Profit making in shop and factory management

Preface

"Profit Making in Shop and Factory Management" is a concise expression of the methods which Mr. Carpenter has developed and which he constantly uses in his own practice. They have been tried and perfected under the stress of daily operation in the course of his experience as supervisor, manager, head of the labor department, and president, of various large manufacturing plants, notably the National Cash Register Company and the Herring-Hall-Marvin Safe Company, of which latter concern he is now chief executive.

The contents of the book appeared first in the form of a series of articles, prepared for and published in The Engineering Magazine during the year 1907. As now presented in this volume, they have been carefully revised, in some points enlarged, to a certain extent rearranged, and a modified division into chapters has been introduced. These alterations however are only in details, adapting more effectively to permanent form the sections which were produced serially, and grouping them most advantageously from the closer perspective which is given to the reader of a book. The subject matter is unchanged in substance, and is even more complete than when it was first printed in the Magazine.

The study of works-management methods will be found to be marked throughout by the clear sight, the fair mind, the direct dealing, and the strong vitality of the author. The whole treatment is vibrant with life, the work indeed having been produced amid the incessant and insistent claims of active work in the management of the great manufacturing company of which he is president and manager. It is inspired by his keen interest in the promotion of better ideals in industrial organization. It is largely a labor of love, freely devoted to the advance of the profession of industrial engineering. And it bears throughout the stamp of tried, practical success.

The Editor.

Chapter I. The Reorganization op a Run-Do wn Concern

The Necessity for Analysis of Existing Conditions — Advantageous Position of a Well Organized Concern — The Manufacturer with his Eyes Closed — The Manufacturer with his Hands Tied — Organizing the Methods of Investigation and Analysis — The Usual Defects of Organization, System and Methods in Manufacturing Plants — The Superintendent — The Foremen — Job Bosses and Workmen — Systems of Pay and their Effect — The Stock System — The Order and Tracing System — The Cost System — Machining Methods — Defects of the Sales Department — Defects of Executive Control 9

Chapter II. The Practical Working op the Committee System

No Ready-Made System is a Panacea — Why New Systems so Often Fail — Co-operation of the Working Force is Essential — The Human Element and the Get-Together Spirit — Formation of the Committee System — The General Factory Committee — Its Personnel — Its Work — Its Meetings — Subsidiary Committees — Job Bosses' Meetings — General Foremen's Meetings — The Workmen — Promotions 23

Chapter III. Reports; Their Necessity and Their Uses

The Necessity for Reports of Varied Kinds — What they should be and what they should Cover — A General Outline of the Essential Reports — The Monthly Analyzed Profit and Loss Sheet — The Sales Reports — The Factory Reports — The Cost Reports — The Points to be Shown and the Methods of Use 36

Chapter IV. The Designing and Drafting Department

Results to be Secured — Close Relations with the Tool Room — Requirements of an Efficient Drafting Department — Meetings with the Committees — Co-operation with Shop Foremen — Standardization in Design — Designing for Cheap Machining and Assembling — Making and Following of Drawings to be Invariable — Reports from Machining and Assembly Departments — The Use of the Committee System 42

Chapter V. The Tool Room; the Heart of the Shop

The Full Functions of the Tool Room — Systems of Tool Supply — Speed of Production in the Tool Room of Vital Import — Methods for Hastening Production — The Choice of the Foreman — Specialization of

CONTENTS

Labor — Standardization — Duplication of Standard Parts — Subdivision of Labor — The Small Shop — Speeding up Tool Production and Checking the Cost — Tool-Cost Cards — Examples — Method of Use — Tool-Room Committee Membership 50

Chapter VI. Minimizing the Time of Machine-Tool Operations

The Determination of Standard Times — The Concentration of the Workman's Time on Running his Machine — The Adoption of High-Speed Steel — Causes of Lost Time — The Starting Point in Minimizing Operation Costs — Investigation of Existing Machinery — Systematic Report upon Improvements in Old Machines and Recommendations for Replacements or New Purchase 64

Chapter VII. Possibilities Attending the Use of High-Speed Steel What Percentage of Increase may be Expected in the Output — The Abundant Provision of Cutting Tools — Standard Shapes for Tools — How Determined — Forging — Hardening— Form for Records — Cooling — Grinding — Use of Automatic Grinders 73

Chapter VIII. The Determination of Standard Times for Machining Operations

The Shop Conditions upon which Standard Times Depend — Tests of Times which should be Attained — How to Begin — Classification of Parts — The Expert Tester — His Qualifications — Practical Speeds in Lathe Work — In Planer Work — In Drilling — Tables—How to Use the Tables — The Committee at Work — Requirements for Maximum Production by the Workman 83

Chapter IX. Standard Times for Handling the Work

The Elements which must be Considered — Causes of Lost Time in Handling — Injuries to Stock or Parts in Handling — The Use of Standard Boxes — Standard Places for Stock and Parts — Records of Handling Times — Forms — Setting-up Time — Times for Work on the Machines — Time for Removing Work from the Machines — The Use of Committee Action 94

Chapter X. Standard Times for Assembling

Special Difficulties to be Found in this Subject — Methods of Procedure which Succeed — Examples of Results Secured — An Instructive Case Described — Foremen's Co-operation Essential — How it can be Enlisted. . . . 101

Chapter XL Stimulating Production by the Wage System

The Attitude of the Workman — Mischief Caused by Cutting of Rates — The True Theory of Costs — The Wage Problem in Introducing Standard Times — How to Get the Workman to Stand for Them — Systems of Pay — Day Work — Piece Work — Premium Plan — The Differential Plan — The Bonus Plan — Special Modifications of the Bonus Plan Recommended 109

CONTENTS 7

Chapter XII. Stock and Cost Systems as a Factor in Profit Making

The Prime Requisites of a Cost System — What it should Accomplish — The Three Fundamental Problems at a Stock System — A Simple and Successful System Described — The Forms and Cards and their Mode of Use — Storage Platforms and what they Accomplish — Stock-Tracing and Cost Sheets — Forms — How the Data are Used. 116

Chapter XIII. The Upbuilding of a Selling Organization

The Various Methods of Selling Manufactured Goods Defined — What is to be Considered in Developing a Selling Force — Training of Salesmen — Its Possibilities Proved — Development of a Selling System — Salesmen's Demonstration Meetings — A Typical Programme — Modes of Stimulating Interest — Salesmen' Training Department — Selection of an Instructor — Preparation of a Manual — Reports and their Importance — Forms — Lists — Advertising 124

Chapter XIV. Effective Organization in the Executive Department Difficulties Peculiar to the Executive Division — The Personal Element — The Use of the Report System — Reports from the Selling Division — Forms — Factory Reports — Forms — Executive Reports — Forms — The Methods Illustrated by an Example and a Typical Programme — The Results Secured 138

PROFIT MAKING IN SHOP AND FACTORY MANAGEMENT

Chapter I. THE REORGANIZATION OF A RUN-DOWN CONCERN

N the day of prosperity, when manufacturers are behind their orders, running full forces night and day, straining every nerve to increase production and are further embarrassed by a constant influx of new business, the consideration of the problems confronting a " run-down'' concern and the ways and means of correcting its serious defects in organization, methods, and systems might not, upon first thought, appear "timely."

I contend, however, that the present is the time to attack and solve these problems. Experience and investigation have disclosed an amazing number of concerns which, even under prosperous conditions, have been having none too easy a time in making headway. Many manufacturers today have an uncomfortable sensation of uncertainty concerning the progress and profits of the establishments under their management.

Any manufacturer feeling the existence of unsatisfactory and unprofitable conditions must make up his mind that the real reasons for them must be discovered and the causes removed at any cost; for should the management, in its conduct of the business, not discover its weaknesses, this same management may be sure that some thoroughly organized competitor will drive the condition to their startled attention when more severe seasons of trade come upon us.

Necessity for Analysis.

To solve the problems confronting him, a man must bring to them an absolutely unbiased mind and a determination to analyze the situation thoroughly and mercilessly, and so to form an accurate judgment as to the underlying reasons. You, the manufacturer, may be sure that unless your factory, selling, and executive organizations can stand this test of your coldest and most searching examination — your analytical test — with any change from expanding conditions of trade, you will rind the foundation of your business slipping from under it, slowly perhaps, but surely.

Advantageous Position of a Well Organized Concern.

We hear much today of the advantages that one competitor secures over another through the "secret rebate," special "shipping privileges," unfair "rate classifications," "secret agreements," etc. In a manufacturing business these advantages count for little against a company with an effective organization of the working force, stimulated by a desire to work not only for self but also for the good of the concern, aided by up-to-date mechanical methods and modern tools especially adapted to the quick, accurate, and economical manufacture of the parts to be produced; supported by comprehensive, though simple, systems that enable the management to keep an accurate check upon the cost of production, and also enable them to determine the proper course to pursue in order to secure still greater economies — a system of manufacture that enables the management to feel certain that the most economical methods of production are being planned and pursued.

Add to this an efficient selling force, properly trained by modern methods, and an economical plan of putting the manufactured goods upon the market, and the firm possessing such advantages is in an impregnable position.

The Manufacturer "With His Eyes Closed."

In this day, a firm which would hold its own, must adopt the most modern methods in organization, method, and system. Reputation gained in the earlier days of a firm's existence is a valuable asset when backed up by modern methods, but amounts to little when it is coupled with obsolete ways of doing business. A business must progress or slide backward. It cannot stand still. The manufacturer can always feel certain that if he is not progressing some one of his competitors surely is. This he may learn to his sorrow. The old maxim "a stern chase is a long one" applies with peculiar force to business conditions. Once your competitor has built his tools for economical production, improved his product, organized his forces, and secured the proper start on the market, his sales and profits multiply and yours decrease. And the longer you delay adopting similar methods, the more the difficulties increase.

There are still many manufacturers who are not satisfied to give their unqualified approval to modern methods in shop and selling organization. The number is growing less every day, but there are thousands to whom these remarks yet apply. To these the very word " organization" implies something mysterious — something big, and certainly something expensive. The idea of " organization" is not compatible with their idea of economical management. To these the idea of "system" is indissolubly linked with "red tape." "System" to them means additions to their clerical force, and additions to their clerical force means additional dollars spent upon "non-producers." They will refuse to admit the advisability of systems sufficient to care for their heavy factory interests, and yet they have sufficient intelligence to keep up their general accounting system. In brief, they do not note the tremendous leaks in their factories because they have not sufficient experience or data to enable them to know, with any degree of exactness, whether or not they are getting proper and economical results from either foremen, men, or machinery. A moment's thought must make such as these realize the possibilities of the existence of such leaks, and they maybe absolutely certain that where such possibilities exist, unchecked and unsystematized, there also exist the losses.

The Manufacturer "With His Hands Tied."

There are, however, many manufacturers on the other hand who realize that something is wrong, seriously wrong, and who would be glad to adopt modern methods if they but knew what they were and how to apply them. But to many a man who is intent on improving conditions, but who necessarily faces ignorance, prejudice, false pride, and stubbornness on the part of those in his organization who should help him, the job is appalling. To such, however, as recognize the conditions and are willing to attack the problem, methods can be suggested, the value of which has been proven over and over in actual experience under the most distressing conditions. Careful investigations, coupled with a thorough campaign of action along organized lines, will bring the reward.

The Reward.

The reward for such investigation, coupled with vigorous, intelligent, and tactful action, is so great as to justify the expenditure of any amount of labor and time. That it will take time, and in most cases a long time, is very true; but that is all the more reason for beginning and continuing courageously along steady lines of progress, and in such a manner that any backward step would not be be possible. The most difficult and discouraging problem to contend with, next to the difficulty of wheeling the old men into line, is that of progressing along new lines, devising and putting into effect new methods and new processes and tools, and at the same time not interfering with the regular required output. However, if the manager is sufficiently impressed by stern necessity to lay out plans for improvement, every one upon whom he must depend must be impressed with the idea that every day must show some progress, however slight, on the part of every one connected with the plans.

Organizing the Method of Investigation and Analysis.

As stated before, nothing can be done in any case until the manufacturer, and such advisers as are qualified and trustworthy, approach the problem in an absolutely unbiased frame of mind. They must make up their minds to analyze coldly each and every man and situation. The problem may be attacked as outlined hereinafter.

Let us consider first the usual defects in organization, system, and methods, in their order, and attempt to discover the "sticking points" in each division. They may be classified as follows: —

1. — Defects of factory organization, dealing with the superintendent, the foremen, the job bosses, and the workmen, and the usual methods of management.

2. — Defects of systems and methods of manufacturing.

3. — Defects of sales organization and executive control.

The separations made here are important ones and should be considered as thoroughly in the case of the concern with fifty men as in the case of the one with five thousand.

If you are interested, take these divisions item by item and make a faithful memorandum of the defects under each heading that you alone know of. If you have such a knowledge of the business as you should have you will be surprised at the number of your notations. Then when you come to the headings of those processes with which you are not familiar, secure the advice of competent persons in each line and observe the extent and character of your notes.

I. Defects of Factory Organization.

The Superintendent.

Singularly enough, the method of management usually adopted is that of placing all the responsibility on the shoulders of one superintendent and failing to surround and strengthen him with a small body of the most efficient foremen, who might prove to be advisers of great value to him. In adopting such a method, the management fails to recognize the great benefit to be derived from securing the best advice of a small group of the best qualified men upon most important subjects, and from giving its foremen an opportunity to increase their knowledge of the business and so to grow to be of greater worth to the concern. The stimulus to the ambition of the foremen because of the opportunity so to show their worth is thus lost. Instead of these men being moved by the hearty desire to co-operate with the firm and with each other " for the good of the company," they are usually impelled by feelings of jealousy and impair the efficiency of themselves and the entire organization by their backbiting and faultfinding.

And yet with any method of organization there must be a head and a strong one. A " cheap" superintendent is dear at any price. A strong and capable man in this position is usually worth any reasonable amount necessary to secure or retain him. A large manufacturer once said: "My $20,000 superintendent is the cheapest man I have." In reply to the expected "Why?" he said: "He's my ' dividend maker.' I tried 'em at $3,000, $5,000, $10,000, only to keep on losing. Finally, I made up my mind I wouldn't pay less than $20,000 — got my man, and he's bringing my dividends. Cheap at $20,000."

The Foremen.

The most important men in the shop. You may have the best qualified superintendent, but if you have inefficient foremen, you have poor management; you may have the best machinery — but with inefficient foremen, poor results; the best systems — complication; the best desires toward your workmen — your poor foremen bring upon you labor troubles galore.

When one stops to consider that these are the men who come into daily touch with your workmen — that they practically control the shop life and shop destinies of your men on machines and bench — that to them falls the responsibility of getting the best results from the workmen, and upon their knowledge you must depend when it comes to the question of getting the proper and best results from the machinery you have bought — is it not absolutely true that they are the most important men in the shop, and that their methods, their intelligence, their experience, are questions most vital to you and your business?

Usual Methods of Appointment and Development. — And yet what are the facts in many cases? The foreman is often a former machine hand promoted to this position because of superior intelligence, diligence, and desire to please. This man, who should have a wide and thorough experience in modern machine practice, is often simply a graduate of your own shop, with experience limited to your routine practice.

The Proper Type. — The foreman should have a thorough knowledge of the best mechanical processes and the types of machines best suited for the work he handles. He should have also a wide knowledge of the tools, such as jigs, milling fixtures, dies, etc., best adapted to his work, and of methods of using them so as to procure the greatest economy in production; and, last but not least, the ability to handle men and get the best from them. Am I setting too high a standard for the foreman? I say No ! positively No ! These are the men who can "make or break" the concern. As is the foreman, so is the department. In nine cases out of ten, he is your "Sticking Point," or is responsible for it, be it poor workmanship, high costs, tardy production, or trouble with your workmen. This is as true of the small shop as of the large one.

Therefore, select him with care, watch him and help him, educate him, and, above all, give him the stimulus of "his chance" and watch him grow, if he is the right kind.

True it is that in the most modern shops the tendency now is to depend less and less upon the foremen on the important questions of speed of machines, types of tools, setting of standard time, and proper prices on jobs. The best practice in the up-to-date shop is to institute speed bosses, rate-making departments, and tool and tool-designing departments, entirely independent of the foremen. In fact, as will be brought out later, such plans, properly instituted and carried out, will accomplish wonders; but this course is rendered necessary because of the weakness of the ordinary foremen. But in most shops it is hardly possible to consider such elaborate, though extremely valuable plans amongst the first steps. Depend upon your foremen you must. Even though the greater plan of organization with speed bosses, rate-making departments, etc., may be determined upon, this consideration of the foremen's efficiency is equally necessary. In fact, the broader plan will utterly fail unless it is supported by the intelligent efforts of the heads of departments.

The Management's Representatives. — Never forget that the foremen are the management's direct representatives to the workmen. The men form their opinion of the company from their opinion of their foremen. Their daily life and career are subject to his control, his whims and vagaries ; their promotions and increases in pay depend upon his characteristics and knowledge. They more often have reason to depend upon his practice of favoritism than upon his sense of fairness. The character and ability of the foremen affect the workmen more directly than any other three factors in the shop organization and management, and as a consequence have a direct effect upon their output and disposition toward the company.

Job Bosses and Woekmen.

In any shop organization, however small, the question of the proper division of the working force, so that the proper amount of supervision can be given to each man or group of men, must receive careful attention. A foreman cannot properly oversee his entire department without assistance and still give his attention to the larger and more important details of his work. The usual method of securing this result is to appoint the more efficient members of the working force " job bosses" with some limited degree of authority over a small group of men. These men perform their share of the work, receiving a slight increase in their pay.

The importance of carefully selecting these men is at once apparent. They are usually the next in line for advancement to assistant foremanship. From these men come your heads of departments. And yet how many managers or shop superintendents possess accurate information concerning the character and ability of their job bosses? They usually promptly pass over to the foremen the responsibility for making these selections, and very often they in turn just as promptly pass the coveted position to some favored friend without much regard to the matter of his ability compared to that of the rest of the group affected — or, to drive the thought harder home — without regard to the ability and intelligence of the rest of the candidates for promotion. Advancement in wage and authority is as important to the $1.50 per day workman as it is to the superintendent. It is the neglect of just such points as these that cause workmen to feel that merit and hard work count for little, and that extra effort brings no reward in the face of an unfair foreman's selection of his friends and favorites for the only progress that is possible to them.

System of Pay and its Effect Upon Workmen.

Of equal importance in its direct effect upon men is the question of the " system of pay" and the method of handling it. Little will be said at this point regarding these matters. However, in considering the defects directly affecting the workmen and seriously affecting the cost of production in many forms of business, the first prize (for total inefficiency) may usually be given blindly to the pay system without much danger of going amiss.

The average system, usually piece work, started by men little versed in modern methods and based upon data usually secured by the foreman by methods "strictly their own" — and as often totally incorrect — supplies a first-class millstone to burden any concern.

Little faith can usually be placed in the average foreman's estimate of a "fair price" for a job. Lacking proper knowledge himself, he will, however, unhesitatingly and with a great display of confidence, place a price upon any piece of work. Then follows the old story of, first, excessive earnings by workmen; second, dissatisfaction on the part of the employer, and consequent reductions in price; and, third, the invariable result of discontented workmen, who find that their only protection from reductions in price lies in the strict adherence to a certain limited rate of earnings and hence of production. The foremen continue blithely to set the prices, the employer suffers unconsciously through excessive costs and limited output, and the workman works away discontented and determined to even up matters for unfair treatment. These conditions are still very prevalent.

It is astonishing to note the manner in which otherwise sensible men will put into effect and enforce methods and policies vitally affecting the workman's daily life, without regard to the "human element" that enters into his makeup and that the manager should know must of necessity be reckoned with.

Much has been said about the tendency of the modern workman to limit his output and not put forth his best efforts to improve either himself or the company's product. This complaint, however, generally comes from the manufacturer who does not consider it worth while to give close attention to such details as are mentioned briefly here. Seldom is it heard from the manager who wisely "puts himself in the other fellow's place," and then builds up his plans along lines that he realizes would mean encouragement and inspiration to him were he in that other fellow's place.

Any man who has sufficiently clear vision to recognize such faults existing in his business must make up his mind to start right in at the bottom and build up. No points can be neglected. The faults in organization and methods mentioned in this brief outline, if existing, must be eradicated before any permanent or really effective improvement can result.

II. Defects of Systems and Methods of Manufacturing.

It is not my intention to do more at this point than to point out the most serious defects of the ordinary systems, as the succeeding chapters will deal with the defects and suggested methods of betterment quite fully. The need of system is, of course, becoming more widely recognized each year. But in many cases the manufacturer stops just short of full success. Many times he also fails to realize the full purport of his system and to reap the full, and, in fact, the greatest benefit possible from it.

The Stock System.

To the manufacturer who is not thoroughly awakened to modern possibilities, the stock system is simply a means of keeping track of his stock. It may never occur to him that it is possible to develop it easily so that he can cut down his necessary working capital to a minimum and reduce his interest account to the lowest point possible, or that, by a little development and attention on the part of several intelligent men, monthly inventories correct within 1\ and 2 per cent can be easily secured and made the basis for an exceedingly valuable factory profit-and-loss sheet, so that factory conditions can be accurately noted monthly.

The Order and Tracing System.

The order and tracing system are often considered "necessary evils," and yet the great success of many a concern depends upon the promptness in filling orders and keeping delivery promises, and the tracing system is responsible for this.

The tracing system as an aid in keeping down stock investment through keeping the regular stock constantly moving is also often a new idea.

The Cost System.

The possibility of ascertaining the cost of the article is often the only thought in the manufacturer's mind when the "cost system" is mentioned, and is accordingly its only function that is developed. In fact, however, the valuable analyses of costs, operation by operation, to be secured from an efficient cost system, supply the manager with invaluable data from which to work in reducing costs. Nor does their effectiveness stop here. If it is decided to start a campaign to increase the efficiency of the factory force and to eliminate the inefficient men, then the individual records of the man will be secured from the cost records. In large bodies of workmen, a steady and intelligent campaign along these lines will work wonders.

While to some this last point may appear to be an unnecessary refinement, it must be admitted by all that a cost system must provide a method of cost analysis which will unerringly reveal the points of high and excessive costs throughout every stage of manufacture. The failure to accomplish this means the failure of the chief function of any cost system, namely, making possible the greatest economy in manufacture.

Linked up closely with the cost system is the "system of pay" or the wage system already touched upon. This will be handled fully later, but must be mentioned now because of its great importance. It, and the "method of organization," form the two pillars upon which rest the whole framework of a successful concern. Any weakness here is felt throughout the entire structure.

Machining Methods.

Closely linked up with the cost system and wage system are the shop processes of production, such as machining, assembling, etc. The lack of system in the first two almost invariably means a deplorable lack of proper results in the shop processes of production. The lack of accurate information relative to the amount of work that can and should be turned out from a first-class tool is astounding. In many shops it is only another case where those methods which vitally affect the cost of production are "up to the foremen," and the foremen, lacking knowledge and experience, cheerfully run their departments year in and year out, satisfied if they turn out sufficient volume to keep the "super" off their trail.