quantities and values, and one recording quantities only. Frequently
both classes are used in one establishment. In the storeroom a system
is maintained which records quantities without prices; in the cost
department a record of values and quantities may be kept.
The records kept in the storeroom are primarily intended to show
quantities on hand, or rather quantities that should be on hand.
Sometimes these records show prices, but there appears to be no good
reason why this should be done. It is better to have all accounting of
values done in the accounting department.
The records under consideration are those of the storeroom. These
records must show _quantities received_ and _quantities issued_, from
which a record of the quantity on hand can be obtained. To supply
the necessary information, the records must show quantities of each
article or kind of material in stock, which necessitates a system
of units. Some articles will move much more rapidly than others;
therefore, a bound book is not practical. Either cards or loose leaves
can be used successfully, a card or sheet being used for the record of
each article.
In order that the records may be instantly available, they must be
properly classified. The classifications should follow the same lines
as the ledger accounts, which will correspond with the classifications
adopted in recording the original inventory. Records of material and
supplies should be separated, and each divided into classes. The
cards or loose leaves should be filed and indexed according to these
classifications.
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.