If a manufacturer were to engage in producing two widely different commodities in two factories, placed side by side, he would naturally organize all "services" for one shop separately, distinct from similar services in the other. He would wish to keep his bills for power, heat and light separate for the two shops and would arrange his transmission machinery accord ingly. The bookkeeping systems would be independ ent of each other and every cost factor would be strictly allocated to the factory to which it belonged. The manufacturer would expect to be able to keep the records of his two activities entirely separate.
On the other hand, a manufacturer might and often does, produce articles of widely different characteris tics in the same factory, without any thought of ar ranging either his plant or his men with a view to separating, as far as possible, the manufacturing costs of the several items. Yet a careful considera tion of the cost-finding problem would lead to radi cally different methods of distributing heat, light, power and similar services and careful departmenti zation, with the cost problem in mind, would often simplify this same problem.
The foregoing discussion will have made it clear that the problem of distributing factory expense in any de partment approaches simple division of such expense as the tools employed become more equal in size and value, as the wages paid approach uniformity, and as the work performed becomes more and more uniform in size and character. The problem of distributing the expense over a department containing twenty-five lathes of the same size and value, operating on exactly the same part, and operated by men of equal wage value and productive capacity, is extremely simple. Such a group can be considered as a large production center and it is comparatively easy to allocate the ex penses to it in bulk, and a simple division of this bulk is about all that is necessary, if any at all is necessary. On the other hand, the problem has been shown to be come increasingly complex as the component factors named vary increasingly in size, character and value.
4. Departmentization according to finished prod uct.—Now there are two distinct methods, or prin ciples, for grouping machines and processes. These affect very greatly not only the physical arrangement of the plant, but also its personal administration, and the ease and accuracy with which expense may be dis tributed. The first method is to group the machines or processes on the basis of the character of the finished product. Thus, in a large, machine-tool works or
ganized in this manner, one department would be equipped with a complete set of machines and tools for building lathes; another would be similarly fitted out to build milling machines; and another would have all the necessary appliances to build drill presses, and so on, each department being equipped entirely inde pendently of the others, and being self-sufficient for the purpose for which it was organized.
This method is a natural outgrowth of conditions in a small shop where the number of tools of any one kind was limited. As new lines of production were added their processes grew up around the personality of some strong executive, or manufacturing superin tendent, who often did not want to assume the re sponsibility of production and delivery unless he had full control of the major part of the productive ma chinery required. Many executives of strong person ality were impatient of the restraint imposed by the necessity of close cooperation between departments. The result of their influence was excessive duplication of tools and processes, and the prevention of the use of more modern forms of administrative organization. This failure to recognize the importance of changing the form of organization as the enterprise grows in size, has doubtless been responsible for the failure of many once prosperous concerns.
5. Departmentization according to processes.— Modern organization, however, moves along different lines. It tends to substitute staff organization for individual effort, to replace the versatile individual with coordinated specialization, and to arrange ma chines by processes rather than by products. Under this second method, therefore, all machines of approxi mate size and character are grouped together. Thus, in the example taken above, all turning would be done in one department, all milling in another, all planing in another, and all assembling in another. In each of these departments, in turn, all machines and proc esses of similar kind and size would be grouped to gether. Thus all small lathes engaged in manufac ture would be in one group, all large lathes in another, and so on. Even in the assembling of the completed product, while all assembly might be in one depart ment, each class of product would be assembled by it self. In other words, by this method, all similar pro duction centers would, as far as possible, be grouped so as to form a large production center, the component parts of which would not vary greatly.