Mass Production: Expansion of the Factory System

As emphasized earlier, the beginnings of factory production in indus- tries other than textiles had to wait for the opening of the anthracite coal fields in Pennsylvania. Before the mid-183os, when coal became available in quantity for industrial purposes, nearly all production was carried on in small shops or at home. American manufacturing was still seasonal and rural. Workers were recruited when they were needed from the local farm population and paid in kind as well as wages. There was as yet only a tiny industrial proletariat and a minuscule class of industrial managers.

Coal provided the energy to power the new machines. More important, it generated the high and steady heat needed in the more advanced methods of production in the refining and distilling and in the furnace and foundry industries. The new availability of coal, in turn, permitted the rise of the modern iron industry and with it the modern machine-making and other metal-working industries in the United States.

Whereas coal, iron, and machines provided the energy, materials, and equipment required for modern factory production, the coming of the railroad and the telegraph encouraged the rapid spread of this form of production. The railroad and the telegraph became themselves large new markets for the metal-working industries. During the 1850s, rails, wheels, spikes, and other railroad products consumed over 20 percent of pig iron produced; the rerolling of worn rails provided rail mills with another substantial business.1 Railroads also came to be the major markets for wood, glass, upholstery, and even India rubber springs. The demand for wire, both iron and copper, rose sharply as the telegraph network was thrown across the country in the 1850s and 1860s. Rarely has a single market become so important so quickly to an industry as the new and rapidly growing transportation and communication networks did in the primary metals industries during the 1850s.

But of far more importance to the expansion of the factory system was the reliability and speed of the new transportation and communication. Without a steady, all-weather flow of goods into and out of their estab- lishments, manufacturers would have had difficulty in maintaining a permanent working force and in keeping their expensive machinery and equipment operating profitably. Moreover, the marketing revolution based on the railroad and telegraph, by permitting manufacturers to sell directly to wholesalers, reduced requirements for working capital and the risk of having unsold goods for long periods of time in the hands of commission merchants. Reduced risks and lower credit costs encouraged further investment in plant, machinery, and other fixed capital.

On the basis of cheap power and heat and of quick and reliable trans- portation and communication, the factory spread rapidly during the 1840s and 1850s. It became the standard form of production in the metal-making and metal-working and in the refining and distilling industries. It replaced the home and the shop in the making of carriages, wagons, furniture, and other wood products, as well as in the production of cloth. The improvements in the sewing machine brought the factory into the production of shoes and clothing. By the 1870s the one remaining vestige of the older putting-out system was in the making of clothing in or near some of the largest cities.2 After the Civil War the factory system expanded even more rapidly. As Carroll D. Wright pointed out in the introduction to the census of manufactures for 1880:

Of the nearly three millions of people employed in the mechanical industries of this country at least four-fifths are working under the factory system. Some of the other remarkable instances of the application of the system [besides those in textiles] are to be found in the manufacture of boots and shoes, of watches, musical instruments, clothing, agricultural implements, metallic goods generally, fire-arms, carriages and wagons, wooden goods, rubber goods, and even the slaughtering of hogs. Most of these industries have been brought under the factory system during the past thirty years.1*1

In the refinery and distilling and the furnace and foundry industries the proportion of workers employed in comparable industrial establishments was probably even higher.

In those mechanical industries where heat was not used in the processes of production, the management of new factories remained relatively simple. Coordination of operations and supervision of workers required little more attention to plant design and organizational procedures than in the textile factories at Lowell during the 1830s. The machinery needed to fabricate and assemble products made of wood, leather, and cloth was relatively easy to operate. Normally, the set of machines used to carry out one stage of several specialized operations was placed in a single room, floor, or building, and the machine tenders and their supervisors formed a department. Each department was then located so that the product moved seriatim through several processes. The final packing or packaging of the materials required little in the way of complex machinery. In such establishments the factory manager was able to supervise personally the foremen or overseers responsible for the operations of each department and to coordinate the flow of materials through them. Neither he nor the owners felt the need for a formalized administrative procedure.

Nor were they pressed to improve their accounting and other statistical controls. Prime costs—those of labor and materials—made up the greater part of total expenses and were easy to determine. Raw and semifinished materials were few in number. Small overhead costs were allocated in the same rough manner as they had been in the 1830s in the large textile factories. Depreciation on capital equipment was handled in the same informal ad hoc way.

During the 1850s and again in the 1870s, depressed years in their industry, leading textile manufacturers, the largest enterprises in American mechanical industries, began to pay closer attention to cost accounting. From the 1850s on they developed “mill accounts,” which permitted them to obtain an accurate picture of prime costs every six months. The Lyman Mills in Holyoke, Massachusetts, for example, began in the fifties to set up mill accounts for cotton, payrolls, and overhead.4 In the last category charges for starch, fuel, and other supplies, as well as “teaming” (that is, local transportation) were allocated to each of Lyman’s mills at the Holyoke site according to its floor area, number of looms, and rated horsepower. These factory accounts were sent to Boston, where the treasurer and directors computed profits on the basis of these costs.

Not until 1886, however, did the company begin to analyze unit costs for their specific products. Then, as on the railroads, these cost data became managerial tools. They were used to rationalize internal opera- tions, to check on the productivity of the workers, to control the receipt and use of cotton, and to check the efficiency of minor improvements in machinery or plant design. On the other hand, these statistical data were not used in pricing or in making investment decisions concerning the expansion or contraction of existing lines. Such decisions remained almost entirely with the firm’s selling agent.

One reason that plant design and organization changed relatively little in the non-heat-using (and so less energy-intensive) mechanical industries was that, after the initial creation of the factory, technological innovation failed to increase dramatically the speed and volume of throughput. Once the new power-driven machines were perfected, increases in output and productivity came in an incremental manner. Machines were speeded up, but only at a relatively slow rate.

The major innovations in textile machinery were completed even before 1850.5 The giant steps came in the earlier decades with the spread of the large innovative mills that integrated all the processes of weaving with those of spinning. After that, the growing skills of workers and foremen may have been as important as improved machinery in increasing the speed of production and the output per worker and per unit of capital invested.6 According to one estimate, such incremental improvements in skills and machinery permitted a factory of 30,000 spindles making print cloth to have in 1891 the output equivalent to one of 40,000 spindles twenty years earlier. In the cutting and shaping of cloth and leather, few significant innovations occurred after workers and facilities in the factories were adjusted to the sewing machine.

Much the same pattern occurred in the woodworking industries. For example, G. & D. Cole Company of New Haven in 1850 expanded its small carriage-making activities from a brick building 28 feet by 50 feet to a “mammoth” establishment. By concentrating on a single style, by obtaining the advanced wood-cutting machinery, and by carefully designing the works, with each process in its appropriate room, the firm increased production from 3 to 25 carriages a week and soon to 2,500-3,000 a year.7 After that, growth came primarily by adding more men and machines. By the outbreak of the Civil War, nearly all the machines needed to mass produce wooden products had been perfected.8 The factories of the nation’s largest carriage manufacturers in the 1890s were similar in appearance, nature of work, technology, plant design, and organization, as those of the Cole Company in the 1850s. The speed and volume of throughput increased steadily but slowly. After forty years the nation’s largest carriage makers, using the most sophisticated wood-cutting ma- chinery, the minutest subdivision of labor, the most carefully designed plants, and nationwide marketing agencies, had an output of 40,000 to 50,000 carriages a year. When the metal automobile replaced the wooden carriage, output in the production of transportation vehicles increased at a much greater rate to a much greater volume.

The processes of production in other non-heat-using industries had the same characteristics as those making cloth, leather, and wood products. Total output was increased more by adding men and machines than by continuing technological and organizational innovation. For this reason the increased size of the enterprise brought few advantages in terms of increased productivity and decreased costs.

Changes in the organization of enterprises in these mechanical industries were more a response to marketing than to technological developments. The ability, after the coming of the railroad and telegraph, to sell directly to jobbers for cash simplified both marketing and finance. As a result, management tended to become centralized in the hands of two or three partners or large stockholders. No longer did the president and treasurer of an enterprise reside in the large commercial center and the partner or agent in charge of production at the distant mills. The offices were usually in one place, normally at the mill, with one partner handling finances and another production; either of them or a third partner bought materials from commodity dealers and sold finished goods to jobbers. In the late nineteenth century even the New England textile mills centralized control of these three basic functions at a single headquarters.

Beyond centralizing their activities there was relatively little change in the technology or organization of production in these mechanical indus- tries after the substitution of machinery for manual operation. In these industries, until well into the twentieth century, the relatively labor- intensive and simple mechanical technology created few pressures or opportunities to develop new types of machinery, new forms of factory or plant design, or new ways of management. Small incremental improve- ments continued in technology and organization and in the skills of workers and their managers. As a result neither the technology nor the or- ganization of the modern factory evolved out of the production processes in the older mechanical industries of textiles, apparel, and other clothing products, of shoes, saddlery, and other leather products, of furniture, wagons, and other wooden products.

Source: Chandler Alfred D. Jr. (1977), The Visible Hand: The Managerial Revolution in American Business, Harvard University Press.

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