The revolution in production came more slowly than did the revolution in distribution, for it required further technological as well as organiza- tional innovation. The new methods of transportation and communication, by permitting a large and steady flow of raw materials into and finished products out of a factory, made possible unprecedented levels of production. The realization of this potential required, however, the invention of new machinery and processes. Once these were developed, manufacturers were able to place within a single establishment (that is, to internalize) several processes of production.
Such mass production techniques came first in industries processing liquids or semiliquids, such as crude oil. They came a little later in a number of mechanical industries, including those processing tobacco and grain. They appeared more slowly in the metal-making and metalworking industries, because there high-volume production required more technological breakthroughs. But when those breakthroughs came, the increases in the speed of output were spectacular. In all these manufactur- ing establishments, the coordination of high-volume flow through several processes of production led to the hiring of a staff of salaried managers and the development of modern factory procedures and organization.
The basic difference between the coming of mass production and mass distribution lies, therefore, in technology. Mass distribution came primarily through organizational innovation and improvement, using the new forms in transportation and communication. Mass production, on the other hand, normally called for technological as well as organizational innovation. Although technological change has often been defined to include organizational change, it does seem useful to distinguish between them. Technological change in production and distribution refer, for the purposes of this study, to innovations in materials, power sources, machin-ery, and other artifacts. Organizational change refers to innovation in the ways such artifacts are arranged and the ways in which the movements and activities of workers and managers are coordinated and controlled.
In production an increase in output for a given input of labor, capital, and materials was achieved technologically in three ways: the development of more efficient machinery and equipment, the use of higher quality raw materials, and an intensified application of energy. Organizationally, output was expanded through improved design of manufacturing or processing plants and by innovations in managerial practices and proce- dures required to synchronize flows and supervise the work force. In- creases in productivity also depend on the skills and abilities of the managers and the workers and the continuing improvement of these skills over time. Each of these factors or any combination of them helped to increase the speed and volume of the flow, or what some processors called the “throughput,” of materials within a single plant or works. (Hereafter, “plant” means a large facility and “works” means an establishment of many facilities.) For managers of the new processes of production a high rate of throughput—usually in terms of units processed per day—became as critical a criterion of performance as a high rate of stock-turn was for managers of mass distribution.
Where the underlying technology of production permitted, increased throughput from technological innovations, improved organizational de- sign, and perfected human skills led to a sharp decrease in the number of workers required to produce a specific unit of output. The ratio of capital to labor, materials to labor, energy to labor, and managers to labor for each unit of output became higher. Such high-volume industries soon became capital-intensive, energy-intensive, and manager-intensive.
Mass production industries can then be defined as those in which tech- nological and organizational innovation created a high rate of throughput and therefore permitted a small working force to produce a massive output. Mass production differed from existing factory production in that machinery and equipment did more merely replace manual operation. They made possible a much greater output at each stage in the overall process of production. Machinery was placed and operated so that the several stages were integrated and synchronized technologically and organizationally within a single industrial establishment. As a result, the speed of throughput was faster at each stage than if each stage had been carried on in separate establishments.
The possibility of achieving high-speed throughput, or mass production, depended on the basic technology of the production processes. Agriculture offered little potential for a sharp accleration of the flow of materials through the processes of production. There, speed and volume rarely reached a level high enough to stimulate organizational and man-agerial innovation. In the raising of corn, cotton, wheat, and other crops, biological constraints determined the time of preparing the soil, sowing, cultivating, and harvesting, and so set the speed of the overall processes of production. Improved strains of crops and better fertilizers increased output per acre worked; improved machinery made it possible to carry out the different processes of production at a somewhat greater speed. But the need almost never arose to devise organizational procedures to integrate and coordinate the processes. Therefore, the family was able to remain the basic agricultural working unit; and the farmer, his family, and a handful of hired helpers relied, until the twentieth century, on human and animal power to work farm implements and machines.
Much the same could be said of the building and construction trades and the mining industries in the nineteenth and early twentieth centuries. Improved machinery increased output and permitted some integration of tasks. In the building industries, however, the tasks remained the tradi- tional ones of the carpenter, bricklayer, plasterer, and the like. The working of mines involved little more than having small teams of men doing much the same thing in different parts of the mine. Until the twentieth century the workers in both these industries relied largely on hand tools. Here, as in agriculture, there was little opportunity to speed up the processes of production by a more intense application of energy. There was little need to build a complex organization to coordinate the flow of goods from one process to another. These industries long remained labor-intensive.
In the mechanical industries (those where machinery replaced men, as in the production of cloth, leather, and wood and products made from such materials), improved technology and the application of nonhuman energy played a larger role. The need for internal organization was more obvious. As the output of the enterprise grew, each process of production was organized into a major department, with its own specialized machines, which were normally operated from one central source of power. Coordi- nation and control of the subunits therefore required close supervision of the machines and the men who tended them.
Yet in these mechanical industries the possibilities of accelerating the velocity of production was limited. Essentially, machines took the place of manual operations. A machine did a task comparable to that of a worker in spinning, weaving, sewing, cutting, and fabricating. The maximum speed of cutting or shaping wood, cloth, or textile products by machinery was quickly reached. Nor did the spinning and weaving of natural fibers or the tanning of natural leather lend itself to massive increase of throughput by a greater application of energy. Since the speed of production was limited and since this energy was used for little more than powering the machines, the requirements for coordination and control remained relatively simple. These mechanical industries continued to be labor-intensive, and the type of organization developed by the early textile mills remained satisfactory. The only important change was the centralization of management in a single office, usually at the mill site.
In some mechanical industries, however, machinery did more than merely replace the manual operations in each process of production. Machines also integrated these processes. The application of continuous- process machinery and nearly continuous-process factories to the pro- duction of tobacco, grain products, canned foodstuffs, soap, and film greatly increased the volume of output and sharply decreased the labor force required in processing. The new high-speed operations brought fundamental changes in the enterprises that adopted them and the indus- tries in which they were located.
The furnace and foundry and the distilling and refining industries lent themselves more readily to mass production than did the mechanical industries. In those industries, where the processes of production required the application of heat and involved chemical rather than mechanical methods, improved technology, a more intensified use of energy, and improved organization greatly expanded the speed of throughput and reduced the number of workers needed to produce a unit of output. En- larged stills, superheated steam, and cracking techniques all brought high- volume, large-batch, or continuous-process production of products made from petroleum, sugar, animal and vegetable fats, and some chemicals, and in the distilling of alcohol and spirits and the brewing of malt liquors. In the furnace industries (those producing iron, steel, copper, other metals, and glass), better furnaces, converters, and rolling and finishing equip- ment, all of which required a more intensive use of energy, did much the same. The resulting increase in the speed and volume of production put a premium on developing plant design to assure the maximum use of equip- ment in order to assure a steady and smooth flow of the maximum amount of materials through the processes of production.
In the metal-working industries, the requirements of high-volume output brought the most significant technological and organizational innovations. In metal-working, production involved a greater number of processes (both chemical and mechanical) than in other industries. It used a wider variety of machinery and equipment and of raw and semifinished materials. Metal was more difficult to cut and shape than cloth, leather, or wood. Much finer tolerances were needed in the making of machinery and other metal products than in the production of apparel and furniture. Therefore, the coordination of the flow of materials through a metal-working establishment was highly complex. Not sur- prisingly, the most significant innovations in machine tools appeared in these industries, and it was here that the practices and procedures of modern systematic or scientific factory management were devised and perfected.
In modern mass production, as in modern mass distribution and modern transportation and communications, economies resulted more from speed than from size. It was not the size of a manufacturing establishment in terms of number of workers and the amount and value of productive equipment but the velocity of throughput and the resulting increase in volume that permitted economies that lowered costs and increased output per worker and per machine. The savings resulting from the use of the same light, power, and maintenance facilities were tiny compared with those achieved by greatly increasing the daily use of equipment and personnel. Central to obtaining economies of speed were the development of new machinery, better raw materials, and intensified application of energy, followed by the creation of organizational designs and procedures to coordinate and control the new high-volume flows through several processes of production. In industries where the processes of production had the potential for such technological innovation—and this was not the case in many industries—a manufacturing establishment that exploited such a potential was able to produce a greater output at lower cost than could a larger plant or works that had not adopted similar improvements. In such mass production industries, organizational and technological innovators acquired a powerful competitive advantage.
An analysis of the rise of mass production and the enterprises that came to manage it requires a general look at the changing technology of pro- duction after the 1850s, with special consideration of those industries where technological and organizational innovation permitted a sharp increase in throughput and so led to the rise of the modern factory. For the modern factory was as much the specific organizational response to the needs of the new production technology as the railroad and the telegraph enterprises were responses to the operational needs of the new technologies of transportation and communication, and as the mass mar- keting firm was to the opportunities created by those same technological advances.
Source: Chandler Alfred D. Jr. (1977), The Visible Hand: The Managerial Revolution in American Business, Harvard University Press.