Mr. C. D. Young,

      I was very much impressed on coming into this building tonight by the fact that there was a band playing.  On the last occasion I think that I was in this room, the Great Lakes Naval band was also playing.  On that evening the occasion was a Liberty Loan Drive, back in 1918, and as I remember the gathering, this room was crowded to the doors and the gallery packed and by the aid of a band and some wealthy Wilmington people, Delaware folks, I think it was the Third or the Fourth Liberty Loan, was put across and Delaware had the largest quota of any state in the United States as a result of that meeting with the band that night.  I hope that may augur well for what is about to follow and I will be able to put over equally well the story I’m going to tell you about the Supply Department of the Railroad.

      It is a distinct personal pleasure, I want to assure you, to me to be here tonight and talk to the Wilmington Club because I feel as though it’s a sort of home coming for me to be back on the old P. B. & W.  I see many faces familiar to me, even with the lapse of time, and of course, there are a large number of new men with whom I am not acquainted.  In talking on the Stores Department I am going to just briefly touch upon the department, how it endeavors to function an what it tries to do, then talk more particularly on what you can do to help that department to accomplish it’s mission in the general scheme of the railroad organization.  In order that I may not waste time getting carried away with my own eloquence, I am going to confine myself to these written notes trying to cover every point that might otherwise be overlooked and thus there will be more time for your own discussion of the subject from which we will get more benefit than from any paper by me.

      The Pennsylvania System is one of the largest single enterprises in the United States.  It traverses, in it’s service of transportation, the states in which the bulk of national resources are produced and refined.  To operate this transportation machine it is necessary that the service be what the public demands for itself, and this requires the maintenance on the railroad property of a stock at local supply points and strategic locations where the work of maintaining the property can be expeditiously and economically performed.  To cater to this business, the Pennsylvania Railroad has invested, in materials and supplies, upwards of eighty million dollars, which represents approximately a four month supply for the railroad.  In order to purchase and distribute this amount of material, an organization sensitive to the needs of the service and at the same time mindful of the capital outlay is required to meet that need.  I am sure you will be interested in knowing of certain commodities representing our largest consumption which must be carried in stock to satisfy our requirement and the money involved in a few of these items.  For example, at the present time we have steel for repairs to freight cars, $10,000,000; castings, all kinds: $75,500,000; lumber: $2,900,000; crossties (these crossties being located principally at treating plants, seasoning): $10,700,000, signal and interlocking materials: $1,800,000; frogs and switches: $2,500,000; other track material $3,500,000.  We have fuel, including the stored coal awaiting our winter’s needs, $6,700,000.  There isn’t time to tell you in detail how the purchases and stores on our railroad are handled and the methods we pursue to satisfy the service required, if you were interested in it, but I would like to tell you of some of the objects and aims of the Stores Department and it’s duty to you, it’s customers.  A few of these may be put in a sort of outline form as follows:

      First: To have the proper kind and quantity of material for the purpose intended.  That sounds like a small item and a small task; it’s really the foundation and reason for a Supply Department—to have the proper kind and quantity of material for the purpose intended.  It is obvious to you that if the Supply Dept. gets you wrong material, it has failed in it’s function;  if it gets you too much material, it has failed in it’s function, and if it gets you too little, it has failed.  Now, when you consider that it is necessary in a great many cases, and I’ll illustrate by a frog or casting, that material item must be satisfied with the standards of P. R. R., that it’s not a merchantable article such as sugar or flour that you can trade with but must be made subject to certain specifications and according to certain plan, so you can see that to build an organization that will supply the proper material in the proper quantity is quite a task in itself.

      Second:  To have this supply at the proper place or where it can be quickly moved to the point of use.  Now, having gotten the proper kind, and quantity of material, it is absolutely essential, in order to satisfy you gentlemen, to have that material where you want it.  The fact that we have it some place doesn’t satisfy you, you want it where the work is going on, where the work is being performed, and it is the function of this department, with the assistance of the other departments, in moving it, to have the material at the right place so you can use it and only in such quantities as are necessary. 

      Third:  To arrange the supply so it will be available at the proper time in order not to interfere with the progress of the work. 

      Fourth:  To have the proper quantity furnished, no more, no less.  For this purpose you naturally organize warehouses, storehouses, that have small distributing stocks at outlying points.  If the service of the railroad is not improved by having more than the proper quantity in your warehouse or storehouse of your supervisor’s storage yard, the failure there is equally as bad as if you have too little.  Now it is necessary, therefore, to get the co-operation of all interested in the use of this material so that we will carry out this forethought, namely to have the proper quantity furnished.  If we have too much, as I have said, it’s an overhead expense to the railroad which is not warranted;  if too little, the work suffers and you who are required to get the work finished in a given period of time, cannot perform your duty and your tasks. 

      Fifth:  To see that the material is properly receipted and accounted for to the end that a correct record of the transaction is available. 

      Sixth:  To care for the material by an orderly system of storage and protect them against loss through the elements or theft.   That is a perfectly obvious necessity of the proper function of storekeeping, that when the material is received it will be piled in orderly fashion, so you will know what you’ve got, what quantity, and that material which quickly deteriorates when exposed to the weather should be placed somewhere where it will be protected.  If rough material, it can be placed out of doors and in that manner, so long as it is protected against theft, the service will be properly taken care of. 

      Seventh: To render this service with the lowest possible inventory and avoid the tying up of liquid assets, thus rendering the money available for other operations of the railroad. 

      This may appear a rather formidable list of requirements but in fact what may seem a difficult task is made easy through the closest co-operation between the users of material and the Department of Supplies.

     The entire problem and one with which most of you are very familiar, is parallel with our own home supply question.  If the same principles which you practice in the economical procurement of your groceries and clothes and other needs of your family are applied to the business of the service supply of the railroad, a maximum efficiency and supply will be obtained with a minimum investment in carrying stock.  I will speak more definitely of this home analogy later.

     In order that I may speak more fully of this now, the underlying thought of this responsibility has been so well expressed in a recent talk by Vice-President Elisha Lee before the Division of Purchasing Stores of the American Railroad Association that I am taking the liberty of quoting him as it bears directly upon this point, and give it sufficient amplification to fix it thoroughly in our minds:  “Therefore I would say from the view point of the executive management responsible for direct results, there is no more important duty resting upon the Stores Department of any railroad than that of keeping down stocks of all kinds to the minimum, consistent with meeting proper and reasonable demands.  This necessitates three-fold watchfulness, first, to minimize the amount of capital that is held in stores; second, to reduce the interest lost in idle capital; third, to keep the company in position to cope promptly with changes in markets or general business conditions without incurring serious loss.  Always bear in mind that you’re the guardians of the company’s treasury.

     “In any railroad there may be from time to time, a tendency on the part of officers in other departments than yours, to order supplies without due consideration to risk and waste in stock; this is not surprising because quite often a readily available supply of material which can be drawn on at any time that may be momentarily wanted, saves a great deal of trouble to the man on the ground.  Sometimes it saves a great deal of hard thinking and planning.  When you find a tendency to extravagance or looseness of that character, it is proper for you to realize that some other department is perhaps losing sight of it’s own responsibility.  It then becomes your, the Stores Department, undoubted duty to step in and prevent such action and put back the responsibility for properly planning the work for other departments to which it belongs.  It cannot fail to be a helpful inspiration to bear constantly in mind that you are trustees for your work in spending other people’s money.  In the high conception of his calling, which every railroad officer worthy of the title feels, that responsibility imposes an obligation to see that all expenses are made as wisely and carefully and economically as possible.”  Speaking further of the Stores Department, Mr. Lee said, “There is of course a word of caution due; if stocks are brought down too low, a point will be reached at which savings in the purchasing and stores work will begin to be over shadowed and over balanced by added cost elsewhere through inability to obtain material with reasonable promptness.  Perhaps the real intelligent test of store keeping is the ability to stop just short of reaching such a point.”

     What does all this mean to us tonight?  Simply this, that the man on the ground is the best judge of what should be ordered for he sees that the real requirements are and when and where he will need material.  In placing a requisition for material, the store keeper cooperating with the foreman, obligates the railroad for an expenditure of money of his estimate of the quantity which should be ordered.  The basis of judgment of quantity to be ordered should be at all times their estimate of the consumption of the material within a very short time after received.  If a quantity greater than that currently needed is specified, the material will not be used promptly and the capital investment will suffer in being tied up in this way.   The machinery in the Stores Dept. is set up to try to forecast what that quantity should be and is based on past consumption.  The final figures settled upon in passing requisitions should rest upon the judgment of the man using the material, who must have in mind from past experience, as to the requirements and what will probably be the conditions at the time of the receipt of the supply.  It is obvious that the failure to order a large enough quantity is a serious mistake because then the output or maintenance will be sacrificed unless an extra effort is made to get an extra supply.  On the other hand, if too great a supply is ordered, no advantage will accrue to anyone.  I’d like to divert just a moment from my notes and stress particularly to the last point I have named, namely, in placing an order for receipt of more material, that the Store keeper, co-operating with the foreman, should settle between them what will be the needs of the service by the time the material is received.   I have heard criticism and just criticism in a number of instances, that too much regard was given for the record of consumption and, regardless of the viewpoint of the maintainer, track foreman, supervisor, shop foreman, that the consumption could not be used as a guide as to the needs.  That is certainly true, but we must have some base for which to work if we are going to intelligently forecast our needs in the future and I know of nothing better than what has been the requirements of that particular service in the past, so I say that in establishing with the Store keeper what you think the needs are going to be, look first to what you have used about that same period the previous year or the last three months and with that as the basis, and only as the basis, then form your judgment as to that the real needs will be when the material is received, remembering at all times that you’re forecasting at least 45, perhaps 60 or 90 days ahead of the time of the actual receipt of the material.  If, in the ordering of material, you over order your supply, it is perfectly natural that the material which is received will either have to be moved away from the point delivered or stored at an expense.  At the same time, perhaps someone else, of better judgment, is suffering from the lack of just the proper quantity of the material because of an oversupply at the wrong place, through over ordering at another place, rather than of poor judgment on his part.  Let me suggest that if material under your individual observation is not properly moving, for any reason whatsoever, it should be your first thought, and is your unquestioned duty to report this fact so the material will be removed to a place where it can be made available to others who may have urgent need of it.  The answer to this is stop hoarding.  There is a tendency, and a perfectly natural one for it to exist, for you to hoard certain materials.  If your experiences has shown a difficulty in obtaining an adequate supply of those particular items.  Perhaps the very reason for this is that the same items of material have been hard to get through the fact that others were hoarding exactly the same thing.  So again, for emphasis, I repeat, if you observe material not being used, this condition should be reported to the Stores people and the material moved from your territory and made available for others’ uses.  This is the only way we can hope for the greatest possible turn over in stock and at the same time the greatest service of material to all interested.  Our executives are constantly watching our materials and supplies accounts and there is no single item that does not come under their closest scrutiny.  It is their thought that unnecessary materials and supplies represent money that should be in the treasury devoted to the improvement in the property rather than lying idle in stores stock.  Let me therefore urge upon you a similar view point, that the idle material is idle money which, in addition to the actual loss of interest accruing against the stored material is subject also to the expense of storage and costly expense for protection, the annual cost of carrying having been estimated as amounting to approximately 15 percent of it’s value.

      Returning to the home economics I referred to, if in providing your groceries you lived at a point distant from your source of supply, requiring that you go to the store or market once a month, it is obvious that you would be required to lay in at least a month’s supply, whereas, if you were conveniently situated or by telephone could order your household needs daily, the size of the order except for staple articles would probably be a day’s requirement or, at the most, a week’s supply.  The Pennsylvania Railroad is situated in a manufacturing territory upon which it depends for it’s source of supply.  With few exceptions it can obtain preference through it’s position and size to an extent which permits it to obtain it’s requirements within the shortest period of time.  Therefore it is incumbent upon us all to make our orders currently.   By this I mean monthly and only in such quantities that the amount requisitioned will represent approximately one month’s needs.  There has always been a tendency which I believe now is being slowly corrected for the local supply point to order 3 or 4 months’ supply of an article and then, after a lapse of 3 or 4 months, to make a replenishing order.  You cannot see how seriously this affects the turnover of stock and how much better it would be for all concerned to order each month only one month’s needs and in that way have just the proper quantity moving forward to meet the requirements of the service, carrying just a little stock on hand to meet the current needs and local emergency.

      I would be unmindful of my opportunity in talking to you if I did not call your attention to some storekeepers sins in which you are vitally interested, namely economy in the use of supplies and materials.  Too little attention is frequently given to the drawing of supplies.  One of the prolific sources of waste is the undue requisitioning of supplies when the use of those already issued would be ample for the quantity needed.  This applies particularly to locomotive and train supplies as well as handling tools used upon the railroad.  Now you may think this statement is over-drawn as to the extravagant use of certain materials,  so at random I have taken one item, shovels, used for firing locomotives and in the maintenance of Way Department for various purposes.  During the past 12 months, 85,000 locomotive and 35,000 M. W. shovels were issued.   This is at the rate of 212 and 119 shovels respectively per day.  This may or may not have been needed; my only thought in presenting it to you is that had greater care been used in ordering this one item, there is no doubt that what a considerable saving would have been made.  It seems that a good rule would be that for every new tool issued, an old one be returned or a satisfactory explanation be given for the disposition of the old one.  Extravagance in the use of supplies, such as oils, waste, soap, matches and the like household articles should be watched and guarded against.  Be mindful of the extravagant use of new material.  It may often seem better to go to the storehouse and draw something new rather than take the time to repair the article needed.  Would any thrifty person go to the shoe store and buy a new pair of shoes when the old pair of shoes needed only the attention of the cobbler for a new sole.

      Let us apply this thought to the ordering of new items the consumption of which seems out of all proportion to needs, such as switch points, interlocking parts, repair items to stand pipes and crossing signs.  The thrifty foreman will insist that such articles are beyond repair before issuing orders for new material to take their place.  Another important phase of good store keeping is to watch the use of cars loaded with company material.  Figures for the entire system for week ending November 15^th, 1923 show 7,700 cars in the service under load at destinations with company material, divided as follows:  coal and coke, 5,657; scrap 180; lumber, 139; ties, 194; sand, gravel, ballast and other track filling material 735; all other material 798.  These figures I have given you are company material cars which have reached their destination awaiting to be unloaded and which have been there more than 24 hours.  In addition to this, you all appreciate there are a great many other cars moving toward destination carrying company material.  So, in the aggregate, you can see, for the P. R. R. System, what an astonishing number of freight cars are in the business of distributing the supplies to the railroad.  These may seem like astonishing figures but when you consider the volume of business transacted they are not unduly large.  It should be our aim, however, to have in the supply service of the railroad just cars enough to render adequate service, but this goal can only be reached by each receiver of material promptly unloading cars as soon as they reach destination, permitting better transportation to our customers.

      How often does it occur in the daily experience of each of you that company material cars are set back one, two or three days because it may not be convenient to unload them just as received.  Keep in mind that cars eventually have to be unloaded that the best interests of the company are generally served by unloading them as soon as received instead of putting off the talk until later.  In the movement of cars from the source of supply to destination, how often does it occur by going out in the yard you find cars with company material not shifted or not placed in trains because it is company material.  It is just as essential that those cars be promptly dispatched so as to release that equipment for further loading. 

      I would like again to tell you how glad I am to have extended to me this invitation to return to Wilmington.  Please keep this thought uppermost in your and that if you will look upon the materials and supplies of the railroad as representing capital needed for it’s operation and guard your proportion of those eighty million dollars with the same careful exercise in the periodical needs of your own house-hold, the Stores Department will secure all the needed support to bring about the results desired by our management.

      Permit me to express my sincere appreciation for the honor to address you and to thank you most heartily for your thoughtful attention.  I would like to pass around among the groups when they are discussing the subject and I am the recipient of all the brickbats that you wish to give the Stores Department.  I want to hear your complaints, so if I come into a room with the group discussing the subject, I would like to have questions put to me as to why we don’t do things right.