This work is
the outcome of several series of lectures on Cost Reduction,
delivered in Germany and Austria in 1913 and 1914, in New
York University in 1915 and 1916, and still later in the
College of the City of New York; supplemented by an article
Foundries Lose Money" in The Foundry, (reprinted twice in my
does not pretend to cover the ground exhaustively, or even
concretely, it does name practically all the principal and
most of the minor causes of loss; and should at least serve
as food for thought and incentive to action.
classifications, which have given me no end of trouble, may
please my critics even less than they do me. They are,
however, the best that I have been able to evolve from the
great variety of possible treatments that suggested
WASHINGTON BRIDGE P. O., N. Y. CITY
Financial Causes of Loss
These are such as
affect every line of manufacturing business, and are caused
by the financial management, as distinct from the commercial
or sales department.
Capital - Very little need be said under this title. While
fortunes have been, still are, and probably ever will be
made on a "shoestring" basis, this is seldom the case with
manufacturing. "Biting off more than one can chew" is a
frequent cause of loss, even of bankruptcy.
As I write I have
a letter from a manufacturing concern having a valuable
specialty, lamenting in ability to take part in a pool for
exporting American products. Owing to financial weakness
there is not enough money to run the plant to sufficient
capacity even to satisfy the domestic demands, much less to
go after foreign trade.
Credit had been given
recklessly, in some instances; a new manager had been appointed
solely because he bought the stock but orders had to be refused
because there was no cash to buy raw materials, and so on.
This refers principally to "water." A concern that is expected
to pay ten per cent on $10,000,000 when it could not possibly
earn that amount on $5,000,000, must record "losses."
There are instances,
however, where real over-capitalization exists and causes loss
because a large part of the capital is drawing only six per cent
at most, while the rest, constituting the real working capital,
is earning ten or twelve. In such a case the "loss" consists in
diminished potential profits.