DISCUSSION GROUP A4

THE COST OF AUTOMATION

by F. T. HUNTER, F.C.A., F.C.W.A.

THIS Paper is an attempt to marshal a number ofthe problems which will arise increasingly in the

future, as a result of the accelerated adoption of newmanufacturing and control techniques described bythe now popular word ' automation '.

It does not attempt to assess cost in terms ofmoney, or men. It is suggested that present experienceand knowledge does not, despite any claims to thecontrary, permit broad generalisations of cost of anyreal importance to be made, and that much moreexperience and research will be necessary.

What does seem reasonably clear is that, as abroad generalisation, these modern techniques areprofitable. That is, doubtless, a glimpse of the obviousin that design and management skills would notbe being devoted to the subject were it not so, butwhat does not seem anything like so clear is just howprofitable they potentially are. There are rumoursthat some of the developments announced to theworld in stentorian tones as miracles, from which goldwill flow in ever-increasing streams, have proved toproduce mere trickles, and the proponents prefernot to discuss the subject.

However, it would seem unarguable that no matterwhat the opposition, manufacturing and controltechniques will change rapidly in the next compara-tively few years, and that more and more reliancewill come to be placed on automatic means ofinitiating and controlling manufacture, and automaticmeans of carrying out a host of clerical and semi-clerical tasks.

A number of problems will arise, technical andmanagerial. Many of them will have a cost aspect,using cost in a broad sense of financial resources,manufacturing capacity, manpower, use or waste ofacquired skills, and so forth, rather than a narrowersense of rates per hour, incentive bonuses, incidenceof overheads, etc.

It would seem sensible that all managementsshould be thinking seriously about such problemsnow, and try to develop some broad lines of approach,rather than deal with them at the crisis stage.

It is, of course, true that many managements arethinking about them now and it would be foolish,

and arrogant, to suggest otherwise. But there isa suspicion that some managements are still, perhaps,in the stage of initial excitement without realisingthat the changes in prospect are very far-reaching.It is easy to over-state the prospects, but it is equallyeasy to ignore them and be engulfed by the tideof progress.

The implications seem to be national and inter-national, and this Paper has to a great extentdiscussed the cost problems from a national viewpointrather than that of an individual concern. All levelsfrom the managing director to the shop floor areinvolved.

It is possible that this Paper will mention pointsdealt with more adequately and in more detail inother Papers and, if so, apologies are extended tothe authors of such Papers.

Broad definition

There are conflicting claims regarding the originof the word ' automation '. There are conflictingideas of what it includes.

It is, perhaps, early days for definitions of generalacceptance based upon tested experience to haveemerged.

The booklet " Automation", of the D.S.I.R.,defines it as " all technical developments that makeautomatic production more possible ".

Is this definition quite wide enough in its wordingto indicate clearly that the developments such ascomputers are included ? While these do not takepart in production in the sense that they form partof a chain of production processes linked electronicallyor mechanically, they take part through the provisionof vital and often complicated information necessaryto highly automatic production.

Indeed, there would seem to be no reason why, indue course, there should not be a large, highly com-plicated, fully automatic factory in which the controland integration of the entire production would becarried out by an electronic computer. So far as thewriter is aware, this has not happened yet but is ittoo far-fetched a concept ? Almost certainly not.

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Are we all to become men from Mars soullesslypressing buttons and gazing at dials ? Sir BenLockspeiser in his preface to the D.S.I.R. bookletsays " Automation will not make robots of us all. Onthe contrary it will demand wider knowledge, greaterability, and a higher degree of skill from worker andmanager alike".

M. Louis Salleron, in his book ' VAutomation',suggests that a simple definition is "l'ensemble desproced6s automatiques qui remplacent le travail de1'homme ".

John Diebold says that automation is " a meansof analysing, organising, and controlling the meansof production to achieve the maximum utilisation ofall the productive resources, mechanical and materialas well as human ".

There are many more, all perhaps having objections,all having much truth in them. One of the shortestis that of Peter F. Drucker : " The use of machinesto control machines ".

A trenchant comment from Sir Robert Barlow,Chairman of the Metal Box Go. Ltd., appears in hisreview to the shareholders on the March, 1956,Accounts. He says:

" So much nonsense has been talked and writtenon this subject that it may be worth while to statethis Company's practical experience of it.

" The word ' automation ' is used to cover methodswhereby an article, in the course of its manufacture,is transferred automatically through a series ofmachines on which various processes are performedwithout manual intervention and often under thecontrol of electronic devices.. This definitionaccurately describes the method by which the greatmajority of our metallic containers are now beingmade. It isn't new! The method has been in usein our factories for more than 30 years and most ofour cans are now made by it at speeds up to 400 aminute. We expect very soon to operate suchmachinery at much higher speeds."

Scope of technical advanceIt is frequently overlooked that there is, basically,

nothing new in automation except the word itself.There has been a constant process of development forover 100 years at least. There have been periodswhen development was not fast, but other periodswhen the pace was furious and almost overwhelming.

The present shows all the signs of being one'of theperiods of furious and almost overwhelming pace.This pace has been accelerated vastly in the last veryfew years by the development of, inter alia,electronics, and ideas of how and how not to dothings are changing very rapidly.

This Paper is concerned, therefore, very largelywith the possible effects of this much accelerated paceof development.

The D.S.I.R. booklet already mentioned suggeststhat three main channels of technical progress willbe pursued :

(a) An expansion of the scope of mechanisation bytransfer-devices that link machine tools in auto-matic production lines, and by advanced

techniques of handling materials and productsand of assembling components.

(b) A rapid development of techniques of automaticcontrol over manufacturing processes and theirapplication to an ever-widening range ofindustries.

(c) The rapid and automatic processing of anincreasing range of technical and business infor-mation by the electronic digital computer, witha consequent extension of automatic control tocomplex manufacturing operations and com-mercial offices.

The D.S.I.R. clearly include under the automationumbrella office work, as distinct from clerical functionsnecessary to control production functions. Forexample, a system of preparing packing schedules,despatch notes and invoices on a computer isautomation.

Railways are another field where automation isbeing thought of and adopted. The French Railwaysare understood to have installed already considerableamounts of automatic control equipment, whichgovern the operation of trains over large areas withhuman intervention only at a remote control centre,and they, as well as the London Transport Executive,are talking seriously of the feasibility of runningelectric trains without drivers.

Many more examples could be cited. The pointreally being made is that automation is not justbetter and more rapid means of making things. Itcovers almost the whole field of human activity, andnot only industrial activity. We accept, nowadays, ascommonplace, cookers which turn themselves on andoff, either to a time control or a heat control, deviceswhich ring alarm clocks and pour out the morningcup of tea, thermostats, and others. They operatein accordance with instructions previously given tothem, and subject to the fallibility of all devices, willcontinue more or less unaided until stopped. Theseare automation.

There is no doubt but that the lives of all of usare being, and will continue to be, affected drasticallyby these developments. While many may deplore anapparent enslavement to machines, and curtailment ofindividual liberties and choices, this is a view that hasagain and again been taken of progress of any kind.It is a view that the writer of this Paper suggests iscompletely erroneous, but, whether it is or is not, therevolution will continue and will prevail.

Paul Einzig in the preface of his book : " TheEconomic Consequences of Automation " says " It isof vital importance, not only from the point of viewof our prosperity, but even for our survival as freenations, to proceed with automation with the utmostspeed."

Capital requirements and resourcesDoes the accelerated pace of automation call for an

increase in the annual rate of investment in fixedassets, and working capital, and if so, where does itcome from ?

There appears to be a wide divergence of viewas to whether the capital requirement will be larger ornot. The problem is not made easier by the obvious

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fact that industries differ, and the truth in one maybe a falsehood in the other.

Paul Einzig says that there is statistical evidenceof a reduction in the value of fixed assets in com-parison with the value of annual output. He pointsout also that an advance in the replacement of manby machine means more capital requirements andnot less.

But is there any evidence yet of whether presenttrends will continue or be reversed ? Probably not.

In some industries new equipment is less costlythan the old, in some it is much more costly, and afactor of importance is the reason for installingmodern equipment.

It can be installed to reduce costs of production,thereby requiring less working capital for a givenvolume of output, or it can be installed to increaseproduction, thereby requiring more working capital.

In 1954 in the United Kingdom £M2,500was devoted to capital goods. This represented 16%of the gross national product. Will automation needmore ?

In the highly automated chemical industry inU.S.A.. evidence was given before a CongressionalSub-Committee that in 1954 the average amountspent on new equipment was $2,240 per productionworker against an average of $877 for manufacturegenerally, and that the total investment was approxi-mately three-and-a-half times per production workercompared with manufacture generally.

It would seem likely that for some time the require-ments of capital will increase because technicalprogress will be rapid, and existing plants will becomeobsolete.

But there is reluctance on the part of industrialiststo scrap plant and install new. If the concern isapparently both making good profits and facing acontinuation of that happy state for some time ahead,it is asking quite a lot to expect a very ready adoptionof a bold and comprehensive re-equipment.

There are, of course, the bold and farseeing whohave no hesitation in spending handsomely ontechnical progress, but there are many who showmarked hesitation.

A survey of the age of plants would probably showa surprisingly high average figure.

It would seem that, so far, the finance needed hascome very largely from the resources of the variouscompanies. The progress, while rapid, has not been allthat rapid and companies have been able to cope withit. For the small concerns the position is, perhaps,more difficult and outside help is needed. Some ofthis cover will come from large customers prepared tofinance a small but technically competent supplier.

The gross national product has risen by approxi-mately 3% per annum since about 1946, and providedthere is a progressive growth, there would seem to beno reason why an increase cannot be made in newequipment without damaging growth and investmentin other things.

In general, it would seem that no difficulties of anyreal consequence should emerge to prevent industryfinding the capital very largely from its own resources,

particularly as after some time cheaper productionshould provide some of the increases necessary.

Machine tool resourcesThe machine tool industry has been working at

pressure for some long time, and deliveries have beendifficult. Any increased demand on them as a resultof automation could probably not be satisfied to anysignificant extent without expansion.

But some of the demands will surely be in the formof substitution, new equipment to new designs takingthe place of demands for the out-dated equipment.

To some extent also, machine tool plants them-selves will adopt automatic techniques and achieve,after some time, greater production.

There is another factor of significance in thatmuch of the equipment needed will come from plantswhich hitherto have not been in the machine toolfield. Companies such as E.M.I, are developing, inconjunction with a machine tool manufacturer,control devices of various kinds. Much, therefore,of the demand will not fall on the machine toolindustry itself but will be spread over other industries.

There are signs, also, that end-product manu-facturers are, because of shortages and, perhaps, lackof technical know-how in the machine tool plants,starting to design and manufacture their own plant.Much of this will, no doubt, be done on a trial anderror basis which almost determines that theexperimentation and working out of the final set-upare often better carried out by the technicians andin the workshops of the user.

It is possible, of course, that increased demand forthe end-products will lead to expansion of manu-facture and a demand for much more plant. If thishappened too rapidly there would be, no doubt, seriousshortages and a general slowing up of the rate ofexpansion, until the machine tool industry hadexpanded correspondingly.

While engineering represents a very large part ofindustrial activity, however, it is by no means inadvance in automation. Flour milling, refining,chemicals, to mention a few, are far ahead. It iseasy to worry about the machine tool industry, butmuch of the present demand for plant falls on peoplewhose use of machine tools is not so great. Themanufacturers of highly automated plants such asmilling and chemicals have less scope themselves toinstall and use effectively in their own works a highdegree of. automation. The demand for automaticcontrol gear falls on the electrical equipment industry,for example, and even today much of their work isdone by hand.

While this sort of pattern will very probablychange, and the engineering side will speed up, thereare grounds for thinking that the rate of speed-upwill not be alarming and that the various concernswill be able to satisfy the demands at least as well asnow.

There are some who express the view that, apartfrom mammoths such as the motor car companies,factories will tend to become smaller and demand lessequipment, because the rate of production will soincrease as to satisfy all possible demand from less

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equipment. The development of more shift workingwhich is a result most likely to flow from automationwill have this effect. Plants will be able to operatealmost day and night without incurring some of theadditional costs and problems which have bedevilledshift working in many industries in the past.

But perhaps it will be found to wear out morequickly, so that the situation is as before.

It is hard to see what the immediate future maybe in terms of " cost". Will it be chaos for sometime with a wild scramble, or will it be more orderlybecause expansion proceeds more slowly ? As aguess, it is suggested that the latter is more likely,although there is not implied in that suggestion anybelief in slowness as a good thing.

ManagementIt is difficult to separate the problems of manage-

ment and manpower. There is a distinct probabilityof a general upgrading of required skills. More andmore people will be required with more and moretechnical skills. Other Papers are discussing theseproblems in detail,

From the cost aspect it would seem most likelythat the personnel needed to run a factory will bemore costly because of a much higher standard oftraining and education.

Management will tend to pass into the hands ofspecialists, and these specialists will require a broadertraining in purely management techniques. Therewill always be such problems. The idea that factorieswill cease, for example, to have welfare problemsbecause there is no one for whom to provide welfareis doubtless, quite feasible but at present, a long wayoff.

There will be :(a) higher investment (in many concerns) in

equipment ;(b) a closer integration of one process and another;(c) an increase in manufacturing complication, if

not in end-products.All this requires increased experience, technique,

breadth of vision, versatility, from the managers. Theymust take a great deal more interest in planning,methods, costs, and must understand more of generalbusiness economics.

It follows that staff such as accountants must under-stand much more of technical problems and methods.Technicians are going to find themselves muchhigher, in general, in the management hierarchy.

Something of the same kind will happen in offices,at least the large ones. More and more highly skilledpeople will be wanted.

Whether such people can be found (and thereare views that the general level of intellectual abilitywill make it difficult) is, doubtless, dealt with in otherPapers.

The effect on the cost of the product, however,should not be an increase. The greater volume ofproduction should more than absorb total costincreases, giving a lower cost per unit.

Boards of Directors, however, will have to accustomthemselves to thinking in terms of a more costly man.

In addition, the cost of training must go up intotal, if not per man. Without being aware of theprecise position, is the technical teaching space cap-able of absorbing many more students? Are therethe necessary teachers available?

As a guess, the answer is no. If it is " yes" to thespace, is it "yes " to the teachers? Broadly, it issuggested that much more must be spent in total ontraining, although experience, in due course, willenable more men to be put through per £1 of cost,just as more pieces should emerge per £1 of cost inan automated factory. This does not suggest anautomated technical college, but the analogy is, surely,sound.

Among the computer manufacturers, at present, acertain amount of general post seems to go onamongst the higher staff at least. This would arguea shortage, and if that is true, is it too cynical tosuspect some degree of buying each other's good menat higher salary rates?

This point is a very important one. The need isobviously there, and will, at least in due course, befilled. Such needs almost always are. But CompanyA won't fill their need unless they are prepared topay the going rate.

The competition for good men may well inflaterates artificially for some time, but permanent andjustified increases in rates will undoubtedly take place.

What looks like finally disappearing is the old-style manager who worked by something called in-tuition (one suspected at times a little gazing at tea-leaves at 11 a.m. and 3 p.m.). That is, perhaps, nota cost to the nation at all, but a very positive gain.

As a matter of interest, advertisements have beenappearing in U.K. journals for technical staff byAmerican Companies. If the pace of advance isaccepted as being greater in America, it would seema reasonable inference from such advertisements thatthe shortage is already showing itself there and can-not be filled from their own resources.

ManpowerThere is not much doubt that unions fear automa-

tion not only in this country, because of the possibilityof redundancy, and there is some evidence thatsmaller firms have not adopted automation becausethey knew that the possibility of being able to reducenumbers was remote.

Is automation likely to be costly, in the sense ofcreating much unemployment? Some say yes,vehemently, some say no equally vehemently.

There is a possibility, perhaps, of temporary un-employment but there is not much sign, at present,of anything large-scale. There is, and has been, ashortage of labour for a long time, and despite someof the reports of recent months not much redundancyhas shown so far.

A switch from some types of employment to othersis most likely (e.g. many more people having oppor-tunities to become higher-grade technicians), andsome people will tend to become much more meremachine-minders.

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This is good and bad obviously. An increase inhigh-grade technicians is good but the disappearanceof craftsmen is bad. On the whole, the good willoutweigh the bad. Classes of employee such asmaintenance and services will increase.

The history of all Industrial Revolutions has beento raise the numbers gainfully employed, and nogood reason seems to have emerged why the presentrevolution (if it can be called that) should not showexactly the same pattern.

Demand should be stimulated through lower costsand prices, which will lead to greater production anda demand for more people.

The evidence so far seems to show that firmsadopting any degree of automation have not laid offpeople because :-

1. Natural wastage took care of some. (There isabout one job change per annum per threeemployed in the U.K.).

2. Shortages have been made up in other spheresof the works.

3. Many firms have expanded.Much the same picture is seen in offices. Though

the degree of automation in offices is, probably not,so far, as extensive as even the little in manufacture,there does not seem to have been much redundancy.Indeed many types of clerical and semi-clerical jobswill increase tremendously. One of the most import-ant tasks in automating an office is to carry out firstsome very extensive O. & M. work. This will de-mand an increasing number skilled in this kind ofwork.

Many people hope that one of the results over theyears will be a reduction in working hours. Thiscalls for more leisure pursuits, and leaving out theargument that few of us are qualified to make anyreal use of increased leisure, there would follow ademand for leisure services.

A point of some significance also is that the indus-tries such as chemicals which are most suitable forautomation are small users of labour.

To quote Sir Robert Barlow again, he says:" Over the period (i.e. some 30 years), and particu-larly during the last 10 years, automation has led toa transformation of our industrial processes with re-sults which we expected. In the first place, themarkets for our goods has- enormously expanded andcanned goods are now an everyday necessity in everyhome. Secondly, the number of people employed inmaking the tin cans has increased greatly and, I mayadd, not only in this country but throughout theworld.

" The process has led to an unsatisfied demandfor more skilled people and indeed the problem offinding and training skilled staff is one of our greatestconcerns. That is why we have at this moment over400 apprentices, to say nothing of men in trainingfor professional and managerial posts.

" Automation, so far as we are concerned, has notonly provided more work, but also more highlyskilled work, which is correspondingly more satisfyingto the individual and more remunerative to him. Itmay be that where automation has to be introduced

on a large scale, some dislocation is inevitable, but Iam sure that it will be short-lived.

" I am absolutely convinced that automation issomething which should be welcomed by the workingpeople of this country, not only in their capacity asproducers, but also in their capacity as consumers. Itis far too often forgotten that the people who makethe goods are the people who buy or use them. It isin their interest to press for every known mechanicalaid to production."

That extract from his 1956 review contains somevery pertinent observations, worthy of thought.

Paul Einzig reaches this conclusion : " Automationis bound to proceed sooner or later whether we like itor not. Our choice does not rest between automationand full employment, but between prompt automa-tion with the possibility of moderate temporary unem-ployment, and delayed automation with the certaintyof grave perennial unemployment, until our progresshas caught up with that of our competitors."

One can, perhaps, understand the thinking whichleads to feather-bedding and restrictive practices. Onecan only hope that the cost of these is realised, beforeit is too late, to be far greater in national damagethan the possible cost in terms of personal hardship oftemporary redundancy which, in any case, does notseem to have been experienced so far.

MaterialNo one seems to know, or have any real idea, of

what the cost in terms of material may be.One can argue that there is a possibility of short-

ages, bottlenecks, and even more rapid exhaustion ofsome materials. The rate of consumption of somematerials is very rapid, and there are some shortages.Steel is an obvious example of a shortage.

There are alarmist reports of a general loweringof water-tables, and a world shortage. In the Southof England the water-table is said to have beenlowered during and since the War by many feet,but the blame is, in some quarters, placed upon theU.S. forces and not industry. Water is a vital com-modity in many industries.

Should there be Government determination ofpriorities before it is too late? Should there be ex-ploration for and extraction of hitherto remote sup-plies and who should pay for it? One can posemany similar questions. The only real fact seemsto be that no one knows the answers. Dare one hopethat somewhere the right people are thinking aboutthem and trying to determine the answers?

Doubtless the research into new materials will growrapidly and show results. Textiles are an obviousexample where new synthetic fibres seem to beannounced every day. But are the basics from whichthese fibres come showing signs of early exhaustion?

The writer has been unable to find much of anauthoritative nature on this aspect of the subject. Itclearly is of extreme importance and extreme diffi-culty. It demands continual research, and it wouldseem essential that the problem should be tackled atGovernmental level.

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PowerThe projected rate of industrial growth will de-

mand an accelerated supply of power, particularlyelectricity. There are fears that in the mid-1960'sthere will be serious shortages because supply willnot keep up with the increasing pace of demand.

It seems clear that coal must be supplementedvery rapidly, and new sources of power obtained.What should they be? Must it be a series of GalderHalls, and what are the cost effects likely to be?

Power consumption should be more effective, be-cause less wastefully used, as a result of automation,but the savings are quite unlikely to provide otherthan a fraction of the increased general demand.

The cost picture of new sources of power does notseem very clear. Can it be proved whether powerfrom Battersea is cheaper than Calder Hall or LochAber or vice versa ? Does it matter ? We must have itand, therefore, the only vital question is : " Wherecan we get it?"

Is the position such that, for many years, almost anysource of supply is worth it, no matter what the cost?

Some unfortunate cost controller is going to havethe sums to do one day, and his answers may well leadto the adoption of one or another methods quitedecisively, but it is doubted whether anyone reallyknows right now. If that is true, there may be somecostly mistakes. Perhaps, though, they might not bequite such mistakes because they might have savedsome disastrous situation at the time.

Who can say that the Brabazon adventure was amistake, costly though it undoubtedly was in moneyterms ?

Industrial patternThere is a distinct tendency to imagine that the

advent of automation will mean a concentration ofindustry in fewer and fewer giants, and that thesmall man is doomed.

Is automation to be confined to the production of afew standardised articles in very large quantities?

If this happened the cost to the community wouldbe the loss of the strengths of small men to a country,and they have many strengths and advantages, andthe loss of variety. There is, of course, far too muchneedless variety very often, but at least let us havesome.

The evidence of the stimulation to the growth ofthe giants is, however, not very convincing.

A small highly-automated plant can concentrateon long runs of a few products, providing a mostuseful service to a large-scale assembler. Many of thelarge-scale concerns are surrounded by a host of smallmen, each producing one or two components. Thereseems no reason why this industrial pattern shouldnot continue to expand.

Another result that may be seen is a change inthe location of some industry. There will be some-what less need to site a new plant in the midst of aclosely populated area, because of the fewer numberof people required in any one automatic plant.

It is also not at all essential that an automatedplant must, of necessity, have very long runs. Set-up for a change can be much quicker than a similar

change in a factory not so highly mechanised, andany one automatic plant can handle comfortably quitea few products.

It seems very likely, therefore, that automation willsee a growth in the number of small specialist firms,and that those firms will by no means be confined toone or two products.

There will always be some people prepared to payfor something different and if there is some degree ofstandardisation, there might even be a growth, orregrowth, of small specialist manufacturers on a craftbasis, catering for the amount of craft trade at pre-sent existing, and for some of the variety at presenthandled by larger concerns who will cease to makemore than a very limited variety.

That there will be some standardisation andsimplification is, probably, inevitable.

Disappearing costsThe cost accountant is going to find his ideas

changed quite considerably. Apart from a change ofthought, discussed in the next section, some of hisold familiar friends in the expense world look likevanishing or at least becoming a great deal smaller.Their place will be taken to a considerable extent bythe increases in technicians, planners and so on.

The sort of expense that will tend to vanish is muchof that embraced under the general head of WorkStudy. Time Study men, Motion Study, piecework,fancy forms of incentive, these will have little placein an automatic plant. The calculations will be donein an office and on a drawing board.

Operator efficiencies will cease to have much mean-ing, and the old distinction between direct and in-direct labour becomes dead.

Operators will cease to take part in the productionitself. They become more of a supervisory nature,but the stimulus towards interest and enjoymentshould be great. Many men will enjoy controllinga superb piece of automatic machinery far morethan operating a capstan lathe and, despite the ideaof making things automatic, there have to be somecontrollers, until the completely automatic factorybecomes common.

Some expenses such as maintenance will probablyincrease. The amount of maintenance will increasein volume in that the new types of plant will requireit and the quality and therefore cost of maintenancestaffs will go up.

There is likely to be a decrease in the cost of jigsand fixtures, but there might be an increase in thecost of tools.

Scrap and rectification should tend to be reducedbecause of the higher degree of control possible withautomatic rather than human means, particularlywhere highly-developed feed-back systems are in use.

The cost of such things as setting-up will alterdrastically.

By and large, the cost accountant will have tostart again and think of what amounts to a newschedule of expenditure.

In the trades where package-filling to set weights isnecessary, for example, there should be a much moreaccurate control on such weighings, with reduced

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losses due to over-filling or claims from customersfor short weight.

Cost accounting

Cost accountants will be faced with re-thinkingtheir approach. Some of the expenses which are likelyto disappear or change have been mentioned in theprevious section, but the problem is a wider onebasically.

In the past many schemes of control accountinghave been built around statistics of operator effici-ency, waiting time, etc., and the behaviour and costof people generally.

This approach, while doubtless absolutely correctat the time, will have little or no meaning underautomation.

Operators will have no effect on speeds of produc-tion, because the speed of the equipment will be setand controlled by the engineering department. Theonly real effect an operator could have would beto fail to see that the equipment was fed with rawmaterial where this was not also automatic, and tofail to deal with breakdowns promptly.

The stopped-time will become one of the import-ant points to watch and will be one of the factorswhich the cost accountant will highlight.

The incidence of maintenance becomes important,and the whole question of overhead allocation willrequire careful thought. There will be a need formuch more accurate and detailed study and alloca-tion. Sloppy methods adopted because they weregood enough will not do any more. They neverreally did, but many thought they did.

Fractions of pennies will count much more whenconsidering this or that line of action.

As mentioned earlier, the accountant will be drawninto top level management in a more positive way.Things like operation research, now receiving increas-ing interest, will demand closer co-operation fromhim, as much of the basic information must comefrom the cost office.

What should be avoided by the cost accountant isan approach conditioned by any preconceivednotions. No one is very clear what is going to emergeas important and what is not.

Managements will be bombarding the cost depart-ments with demands for all sorts of new informationand the cost accountant must be broad-minded andalert enough to respond, and think out freshapproaches.

Much of the management accounting approachtoday is concerned with the behaviour of people. Assuggested, this concern is becoming of secondaryimportance and the accountant must become con-cerned primarily with the behaviour of automaticmachinery.

Not so much appears to have been published sofar on comparative costs, but the following figureshave been fairly recently published and show someindication of the fairly drastic shift of emphasis.

The Ford Motor Co. have shown for a 7-multi-station transfer machine doing motor car cylinderblocks :30 operators — One-half of non-transfer line

on tractor blocks31£ min. cycle time — 71 minutes for tractor line

Cost approximately halved.

Service to small concerns

The increased costs of mechanising, planning, con-trolling, standardising and simplifying, to mention afew of the possible sources of increases, will befrightening to many small concerns. To some theywill be prohibitive. To some they will be quite un-economic, because there will not be enough work tokeep the highly-qualified, highly-paid staff fullyemployed.

Is there a possibility of developing design andplanning service on a hire-basis for small people?There seems to be a clear field for this type of centralservice in computer work, where programming andmachine time will be on hire. Why not in some of theother fields?

Perhaps the larger customers may find it worththeir while to provide such services to some of theirsmaller but vital suppliers. It has been suggestedthat assistance towards the cost of equipment maywell be provided by large customers to small men,and the idea of providing skilled technical help alsowould not seem to be too difficult or far-fetched.

To some extent work of this kind is already done,much technical help being given by the larger con-cerns, and also by consultants. But this is not organ-ised as a rule in quite the way of regular but part-time service, whereby the part-timers are a permanentand necessary part of the management set-up in asmaller concern.

It is almost certain that some, at least, of theconsultants have such a service very much in mind,if not as yet in actual being.

Conclusion

Perhaps one of the better results of the currentinterest in automation is that apart altogether fromthe mere fact of doing things much faster, morecheaply and more efficiently, the things being done

(concluded on page 447)

The Austin Motor Co. haveshown in the adjoining column.

given the figures

Capital costFloor spaceCost per m/coperating hour ...(Power, Deprecia-tion, Insurance,Repairs, floor space,etc.)Labour cost perhourOutput

13-StationTransfer Machine

£25,903390 sq. ft.

£3. 13s. 3d.

lid.3,000 Components

IndividualMachines£30,850

500 sq. ft.

£4. 8s. 9d.

£2. 17s. 2d.2,500 Components

422