5. Application to manufacturing plants.—One of the most marked and important characteristics of mod ern industry is the tremendously extended use of the principle of division of labor. While this principle is inherent in the formation of civilized society and has been used by mankind from the beginning, the mod ern industrial era has extended its use in a most re markable degree. The installation of highly devel oped and specialized machinery has aided materially in furthering the use of this principle. The production of the smallest article may be the work of many hands. One man may plan or ,design it, another may make tools for its production, many others may work on in dividual operations, not even knowing what sort of article the several parts are intended for; while others, who may not have seen a single part manufactured, may assemble the completed product. The cost of any manufactured article, therefore, may be made up of the cost of small portions of the labor of many men, some of whom may work directly upon the article and some of whom may work only indirectly upon it. As in the case of the farmer, it may not be easy to compute just what the exact total cost of the final product may be.
A diagrammatic outline of the essential factors in any productive enterprise is shown in Figure 1 ( page 18 ) . No matter how complex the ownership of a plant may be, it can be, and usually is, reduced to a board of directors or some similar group which repre sents the owning body, and dictates the general policy of the enterprise. These directors in turn may be rep resented by the president or general manager who is in actual charge of the plant. They may also elect such officers as the secretary and the treasurer to serve as independent checks on the operation of the business. Under the president are the four main branches or de partments of operation already noted, namely, pro ducing, selling, financing and accounting. If the plant is owned by partners or by an individual the organiza tion is, of course, simplified, and where the plant is small, one individual may perform several of the fore going functions. The general idea, however, of the four main branches should not be lost sight of, no mat ter how much the detail arrangements of the adminis tration may vary. For instance, in some cases the engineering department is so important as to be placed directly under the general manager, but this is purely an administrative matter and does not affect the prin ciples presented, the engineering department being strictly a branch of the production department. Such an arrangement is, in fact, another manifestation of the advantage of division of labor. Formerly all en gineering planning was done in the shop as the work progressed, and often by haphazard methods. Expe- •
rience has shown that better and more economical re sults are obtained when this work of planning is in the hands of specialists. Similar remarks would apply to industries where other kinds of highly trained spe cialists, such as chemists, for example, are employed.
6. Departments not always fully developed.—It may be noted that the degree to which some of these departments may be developed in any one industry or enterprise may vary widely with conditions. Some concerns have only very rudimentary sales depart ments, depending on other organizations to dispose of their product. In other cases the sales organization may be highly developed and it is not uncommon that the cost of marketing a commodity is equal to, or greater than, the actual cost of production. Other enterprises, again, may do little or no pur chasing of materials except for machinery and re pairs, having acquired once for all such natural sources of supply as are necessary for their purpose. Still other enterprises do no producing, in a strict sense, the purchasing department taking the place of the production department which is so prominent a fea ture of other industries. Thus a mercantile concern simply buys finished or marketable goods and sells them again. The general principles involving all four functions should not be forgotten, however, and ac counting, as has already been noted, must always be carried on, whether the enterprise in question does buying, producing, or selling, or all three combined.
7. Departmentization.—As a factory grows in size, or as the scope of the work broadens, the economic advantage of the use of division of labor naturally brings about departmentization. Departmentization is also desirable from the standpoint of administra tion—and the entire problem of cost finding is closely connected with the problems of organization. A dia grammatic outline of the several departments of a typical manufacturing enterprise, showing the rela tive positions of the several departments, from an ad ministrative standpoint, is shown in Figure 2 (page 21) . The four main divisions, producing, selling, financing and accounting are functionalized under the general manager, in the care of the sales manager, the factory manager, the treasurer and the accountant, or controller. Under the factory manager is organized the production department with its many sub-depart ments. Some of these sub-departments are function alized directly under the factory manager while others are placed under the factory superintendent. The ar rangement shown is suggestive only, tho it illustrates a somewhat common arrangement of the several de partments.