22. Contingency Materials.
23. Contingency Supplies.
24. Cost of Finding and Recovering Lost Freight and Supplies.
25. Profit.
COST REDUCTION
The ultimate aim of cost analysis is economic efficiency; and any system or method of cost analysis which does not result in the lessening of the total cost per unit of work performed, must necessarily be a failure.
After the costs on work have been partially analyzed, it becomes the province of the engineer to introduce methods and devices whereby the expense of obtaining the various data may be more than offset in the general economy of the work. It was long ago realized that shop practice could be economized by methods of systematization; and we have an early instance of the appreciation of this fact in the story of the struggles and methods re-sorted to by James Watt in the construction of the early steam engines. The troubles arising from incompetent workmen, drunkenness, and the necessity of doing work in different parts of the country far removed from headquarters, were as real then as they are now, with this disadvantage, that in the eighteenth century the press, the telephone, and the professional schools had not reached a development admitting of intelligent coöperation in the attack upon this problem.
Within the last score of years it has been found that cost-analysis applied to shop work problems gives most amazing results. When the piece-work system was introduced, it was believed that the final solution of the problem had been attained. The men were then placed upon the footing of contractors. A man got so much pay for accomplishing so much work; and it was most clearly to his interest to accomplish the maximum of work in order to get the maximum of pay. It was immediately evident that the good men would soon show such a contrast to the poor men on the work as to inspire a constant rivalry, thereby resulting in a very much higher output. In order that the desire to accomplish more work should not interfere with the quality of the work, all materials were systematically and rigidly inspected.
For a good many years the piece-work system flourished, and it is still flourishing as compared with its predecessors. It is vigorously fought by trades unions and by the less able among the men. It is tolerated by those of mediocre ability, and it is heartily endorsed by the most skilful. In order to remove the resistance of labor unions, a modification of the piece-rate system, known as the bonus system, has been devised. It will be described in a subsequent paragraph.
Remarkable development has been achieved in the shop by the most brilliant work on the part of the men who have applied cost analysis, favored by the fact that in the shop one has conditions of work which are practically invariable from day to day. It is possible, then, to compare the work done per unit of time in the morning, with the work done per unit of time in the afternoon, or for each hour in the day, and thus to determine the effect of fatigue of the operators upon their efficiency and the effect of such specific influences as the character of artificial light, the grade of steel in tools, and even the economic value of providing reading rooms, white-enameled lavatories, and recreation for the operatives. To cost analysis has been largely due the development of the special high-speed steels and an amazing number of improvements in machinery, entirely aside from the stimulus and education of the workmen.