutually co-ordinated. But it is strategy and production goals which must be correlated, not strategy and the apportionment of raw and basic industrial materials. The concepts of strategy govern, not the use of resources, but the determination of the production program. When the program has been determined, responsibility for utilizing all resources-raw materials, basic industrial materials, machine tools, fabricating machinery, plants, management and labor-to achieve this program rests not with the Chiefs of Staff, but with the chiefs of production. The President of the United States has placed upon the Chairman of the War Production Board the duty of exercising direction over the entire war procurement and production program. The battle of production is the primary responsibility of the Chairman .of the War Production Board in much the same sense that the military battles are the primary responsibility of the military chiefs.
As the report recognizes, the reciprocal adjustment of strategy and production, to be effective, implies the integration of the American and British production programs, just as it implies the integration of American and British strategic decisions. I have been discussing the need for such an integration of production programs with Mr. Hopkins for some time. By a letter dated April 22d to the Chairman of the British Supply Council
in North America (copies of which were sent to the Secretary of War and the Secretary of the Navy), I arranged for the preliminary phases of the work. I have recently asked Mr. Lyttleton, the British production chief, to come to America to carry the work forward with me, with particular emphasis upon 1942 and the early part of 1943, in order that the combined production program, together with a statement of adjustments therein required by production factors, may then be placed before the Combined Chiefs of Staff for final determination in the light of strategic decisions. Mr. Lyttleton has agreed to come.
The Combined Chiefs of Staff cannot determine their plans without a picture of the current facts and the future practical possibilities of production. The chiefs of production cannot achieve the best possible results without accurate and up-to-date knowledge of the material requirements of the Services. It is only through close and continuous relations between the Combined Chiefs of Staff and those charged with ultimate responsibility for production that we can bring about a situation in which equipment will be ready for military action-in the right amount, of the right kind, in proper balance, and at the right time.