Part 4

For example, we will suppose that one division of the material account is hardware. On one index will be written the word _Hardware_, the index forming a main division. Back of the index all cards or sheets recording articles that come in the hardware classification will be filed, these records also being properly classified and subdivided. In the hardware stock will be found screws of several classes, as round─head bright, round─head blued, flat─head bright, flat─head blued. In the _S_ section, back of _Hardware_, one index will be headed _Screws_. This division will be subdivided by indexes headed with the names of the classes or kinds of screws. The stores record cards or sheets will then be filed back of these subdivision indexes in the order of sizes. A card or sheet may be used for each size, or several sizes may be recorded on the same sheet.

=24. Verification of Stores Records.= When indexed in this manner the stores record of any article can be quickly located, and the sectional divisions will assist greatly in verifying the records. While the stores records are intended merely as records of material in stock, their accuracy must be verified by an actual inventory, just as the cash account is verified by a count of cash on hand. However, if thoroughly classified, it is not necessary to verify all of the stores records at one time; they can be verified by sections, or the record of a single article can be verified by an article inventory, without regard to other records.

Accounts in the ledger should be arranged to correspond with the stores classifications, that is, purchase accounts should be carried with materials forming the main divisions of the stores records; as _Hardware_, _Bar Steel_, _Foundry Material_, _Foundry Supplies_, and _Factory Supplies_. When the stock of one class, as hardware, is inventoried, the result should be recorded on the regular inventory sheet, priced, and extended, and the total compared with the hardware purchase account in the ledger. Any discrepancies should be adjusted at once, but if the records are carefully kept, and an inventory of each class is taken two or three times a year, the discrepancies should be practically nil.

If the routine prescribed is faithfully followed, there is no theoretical reason why stores records should not check as closely as cash, with the possible exception of bulk stores, like fuel and ores, where estimates are necessary. Even then, if inventories are taken when these stores are at the lowest point, there should be little difficulty in arriving at accurate results. However, the greatest responsibility rests on the chief stores clerk. He must not let a single pound of material leave the storeroom without an order, for it is on the accuracy of his records that all of the accounts are based. The order copies received in the cost department furnish the basis for all material charges. Here prices are entered and extensions are made. The chief cost clerk will transmit to the chief accountant weekly or monthly recapitulations of all material charged out. The chief accountant will credit his purchase accounts and debit _Manufacturing_, _Maintenance_, _Repair_, or _Expense_ accounts as the case may be. _Purchase_ accounts thus become _controlling_ accounts of the stores records, and the latter takes its legitimate place as an integral part of the accounting system.

RECORD FORMS

=25.= All forms for stores records, no matter what the class of material recorded, possess certain characteristics in common; yet the information required about each special class is usually of such nature that a special form is advisable. This may mean the use of several forms in the same establishment.

When installing any system, however, it is more economical to invest more money in printing and have forms that fit exactly, than to attempt to make special records conform to forms prepared for other purposes. If certain specific information is required, the form should be designed to exhibit just that information, and if the form is properly designed, the saving of time both in recording and consulting the record will much more than offset the slight additional cost of special printing.

The number of forms must not be so large as to cause confusion, but against the opposite extreme the cost of time must be considered. It will be found that the value of clerks' time is greater than the cost of printing.

[Illustration: Fig. 25. Form for a Stock Record of Materials and Supplies]

=26. Material and Supplies.= For material and supplies the same form will be found satisfactory in most establishments. The form should provide for the name of the material, the unit in which it is purchased, the purpose for which used, the location in the storeroom, and quantities received and delivered. Fig. 25 shows a form designed for records of this class. In addition to the headings specified above, spaces will be noted at the top of this card for _maximum_ and _minimum_. These refer to the quantities of material to be carried in stock and represent the high and low limits. These limits should be established for each article in stock and when any article reaches the low limit a report should be sent to the purchasing agent on the form shown in Fig. 11, Page 14. This form provides for a record of order numbers for all deliveries, a feature which should be incorporated in all cases where the form is for the use of a manufacturing business. At the extreme right is a column headed _verified_. When an inventory is taken, the date and balance on hand is to be entered under this head.

[Illustration: Fig. 26. Stock Record Form showing Orders Placed]

A conventional form is shown in Fig. 26. The special feature of this form is a column for a record of orders placed. Usually this column is not required on the record of the stores clerk, but, if used, the order numbers should be entered from the receiving clerk's copy of the purchase order. On both of the forms illustrated several columns are provided for _deliveries_ to one for _receipts_. This is necessary, as deliveries are in smaller quantities and much more frequent than receipts.

Fig. 27 shows a form that includes _values_ as well as quantities. This is not considered necessary, as a rule, for the storeroom, but where the stores records are kept in the factory office, as is sometimes done, it is a good plan to include values. On the reverse side of this form a complete record of orders is kept.

Another form that includes values is shown in Fig. 28. This form is well adapted for a record of almost any class of material or supplies.

The form illustrated by Fig. 29 is specially adapted for a record of supplies. Under the head of _distribution_ the department to which the supplies are issued is entered.

[Illustration: Fig. 27. Front and Reverse of Stores Card Used by a Manufacturer]

=27. Parts and Finished Stores.= A record of parts and finished stores is very essential in many manufacturing enterprises. The modern tendency in machinery manufacture, for instance, is to standardize production, making all parts interchangeable. Parts are manufactured in large quantities, on special orders, and placed in stock until needed.

It is very necessary to know the condition of the stock of parts to insure against overstocking, and to prevent the supply running low. A record of parts should therefore be maintained on the same lines as for material and supplies. Usually, a parts storeroom, with a clerk in charge, is maintained apart from the material storeroom.

[Illustration: Fig. 28. Stores Record Form which Includes Values]

[Illustration: Fig. 29. Special Stores Card for Supplies]

The form illustrated by Fig. 30 is designed for a record of parts and finished stores. This form provides for a record of the same information as given for material, with the addition of the number and size of the part. No change is needed in the form of record of receipts and deliveries.

[Illustration: Fig. 30. Stores Record of Parts and Finished Stores]

[Illustration: Fig. 31. A Record of Parts in Stock]

Fig. 31 shows another form for parts. The special feature of this form is the record of values, which is advisable if the records are kept in the cost department. Parts records are more frequently kept in the cost department than material and supplies records.

=28. Material Returned to Stock.= When a foreman receives an order to manufacture a certain article, or part, he estimates the quantity of material required and draws it from the storeroom. Naturally he does not always estimate the exact quantity; he may run short or have material left when the job is completed.

[Illustration: Fig. 32. Record of Material Returned to Stock]

Unless the material can be used immediately on another job, it should be returned to stock, with a report to the stores department. The form for such a report is shown in Fig. 32. An essential feature of this form is the order number for which the material was drawn, this being the production or shop order number.

When the stores clerk receives unused material and this report, he will enter the quantity on the stores record under the head of _receipts_, and forward the report to the cost department. The cost and value will then be entered and credited on the cost records.

=29. Material Transferred.= When a foreman has left─over material which can be used on another job, a report is necessary to insure credit to the job for which it was drawn and a charge to the job on which it was used. Fig. 33 is a form for this report. This shows the numbers of the jobs for which the material was drawn and to which the material has been transferred. After entering the correct quantities on his stores record, he sends the report to the cost department. If it is not considered necessary for the stores clerk to make these corrections on his records, the report may be sent to the cost department by the foreman.

[Illustration: Fig. 33. Report of Materials Transferred]

MACHINERY AND EQUIPMENT RECORDS

=30.= In every business enterprise there should be kept a record that will give a full and complete history of every machine or other article of permanent equipment. There are many ways in which such a record will prove valuable.

Not infrequently a new part will be needed for a machine which has been in use for several years. There may be no mark on the machine showing the name of the manufacturer; perhaps no one remembers from whom it was purchased. The result is a frenzied search through books and files──confusion──a vexing delay──all for the want of proper records.

[Illustration: LATHE DEPARTMENT IN THE PLANT OF THE BURROUGHS ADDING MACHINE CO., DETROIT, MICH.]

Or, there is a fire, resulting in the loss of a machine costing $3,000.00 that has been in use two years. The adjuster figures depreciation at, say, 10% a year, or $600.00. There is no record showing that it cost $400.00 additional to install the machine, or that repairs have been put on it to maintain its efficiency. At least the depreciation should be figured on a basis of $3,400.00, the real cost of the machine.

A proper record would show the original cost, the amount expended for repairs and additions, and the amount charged off for depreciation. Such a record should be kept, but no special form is required. The machine inventory form, Fig. 15, answers the purpose. For the more important machinery, one of these sheets should be used for each machine. These sheets constitute a machinery and equipment ledger, controlled by the machinery and equipment accounts in the general or special ledger. Thus the connection between these records and the general accounting system is maintained.

THE TOOL ROOM

=31.= One department of a factory that is either a source of expense or a factor in saving money, according to the way it is conducted, is the tool room. The tool storeroom is referred to here, rather than the department maintained by large manufacturing enterprises for the manufacture of machine tools.

Every manufacturer is obliged to maintain a complete stock of tools of sufficient size to meet the requirements of his establishment. Unless these tools are properly cared for, the investment is very liable to creep up to a point entirely out of proportion to the requirements.

Perhaps no class of property in a manufacturing plant is so frequently lost as small tools. When no storage place is provided, workmen are liable to leave tools where they were last used. They are soon scattered about the shops and, because they are not readily found, new tools are purchased.

A special tool room is usually necessary, though in some cases the tools can be stored and cared for in the material storeroom. In plants manufacturing machine tools for their own use, the foreman of the tool department can care for the small tools in connection with his regular work. It is also the duty of this department to keep the tools in proper condition for use.

For the storage of tools there should be provided racks and bins in suitable sizes. All tools should be numbered and the sections of the tool rack given corresponding numbers. For example, the stock includes one dozen hammers of a given size and style. This tool is given number twenty and the number is stamped on each hammer. The hammers are placed in section number twenty of the tool rack. At the same time twelve brass checks are stamped with the same number and hung on a hook above the section containing the tools.

[Illustration: Fig. 34. Section of Rack for the Storage of Small Tools]

A section of such a tool rack, showing the number checks, is illustrated in Fig. 34.

There are several methods of keeping track of tools issued to workmen. In some plants a written receipt is required for each tool issued, but this plan is not recommended for the reason that the workman should not be asked to take the time to write a receipt, or to wait until it is made out by the tool─room foreman. He should be given the tool promptly and the system employed should not cause him to waste time.

To overcome these difficulties, the check system is used. There are several variations in the operation of this system, but, in the opinion of the writer, the double check system is the most practical and satisfactory.

[Illustration: Fig. 35. Board on which Tool Checks are Kept]

First, the tools are numbered, as described above, and a brass check provided for each tool. Then a board, divided into squares, as shown in Fig. 35, is prepared. In these squares the names or numbers of the men obliged to draw tools are written. Each square contains two hooks on one of which twelve checks bearing the man's number are hung. When workman No. 2 receives tool No. 15, one of the No. 2 checks is taken from the board and hung above section No. 15 in the tool rack; at the same time one of the No. 15 tool checks is hung on the second hook in the No. 2 square on the board.

It will be readily seen that there must be, at all times, twelve checks in each square on the board, counting both tool and workman's checks. Reference to the tool rack will show how many tools have been issued and what workman has them. The advantage of this system is that it is practically automatic. A perfect record of the movement of tools is kept without the necessity of making entries on cards or in books.

Another method of operating the double check system is to supply the workman with a number of tool checks, these checks bearing the workman's number. When he wishes to withdraw a tool he presents one of these checks, which is hung above the tool rack. One of the checks bearing the tool number is then placed on the hook under the workman's number on the board.

One disadvantage of this system is that the workman is more liable to lose checks than he is to lose tools. Theoretically, the number of checks in possession of the workman at any time, added to the number of checks on his hook on the board, should equal the number originally given to him. If, however, he loses a check, it usually means a dispute, as the workmen naturally does not feel that he should be penalized by failure to return a check on which no tool has been issued. All things considered, the method first described is probably the most satisfactory.

[Illustration: Fig 36. Special Stock Record of Machine Tools]

=32. Tool Records.= While the system described above furnishes a complete check on the tools, it should be supplemented by a record which will serve as a perpetual record of values. The tools may be divided into two classes, namely, _machine_ tools, and _small_ tools, each requiring a somewhat different form of record.

Fig. 36 is the form of record for machine tools, this being on either a card or loose leaf. One card is used for each tool required. The record shows the name of the tool, the number, size, purpose for which used, and date made. Below this is a complete record of the cost, showing quantity manufactured, cost of material, labor, and burden. When tools are destroyed a record is made showing date and value, and the balance on hand is debited in the last column.

For small tools Fig. 37 is used. This record shows much the same information as for machine tools. The special feature of this form is the record of quantities received from time to time, number delivered and returned, and number destroyed. As a rule, it is unnecessary to record deliveries on this card, though in the case of some very expensive tools, it may be advisable to do so.

Both of the forms referred to above are filed in the same manner as other stores─record cards. The main divisions would be by name, or by departments, with subdivisions according to size.

[Illustration: Fig. 37. Inventory Form for Small Tools]

[Illustration: THE SHOP ORDER DEPARTMENT This Department Issues all Manufacturing Orders and by a System of Tracers Follows the Work through the Various Shops to Completion. Western Gas Construction Co., Ft. Wayne, Ind.]

RECORDS OF LABOR AND MANUFACTURING ORDERS

LABOR RECORDS

=1.= The successful outcome of any project, in whatever field of endeavor, depends on the coöperation of labor. Labor is energy applied. The intelligence with which the energy is applied determines its productiveness. The unskilled laborer applies energy, in the form of his own strength, directly to the task before him. The skilled worker uses his skill to direct the energy of nature that has been applied to propel machines and appliances, which in turn have been created by the skillful manipulation of inanimate properties. Thus the combination of natural forces and the intelligent application of those forces, under the direction of a skilled man, result in the highest degree of productiveness.

In the employment of labor, there are two parties to be considered──the employer of labor and the seller of labor. The desire of the first is to secure the results of the labor at the lowest possible cost per unit of production rather than at the lowest cost per individual. The desire of the second is to secure the highest price for his labor, based on the unit of time rather than on the unit of production.

In the final analysis, the desires of the two are found not to be inconsistent, nor opposed to each other. The employer cares little what labor costs per unit of time, provided the cost per unit of production is kept down to the lowest point; the seller of labor cares not how many units of production result from his labor provided he is paid a satisfactory wage.

The ideal method of regulating the payment of wages is, therefore, one which will insure to the laborer a high wage under conditions resulting in a correspondingly high rate of production. To solve this problem, to evolve an ideal system, has long been the study of engineers. The studies of these men are bound to have a far─reaching effect. From the older method of an exclusive day wage to the modern systems that combine day wage and piece rates, is a long step. Investigations and experiments, now going on in all directions, are carrying the movement forward, and are destined to evolve an ideal system.

WAGE SYSTEMS

=2.= Wage systems, as applied to manufacturing industries, may be divided into the general classifications of day wage, piece rate, and premium systems. Besides these three, there are a number of systems, bearing the names of their originators, which are the result of a combination of certain features found in two or more of the three general methods. A study of modern wage systems necessarily involves a study of the distinguishing features of the three primary methods.

=3. Day Wage.= Of the three general plans on which labor is paid, the oldest and best known is the day─wage plan. It is the most widely used because best understood. The day─wage plan contemplates the payment of a stated wage for a stated unit of time. If all men performing the same task were equally skillful, or if the wage rate could be adjusted in conformity with the varying degrees of productiveness found in every body of workmen, the day─wage plan would be ideal. But neither of these conditions exists.

Workers are liable to insist on the application of the rule of organized labor, that all men performing similar tasks shall be paid the same wage. Since all men are not equally skillful, this results in certain inequalities. On the one hand, the wage rate is based on the lowest rate of production, which is unjust to the more skillful man, who either reduces his productiveness to the level of the least skillful, or transfers his energies to another field of endeavor. As an opposite extreme, the rate is based on the highest rate of production, which is manifestly unfair to the employer.

In actual practice, then, it is necessary, from the standpoint of the employer, to employ overseers to drive all workmen to a maximum rate of production, which, theoretically, means the elimination of all workers who are unable to attain the maximum. Again an injustice results, this time to the weaker man.

=4. Piece Rate.= The first plan evolved, in the search for a plan that would remedy the inequalities of the day─wage plan, was the piece─rate plan. The piece─rate plan contemplates the payment of a stated wage per unit of production, without consideration of the rate of production.

The argument was advanced that a uniform rate per unit of production would result in an equitable wage, because based on the productive skill of the individual. But the plan has failed in many cases to produce the desired results, for the reason that it does not take into consideration the factor of time.

In the establishment of a wage rate, the factor of time must be considered, or the rate will not be equitable as between employer and employe. The employer must furnish the shop, the tools, the power, the heat and light. The cost of these items does not necessarily vary in direct ratio with the increase or decrease in production. These expenses must be absorbed by the finished product, therefore, even under a piece─rate plan, the rate of production (the factor of time) has an actual bearing on the rate per unit.