Wednesday, September 18, 2013

Forces Causing Pressure for the Reduction of Cost

The forces, causing this pressure for the reduction of cost
are principally two. The older and cruder is competition.
The later and larger, which in itself carries the answer to
competition, is the effort toward efficiency.

Competition was not created by the manufacturing sys-
tem. It existed from the foundation of the world. But
it took on a new meaning and new activity when the things
began to be made first and sold after (as they are under the
manufacturing system) instead of being sold first and made
afterward, as they were under the older order. If you con-
tract to buy something which is not yet in existence a
bridge, a house, a suit of clothes, or what not the bar-
gain is largely a matter of estimate, often, indeed, a matter
of guess work, on both sides. You have to strike a mental bal-
ance between the several alternatives presented and compare
in your mind net results of cost, design, quality, certainty and
promptness of delivery, personality, credit, and perhaps
many other things, some of them intangible, and some only
to be proved by the outcome. The proposition that seems
most attractive is closed; the competing ones are never car-
ried out at all. The buyer never can tell with absolute cer-
tainty whether or not he got the best value for his money;
he can only compare the thing which has been made with what
he thinks the other things would have been if they had been
made. The seller does not know until everything is over
whether or not he made a profit, or how much. But when
you sell things already made, like lathes or high-speed en-
gines or dynamos, off the sales-room floor, the prospective
buyer can make the most absolute and intimate comparison
between the things and their prices. He can compare
Brown & Sharpe with Lodge & Shipley, Harrisburg with
the Ball engine, Westinghouse with Crocker-Wheeler. He
can compare accurately design, quality, cost before a word or
a dollar passes. The necessity for offering the best goods
for the least money and yet making a fair* profit becomes
vital and insistent, and so the knowledge of actual costs and
the ability to reduce costs become fundamental. Competi-
tion has therefore been in one way a tremendous force for
economy in manufacturing. And yet, by a paradox, in an-
other way competition has been one of the great sources of
waste, by causing duplication of plant, of organization, of
equipment, of sales effort, and of middle-men none of
which may have any better reason for existence than some-
one's desire to share in tempting-looking profits, but all of
which must be paid by the consumer all of which become
a burden on society at large 1 .

The new and ethically fine ideal, therefore, is efficiency
the reduction of costs and the elimination of waste for
the primary purpose of doing the thing as well as it can
be done, and the distribution of the increased profits thus
secured among producer, consumer, and employee. Effi-
ciency is a concept as much finer than competition as crea-
tion, conservation, is finer than warfare. It is a philos-
ophy an interpretation of the relations of things that may
be applied not only to industry but to all life. Let me quote
a few sentences from Harrington Emerson's " Efficiency as
a Basis for Operation and Wages " :

" If we could eliminate all the wastes due to evil, all men
would be good; if we could eliminate all the wastes due to
ignorance, all men would have the benefit of supreme wis-
dom; if we could eliminate all the wastes due to laziness and
misdirected efforts, all men would be reasonably and health-
fully industrious. It is not impossible that through efficiency
standards, with efficiency rewards and penalties, we could
in the course of a few generations crowd off the sphere the
inefficient and develop the efficient, thus producing a nation
of men good, wise and industrious, thus giving to God what
is His, to Caesar what is his, and to the individual what is
his. The attainable standard becomes very high, the at-
tainment itself becomes very high.

" Efficiency is to be attained not by individual striving,
but solely by establishing, from all the accumulated and
available wisdom of the world, staff-knowledge standards
for each act by carrying staff standards into effect through
directing line organization, through rewards for individual
excellence; persuading the individual to accept staff stand-
ards, to accept line direction and control, and under this
double guidance to do his own uttermost best."

Efficiency, then, and in consequence industrial engineer-
ing, which is the prosecution of efficiency in manufacturing,
involves much more than mere technical considerations or
technical knowledge. If we consider the way in which the
manufacturing system came into existence, we can quite
easily and clearly discover its most important elements; we
shall see particularly something that it is of the utmost im-
portance for us to understand, and that is that it did not
originate in technical advances alone, and it has never de-
pended upon technical advances alone, but it has been in-
fluenced at least in equal and perhaps in larger proportion
by economic or commercial conditions, and by another set
of factors which are psychological that is, which have to
do with the thoughts and purposes and emotions of men.

No comments:

Post a Comment