Chapter C: E. Knoeppel (6)

Valuable as this comparison is, it would be still more valuable if it showed _why_ the cost is less. Suppose labor and material costs are segregated. Comparison shows that the reduction of three cents is made up of one cent material and two cents labor. Now if the quantity and cost of each kind of material used, and the time and cost of each operation are segregated, an analysis will show the exact operations on which the saving has been made. It will be found, perhaps, that the cost of operation No. 10 was actually decreased three cents, but that the cost of No. 16 increased one cent. Why these variations? Was some unusually favorable condition responsible for the saving on No. 10, or can the new cost be maintained? Can the cost of No. 16 be brought back to the former figure?──these are the questions to be answered by the production engineer. The records of the accountant supply him with the means of comparison──point out both saving and waste. Profiting by the information, the engineer devises ways of approaching more closely to maximum standards of efficiency.

Comparative records should, therefore, provide for a comparison of every item entering into manufacturing cost. Comparisons should be based on standard units; if two jobs are to be compared, they must be identical or the comparison is of no particular value. The modern method of manufacturing standard parts makes comparison of practical value. Savings and wastes are more readily located in the manufacture of parts, than in building a complete machine.

Excellent examples of comparative records are shown in Figs. 18 and 19. Fig. 18 provides a detailed comparative record of labor costs, the costs of seven jobs being recorded on each sheet. This shows, for each operation, the number of pieces, hours, amount, average labor cost, and average time consumed. If on three orders, 2,000, 3,000 and 5,000 parts are made, this record will show the total cost of each order, the cost of each part, and by comparison, the relative cost when manufactured in different quantities.

To provide for an analysis of material costs, the form shown in Fig. 19 is used. This is similar to the form shown in Fig. 18, the difference being that it shows detailed costs of each separate kind of material. Fig. 19 is printed on the reverse of Fig. 18. The form is loose leaf and the sheets are filed in a binder in the order of part numbers.

Fig. 20 is a card form used for a monthly comparison of costs of standing orders or expense orders, with labor and material costs separated. The form provides for a comparison of monthly costs covering a period of four years──a very valuable record. As an illustration of the manner of using this form, it will be supposed that machine shop repairs are made on order No. 460. Both material and labor are included in the cost of repairs. One of these cards would be used for this order and, at the end of each month, the totals of material and labor used on machine─shop repairs would be entered. The total would be extended in the third column.

CONTINUOUS PROCESS FACTORIES

=46.= A distinct class of manufacture, which involves certain special problems in cost accounting, is the business in which the process is continuous. For convenience, we refer to such factories as _continuous process factories_. Any factory in which a definite quantity of raw material is converted into a finished product, the quantity of the product not being definitely determined in advance, is classed as a continuous process factory. Examples are flour mills, sugar and salt refineries, nail mills, button and pin factories, and yarn mills.

The problem in factories of this class is to find the total cost of production and the total number of units of production; the former divided by the latter will give the cost per unit.

The cost of production includes the cost of material, labor, and expense. It is necessary, therefore, to keep an accurate record of material and supplies issued to the factory, just as is done in factories manufacturing goods on special orders. Labor costs should be recorded by departments, and the distribution of expense should be by departments, as far as possible. Forms similar to those shown in the preceding pages can be used.

=47. By─Products.= A special problem found in certain industries is to provide for an accounting of salvage, which is either sold in its natural state or manufactured into other products──known as _by─products_. For example, the operation of the cutting room of a harness factory is a continuous process──sides of leather are cut to produce the largest possible quantity of stock that can be used in the manufacture of harness. The pieces produced vary in size, and it is necessary to figure the cost of cut stock by weight. After this stock has been produced, there remains a certain quantity of scrap leather. This scrap leather is not worth what it originally cost in the sides of leather, but has a certain market value. It should, therefore, be weighed and the value credited against the gross charge for leather to the cutting room.

Now, some manufacturers, instead of selling this scrap as it comes from the cutting tables, convert the best of it into such by─products as heels and washers, selling the residue as scrap. Here is an added manufacturing process──a new department, operated because the price obtained for the by─product makes it profitable. The natural thing to do is to keep accurate cost records for this department, charging the material at scrap prices and take credit for the profits. But some accountants contend that the value of the by─product──less cost of production──should be credited against the material charge to the principal product. Provided the volume and value of the by─product is small, there is no serious objection to this plan, but it is not a safe rule to follow.

In some industries, the value of the by─products is greater than that of the so─called principal product. The large soap factories make glycerine and other by─products of greater value than the soap products. So profitable is this branch of the business that the scrap or residue from the manufacture of soap, is bought from smaller factories, to be used in the manufacture of these by─products. The by─products from the manufacture of gas produces a revenue, in the case of a large gas company, more than sufficient to pay the entire cost of operating the plant. Under these conditions, it is readily seen that the manufacture and sale of by─products should be treated as a distinct branch of the business; otherwise it might easily be shown that the principal product is without cost.

PRODUCTION RECORDS

=48.= Methods of recording the cost of material and labor used, and of tabulating these costs for individual jobs, have been discussed in the preceding pages. To complete the cost department records, there should be a record of total production──a record showing the cost of all finished jobs. This information has an important bearing on the general accounting system.

The form of the report of production will naturally vary in different lines of business, though the information needed follows the same lines in all cases. The essential feature is an exact record covering every article manufactured in the factory; and every order for parts must be considered as an order for finished product.

Sometimes daily reports of finished orders will be required by the main office, especially when the factory is located at a distance. As a rule, however, a report covering a period of a week or a month will serve the purpose.

A form that is adapted for most industries, and for daily, weekly, or monthly reports, is shown in Fig. 21. In the heading of this form, provision is made for the name of the department. When it is desired to keep separate records of two or more classes of goods made in the same factory, it is necessary to make a report of each class. The class is usually indicated by the name of the department; when it is not, the name of the class should be substituted. The body of the form records the date started, order number, date finished, quantity, and cost in detail.

The making of this report requires very little additional labor in the cost department. Each day, when costs are tabulated on the finished job cost cards, the details are entered on the report, each job being placed in its proper class. At the end of the week or month, the total column is footed and the report is sent to the general accounting office. If the office and factory are widely separated, the report should be made in duplicate, and a copy retained in the cost department.

CONTROLLING ACCOUNTS

=49.= Certain controlling accounts are required in the general ledger to complete the connection between the cost and general accounting system──to bind the two together. These controlling accounts, which absorb all of the elements of cost from month to month, furnish the means of proving the accuracy of cost figures; they change the cost system from single entry to double entry.

Two controlling accounts are necessary──_Manufacturing_ and _Expense Distribution_. The former finally absorbs the latter and is, therefore, the principal controlling account.

One manufacturing account may represent the entire product of the plant, or there may be several accounts representing different classes of goods, or departments of the business. In machinery manufacture, the foundry is frequently treated as a separate business; in the manufacture of knit underwear, the yarn and knitting mills are operated as separate plants; in a harness factory, separate accounts are kept of the manufacture of harness, collars, and saddles. Each of these divisions, whether departments or kinds of goods, calls for a manufacturing account.

Expense distribution is subdivided in every business having more than one department or shop. The subdivisions of this account are _General Expense Distribution_ and _Shop Expense Distribution_, an account with the latter being kept for each shop.

The sources of charges to manufacturing accounts are reports of material issued to the factory on production orders, Fig. 9, reports of direct and indirect labor employed on production, Fig. 12, and the expense distribution accounts. Credits to manufacturing accounts are derived from reports of finished jobs, as in Fig. 21.

The sources of charges to expense distribution accounts are: reports of material issued to the factory to be used for repairs, Fig. 9, reports of supplies issued, Fig. 11, reports of labor employed on repair jobs, Fig. 12, and the different accounts covering expense items that must be apportioned. A credit to expense distribution account, with a corresponding charge to manufacturing account, closes this account monthly.

=50. Controlling Account Entries.= The accuracy of the entries to controlling accounts in the general books is of the utmost importance. Upon them depends the proof of accuracy of the cost figures of the cost department on individual jobs.

Material and labor costs are accurately determined. The value of material drawn for all purposes, as shown by the report in Fig. 9, is credited to material purchase accounts, and these accounts are checked against the storeroom records. Reports of supplies drawn are handled in the same manner. The labor report, Fig. 12, covers all labor charges and must agree with the pay─roll for the period covered.

In the distribution of expense, however, there are many opportunities for error. While the total expense to be charged against the factory for a given period is accurately determined, the amount is not known until the end of the period. This is represented by the amounts charged to the different expense distribution accounts. In the meantime, to determine the cost of individual jobs, it is necessary to apportion expense on a percentage basis, as explained in the discussion of that subject. Since that ratio for the current period is unknown, it is necessary to assume that the actual ratio for the preceding period still is correct; therefore, that ratio is used in figuring the cost of all jobs. It is only when the expense distribution for the current period is made on the general books and the true ratio determined, that discrepancies, if any, are discovered. Unless the distribution is accurate, the resulting ratio will be incorrect.

Formerly, it was the custom to base the expense ratio on the actual figure for the preceding year, which meant that changes in expense ratio were not taken into account for an entire year. As a result, the total manufacturing cost shown by the books at the end of the year, did not agree with the costs as figured in the cost department; it was usually much higher.

By operating the controlling accounts, making accurate distributions of expense, the period can be limited to one month. Discrepancies are then quickly discovered and the necessary adjustment made in the expense ratio used. If it is found, at the end of the month that the true ratio of expense is higher or lower than for the preceding month, the percentage to be used for the next month is raised or lowered accordingly. With a careful distribution of the expense items each month, the variations in the ratio should be very slight.

The objection is sometimes made that a monthly distribution of expense is inequitable──that certain expenses may be abnormally high in some months and below the average in others. But with proper controlling accounts, this objection ceases to be serious. Certain expenses are paid in one month that should be distributed over an entire year──as taxes, insurance, and repairs. The amounts charged to the expense distribution accounts each month, are only the amounts that should be apportioned to that month. Taking taxes as an example, one─twelfth of the entire amount should be charged each month.

As an example of adjusting entries for controlling accounts, journal pages are illustrated, in Fig. 21, containing entries made at the end of the month──with explanations. It will be noted that the last entry is a charge to _manufactured goods_ account, and a credit to _manufacturing_ account of the total cost of finished goods, as shown in the report, Fig. 20.

This account, _manufactured goods_, occupies the same position as a purchase account. It represents the cost of finished goods to the commercial division of the business. To this cost must be added an amount sufficient to cover selling expense and provide a profit, as is done when goods are purchased for resale. Selling expense should not be included in the cost department's figures; nothing should be added to the actual cost of manufacture, unless it is desired to add a small amount to provide a factory profit.

_Manufacturing_ account has been charged for the cost of manufacture──material, labor, and expense──and credited with the cost of finished goods. This does not close the account, however, because all jobs started have not been finished, as there still is work in process. The _balance_ of the manufacturing account, then, represents the cost of this work and should agree with an actual inventory of work in process.

No attempt has been made to describe a cost system for a particular business──principles only have been considered in this discussion. Proper application of these principles, however, will result in a practical system for any manufacturing business. The exact manner of applying these principles──the detail──depends on the nature of the business; the results desired are the same in all lines. Physical conditions, nature of the product, the policy of the management, the manner in which the business is conducted──all of these factors must be studied and given due consideration in outlining the system. Then the most simple system that will produce results is best, but in the effort to make the system simple, _necessary_ details should not be overlooked. It must be remembered that in a comparison of details of cost, increases are more quickly located than if the comparison refers to finished work.

MACHINE SHOP MANAGEMENT

MANUFACTURING

=Manufacturing Conditions and Developments.= Millions of dollars are annually spent in building new factories. Other millions are spent in equipping them with the best machinery that trained and experienced men have been able to devise. Still more millions of money are annually paid to the officials who manage and the employees who man these enormous manufacturing plants.

Why? Why could not these expert employees labor in their own homes or their individual shops, and produce the manufactured goods without all these enormous expenses? What are the necessities which impel men to spend these vast sums of money in erecting, equipping, and operating these immense plants?

Casually considering the question, the _factory_ or _manufacturing plant_ does not seem to be a real necessity. A large force of employees working under a single management does not seem to be the most economical method of producing the desired goods. Certainly every man is free to choose his own particular line of work; and there are many persons who, seeing a large force of employees giving their entire life work to the enrichment of successful manufacturers, while the employees themselves work long hours at hard and laborious tasks and fare so poorly that they are seldom enabled to save any considerable portion of their wages, not infrequently ending an industrious life in poverty and want, are led to believe that the factory is not a necessity or even a benefit to mankind, but rather a means for reducing the individual worker to a condition of grinding servitude, voluntary perhaps, but often the result of dire necessity.

These people, considering all the hardships in the life of factory employees, are likely to hold and often to express the opinion that the highest welfare of the human race really demands a return to the simpler life of early days, when a much larger proportion of the people lived upon farms, producing their own provisions, raising the flax and the wool wherewith they clothed themselves, quite independently of the wealthy classes, whether bankers, capitalists, or manufacturers, the factory as we know it to─day having hardly begun its marvelous era of existence.

Let us consider for a moment how all this has come about. In the earlier years of the independence of this country, the chief dependence was upon the results of agricultural work. In due time the development of the resources of the country has placed manufacturers at the front, so that in very recent years the value of manufactured products has become nearly double that of agricultural.

These results, like many others of a less notable character, commenced from very small beginnings; and it has been by inborn mechanical ability, remarkable ingenuity, patient development, and tireless energy, that mechanical undertakings have been developed from meager initial facilities, until, in the vast manufacturing enterprises of the present day, the American mechanic in nearly all lines leads the world in originality and practical achievement.

=Early New England Mechanics.= When the early settlers of New England labored under the restrictive and harassing laws of the Mother Country, and under their administration were goaded and exasperated beyond endurance in many ways, not the least of which was that of being obliged to purchase many manufactured articles from England at extortionate prices──or, if purchased from other countries, still paying taxes to England for the privilege──they rebelled. Determining to buy no more foreign goods, they set out, at first in most clumsy and primitive fashion, to make for themselves such articles as were really necessaries, and, in noble self─denial, to live without those which they could not make for themselves. They doubtless little realized, however, that they were thereby laying the foundations of the greatest manufacturing country in the world. By the principles thus inaugurated, they instituted the first industrial _boycott_ in the history of the country──the one that has had more important and far─reaching influences than anything of the kind before or since.

=Industrial Freedom.= While the departure of the Pilgrims for this country, and the making of their homes on the "stern and rock─bound coast" of New England, were for the purpose of seeking religious freedom, it is also true that freedom soon meant very much more than this to them; and with a larger conception of their opportunities and possibilities, some of which were in reality forced upon them by adverse circumstances, there came to them the inspiration of _industrial_ as well as _religious freedom_. The world has seen and has given them due credit for the determined and heroic manner in which they went about their self─appointed task; and they have amply demonstrated to posterity their appreciation of and grasp upon the possibilities and conditions, and the breadth and nobility of character which they exhibited in working out the many perplexing problems that confronted them.

=Development of American Industrial Enterprises.= American manufacturing came into being with these small beginnings and crude efforts to fashion those common objects of household necessity and daily use, which, although crude and clumsy, yet answered the purpose until supplanted later by those of more improved form and workmanship. These primitive successes led to greater endeavors, and developed into still broader usefulness, when the time came that necessities had been provided for and luxuries were now demanded by the higher plane of living to which the people had in due time advanced.

Thus the crude beginnings and rude surroundings among which the early American mechanic performed his work, were in his own house. Soon he outgrew these primitive facilities, and built small shops, frequently in the garden or back yard of his home. These gradually enlarged. The development of the business demanded increased facilities, and buildings were erected quite independent of the home surroundings, and two or more men were associated as manufacturers. These plants developed and enlarged, and in due course of time became the machine shops and the factories, which have since multiplied many hundreds of times, not only in number and in value, but in influence and importance, until to─day our country stands the foremost manufacturing nation of the world. This is true, not only as to the volume and value of her manufactured productions, but also as to their great range and diversity of kind and usefulness. One by one the American mechanic has taken up the various classes of work formerly monopolized by this country or that, failing perhaps at first, but always progressing and developing, until, by native ingenuity and unflagging energy, all obstacles have been overcome, all difficulties put aside, new industries have come into being, and other "victories" of peace "no less than those of war" have been added to the laurels of the American mechanic and of his ever─ready and ever─confident partner, the American manufacturer and capitalist. It is to this combination, each confident of and faithful to the abilities and honor of the other, and each acting his part in his own sphere of usefulness, that the immense success of American manufacturing is due.

The factories of to─day are the logical results of a natural growth and development of the various branches of business for which they were originally built and organized. As the buildings increased in numbers and dimensions, the methods of construction, the equipment, and the systems by which they were managed, developed methods of greater economy and efficiency.

=Tools of the Early Mechanic.= The early mechanic had few tools and appliances wherewith to perform his work; and these were crude and primitive, consisting principally of a limited number of hand─tools brought from the Old Country, and occasionally a hand─lathe of modern dimensions and operated by foot─power. But with their few tools and meager facilities, and animated by the condition that "necessity is the mother of invention," these old─time mechanics proceeded with practical common sense and ingenuity to design and construct better tools and machines──which have continually developed, until we have the splendid array of manufacturing machinery seen on every hand to─day. As machinery developed, larger and larger amounts of money had to be expended; and the banker had to be called upon to provide it. Thus the capitalist became the partner of the manufacturer, the one furnishing the mechanical ability and inventive genius for the actual designing and building of machinery and manufactured goods, while the other contributed the money to carry on the work, and the business ability necessary to market the product.

=Relations of Capital and Labor.= In brief, this is the condition to─day. But, says the carping critic, "there are often hundreds of struggling and hard─working employees where there is one rich manufacturer." This may be partly true, although it is a fact beyond dispute that the American mechanic is the best paid workman in the world. It is true that there are hundreds of workmen to one capitalist. Why? The Creator has so ordained that there shall be many of moderate ability, and but few possessing the unusual ability and talent to lead them. So it has ever been since the days of Moses, and so it probably will ever continue to be. Doestick's regiment composed entirely of colonels was a manifest absurdity, and so intended as an illustration of a well─known and natural condition that should be realized by every reasonable and thoughtful man who considers these questions.

Considering carefully the great scheme of manufacturing, and the immense industrial problem of supplying the wants of the people of this great country and providing for the vast volume of trade that goes abroad, by the modern manufacturing plants equipped with all that is latest and best in machinery for every conceivable purpose, it should not be forgotten that, as the very basis and foundation of the whole, stands the modern _machine tool_, and that it is principally to the great and important development of this that we owe primarily our industrial growth and prosperity as a manufacturing nation. To the machine tool may easily be traced the gradual but continued upward tendency of the mechanic and his methods, from the hard physical toil and small pay of the early days, to the immeasurably lighter exertion and increased compensation made possible by the highly developed condition of the automatic machines of the present day. It has been an oft─repeated victory of "mind over matter," wherein _brains_ have won where _hands_ made but little advance; _ideas_ have developed wonderful mechanisms that have revolutionized the earlier methods of manufacturing and raised the standard of mechanical excellence beyond what was thought possible years ago, and at the same time reduced the cost to a fraction of its former amount.

Here, again, the capitalist furnished the means whereby the practical realization of the ingenious designs of the mechanic's fertile brain became possible, and the successful combination of capital and labor brought success to both.

=Combinations of Capital.= But here comes our critical labor agitator again with the comment: "It is all very well to talk about the amicable relations of capital and labor, and how each ought to help the other, but how about the great combinations of capital that we ordinarily call "trusts"? To give a correct and intelligent, as well as a fair and truthful answer to this question, we must know the _conditions_ under which the combination is formed, the _plan_ upon which it is organized, and the _object_ of its formation. As these are not given, we must assume the conditions of some well─known combination. Let it be the United States Steel Corporation. One of the foremost men in this combination has defined his position on the subject, and in so doing has outlined the policy of the corporation, by saying:

"Any combination of capital which operates, _first_, to prevent competition; _second_, to increase the price of the product; and _third_, to reduce the wages of the workmen, is working under a trio of wrong principles that sooner or later will bring about disaster."

Let us see how the actual operation of this combination of capital really works out in practice.

_First_──The Steel Corporation has never sought to prevent competition. Steel mills, large and small, have operated when, where, and how they pleased, with no interference from the Steel Corporation.

_Second_──The price of steel has not been increased; on the contrary, it has been greatly reduced under its management. Thirty years ago a very indifferent quality of machine steel cost from 8 to 12 cents per pound. To─day ordinary machine steel of a much better quality than that mentioned above can be had for 2 cents a pound or less.

_Third_──The wages of workmen have not only not been reduced, but have actually been doubled since the labor troubles in the steel mills known as the "Homestead Strike" (1892). The Steel Corporation has gone much further than to double the wages of the steel workers. They have made it possible for the workmen to become partners in the great work of the corporation, by obligating themselves to sell to their workmen a certain amount each year of stock in the corporation, so that the men who labor in the mills may also become part owners and participate in the dividends resulting from their work on exactly the same percentage as the capitalist himself does.

Our critic comes back to the charge by saying that "the Steel Corporation has bought up many steel plants in various parts of the country, and added them to its already enormous properties." Quite true. And for what purpose? Let us see what they do with these plants. How do they manage this part of the business? What is their plan of working? The conditions were these: Before the advent of the United States Steel Corporation, there were many isolated steel manufacturing plants, each being equipped for the making of a number of kinds of steel products──for instance, steel railroad rails, structural steel, merchant bar steel, steel boiler─plates, steel tank─plates, and so on. The equipment necessary for producing these different forms of steel was very expensive; and inasmuch as a considerable portion of this equipment for some particular kind of product would necessarily be idle on account of the fluctuations of trade, the expense burden was abnormally high on account of this idle equipment. How has this condition been handled by the Steel Corporation? This has been the plan: Suppose they have purchased five plants, each making the five classes of product indicated above, and working under the disadvantages of a variety of products. These plants are examined, and inventories made of their equipments. It is then decided which mill is best adapted for making each one of the five classes of products. Then there is a redistribution of the equipment of the plants, placing in the plant selected for it all that in the several plants is adapted to a certain product; removing all the machinery from this plant that is not adapted to the particular product to be turned out, to be distributed among the other plants according to the particular class of products for which each one is designed. Thus each plant is equipped to turn out the single class of product which is most appropriate for it, by drawing upon the other plants for such machinery as they have which may supplement its own in this line.

By this plan, each plant makes but one class of product. Having the best machinery from all the plants for this purpose, and concentrating its energies on a single class, it is enabled not only to turn out a better product, but to turn it out much more economically than before. As the workmen become more expert on their single line of product, they work more efficiently and consequently earn higher wages. All these conditions, producing an economical output, enable the manufacturers to reduce the selling price.

The conditions of economy brought about in the management of the manufacturing operations and in marketing the product, are very marked when a large number of plants operate under one general head. Again, with the immense amount of capital at the disposal of such a corporation, it is enabled to secure the services of the best experts, and the most valuable processes in existence.

There are many other advantages, not only to the corporation and its employees, but to the users of its products, and so to the general public, when a combination of capital is _honestly made and honestly administered_.

=Betterment of Industrial Conditions.= What has been said of the Steel Corporation as to favoring of employees, has been duplicated in various ways by different manufacturers all over the country. Factory sites have been beautified by landscape gardening, and trees and shrubbery have made the surroundings of working men and women pleasant and attractive. Land has been purchased, and workingmen's homes built and rented to them at fair rates. Factory dining rooms are provided; reading rooms, libraries, gymnasiums, clubs, and social organizations are inaugurated; emergency hospitals or "first aid" rooms are arranged, with all or nearly all these services free except that provided in dining rooms, which is furnished at actual cost. More recently, a firm in Connecticut announces that it will furnish free medical attendance to all its employees and their families.

Schools have been established for apprentices, wherein they receive such technical instruction as may be necessary to their success in the trade they are learning──and this, not only without expense to themselves or to their parents, but they are paid by the hour for time spent in their school work, the same as for their time in the shop.

To foster a practical interest in the work of the shops, many concerns have what is called the _Suggestion System_, whereby the employees may make written suggestions of any improvements which they desire as to shop methods and routine, the design and construction of the product, and many kindred subjects, the best suggestions made each month receiving prizes.

All of these matters emphasize the fact that the mutual interests of the capitalist who manufactures and sells, and of the employee by the efforts of whose hand and brain the products are being turned out, are each year being recognized and in a very large majority of cases are being acted upon in good faith.

=Methods of Modern Manufacturing.= In former times, machines were built one at a time or in very small lots. Parts were made and fitted to the particular machine to which they belonged; and while the same general form and dimensions were practically maintained, there was no attempt made to render the several parts so exact as to fit upon any other machine than the one for which they were intended. Systems of gauges had not been developed, and the planer was yet a comparatively new tool; much work was still done by hand, the hammer, the cold chisel, and the file being the chief reliance of a large majority of machinists. This was the state of the machine shop and its methods nearly up to the year 1800.

=Interchangeable Manufacturing.= The use of milling cutters and the commencement of practically interchangeable manufacturing, came into machine shop practice at nearly the same time. It has been said that "but for the milling machine, there would have been no such thing as interchangeable manufacturing." It might be said with quite as much truth, that if the system of interchangeable manufacturing had not been conceived, there would have been little need for the milling machine. Each, to a great extent, depended very much upon the development of the other──and upon a third factor, the conception and development of the method of handling work (particularly small parts) in jigs and fixtures.

Milling cutters were made in America by one of the early machinists, a Frenchman named Vaucanson, who died in 1782. A sample of these had a hexagonal instead of a round hole, and the pitch of the teeth was very fine, so that the cutter resembled a saw rather than those at present in use. It is said that a man by the name of Bodmer, in Manchester, England, had made a milling machine in 1824.

It is altogether probable that Eli Whitney, the inventor of the cotton gin, had built and used milling machines previous to this date, as the following item of mechanical history would seem to indicate. In January, 1798, Eli Whitney received from the United States Government an order to furnish ten thousand muskets, of which four thousand were to be delivered in one year, and the balance in two years. Mr. Whitney went at the undertaking in a very thorough and systematic manner. He first developed a water power; then erected suitable buildings; considered and developed ways and means for a larger and better product than had previously been realized; designed and built machinery to effect it; and trained workmen to a degree of skill necessary to success in their new employment.

The difficulties which Mr. Whitney encountered and the obstacles which he had to overcome, were so much greater than he anticipated that it was really eight years instead of two before he had succeeded in completing the government order for the ten thousand muskets. However, the progress which he had made in this new enterprise, and the character of the product which he turned out and delivered, were so satisfactory to the government officials that Congress treated him with the greatest courtesy and consideration.

His shops were situated in the city of New Haven, Conn., and soon became the Mecca of government officials, manufacturers, traveling notables, and foreigners, who had heard of this wonderful American mechanic and came to see his work for themselves──to find that the system, the machines, and the tools which he had perfected were well worth the journey. His innovations in the manufacture of arms formed as great an epoch in mechanical history as had his invention of the cotton gin.

Jigs and fixtures were among his equipment; and it is altogether probable that milling machines were also in use, since he must have had practical knowledge of the utility of the milling cutter at this time, as it is generally assumed that the first practical use of the milling machine was in the making of parts of muskets.

The buildings which Mr. Whitney erected for his use were substantial stone structures, and stand in a part of the city called in his honor "Whitneyville." They form a part of the extensive plant of the Winchester Repeating Arms Company.

At this point and at this early day, therefore, was inaugurated the modern system of interchangeable manufacturing──or the manufacturing, in large numbers, of duplicate parts, within such a limited degree of variation as to admit of their ready interchangeability with one another. The system was not one that would be confined to the manufacture of arms, but was adaptable to the production of all kinds of small and moderate─sized machinery, and was the initial effort which in due time revolutionized the then existing shop methods, and which has since built up the American system of manufacturing to the proud distinction of being superior to anything of the kind in other manufacturing countries.

In the operations of modern manufacturing, the principal object sought is to turn out the product economically and accurately. To produce these results economically, the parts must be produced very rapidly. To produce them rapidly, not only must there be a very complete and efficient equipment of machines, attachments, tools, jigs, fixtures, and gauges or measuring devices, but there must also be a very complete system of shop methods by which the operation of this equipment is carried on.

It has been well said that "the man in whose brain the manufacturing system was born was he who first took a piece of scrap iron and drilled two holes in it, to guide a drill in making another piece with two holes in it the same distance apart as in the first piece." The men who now fill our drafting rooms and tool rooms, and who devise and construct tools for the production of interchangeable metal parts, are his descendants. They have made possible the manufacture of the breech─loading gun, the typewriter, the cheap sewing machine, the cash register, the machine─made watch, the automobile, as well as a thousand and one other mechanical articles, machines, and devices which form an integral part of our twentieth─century civilization.

To render these systems efficient and economical for these purposes, the work must be _repetition or duplicate work_. That is, there must be very large numbers of each of the different parts; and to carry out the scheme of operation for the division and subdivision of work; a single operation on a large number of parts is performed; then the work is handled again, perhaps in another machine, and another operation is performed; and so on until the part is complete. Thus a piece of comparatively simple form may require a large number of separate and distinct operations to complete it. But, as each single operation is performed by one operator, he may give his undivided attention to the accuracy of that operation; hence very accurate work can be produced.

In the development of these systems, the work has continually grown more and more complex, as have also the requirements as to the buildings in which manufacturing work is performed, and as to the equipment necessary to perform it. Conditions have been continually changing; greater speed as well as greater accuracy in all machine operations has been demanded; and a largely increased output per employee has been required. So great and urgent has been this demand that the employee of to─day will turn out from three to ten times the volume of product of a given kind that he did only a few years ago. Undoubtedly this result has been brought about in great measure by the great improvement in machines, tools, and fixtures. Much is also due to the use of tools composed of high─speed steel; still more, to the employment of improved systems for handling work.

But all of these do not fully explain the enormous increase in product per employee. This has been brought about by various methods of shop management. One of these is the specialization of operations and the division and subdivision of departments, whereby each operator has a certain well─defined and very limited number of operations to perform. These operations he performs over and over, hundreds and sometimes thousands of times daily, until he becomes so accustomed to each movement that the operations are performed not only with great rapidity but also with great accuracy. Still another factor in the question of individual output, is the efforts that have been made through systems of premiums, bonus, and similar methods of reward for individual effort when the output reaches or exceeds a certain fixed limit. These rewards are not confined to the operatives, but are often extended to the foremen, assistant foremen, gang bosses, and others of the "non─productive" force who have indirectly contributed to the efficiency of individuals and hence to departmental efficiency.

In the succeeding articles, these matters will be taken up and treated in detail, giving the actual practice as now prevailing in some of the best organized manufacturing plants.

MACHINE SHOP MANAGEMENT

=Modern Meaning of Shop Management.= The present understanding of the term _Shop Management_ is quite different from the sense in which it was used years ago. Formerly the management of the shop was vested in a _superintendent_ whose duties consisted in purchasing material, inspecting it when it was received, turning it over to the foreman, and in a general way looking after the work as it was being performed. In addition to these duties, he frequently handled the selling of the product, the collection of accounts, and the proper provision for meeting the pay─roll on pay─days. He also had a general supervision over the grounds and buildings and their care and maintenance, as well as the provision for power, lighting, and heating. By this arrangement of duties, it will be seen that comparatively little time was devoted to actual shop operations, and much time to different lines of duties that might more economically and often quite as efficiently be performed by assistants at a much lower rate of pay.

In the modern methods of shop management, all these things are changed. The specialization of workmanship, the division of duties, the limiting of responsibilities──each restricted within narrow limits by sharply defined regulations──have reduced the variety of operations of the workman, and of responsibilities and duties of the men who direct manufacturing work.

We find the purchasing of material and supplies in charge of a _Purchasing Agent_. We find these purchases checked by a _Receiving Clerk_, turned over to a _Storekeeper_, and subject to examination by a regular _Inspector_. They are then put into the storeroom, whence they are drawn as needed for the different departments, the foremen of which sign definite orders for such kinds, quantities, and qualities as may be needed, specifying the purposes for which they are to be used or the particular orders to which they are to be charged. When issued, they are receipted for by the person receiving them. All this is conducted with the same regard for business rules as if the foreman were making a purchase on his own account and paying for the goods. We find the selling of the product in the hands of an expert _Sales Manager_, often assisted by a corps of engineers, draftsmen, bookkeepers, and clerks, numbering more persons than the entire factory's force of non─producers twenty years previously. A _Credit and Collection Department_ attends to all collections, and the _Treasurer_ and _Cashier_ see to it that the money for the pay─roll is on hand when wanted. A _Production Engineer_ regulates the volume of work going into the shop, and the sequence of mechanical operations by which each piece or part is to be machined and perfected. An assistant to the Superintendent looks after the condition and maintenance of grounds and buildings, yards, and the transportation facilities of the plant.

By these developments of the system of management into a division of duties and responsibilities, the time, attention, and abilities of the Superintendent may be devoted to his legitimate purposes of _superintendence_ or _supervision_, planning and directing the work of the assistants and heads of departments.

=A Typical Manufacturing Plant.= For the purpose of taking up the question of Management in a systematic and practical manner, we must first assume that we have a shop to manage; and secondly, that it is of the usual type of manufacturing plant, built, organized, and managed at the present day. The plan of such a plant is given in Fig. 1.

In planning a plant of this character, provision must primarily be made for the various departments for the following purposes:

1. An _Engineering Department_, wherein the machines forming the product may be designed and the drawings made for the various classes of mechanics who are to perform the work of turning out the product.

2. A _Pattern─Making Department_, in which the necessary patterns are made for use in the foundry for producing the castings.

3. A _Forge Shop_, capable of producing such forgings as are required in the machinery to be built.

4. An _Iron and Brass Foundry_, in which may be produced the rough castings of the parts that are to enter into the machines constituting the product.

5. _Manufacturing Departments_, in which all parts (large and small) of the product are made from the rough stock──such as castings, forgings, bar stock, and the like, to the completed parts ready for assembling.

6. _Assembling and Erecting Departments_, in which individual parts may be assembled into groups of related parts, and these erected into complete machines.

7. A _Power Plant_, containing the proper equipment for furnishing the necessary power for driving the machinery in these various departments, and for providing lighting and heating facilities for the plant.

The _General Office_ of the concern is of course understood; but, as it cannot properly be classed with departments of the plant, it is not included in the above enumeration.

In addition to the above list of principal departments, there will be the following──quite as necessary, but secondary in importance:

1. The _Transportation System_, including shop and yard tracks and cars, elevators, cranes, hoists, and all similar appliances for handling material.

2. The _Tool Room_, for making tools, jigs, and fixtures, and for properly storing them in a convenient manner for issuing when they are called for.

3. An _Experimental Room_, which all progressive concerns find necessary in the development of their product.

4. The _Store─Room_, in which are stored the raw material and the purchased stock, either partly or completely manufactured, which are issued to the different departments as needed for their daily routine work.

5. The _Finished Parts Store─Room_, in which the smaller parts of the product, as fast as they are completed, are stored and held until wanted for the process of assembling.

6. The _Pattern Storage Room_. In this department, often occupying several floors of a building specially constructed for this purpose, are stored all patterns for the iron and brass foundries, and also those sent to outside foundries for malleable and steel castings.

7. The _Carpenter Shop_. This is a general utility department making boxes and crates for shipping; doing carpenter work in keeping the grounds and buildings in proper repair, and making necessary changes therein; making and repairing flasks for the foundry; and similar work.

8. The _Paint Shop_. A small room serving little more than as a storeroom for paints and painters' materials, as their work is principally done at various points in the shops, wherever the machines or parts may happen to be.

9. The _Shipping Room_. In a plant building large machinery, the shipping room is simply an office for the shipper, the physical work of shipping being done in the shops, wherever the machine may happen to be at the time.

Referring to the plan given in Fig. 1, it will be seen that the Administration Building is placed in substantially the center of the front line of the plant. The first and second floors of such a building are usually devoted to administrative, commercial, and accounting purposes. The upper floor is usually occupied by the Engineering Department and drafting room.

The three Manufacturing Buildings numbered 1, 2, and 3 are devoted to the various operations of making the parts of which the machinery product is composed. These parts are then sent to the Erecting Building (No. 4).

The system of shop transportation consists primarily of shop tracks and cars, and is extended to the yard, being so designed as to connect all buildings of the plant with one another and with the yard. It also reaches the railroad tracks at numerous points. Overhead traveling cranes cover the manufacturing buildings, and extend into the erecting building far enough to form a connection with the large traveling crane serving it, by which the large parts of machines are carried from place to place as may be required by the erecting men. This crane serves to load the finished machines upon the railroad cars, when they are to be shipped, the railroad track being extended within the building for this purpose, as shown in Fig. 1.

The Tool Room is given as central a location as possible, and would naturally be near the junction of building No. 2 with the erecting building.

The Experimental Room has no particular place, but is frequently so placed as to be away from the active manufacturing operations, with which it is liable to interfere if too closely related.

The general Store─Room for purchased material may be in the erecting building, but is frequently located, for convenience of communication, nearer the general offices──as for instance, in front of building No. 1.

The smaller parts are stored in a Finished Parts Store─Room, usually located in this building. Thence they are issued to the Assembling Department as required.

The Pattern Shop building will often be composed of three floors. On the ground floor will be the Carpenter Shop and flask making and repairing work. On the second floor will be the pattern─making shop, and on the third floor will be the pattern storage rooms. A large elevator serves all three floors.

The Paint Shop is sometimes located in one of the manufacturing buildings or the erecting building; but as the painting of machine parts and complete machines is generally done in any one of the departments where the work may be, and the paint shop is hardly more than a storeroom for paints, a due consideration of the question of fire protection would indicate that it had better be placed in a small building entirely detached from all manufacturing buildings.

The Power House, in the former method of transmitting power by shafting and belting, was located as nearly as possible in the center of the space over which power was to be distributed. Since the advent of electricity and its common use for transmitting power, the question of the location of the power house is relieved from this condition; it may be located at the point most convenient to railroad facilities for receiving fuel, or for obtaining the necessary water for boilers, for fire purposes, etc.