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The New Zealand Railways Magazine, Volume 1, Issue 4 (August 24, 1926)

Production Engineering — Part IV.: Costing Systems

page 30

Production Engineering
Part IV.: Costing Systems

What I have always found to be the most difficult task of a production man in railroad departments is to remedy the lack of real interest in and knowledge of “costs.”

What did this job cost?

Is the labour charge right

What did the material cost?

Is the cost excessive?

Questions like these make one about as popular as rain on Cup Day. Why is there this inherent dislike and dodging of costing facts? It is quite obvious that paper records of all kinds are generally unpopular. Often they hurt. The old-time foreman disliked them, even as a workman he never could see “why the cost of repairs to one engine should be kept separate from another,” and “time distribution business” was always “rot,”—“out of one pocket into another,” and so on.

The reason for all this is not hard to find. In the first place the former system of accounting
Graphic Record of Locomotive Repair Costs

Graphic Record of Locomotive Repair Costs

was one that was designed by accountants for accountants, to record accurately the money spent. Costs obtained under this system were available for use six weeks or two months after the money was actually spent.

“Is that all right from the financial requirement viewpoint?”

“Yes, quite so.”

“Is it all right from the point of view of the man responsible for spending the money?”

“No good at all. All the figures in the world won't alter the cost of a job, if not provided until six weeks after the job is done.

From this you will understand why I call the old system “post mortem costs,” and why I say that “live” costs are what are required by those in charge of expenditures; for “live” costs are capable of being improved.

page 31

Now, we are changing our Workshops costing methods and the objects are:—

1. To indicate the cost of each order, to every foreman or supervisor interested, up to the day previous, so that he can take an interest in the cost of his Department's work and can see the result of such economies as he may be able to devise. By receiving advice of progressive costs, he knows what his work is costing, while he still has it and while he can do something, if it is running excessively high.

2. To cost all material used daily, so that the men ordering material know the cost of it. In the past no provision was made for the shops to know the cost of any material. How was a foreman to know whether it would pay to scrap a part or order new?

3. To provide all necessary information so that the business of a railway shop can be carried on, like any other business has to be carried on—on a financial basis.

We have no license to operate on any other basis than sound financial lines. If an outside business ran its affairs with as little cost information as we had it would end up with no orders, no business, bankrupt. Eighty per cent. of manufacturing business failures are attributed to lack of cost information. They did not know what their product did cost! They fooled themselves, but not their banker.

I agree that we have never before provided cost information to our manufacturing departments in order that they could become interested in costs. It is also a fact that it will take a few years before we get any comparative costs that we can intelligently use. But a start must be made sometime and that time is now.

Never mind about the past. Get in now, and start and take an interest in what costs you think you ought to know. Ask for it and you will get it, and if you want more varied information it can be arranged. To-day we are arranging for “live” costs to be provided. To-morrow, we are going to ask you to estimate on your own work; just as you would ask a builder for an estimate on a house design; just as you would ask a bootmaker for the price of soling your boots before giving him the job; just as we obtain competitive quotes for every purchase we make.

Is it sound business? Of course it is, and the railways—successful railways in my personal experience—have done this very thing for years.

Finally, don't think it an accountant's job to tell you what you, in the shops, need to know. What part of an accountant's education would tell him what details a shop man should know, I can't imagine. The job is engineering—management.

An Historic Landmark.

The obelisk shown below is situated near Pokaka at a point exactly half way between Wellington and Auckland on the North Island Main Trunk Line.

The inscription reads as follows:—

“This obelisk is erected opposite the spot where the Rt. Hon. Sir Joseph Ward, P.C., K.C.M.G., Premier of the Dominion, drove the last spike of the North Island Main Trunk Railway on 6th November, 1908.—Hon. W. Hall-Jones, Minister for Public Works and Railways.”

There is a greater variety of parts in what we call a character than there are features in a face; and the morality of that is no more determined by one part than the beauty or deformity of this is by one single feature; each is to be judged by all the parts or features—not taken singly, but altogether.