RESERVES FOR INCREASING THE LEVEL OF UTILIZATION OF EQUIPMENT AND PRODUCTION CAPACITY OF AN ENTERPRISE

G. V. SIMONOV

(Presented by the scientific seminar of the Department of Economics)

The growth of the efficiency of social production depends to a significant degree on the volume of capital investments in fixed assets and on their most efficient use.

Only with the rational use of capital investments and fixed assets can the further growth of social production be ensured. The better capital investments are used and the higher the return on fixed assets, the greater the national income of the country and, consequently, the consumption fund.

In this connection, increasing the efficiency of capital investments and fixed assets acquires paramount national-economic significance.

Speaking at the December (1969) Plenum of the CPSU Central Committee, General Secretary L. I. Brezhnev said that at present the main task of the long-term development of our economy is to achieve a sharp, 2–2.5-fold increase in the efficiency of available resources, as well as of new investments. We have no other path. This is not only the principal path, but the only one. In all subsequent Party and government documents dealing with the development of the national economy, the line toward a sharp increase in the efficiency of social production is likewise clearly reflected. However, practice shows that in the matter of further increasing the efficiency of capital investments and fixed assets, both in the country as a whole and at the industrial enterprises of our region, enormous reserves still exist.

One of the first reasons in this matter could be named as the long periods required for the construction of industrial and other facilities, as well as for the attainment of design capacities. Thus, in the region as a whole, in 1967 the capital-investment plan was fulfilled by only 87.5%, while the commissioning plan was fulfilled by 66.2%. In 1968 the corresponding figures were 97 and 74%; in 1969, 93.8 and 66.9%. In 1970 the capital-investment plan for facilities of production and nonproduction purpose was fulfilled by 102%, while the commissioning of fixed assets amounted to about 74%. Thus, in just one year, from 1/I 1969 to 1/I 1970, the volume of unfinished construction increased by 44.0 million rubles and amounted to 77% of the volume of annual capital investments. All this leads to the fact that enormous sums of state funds are immobilized and the cost of construction of facilities increases significantly. Thus, only on the example of the construction of the cast-iron foundry shop of the “Sibelektromotor” plant

one can show specifically what this delay in construction costs the state. With an estimated cost of the facility of 5.4 million rubles, as of January 1, 1971 work had been performed for 5.6 million rubles, while only 1.24 million rubles had been put into operation, including construction-and-installation work amounting to 0.76 million rubles and equipment amounting to 0.48 million rubles. The facility, however, has already been under construction for eleven years. Quite simple calculations show that, because of the enormous delay in construction, it has already cost the state about 10.0 million rubles. A number of other facilities could also be named whose construction period has exceeded 10 years.

According to data from the Oblast Statistical Administration, delays in putting industrial facilities into operation in the oblast have led to a significant increase at enterprises in the amount of uninstalled equipment. Whereas on January 1, 1965 it amounted to 4.815 million rubles, by 1969 it had already reached about 10.0 million rubles.

All that has been said above indicates that, even at the stage of utilizing capital investments, there are significant reserves for increasing the efficiency of the national economy.

Fixed assets of the socialist national economy are the most important part of our national wealth. In the entire national economy in 1968, fixed assets amounted to an enormous sum—about 500 billion rubles. From 1928 to 1964, the fixed assets of industry increased 52.4-fold; from 1950 to 1965, 3.5-fold; and from 1960 to 1967, twofold. Over 50 years of Soviet power, the fixed assets of industry increased 58.7-fold. If the United States was able to double its basic production assets in 22 years, England in 19 years, and the FRG in more than 10 years, then the Soviet Union increased them in 8 years. Now our task is to use these assets as efficiently as possible.

One of the general indicators of the efficiency of utilization of production assets is the capital productivity coefficient, which characterizes how much output the state receives per year from one ruble of these assets. Statistical data show that over a number of recent years it has declined almost year by year. If in 1965 it was 2.0056 (100%), then in 1966 it was 1.831 (91.3%); in 1967, 1.9567 (106.8%); in 1968, 1.9405 (99.1%); in 1969, 1.8324 (94.4%); in 1970, 1.8510 (100.9%). Thus, overall from 1965 to 1970 it fell by 8%, i.e., amounted to only 92%.

Approximately the same task existed in the preceding five-year plan. The year 1965 relative to 1960 amounted in the oblast to only 90.3% (for the country as a whole over this period it amounted to 92.12%), i.e., we see that output is increasing at a slower rate than fixed assets are growing. Thus, in the oblast from 1960 to 1968, assets increased 1.86-fold, while output increased 1.7-fold.

The factors influencing the decline in capital productivity are highly varied, but we shall dwell only on those that depend mainly on the enterprises themselves.

The first of these factors may be said to be the still large amount of surplus and uninstalled equipment. Thus, in the main line of activity from 1965 to 1967 the amount of uninstalled equipment increased from 1.0 to 2.7 million rubles, including surplus equipment from 0.85 to 1.24 million rubles. True, in recent years the rate of accumulation of such equipment has declined, but the quantity of this immobilized equipment is still very large.

The next factor on which attention should be focused is the lengthy time required to master new equipment. Very often factories are simply not prepared for the rapid use of such equipment.

Almost a year goes by without the numerically controlled machine tools being used at the Mathematical Machines Plant, although the cost of such machines is many times greater than the cost of ordinary equipment of the same type. Examples of delays in mastering high-productivity equipment could also be seen at other plants in the city. All this indicates that factories do not always devote the necessary attention to accelerating the commissioning of new technology.

An important factor in improving the efficiency of the use of fixed assets, including their active part—working machines and equipment—is the shift coefficient. Thus, if the possible shift operation of equipment can be equal to 2, in practice it is considerably lower. At the end of 1967 (November 22), the regional statistical administration analyzed the use of installed equipment. Of the 7,800 units surveyed, 1,180 units, or more than 15%, were not operating at all on that day. This included 41.8% of the equipment at the Mathematical Machines Plant that did not operate that day; at the Sibélektromotor Plant, 22.3% (1st shift—74%; 2nd—50%; 3rd—4%); and at the Electromechanical Plant, 23.4% (1st shift—70%; 2nd—43%; 3rd—3%). Thus, the shift coefficient at TSEM was 1.28, and at TEMZ—1.16. The survey was conducted mainly in primary production, and we know that in auxiliary production at plants the fixed assets are used even less effectively. Data from analyses in recent years, 1970–1971, show that the shift coefficient still remains rather low and does not exceed 1.4–1.5 on average. Across the 12 enterprises analyzed, in primary production it ranged from 1.06 to 1.76.

Intra-shift losses of equipment working time are also large. If the possible utilization of intra-shift time is considered to be 90–95%, in practice it does not exceed 80–85% on average (according to the analysis, the range is from 73 to 97%).

There are large losses of equipment working time in various kinds of scheduled repairs, which reduces the efficiency of its use and also requires substantial labor and material expenditures. In the country as a whole, repair of metal-cutting equipment alone employs 3.5 times more workers than the machine-tool industry itself, and about three billion rubles a year are spent on it.

An analysis of the coefficient of machine-tool utilization by machine time at a number of machine-building plants in the city showed that, instead of the possible 65–70%, it often does not exceed 45–50%. Large reserves for increasing efficiency can also be found in raising the coefficient of machine-tool utilization by power. A saving of just 1% of electric power nationwide is equivalent to additional output of 6.5 billion kWh of electricity and a saving of 2 million tons of coal. For comparison, let us recall that in 1928 all power stations in the country generated 5 billion kWh of electricity.

In recent years, in our view, machine-building enterprises have begun to devote less attention to the modernization of existing equipment. The main direction has become the renewal of the machine-tool fleet. Yet it is quite clear that, given the limited quantity of new equipment, economically justified modernization can produce a significant effect.

The problem of the rational use of fixed assets applies not only to equipment, but also to other groups of fixed production assets: buildings, structures, instruments, and so on.

A particularly significant role for the enterprise is acquired by the problem of increasing efficiency under the conditions of the economic reform, when the greater responsibility of enterprises for the use of production assets is directly linked with economic incentives—with the creation of incentive funds for enterprises.

The indicators of payment for production assets, estimated profit and profitability, and credit as a method of expanding production compel enterprises to approach more carefully the calculation of the volumes of production assets at their disposal for ensuring normal activity.

Thus, in 1970 GPZ-5, out of a balance-sheet profit of 3.9 million rubles, paid 1.7 million rubles for production assets; the electric-lamp plant—0.7 and 0.3 million rubles; and “Sibelektromotor”—5.4 and 1.1 million rubles, respectively.

Among the indicators aimed at improving the use of fixed assets in machine building, a special place is occupied by the growth of the production qualifications of personnel. The creation and strengthening of a permanent contingent of skilled personnel, the improvement of their qualifications, and the cultivation of a communist attitude toward labor exert an important influence on the better use of fixed assets in industry. Among the Tomsk enterprises that have done much in this direction, one may name the manometer plant, the cutting-tools plant, and GPZ-5.

Important factors aimed at increasing the efficiency of the use of fixed assets are the efficiency of the use of circulating assets, improvement in the rhythmicity of enterprise work, and other factors. For example, the acceleration of the turnover of circulating assets in 1970 as compared with 1969 from 88 to 76 days increased the indicator of sales of commodity output per unit of circulating assets at the manometer plant from 1.01 to 1.12; at the “Tomkabel” plant—from 0.96 to 1.25; while an increase in the turnover period at the electric-lamp plant from 117 days to 155 reduced the return on fixed assets per unit of circulating assets from 0.69 to 0.58.

Thus, improvement in the use of fixed assets is achieved through the most varied, interrelated factors.

As recommendations for the enterprises of the city for a sharp improvement in the use of new and existing fixed production assets, one may propose both the approaches already considered and some others. In our view, all enterprises, when considering questions of introducing new equipment, should without fail carry out a calculation of its economic efficiency. It is also necessary to be prepared in advance for the earliest possible commissioning of this equipment. This can be accomplished through preliminary familiarization with the operation of analogous equipment at other plants, preparation of areas for installation, development of programs, and adjustment of one of a group of analogous machines under the conditions of special sections or laboratories.

For better use of existing assets, plants should more widely practice the holding of monthly campaigns and one-time inspections to identify hidden reserves of production, keep strict records of the use of fixed assets, create initiative groups, more broadly involve in this work representatives of specialized and economic departments, as well as students of higher educational institutions, and consider other proposals submitted by employees of enterprises and higher educational institutions.

Our progress forward depends to a great extent on the successful fulfillment of this program and on how effectively capital investments are used.