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DIVI6I0H OP SIMPLIFIED PRACTICE

DEPARTMEHT OF COMMERCE

Washington

Sept. 15, 1526. Ho. IS.

THE CREDIT ivIAlTAGSE AMD SIMPLIFIED IRACTICE

By Ray M. Hudson, Chief, Division of Simplified Practice.

Modern "business is laying groat stress on reducing not only the costs 01 ^manufacturing and selling hut also of collecting pay for goods sold. The trend fu

organi

zation in business is for closer teamwrk, in order to achieve these enas. One of the important links in the "business chain is the credit department; and

for this reason it is worth while to consider briefly how Simplified Practice

concerns the credit executive.

n Distress

•s merchandise11 , thrown on the market by firms in financial diiiicujUg,

amounts to hundreds of millions of dollars annually, according to estimates a.v hie

National Association of Credit Men. Such n distress merchandise1 ’, unloaded at

** sacrifice 11 prices or unusual discounts, is paid for in two ways by the C 0 i.-sui.ei,

In the first place, the merchants of his community face a loss of the normal

profits on their own goods of perhaps the same brands. In the second place, t.ue consumer unwittingly pays the added costs suffered by the manufacturer, wnolesalei

or jobber who sold the goods to the unfortunate business house.

Obviously, such conditions represent a waste, and to pm rent them would ^

benefit everyone down the line. •Unis, then, is the opportu -ty for the credio executive. Ho one needs a more thorough knowledge Cf human nature than he. Ho one

las a better opportunity to build up a liaison organisation with his company 1 s sales force and use this liaison for preventive measures.

Inquiries by merchants to a big service bureau indicate that one in every

nine is concerned with how to move slow stocks and how to speed up stock inn.

. :ese are symptoms of waste in overlarge or uoorly-built-up inventories some times

cue to over-liberal credit policies. They do not necessarily indict the merenarn

,

tut they do call for cooperative action for correction and prevention by ntercnauu

sales managers, and credit men.

Simplified Practice, tr.vvvo.gh cooperation, with industry in eliminating the

slow-moving or obsolete articles produced by it, by reducing unnecessary or excessive varieties, offers an opportunity for concentration of inventories on tne liio,

actively- demanded goons, for lower stock investments, 'quicker turnover, and a

common sense avoidance of waste. It also helps the merchant to gauge his needs

acre effectively, and buy more intelligently.

In their double responsibility to protect their own firms and to conserve

the best interests of their clients, the credit executives may very properly mane

suggestions which will enable those clients to avoid dangers and do a more pro_j.--

afcle and larger business. And the cooperation of both the credit manager and bus

client in the Simplification movement is needed if their industry is to do as

50 other big industries have done-- eliminate y/astes and put their energy, inteiliaer the credit executive gence and funds at work in the most effective manner, whet

and his client represent ''reducers, distributors or users.

Secretary Hoover , in a speech to the national Distribution conieinece,

summed the matter up thus:

"Pew people who have examined our distributive methods will deny that a minor element of our retail traders are so ignorant of the primus of accounting

that they unconsciously deplete their capital to the point of exhaustion before

they cease operations. It is also generally apparent that such people are dangerous competitors, who undermine the whole scheme of fair competition, and

thus do far more damage than their numbers might imply. . These men are sure to

result eventually in failures with a consequent waste of capital, which is

reflected in higher costs to the consumer. * * * The only remedy I know is education.* * * "

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The West Coast Lumbermen's Association, at a recent meeting, voted for

100 percent adherence to American Lumber Standards.

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At a recent meeting of the Mid-Continent Retail Lumber Dealers Association,

with architects, building and loan officials, and contractors, 0. L- Curd, president of the association, declared that American Lumber Standards and grademarking "will be a great thing and for the best interest of the manufacturer, retailer

architect, also the real estate men and the ultimate consumer, and for the loan

companies who furnish the money, for they will have a better idea of tiie value of

the property upon which they are making the loans."

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" . . . . . . the fundemental cause of our prosperity", says the onlletin of a

great Hew York Bank, "over the past few years has not been the activity o i any

one industry or group of industries, but rather the great per capita production

which has made it -oossible for each worker to share a larger way in one returns

from industry and thus maintain consumption on a high level of production."

Simplified Practice helps to maintain per capita production.

And

J|C $ $

Under the heading "Standardization of Grinding Wheels in America," the^

Italian Magazine "L 'Industria Meccanica, discusses the Simplified Practice Recommendation of Grinding Wheels and the work leading up to the elimination of

459,000 sizes and shapes of this product. This journal declares "This method

clearly shows what economy can result from it."

* #

Meeting the chain store on its own ground, one Illinois retailer tells in

an Exchange of some factors in this competition: "One merchandising point I have learned is to carry not more than one or two duplicating lines. Some years

ago I thought I must keep every well-known brand in stocm. ...... .That cut down

my turnover and increased my loss from dead stock. My turnover is now 25 times a

year, and all the dead stock in my store could be carried out in one wheelbarrow load."

* * Sic *

British motor manufacturers are working through the Society of Motor Manufacturers and. Traders to "bring about standardisation of parts and components

which can he made interchangeable without impeding progress in design, says a

recent issue of the London Times Trade la Engineering Supplement . Reduction oi

costs is the goal there, as it is here,

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Class Ho. 1 railroads of the country showed that in I925 capital tied up

in supplies was reduced to $35>000?900 over that for 1924, 67 roads showing a

reduction, says an Exchange. The Pennsylvania Railroad made a $15,000,000 cut

and the Atchison, Topeka & Santa Je, $3*000,000, Union Pacific Lines, Hew Tork

Central and Chicago & northwestern, more than $2,000,000 each. The Chicago, Burlington St Quincy, Baltimore & Ohio, Boston & Maine , Chesapeake & Ohio, Hew lorx,

Few Haven & Hartford, For folk & Western, northern Pacific, and Southern Paciiic, were in the $1,000,000 reduction class. Simplification proves its worth again.

Sit sf: * # ¥

3y concentration of its stores material of different types at strategic

points and by merging its reclamation work at a single center, the Boston &

Albany Railroad has reduced its stocks 40 percent, and material balances have

been $2,845,600, says an Exchange.

In the saving.

Simplification and stock control were xacoors

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Under the title 11 An American Initiative and Eight Against Waste11

, Henry

Le Chatelier, of Paris, in a recent bulletin, comments n In order to understand

the prosperity of the United States, it will not do merely to examine their

industrial realizations in detail: it will be necessary to study as well the hidden and profound causes of their success. Standardization as now prosecuted

under the impulse of the Department of Commerce is the result of a long series oi

efforts . . . .a

;ys if -j; if if

The Bureau of Standards of this Department has prepared a classified list

of the commercial testing laboratories of the country in accordance with the

types of commodities tested. The information relating to these laboratories

has been arranged alphebet ically in accordance with the geographical location

of the headquarters of the laboratories. Work has been completed on the preliminary classification of the college laboratories, but it has been considered

desirable to postpone the preparation of the final classified list of tnese

laboratories until after the opening of the colleges in the Pali.

* * ifi * *

The entire membership of the Asphalt Shingle Roofing Association have

voted officially to certify to the purchasers that commodities supplied oy them

under the Federal Government Master opeeifications have been tested and found

to comply with these specifications.

* * * * - 3 -

The marketing system of the country is undergoing constant improvement by

the adoption of simplification and the elimination of waste resulting in better

economical metnods of buying* efficiency in storing goods, better financing,

etc. Chain stores have become perhaps the most important development in the

merchandising field, largely because they simplify the soiling function. They

reduce che storage service to a minimum, because in their warehouses they carry

a limited line of goods, as compared with the wholesale grocer. They know the

needs of their own retail outlets and can, therefore, buy and keep in stock only

what will be needed. Turnover is accelerated. There is no accumulation of

old stocks. This rapid turnover is carried out also in the ratail outlets.

Analogous to the savings in the wholesale departments of chain store companies

are the savings of cooperative wholesale houses in the drug trade, grocery trade,

and to a considerable extent in other fields.

* sjc * * $

A nnual savings running well into the millions of dollars are the direct

results of the contests held each year by the lumber industry* The contests are arranged by the national Lumber Manufacturers Association as an important

feature ol its waste prevention campaign. The Paramount objective is to stimulate employees to concentrate their thought upon the problems of logging and

milling, and, by so doing, to promote their own welfare, to assist in securing

closer utilization of standing timber, to assist in the improvement of the quality

of lumber, and to help reduce the cost of efficient lumber manufacture. Prizes

have just been awarded to the winners of the fourth annual contest by the association.

sis * * #

In a recent review of American business methods, the 11 London Observer11 made

tnis significant comment: n Our investigation shewed plainly that America's

prosperity was due not so much to her natural advantages as to the enlightened

policy of her citizens in developing them. 11

* s|e # * *

The Honorable James Francis Burke in a recent address Said: 11 The new watchword for both business and government is WEED OUT THE WASTE. n He further

said tnat the world is realizing that improved manufacturing methods are adding

to the pleasure of living. As the comfort and contentment of the masses are

increased, the stability of trade and the security of investment are likewise

promoted. Reducing lost motion, cutting out elements of waste, eliminating

too high a degree of diversification of products, and doing away with a large

number of unnecessary plants that rest like crushing weights on the back of

American industry, — all of these are steps toward economy and efficiency,

increased profits to the manufacturer, increased wages to labor and lower prices

to the consumer.

* £

The Stores Department of the Erie Railroad recently held an annual meeting at Kent,. Ohio, which was productive of many interesting facts in regard to

the progress made in the direction of efficiency and the recognition given the

work, Notable among these was the steady reduction which has taken place in the

supplies carried in stock on this road from approximately $12,000,000 in 1921

to approximately $7 >000 >000 at the close of 192j. The reductions were made

_ 4 „

,ossi"bie (i) by the installation, of stock kooks; (2) patting into effect standard

practices insuring uniformity; (3) by improving physical conditions with unit

piling and unit count of material, resulting in quick monthly inventories; ( 4) ky

assemkling slow-moving material at strategic points where it could he secured

quickly; (3) ky watching obsolete material, the retirement of old equipment, the

standardization of material and the study of standards.

# * * *

A Bibliography on Executive Ability, Leadership and Management has keen prepared ky the Division, mimeographed copies of which will gladly ke supplied upon

requesi3t to the Chief of the Division. It is expected this bibliography will be J.

~~ WJ. WiiV -l-'.i- V J- ^ V -V- KJ W w w ' V_3 XL V helpful to executives and others interested in improved management practices,

the increasing responsibilities of executives in this new and greater era of

industrial and commercial development.

and 4-V

:*! % sjs *

Over loO cities have lined up for meetings during Management W eek, October

25-30, 1326.

Rotary International, the Kiwanis, the Civitans, the Cosmopolitan and the

Lions Clubs have all taken hold of the movement. The National Industrial Conference Board, with its many member organizations, National Association of Purchasing

Agents, National Association of Office Managers, National Association of Brass

Manufacturers, American 'Bailway Association, Division of Purchases and Stores,

National Association of Cost Accountants, National Retail Dry Goods Association,

Society of Automotive Engineers and Taylor Society are among the national bodies

which are supporting Management W eek in one way or another.

President P, E. Crowley of the New York Central System advises the rational

Committee that he is placing the subject before the executives of the various

New York Central Lines for attention. The Delaware & Hudson, Delaware, Lacka- wanna and Western, Norfolk & Western, Norfolk & Southern, Chicago, Milwaukee &

St. Paul, Missouri-Kansas-Texas, and Southern Railway are among the railroads

which are cooperating, while 16 life insurance companies in a half dozen or more

states, l4 colleges and a large number of corporations and individual concerns

are lending their assistance.

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Mr. Ray M» Hudson, Chief of the Division of Simplified Practice, Department

of Commerce, is on a trip to the Pacific Coast to meet organizations and individ-^

uals interested in Elimination of Waste. This trip was taken at the request 01 the

Western Manufacturers A ssociations. Purchasing Agents Associations and other

organizations so that the manufacturers, distributors and consumers on the coast

may have an opportunity to learn at first hand, something of the economic movement

to reduce waste, which is being sponsered by the Department of Commerce in cooperation with A merican Industries.

4 Jji % * *

The inclosed list shows the active and completed projects of the Division or Simulified Practice as of September first.

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