HARDWOOD RECORD 



21 



• The Cost Problem from Another Angle 



Perhaps nothing has occupied the attention of the manufacturer more 

 continuously for the past several years than the problem of cost. We have 

 heard constantly of costs. Cost systems, cost accountants, cost experts, 

 efficiency engineers and business economists. Much good has been done, 

 but the surprising feature is, how little good has been done compared to 

 the amount of effort and money expended. Many, I fear, do not follow 

 out what may be a perfectly good system of figuring costs on account of 

 the necessary and constant labor involved. 



Individual conditions determine the whole question. Each concern must 

 work out its own commercial salvation to the extent of knowing exactly 

 what it costs to perform a certain operation : not, mind you, what it 

 ought to cost, or what it costs other people, or what it probably costs, but 

 what it does actually cost every day the thing is done. He says : 

 "mental laziness" (and I think he might also have added physical lazi- 

 ness) "Is responsible for failure to go underneath the surface and get at 

 the facts, in a good many cases. Veneer producers, like other people, 

 would much rather let the other man go to the trouble of figuring the 

 thing for them, even though it is quite likely that his answer is not cor- 

 rect, than to worry about getting the solution of the problem themselves." 



The man who is running only rotary machines has an ea.sy proposition 

 compared with the concern which is not only putting out rotary stock, but 

 also slice cut and sawed veneers : and there are concerns which do all 

 these things and then glue up oak, gum, mahogany and Circassian walnut 

 veneers in addition ; and it must be admitted that figuring out cnsts in 

 each department on each kind of wood in a proposition of that sort is not 

 an easy task. But that only emphasizes the comparative simplicity of the 

 problem of the rotary man, and suggests that 

 there need be no excuse for the mill cutting plain 

 stuff not knowing what the manufacturing opera- 

 tions cost. 



Some veneer men take the attitude that it 

 doesn't really matter whether or not they know 

 exactly what stock is costing them ; that the 

 market price is established, and they must take 

 it or leave it. But this is a fallacy, if one went 

 no farther than to point out the desirability, if 

 not the necessity, of knowing how great a mar- 

 gin of profit — or loss — were being recorded. 



I want to emphasize the statement that some 

 veneer men take the attitude that it doesn't 

 really matter whether or not they know exactly 

 what stock is costing them : that the market 

 price is established and they must take it or 

 leave it. I wonder how much veneer is manu- 

 factured and sold upon just that plan, which is 

 one of the other angles of the cost problem. 



A few years ago a veneer manufacturer who 

 cuts considerable quantities of gum, bought in 

 the summer a large number of logs at an ad- 

 vantageous price, delivered at a railroad point in 

 the South. Shipments of logs to the cutting 

 mill had hardly started when the business world 

 was struck by one of those so-called panics. 

 Cutting practically stopped for lack of orders : 

 mill yard full of logs and no place to put more. 

 Fortunately, it could be arranged to have the 

 logs lie at the shipping point indefinitely, and 

 they did lie there (or most of them did) during 

 the summer, the autumn and winter succeeding, and until the following 

 spring. When they did come in to the cutting mill they were badly split 

 on the ends and sap rotten. The rotten sap not only cost the loss of the 

 best part of the log, but in addition it was necessary to adze or cut it off 

 before good wood could be reached, and while the cutting was being done, 

 fresh logs could have been Ixiught at as low price as the original cost of 

 the defective ones. Had Mr. Veneer Cutter figured this possibility into his 

 «ost? Hardly; and there appears another angle. 



Some mills have been located on rivers for a series of years, one that I 

 know of for nearly a quarter of a century. In that length of time, to be 

 exact, 24 years, this mill has been flooded by freshets in the river three 

 times. Well, once in eight years is not so bad, you say. Just so, but the 

 three floods have occurred inside of the past six years and two of the 

 three happened within a space of less than three months. We must all 

 admit that this a little too much water in the system. Did Mr. Veneer 

 Man figure floods into his cost? Hardly; this is another angle, and one 

 that can be guarded against surely only by moving. Fires, cyclones, 

 liability of all sorts, credits, etc., can be insured, but floods, no. 



A few years ago this association seemed to realize the necessity for a 

 table of relative values for dimension rotary cut stock. A com- 

 mittee was appointed to prepare a table. This committee labored 

 with the idea uppermost that as lengths increased, value increased, 

 and that the same principle applied to increasing widths, and that the 

 ratio of increase as sizes increased was greater as applied to large sizes 

 than to smaller ones. After spending much time in the preparation of a 

 table or card, their report was presented to the Rotary Club with the 

 statement that it was not a price list, but a table of relative values from 

 which suitable discounts should be deducted to arrive at recommended 

 tninimums of sales prices. I think the committee expected some opposi- 



tion and was prepared to argue the question. But the club moved to 

 adopt and print, which was done without remark or question ; the associa- 

 tion afterward confirmed the action in the same indifferent way. In con- 

 sequence the whole proposition is a dead letter and manufacturers of the 

 larger sizes of dimension stock fall to obtain their value and each has 

 quantities of so-called cut-downs to sell at any old price. 



But some one says, what has that to do with cost? You are talking 

 about sales values. It has everything to do with cost if one is brought 

 to the realizing sense that one piece of rotary cut anything in any thick- 

 ness 24x72 inches, costs more than two pieces of the same material 12x72 

 inches. 



A sales agent wrote recently to a panel manufacturer, who is inci- 

 dentally also a cutter, offering to sell at a low delivered price a car of 

 %-inch rotary cut stock in widths of 12, 14, 16 and 18 inches by 22 and 

 23 inches long. He stated that there was at least 40 per cent of face 

 stock in the lot. The stock was cut-downs from larger sized dimension 

 sheets. He said : "We have shipped several cars this year." I suppose 

 several cars would mean at least three, and this one would be four cars in 

 less than five months. 



Why should a veneer cutter have an accumulation of several cars of cut- 

 downs in such sizes as these within the short space of time named, or in 

 any space of time whatever? Is he in cutting paying attention to the 

 possibilities of the case to have such accumulations? Does he know what 

 his large dimension sizes are costing? Does he know what these cut- 

 downs are costing? Is he, in selling, getting cost for his large dimension 

 .sizes, or does he expect the proceeds of the cut-downs to represent his 

 profit or does he figure the cut-downs as all velvet? 



Henry H. Gibson, editor of Hakdwood 

 Eecokd, Chicago, read an interesting paper 

 on "Rational Conservation," in which he 

 maintained that there is a good deal of hys- 

 teria in connection with the movement to eon- 

 serve the country's natural resources. He 

 maintained further that the honest workers 

 proceed in an orderly manner to plan what 

 they are proposing doing and go quietly about 

 their work; that the sensationalist merely 

 "comes along," demanding things that are 

 impractical, insisting on following theory and 

 having no patience with deliberation, although 

 it is entirely necessary that a deliberate course 

 be followed in order to insure efficient results. 

 He loudly declaims on the conditions of for- 

 estry as applied abroad, not taking into con- 

 sideration the vast difference in basic condi- 

 tions here. 



According to the speaker, the main point for 

 consideration in conservation is the matter of 

 profit. He raised the contention that unless 

 a profit is insured it is idle to talk conserva- 

 tion to the practical man. He stated further 

 that if the men interested in conservation want 

 to perfect a greater saving in wood and mill operations they should 

 show the manufacturer how to get some profit out of that waste, and 

 that if the advice is sound it wUl be acted upon. He further stated 

 that methods of conservation must vary with varying conditions in 

 different parts of the country, and said that as much as could be con- 

 sistently asked of any man who works timber in the woods or lumber 

 in the factory, is that he make the best possible use of the material 

 consistent with proper profit. There is no economy in saving material 

 if it costs more to save it than to waste it. 



One of the strongest points in the paper was the suggestion that 

 diversified industries working hand in hand could solve the conserva- 

 tion problem as far as forest resources are concerned, and that the 

 problem will not be solved in any other way. The one thing to be 

 considered in this situation is that no single industry can make use 

 of the whole tree, but that it is necessary to have various industries 

 using different parts in order to utilize the tree in its entirety. 



Alvin T. Coate of the Insurance Audit & Inspection Company of 

 Indianapolis, Ind., gave an interesting and instructive talk on ' ' Insur- 

 ance Efficiency. " This talk follows: 



Insurance Efficiency 



I am sufficiently acquainted with the temper and purpose of trade con- 

 ventions such as this to know that you do not wish any historic or 

 academic treatise on the broad subject of insurance. IS this portion of 



E. KI.IXE, LOUISVILLE, KY 

 ACTIVE IN THE WORK OF 

 THE ASSOCIATION. 



